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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 10-Q



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(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, 2007

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



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EXCELSIOR VENTURE PARTNERS III,
LLC

(Exact Name of Registrant as Specified in Its Charter)



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

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



Former Name, Former Address and Former Fiscal Year, if Changed Since last Report.



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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  xNo ̈

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

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEEDING FIVE YEARS:

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

As of April 30, 2007, there were 295,210 shares of the Registrants Common Stock, $.01 par value per share, outstanding.



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##### Table of Contents

EXCELSIOR VENTURE PARTNERS III, LLC

Excelsior Venture Partners III, LLCs (the
Companys) prospects, including the prospects of its underlying investments, are subject to certain uncertainties and risks. This Quarterly Report on Form10-Q contains certain forward-looking statements within the meaning of the
federal securities laws that also involve substantial uncertainties and risks. The future results of the Company and its underlying investments may differ materially from its historical results and actual results could differ materially from those
projected in forward-looking statements as a result of certain risk factors. Readers should pay particular attention to the considerations described in the section of this report entitled Managements Discussion and Analysis of Financial
Conditions and Results of Operations. Readers should also carefully review the risk factors described in the other documents the Company files, or has filed, from time to time with the Securities and Exchange Commission.



|         |  |                                                                                                        |  |         
|-------- |  | ------------------------------------------------------------------------------------------------------ |  | --------
|         |  | INDEX                                                                                                  |  | PAGE NO.
|PART I.  |  | FINANCIAL INFORMATION                                                                                  |  |         
|         |  |                                                                                                       
|Item 1.  |  | Financial Statements.                                                                                  |  | 1       
|         |  |                                                                                                       
|         |  | Portfolio of Investments as of April 30, 2007 and October 31, 2006.                                    |  | 2       
|         |  |                                                                                                       
|         |  | Statements of Assets and Liabilities at April 30, 2007 and October 31, 2006.                           |  | 8       
|         |  |                                                                                                       
|         |  | Statements of Operations for the six months period ended April 30, 2007 and April 30, 2006.            |  | 9       
|         |  |                                                                                                       
|         |  | Statements of Operations for the three months period ended April 30, 2007 and April 30, 2006.          |  | 10      
|         |  |                                                                                                       
|         |  | Statements of Changes in Net Assets for the six months period ended April 30, 2007 and April 30, 2006. |  | 11      
|         |  |                                                                                                       
|         |  | Statements of Cash Flows for the six months period ended April 30, 2007 and April 30, 2006.            |  | 12      
|         |  |                                                                                                       
|         |  | Financial Highlights for the six months period ended April 30, 2007 and April 30, 2006.                |  | 13      
|         |  |                                                                                                       
|         |  | Notes to Financial Statements.                                                                         |  | 14      
|         |  |                                                                                                       
|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.                                                                               |  | 23      
|         |  |                                                                                                       
|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      



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##### Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Excelsior Venture Partners III, LLC

Portfolio of Investments (Unaudited)



|                                 |  |                |            |                 |        |  
|-------------------------------- |  | -------------- | ---------- | --------------- | ------ | -
|                                 |  | April 30, 2007 |           
|PORTFOLIO STRUCTURE              |  | Value          |            | % of Net Assets |       
|SHORT-TERM INVESTMENTS:          |  |                |            |                 |        |  
|                                 |  |               
|MONEY MARKET INSTRUMENTS         |  | $              | 10,162,187 |                 | 15.26  | %
|                                 |  |               
|INVESTMENT COMPANIES             |  |                | 984,128    |                 | 1.48   | %
|                                 |  |               
|PRIVATE COMPANIES                |  |                | 36,203,149 |                 | 54.36  | %
|                                 |  |               
|PRIVATE INVESTMENT FUNDS         |  |                | 14,826,431 |                 | 22.26  | %
|                                 |  |                |            |                 |        |  
|TOTAL INVESTMENTS                |  |                | 62,175,895 |                 | 93.36  | %
|OTHER ASSETS & LIABILITIES (NET) |  |                | 4,427,323  |                 | 6.64   | %
|                                 |  |                |            |                 |        |  
|NET ASSETS                       |  | $              | 66,603,218 |                 | 100.00 | %
|                                 |  |                |            |                 |        |  

Excelsior Venture Partners III, LLC

Portfolio of Investments (Audited)



|                                 |  |                  |            |   |                 |        |   
|-------------------------------- |  | ---------------- | ---------- | - | --------------- | ------ | --
|                                 |  | October 31, 2006 |           
|PORTFOLIO STRUCTURE              |  | Value            |            |   | % of Net Assets |       
|SHORT-TERM INVESTMENTS:          |  |                  |            |   |                 |        |   
|                                 |  |                 
|MONEY MARKET INSTRUMENTS         |  | $                | 13,378,310 |   |                 | 17.71  | % 
|                                 |  |                 
|INVESTMENT COMPANIES             |  |                  | 1,044,128  |   |                 | 1.38   | % 
|                                 |  |                 
|PRIVATE COMPANIES                |  |                  | 48,982,337 |   |                 | 64.82  | % 
|                                 |  |                 
|PRIVATE INVESTMENT FUNDS         |  |                  | 12,484,040 |   |                 | 16.52  | % 
|                                 |  |                  |            |   |                 |        |   
|TOTAL INVESTMENTS                |  |                  | 75,888,815 |   |                 | 100.43 | % 
|OTHER ASSETS & LIABILITIES (NET) |  |                  | (326,723   | ) |                 | (0.43  | )%
|                                 |  |                  |            |   |                 |        |   
|NET ASSETS                       |  | $                | 75,562,092 |   |                 | 100.00 | % 
|                                 |  |                  |            |   |                 |        |   

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



1



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments April 30, 2007 (Unaudited)



|                                            |                                   |  |                                                      |                       |             |                |   |           
|------------------------------------------- | --------------------------------- |  | ---------------------------------------------------- | --------------------- | ----------- | -------------- | - | ----------
|PrincipalAmount/Shares/ OwnershipPercentage |                                   |  |                                                      | AcquisitionDate(s) ## |             | Value (Note 1)
|                                            | MONEY MARKET INSTRUMENTS  15.26% |  |                                                      |                       |             |               
|$                                           | 3,000,000                         |  | Federal Home Loan Bank Discount Note 5.14%, 05/09/07 |                       |             |                | $ | 2,996,574 
|                                            | 3,000,000                         |  | Federal Home Loan Bank Discount Note 5.12%, 05/23/07 |                       |             |                |   | 2,990,613 
|                                            | 4,175,000                         |  | Federal Home Loan Bank Discount Note 5.06%, 05/01/07 |                       |             |                |   | 4,175,000 
|                                            |                                   |  |                                                      |                       |             |                |   |           
|                                            |                                   |  | TOTAL MONEY MARKET INSTRUMENTS (Cost $10,162,187)    |                       |             |                |   | 10,162,187
|                                            |                                   |  |                                                      |                       |             |                |   |           
|                                            | PRIVATE COMPANIES **  54.36%     |  |                                                      |                       |             |               
|                                            | Common Stocks #,@  1.93%         |  |                                                      |                       |             |               
|                                            | Capital Equipment  0.00%         |  |                                                      |                       |             |               
|                                            | 157,396                           |  | MIDAS Vision Systems, Inc.                           |                       | 03/03       |                |   |          
|                                            |                                   |  |                                                      |                       |             |                |   |           
|                                            | Enterprise Software  0.00%       |  |                                                      |                       |             |               
|                                            | 1,000,000                         |  | ***Cydelity, Inc.                                    |                       | 01/04       |                |   |          
|                                            |                                   |  |                                                      |                       |             |                |   |           
|                                            | Life Sciences  0.00%             |  |                                                      |                       |             |               
|                                            | 46,860                            |  | Genoptix, Inc.                                       |                       | 07/03       |                |   |          
|                                            |                                   |  |                                                      |                       |             |                |   |           
|                                            | Optical  1.93%                   |  |                                                      |                       |             |               
|                                            | 1,079,541                         |  | OpVista, Inc.,                                       |                       | 04/06       |                |   | 1,280,541 
|                                            |                                   |  |                                                      |                       |             |                |   |           
|                                            |                                   |  | TOTAL COMMON STOCKS (Cost $14,431,530)               |                       |             |                |   | 1,280,541 
|                                            |                                   |  |                                                      |                       |             |                |   |           
|                                            | Preferred Stocks #  51.91%       |  |                                                      |                       |             |               
|                                            | Capital Equipment @  0.00%       |  |                                                      |                       |             |               
|                                            | 933,593                           |  | MIDAS Vision Systems, Inc., Series A-1               |                       | 03/03       |                |   |          
|                                            |                                   |  |                                                      |                       |             |                |   |           
|                                            | Enterprise Software @  10.26%    |  |                                                      |                       |             |               
|                                            | 19,995,000                        |  | ***Cydelity Inc., Series A                           |                       | 01/04       |                |   |          
|                                            | 19,702,277                        |  | ***Cydelity Inc., Series A-1                         |                       | 05/06       |                |   |          
|                                            | 25,535,051                        |  | ***Cydelity Inc., Series A-2                         |                       | 05/06       |                |   | 1,600,000 
|                                            | 8,369,880                         |  | ***LogicLibrary, Inc., Series A                      |                       | 01/02-11/06 |                |   | 3,826,844 
|                                            | 3,080,464                         |  | ***LogicLibrary, Inc., Series A-1                    |                       | 08/03-05/04 |                |   | 1,408,450 
|                                            |                                   |  |                                                      |                       |             |                |   |           
|                                            |                                   |  |                                                      |                       |             |                |   | 6,835,294 
|                                            |                                   |  |                                                      |                       |             |                |   |           
|                                            | Life Sciences  8.43%             |  |                                                      |                       |             |               
|                                            | 1,999,999                         |  | Archemix Corporation, Inc., Series A                 |                       | 08/02-11/03 |                |   | 1,999,999 
|                                            | 700,000                           |  | Archemix Corporation, Inc., Series B                 |                       | 03/04-12/05 |                |   | 700,000   
|                                            | 942,481                           |  | Genoptix, Inc., Series 1-A@                          |                       | 08/04       |                |   | 950,822   
|                                            | 1,403,696                         |  | Genoptix, Inc., Series 1-B@                          |                       | 08/04       |                |   | 950,822   
|                                            | 620,580                           |  | Genoptix, Inc., Series 1-C@                          |                       | 08/04-01/05 |                |   | 554,178   
|                                            | 728,413                           |  | Genoptix, Inc., Series 1-D@                          |                       | 05/05       |                |   | 461,815   
|                                            |                                   |  |                                                      |                       |             |                |   |           
|                                            |                                   |  |                                                      |                       |             |                |   | 5,617,636 
|                                            | Medical Technology @  3.64%      |  |                                                      |                       |             |               
|                                            | 4,166,667                         |  | Tensys Medical, Inc., Series C                       |                       | 03/02       |                |   | 1,887,160 
|                                            | 1,187,500                         |  | Tensys Medical, Inc., Series D                       |                       | 05/04       |                |   | 537,840   
|                                            |                                   |  |                                                      |                       |             |                |   |           
|                                            |                                   |  |                                                      |                       |             |                |   | 2,425,000 

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



2



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments April 30, 2007 (Unaudited) (continued)



|                                            |  |                                                      |  |                       |  |               
|------------------------------------------- |  | ---------------------------------------------------- |  | --------------------- |  | --------------
|PrincipalAmount/Shares/ OwnershipPercentage |  |                                                      |  | AcquisitionDate(s) ## |  | Value (Note 1)
|PRIVATE COMPANIES ** 54.36%                |  |                                                      |  |                      
|Optical @  15.77%                          |  |                                                      |  |                      
|956,234                                     |  | NanoOpto Corporation, Series A-1                     |  | 10/01-03/02           |  | 840,912       
|3,023,399                                   |  | NanoOpto Corporation, Series B                       |  | 09/03-07/04           |  | 1,286,155     
|1,682,470                                   |  | NanoOpto Corporation, Series C                       |  | 03/05                 |  | 733,389       
|1,234,263                                   |  | NanoOpto Corporation, Series D                       |  | 05/06                 |  | 382,622       
|5,683,907                                   |  | OpVista, Inc., Series AA                             |  | 06/06-01/07           |  | 6,742,193     
|433,399                                     |  | OpVista, Inc., Series BB Convertible                 |  | 03/07                 |  | 514,094       
|                                            |  |                                                      |  |                       |  |               
|                                            |  |                                                      |  |                       |  | 10,499,365    
|Semiconductor @  0.00%                     |  |                                                      |  |                      
|7,000,000                                   |  | Chips & Systems, Inc., Series A                      |  | 03/04                 |  |              
|                                            |  |                                                      |  |                       |  |               
|                                            |  |                                                      |  |                       |  |              
|Wireless @ 13.81%                          |  |                                                      |  |                      
|4,433,333                                   |  | Ethertronics, Inc., Series B                         |  | 06/01-05/04           |  | 6,650,000     
|1,697,957                                   |  | Ethertronics, Inc., Series C                         |  | 05/05-07/06           |  | 2,546,936     
|                                            |  |                                                      |  |                       |  |               
|                                            |  |                                                      |  |                       |  | 9,196,936     
|                                            |  |                                                      |  |                       |  |               
|                                            |  | TOTAL PREFERRED STOCKS (Cost $52,234,230)            |  |                       |  | 34,574,231    
|                                            |  |                                                      |  |                       |  |               
|Notes @ 0.52%                              |  |                                                      |  |                      
|Medical Technology  0.16%                  |  |                                                      |  |                      
|111,056                                     |  | Tensys Medical, Inc., Bridge Note                    |  | 07/06-03/07           |  | 111,056       
|                                            |  |                                                      |  |                       |  |               
|Optical  0.36 %                            |  |                                                      |  |                      
|237,321                                     |  | NanoOpto Corp., Bridge Note                          |  | 03/07                 |  | 237,321       
|                                            |  |                                                      |  |                       |  |               
|Semiconductor 0.00 %                       |  |                                                      |  |                      
|1,441,133                                   |  | Chips & Systems, Inc., 6% Bridge Note March 2005 #   |  | 11/04-02/05           |  |              
|                                            |  |                                                      |  |                       |  |               
|                                            |  | TOTAL NOTES (Cost $1,789,510)                        |  |                       |  | 348,377       
|                                            |  |                                                      |  |                       |  |               
|Warrants #,@  0.00%                        |  |                                                      |  |                      
|Optical 0.00 %                             |  |                                                      |  |                      
|229,410                                     |  | NanoOpto Corp. Series C (expiration date 12/09)      |  | 12/04                 |  |              
|                                            |  |                                                      |  |                       |  |               
|Wireless  0.00%                            |  |                                                      |  |                      
|281,667                                     |  | Ethertronics, Inc., Series B (expiration date 09/07) |  | 09/02-08/03           |  |              
|214,073                                     |  | Ethertronics, Inc., Series C (expiration date 01/09) |  | 05/05-07/06           |  |              
|                                            |  |                                                      |  |                       |  |               
|                                            |  | TOTAL WARRANTS (Cost $0)                             |  |                       |  |              
|                                            |  |                                                      |  |                       |  |               
|                                            |  | TOTAL  PRIVATE COMPANIES (Cost $68,455,270)         |  |                       |  | 36,203,149    
|                                            |  |                                                      |  |                       |  |               

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



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments April 30, 2007 (Unaudited) (continued)



|                                              |   |  |                                                                              |            |                        |  |             
|--------------------------------------------- | - |  | ---------------------------------------------------------------------------- | ---------- | ---------------------- |  | ------------
|PrincipalAmount/OwnershipPercentage           |   |  |                                                                              |            | Acquisition Date(s) ## |  | Value(Note1)
|PRIVATE INVESTMENT FUNDS **, # 22.26%        |   |  |                                                                              |           
|0.37                                          | % |  | Advanced Technology Ventures VII, LP                                         |            | 08/01-04/07            |  | 1,705,446   
|1.56                                          | % |  | Burrill Life Sciences Capital Fund                                           |            | 12/02-03/07            |  | 1,444,347   
|1.33                                          | % |  | CHL Medical Partners II, LP                                                  |            | 01/02-03/07            |  | 1,236,592   
|1.04                                          | % |  | CMEA Ventures VI, LP                                                         |            | 12/03-04/07            |  | 1,687,487   
|0.36                                          | % |  | Morgenthaler Partners VII, LP                                                |            | 07/01-01/07            |  | 1,747,977   
|0.56                                          | % |  | Prospect Venture Partners II, LP                                             |            | 06/01-04/07            |  | 2,084,587   
|0.98                                          | % |  | Sevin Rosen Fund IX, LP                                                      |            | 10/04-04/07            |  | 1,298,872   
|2.36                                          | % |  | Tallwood II, LP                                                              |            | 12/02-11/06            |  | 1,428,929   
|1.70                                          | % |  | Valhalla Partners, LP                                                        |            | 10/03-04/07            |  | 2,192,194   
|                                              |   |  |                                                                              |            |                        |  |             
|                                              |   |  | TOTAL  PRIVATE INVESTMENT FUNDS (Cost $15,283,279)                          |            |                        |  | 14,826,431  
|                                              |   |  |                                                                              |            |                        |  |             
|INVESTMENT COMPANIES 1.48%                   |   |  |                                                                              |           
|984,128                                       |   |  | Dreyfus Government Cash Management Fund Institutional Shares (Cost $984,128) |            |                        |  | 984,128     
|                                              |   |  |                                                                              |            |                        |  |             
|TOTAL INVESTMENTS (Cost $94,884,864)  93.36% |   |  |                                                                              | 62,175,895
|OTHER ASSETS & LIABILITIES (NET)  6.64%      |   |  |                                                                              | 4,427,323 
|                                              |   |  |                                                                              |            |                        |  |             
|NET ASSETS  100.00%                          |   |  |                                                                              | 66,603,218
|                                              |   |  |                                                                              |            |                        |  |             

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|** | Restricted as to public resale. Total cost of restricted securities at April 30, 2007 aggregated $83,738,549. Total value of restricted securities owned at April 30, 2007
was $51,029,580 or 76.62% of net assets.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|@ | April 30, 2007 the Company owned 5% or more of the companys outstanding shares thereby making the company an affiliate as defined bythe Investment Company Act of 1940, as
amended. Total value of affiliated securities owned at April 30, 2007 (including investments incontrolled affiliates) was $33,503,150.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*** | At April 30, 2007 the Company owned 25% or more of the companys outstanding shares thereby making the company a controlled affiliate as defined by the Investment Company
Act of 1940, as amended. Total value of controlled affiliated securities owned at April 30, 2007 was $6,835,294.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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



4



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments at October 31, 2006 (Audited)



|                                            |                                  |  |                                                        |                       |             |               |           
|------------------------------------------- | -------------------------------- |  | ------------------------------------------------------ | --------------------- | ----------- | ------------- | ----------
|PrincipalAmount/Shares/ OwnershipPercentage |                                  |  |                                                        | AcquisitionDate(s) ## |             | Value(Note 1)
|                                            | MONEY MARKET INSTRUMENTS 17.71% |  |                                                        |                       |            
|$                                           | 1,500,000                        |  | Federal Farm Credit Bank Discount Note 5.07%, 11/01/06 |                       |             |               | 1,500,000 
|                                            | 6,890,000                        |  | Federal Farm Credit Bank Discount Note 5.09%, 11/13/06 |                       |             |               | 6,878,310 
|                                            | 2,000,000                        |  | Federal Home Loan Bank Discount Note 5.09%, 11/01/06   |                       |             |               | 2,000,000 
|                                            | 3,000,000                        |  | Federal Home Loan Bank Discount Note 5.065%, 11/01/06  |                       |             |               | 3,000,000 
|                                            |                                  |  |                                                        |                       |             |               |           
|                                            |                                  |  | TOTAL MONEY MARKET INSTRUMENTS (Cost $13,378,310)      |                       |             |               | 13,378,310
|                                            |                                  |  |                                                        |                       |             |               |           
|                                            | PRIVATE COMPANIES **  64.82%    |  |                                                        |                       |            
|                                            |                                  |  | Common Stocks #, @ 1.50%                              |                       |             |               |           
|                                            |                                  |  | Capital Equipment  0.00%                              |                       |             |               |           
|                                            | 157,396                          |  | MIDAS Vision Systems, Inc.                             |                       | 03/03       |               |          
|                                            |                                  |  |                                                        |                       |             |               |           
|                                            |                                  |  | Enterprise Software  0.00%                            |                       |             |               |           
|                                            | 1,000,000                        |  | ***Cydelity, Inc.                                      |                       | 01/04       |               |          
|                                            |                                  |  |                                                        |                       |             |               |           
|                                            |                                  |  | Life Sciences  0.00%                                  |                       |             |               |           
|                                            | 46,860                           |  | Genoptix, Inc.                                         |                       | 07/03       |               |          
|                                            |                                  |  |                                                        |                       |             |               |           
|                                            |                                  |  | Optical  1.50%                                        |                       |             |               |           
|                                            | 1,079,541                        |  | OpVista, Inc,.                                         |                       | 06/06       |               | 1,138,542 
|                                            |                                  |  |                                                        |                       |             |               |           
|                                            |                                  |  | Semiconductor  0.00%                                  |                       |             |               |           
|                                            | 40,026                           |  | Silverback Systems, Inc.                               |                       | 04/06       |               |          
|                                            |                                  |  |                                                        |                       |             |               |           
|                                            |                                  |  | TOTAL COMMON STOCKS (Cost $19,190,611)                 |                       |             |               | 1,138,542 
|                                            |                                  |  |                                                        |                       |             |               |           
|                                            |                                  |  | Preferred Stocks #  61.39%                            |                       |             |               |           
|                                            |                                  |  | Capital Equipment @  0.00%                            |                       |             |               |           
|                                            | 933,593                          |  | MIDAS Vision Systems, Inc., Series A-1                 |                       | 03/03       |               |          
|                                            |                                  |  |                                                        |                       |             |               |           
|                                            |                                  |  | Enterprise Software @  25.82%                         |                       |             |               |           
|                                            | 19,995,000                       |  | ***Cydelity, Inc., Series A                            |                       | 01/04       |               |          
|                                            | 19,702,277                       |  | ***Cydelity, Inc., Series A-1                          |                       | 05/06       |               | 3,940,456 
|                                            | 25,535,051                       |  | ***Cydelity, Inc., Series A-2                          |                       | 05/06       |               | 2,500,009 
|                                            | 7,762,821                        |  | ***LogicLibrary, Inc., Series A                        |                       | 01/02-09/06 |               | 3,549,296 
|                                            | 3,080,464                        |  | ***LogicLibrary, Inc., Series A-1                      |                       | 08/03-05/04 |               | 1,408,450 
|                                            | 46,362,656                       |  | ***Pilot Software Inc., Series A                       |                       | 05/02-06/05 |               | 8,110,096 
|                                            |                                  |  |                                                        |                       |             |               |           
|                                            |                                  |  |                                                        |                       |             |               | 19,508,307
|                                            |                                  |  |                                                        |                       |             |               |           
|                                            |                                  |  | Life Sciences  7.43%                                  |                       |             |               |           
|                                            | 1,999,999                        |  | Archemix Corporation, Series A                         |                       | 08/02-11/03 |               | 1,999,999 
|                                            | 700,000                          |  | Archemix Corporation, Series B                         |                       | 03/04-12/05 |               | 700,000   
|                                            | 942,481                          |  | Genoptix, Inc., Series 1-A @                           |                       | 08/04       |               | 950,822   
|                                            | 1,403,696                        |  | Genoptix, Inc., Series 1-B @                           |                       | 08/04       |               | 950,822   
|                                            | 620,580                          |  | Genoptix, Inc., Series 1-C @                           |                       | 08/04-01/05 |               | 554,178   
|                                            | 728,413                          |  | Genoptix, Inc., Series 1-D @                           |                       | 05/05       |               | 461,815   
|                                            |                                  |  |                                                        |                       |             |               |           
|                                            |                                  |  |                                                        |                       |             |               | 5,617,636 
|                                            |                                  |  |                                                        |                       |             |               |           
|                                            |                                  |  | Medical Technology @  3.21%                           |                       |             |               |           
|                                            | 4,166,667                        |  | Tensys Medical, Inc., Series C                         |                       | 03/02       |               | 1,887,160 
|                                            | 1,187,500                        |  | Tensys Medical, Inc., Series D                         |                       | 05/04       |               | 537,840   
|                                            |                                  |  |                                                        |                       |             |               |           
|                                            |                                  |  |                                                        |                       |             |               | 2,425,000 
|                                            |                                  |  |                                                        |                       |             |               |           

The accompanying notes are an integral part of these Financial Statements



5



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments October 31, 2006 (Audited)  (continued)



|                                            |           |  |                                                                        |                        |             |                |           
|------------------------------------------- | --------- |  | ---------------------------------------------------------------------- | ---------------------- | ----------- | -------------- | ----------
|Shares/PrincipalAmount/ OwnershipPercentage |           |  |                                                                        | Acquisition Date(s) ## |             | Value (Note 1)
|                                            |           |  | PRIVATE COMPANIES **                                                   |                        |             |                |           
|                                            |           |  | Preferred Stocks #                                                     |                        |             |                |           
|                                            |           |  | Optical @  11.40%                                                     |                        |             |                |           
|                                            | 956,234   |  | NanoOpto Corporation, Series A-1                                       |                        | 10/01-3/02  |                | 840,912   
|                                            | 3,023,399 |  | NanoOpto Corporation, Series B                                         |                        | 09/03-07/04 |                | 1,286,155 
|                                            | 1,682,470 |  | NanoOpto Corporation, Series C                                         |                        | 03/05       |                | 733,389   
|                                            | 1,234,263 |  | NanoOpto Corporation, Series D                                         |                        | 05/06       |                | 382,622   
|                                            | 5,089,790 |  | OpVista, Inc., Series AA                                               |                        | 06/06-08/06 |                | 5,367,967 
|                                            |           |  |                                                                        |                        |             |                |           
|                                            |           |  |                                                                        |                        |             |                | 8,611,045 
|                                            |           |  |                                                                        |                        |             |                |           
|                                            |           |  | Semi-Conductor @  2.12%                                               |                        |             |                |           
|                                            | 7,000,000 |  | Chips & Systems, Inc., Series A                                        |                        | 03/04       |                |          
|                                            | 772,503   |  | Silverback Systems, Inc., Series A-2                                   |                        | 04/06       |                |          
|                                            | 559,993   |  | Silverback Systems, Inc., Series B                                     |                        | 04/06       |                | 1,600,000 
|                                            |           |  |                                                                        |                        |             |                |           
|                                            |           |  |                                                                        |                        |             |                | 1,600,000 
|                                            |           |  |                                                                        |                        |             |                |           
|                                            |           |  | Wireless @  11.41%                                                    |                        |             |                |           
|                                            | 4,433,333 |  | Ethertronics, Inc., Series B                                           |                        | 06/01-05/04 |                | 6,650,000 
|                                            | 1,316,793 |  | Ethertronics, Inc., Series C                                           |                        | 05/05-07/06 |                | 1,975,190 
|                                            |           |  |                                                                        |                        |             |                |           
|                                            |           |  |                                                                        |                        |             |                | 8,625,190 
|                                            |           |  |                                                                        |                        |             |                |           
|                                            |           |  | TOTAL PREFERRED STOCKS (COST $62,048,095)                              |                        |             |                | 46,387,178
|                                            |           |  |                                                                        |                        |             |                |           
|                                            |           |  | Notes@  1.93%                                                         |                        |             |                |           
|                                            |           |  | Enterprise Software  1.86%                                            |                        |             |                |           
|$                                           | 1,404,600 |  | ***Pilot Software Inc., 9.00% Bridge Note , August 2007 & October 2007 |                        | 08/06-10/06 |                | 1,404,600 
|                                            |           |  |                                                                        |                        |             |                |           
|                                            |           |  | Medical Technology  0.07%                                             |                        |             |                |           
|$                                           | 52,017    |  | Tensys Medical, Inc., 8.00% Bridge Note, April 2007                    |                        | 07/06       |                | 52,017    
|                                            |           |  |                                                                        |                        |             |                |           
|                                            |           |  | Semi-Conductor 0.00%                                                  |                        |             |                |           
|$                                           | 1,441,133 |  | Chips & Systems, Inc., 6.00% Bridge Note, March 2005 #                 |                        | 11/04-02/05 |                |          
|                                            |           |  |                                                                        |                        |             |                |           
|                                            |           |  | TOTAL NOTES (COST $2,897,750)                                          |                        |             |                | 1,456,617 
|                                            |           |  |                                                                        |                        |             |                |           
|                                            |           |  | Warrants #, @ 0.00%                                                   |                        |             |                |           
|                                            |           |  | Optical  0.00%                                                        |                        |             |                |           
|                                            | 229,410   |  | NanoOpto Corp. Series C (expiration date 12/09)                        |                        | 12/04       |                |          
|                                            |           |  | Wireless  0.00%                                                       |                        |             |                |           
|                                            | 281,667   |  | Ethertronics, Inc. Series B (expiration date 09/07)                    |                        | 09/02-08/03 |                |          
|                                            | 214,073   |  | Ethertronics, Inc. Series C (expiration date 01/09)                    |                        | 05/05-07/06 |                |          
|                                            |           |  |                                                                        |                        |             |                |           
|                                            |           |  | TOTAL WARRANTS (Cost $0)                                               |                        |             |                |          
|                                            |           |  |                                                                        |                        |             |                |           
|                                            |           |  | TOTAL  PRIVATE COMPANIES (Cost $84,136,456)                           |                        |             |                | 48,982,337

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



6



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments October 31, 2006 (Audited)  (continued)



|                                           |   |  |                                                                                |  |                        |  |                |            |  
|------------------------------------------ | - |  | ------------------------------------------------------------------------------ |  | ---------------------- |  | -------------- | ---------- | -
|PrincipalAmount/Shares/OwnershipPercentage |   |  |                                                                                |  | Acquisition Date(s) ## |  | Value (Note 1) |           
|                                           |   |  | PRIVATE INVESTMENT FUNDS **, #  16.52%                                        |  |                        |  |                |            |  
|0.39                                       | % |  | Advanced Technology Ventures VII, L.P.                                         |  | 08/01-09/06            |  |                | 1,342,895  |  
|1.58                                       | % |  | Burrill Life Sciences Capital Fund                                             |  | 12/02-09/06            |  |                | 1,311,766  |  
|1.35                                       | % |  | CHL Medical Partners II, L.P.                                                  |  | 01/02-10/06            |  |                | 1,024,130  |  
|1.04                                       | % |  | CMEA Ventures VI, L.P.                                                         |  | 12/03-08/06            |  |                | 1,086,085  |  
|0.36                                       | % |  | Morgenthaler Partners VII, L.P.                                                |  | 07/01-10/06            |  |                | 1,620,474  |  
|0.58                                       | % |  | Prospect Ventures Partners II, L.P.                                            |  | 06/01-10/06            |  |                | 1,801,556  |  
|0.98                                       | % |  | Sevin Rosen Fund IX, L.P.                                                      |  | 10/04-09/06            |  |                | 1,151,676  |  
|2.36                                       | % |  | Tallwood II, L.P.                                                              |  | 12/02-05/06            |  |                | 1,513,112  |  
|1.70                                       | % |  | Valhalla Partners, L.P.                                                        |  | 10/03-06/06            |  |                | 1,632,346  |  
|                                           |   |  |                                                                                |  |                        |  |                |            |  
|                                           |   |  | TOTAL PRIVATE INVESTMENT FUNDS (Cost $13,780,450)                              |  |                        |  |                | 12,484,040 |  
|                                           |   |  |                                                                                |  |                        |  |                |            |  
|                                           |   |  | INVESTMENT COMPANIES  1.38%                                                   |  |                        |  |                |            |  
|1,044,128                                  |   |  | Dreyfus Government Cash Management Fund Institutional Shares (Cost $1,044,128) |  |                        |  |                | 1,044,128  |  
|                                           |   |  |                                                                                |  |                        |  |                |            |  
|                                           |   |  | TOTAL INVESTMENTS (Cost $112,339,344)  100.43%                                |  |                        |  |                | 75,888,815 |  
|                                           |   |  | OTHER ASSETS & LIABILITIES (NET) (0.43%)                                      |  |                        |  |                | (326,723   | )
|                                           |   |  |                                                                                |  |                        |  |                |            |  
|                                           |   |  | NET ASSETS  100.00%                                                           |  |                        |  | $              | 75,562,092 |  
|                                           |   |  |                                                                                |  |                        |  |                |            |  

---

|** | Restricted as to public resale. Total cost of restricted securities at October 31, 2006 aggregated $97,916,906. Total value of restricted securities owned at October 31,
2006 was $61,466,377 or 81.35% of net assets.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|@ | At October 31, 2006, 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, as amended. Total value of affiliated securities owned at October 31, 2006 (including investments in controlled affiliates) was $46,282,338. See Note 5.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*** | At October 31, 2006, 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, as amended. Total value of controlled affiliated securities owned at October 31, 2006 was $20,912,907. See Note 5.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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



7



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##### Table of Contents

Excelsior Venture Partners III, LLC

Statements of Assets and Liabilities



|                                                                                                        |  |                           |             |   |                           |   |             |  
|------------------------------------------------------------------------------------------------------- |  | ------------------------- | ----------- | - | ------------------------- | - | ----------- | -
|                                                                                                        |  | April 30, 2007(Unaudited) |             |   | October 31, 2006(Audited) |  
|ASSETS:                                                                                                 |  |                           |             |   |                           |   |             |  
|Unaffiliated Issuers at value (Cost $29,129,593 and $30,902,887 respectively)                           |  | $                         | 28,672,745  |   |                           | $ | 29,606,477  |  
|Controlled Affiliated Issuers at value (Cost $15,675,759 and $24,912,907 respectively)                  |  |                           | 6,835,294   |   |                           |   | 20,912,907  |  
|Non-Controlled Affiliated Issuers at value (Cost $50,079,512 and $56,523,550 respectively)              |  |                           | 26,667,856  |   |                           |   | 25,369,431  |  
|                                                                                                        |  |                           |             |   |                           |   |             |  
|Investments, at value (Cost $94,884,864 and $112,339,344 respectively) (Note 1)                         |  |                           | 62,175,895  |   |                           |   | 75,888,815  |  
|Cash and cash equivalents (Note 1)                                                                      |  |                           | 165,071     |   |                           |   | 2,934       |  
|Interest receivable                                                                                     |  |                           | 12,753      |   |                           |   | 24,939      |  
|Sale of Investment receivable                                                                           |  |                           | 4,604,587   |   |                           |   |            |  
|Other receivables                                                                                       |  |                           | 1,945       |   |                           |   | 1,945       |  
|Prepaid Insurance                                                                                       |  |                           | 16,743      |   |                           |   | 1,378       |  
|                                                                                                        |  |                           |             |   |                           |   |             |  
|Total Assets                                                                                            |  |                           | 66,976,994  |   |                           |   | 75,920,011  |  
|                                                                                                        |  |                           |             |   |                           |   |             |  
|LIABILITIES:                                                                                            |  |                           |             |   |                           |   |             |  
|Management fees payable (Note 2)                                                                        |  |                           | 162,402     |   |                           |   | 190,458     |  
|Professional fees payable                                                                               |  |                           | 76,265      |   |                           |   | 87,000      |  
|Administration fees payable (Note 2)                                                                    |  |                           | 77,639      |   |                           |   | 53,961      |  
|Board of Managers fees payable (Note 2)                                                                |  |                           | 44,000      |   |                           |   | 22,000      |  
|Other payables                                                                                          |  |                           | 13,470      |   |                           |   | 4,500       |  
|                                                                                                        |  |                           |             |   |                           |   |             |  
|Total Liabilities                                                                                       |  |                           | 373,776     |   |                           |   | 357,919     |  
|                                                                                                        |  |                           |             |   |                           |   |             |  
|NET ASSETS                                                                                              |  | $                         | 66,603,218  |   |                           | $ | 75,562,092  |  
|                                                                                                        |  |                           |             |   |                           |   |             |  
|NET ASSETS consist of:                                                                                  |  |                           |             |   |                           |   |             |  
|Members capital                                                                                        |  | $                         | 99,312,187  |   |                           | $ | 112,012,621 |  
|Accumulated net unrealized (depreciation) on investments                                                |  |                           | (32,708,969 | ) |                           |   | (36,450,529 | )
|                                                                                                        |  |                           |             |   |                           |   |             |  
|Total Net Assets                                                                                        |  | $                         | 66,603,218  |   |                           | $ | 5,562,092   |  
|                                                                                                        |  |                           |             |   |                           |   |             |  
|Units of Membership Interest Issued and Outstanding (Unlimited Number of no par value units authorized) |  |                           | 295,210     |   |                           |   | 295,210     |  
|                                                                                                        |  |                           |             |   |                           |   |             |  
|NET ASSET VALUE PER UNIT                                                                                |  | $                         | 225.61      |   |                           | $ | 255.96      |  
|                                                                                                        |  |                           |             |   |                           |   |             |  

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



8



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##### Table of Contents

Excelsior Venture Partners III, LLC

Statements of Operations (Unaudited)



|                                                                    |  |                            |            |   |      |   |            |  
|------------------------------------------------------------------- |  | -------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                    |  | Six Months Ended April 30, |           
|                                                                    |  | 2007                       |            |   | 2006 |  
|INVESTMENT INCOME:                                                  |  |                            |            |   |      |   |            |  
|Interest income from unaffiliated investments                       |  | $                          | 365,742    |   |      | $ | 567,290    |  
|Interest income from affiliated investments                         |  |                            | (12,259    | ) |      |   | 196,667    |  
|Dividend income                                                     |  |                            | 26,595     |   |      |   | 15,316     |  
|                                                                    |  |                            |            |   |      |   |            |  
|Total Investment Income                                             |  |                            | 380,078    |   |      |   | 779,273    |  
|                                                                    |  |                            |            |   |      |   |            |  
|EXPENSES:                                                           |  |                            |            |   |      |   |            |  
|Management fees (Note 2)                                            |  |                            | 348,046    |   |      |   | 843,118    |  
|Professional fees                                                   |  |                            | 191,606    |   |      |   | 116,390    |  
|Administration fees (Note 2)                                        |  |                            | 75,833     |   |      |   | 65,434     |  
|Board of Managers fees (Note 2)                                    |  |                            | 44,000     |   |      |   | 29,754     |  
|Insurance Expense                                                   |  |                            | 15,554     |   |      |   | 22,065     |  
|Custodian fees                                                      |  |                            | 15,000     |   |      |   | 17,901     |  
|Miscellaneous fees                                                  |  |                            | 15,000     |   |      |   | 16,400     |  
|                                                                    |  |                            |            |   |      |   |            |  
|Total Expenses                                                      |  |                            | 705,039    |   |      |   | 1,111,062  |  
|                                                                    |  |                            |            |   |      |   |            |  
|NET INVESTMENT LOSS                                                 |  |                            | (324,961   | ) |      |   | (331,789   | )
|                                                                    |  |                            |            |   |      |   |            |  
|NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: (Note 1)    |  |                            |            |   |      |   |            |  
|                                                                    |  |                           
|Net realized (loss) on investments on unaffiliated investments      |  |                            | (9,461     | ) |      |   | (6,550     | )
|Net realized (loss) gain on investments on affiliated investments   |  |                            | (4,100,132 | ) |      |   | 16,396     |  
|Net change in unrealized appreciation (depreciation) on investments |  |                            | 3,741,560  |   |      |   | (2,938,770 | )
|                                                                    |  |                            |            |   |      |   |            |  
|NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS                   |  |                            | (368,033   | ) |      |   | (2,928,924 | )
|                                                                    |  |                            |            |   |      |   |            |  
|NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS              |  | $                          | (692,994   | ) |      | $ | (3,260,713 | )
|                                                                    |  |                            |            |   |      |   |            |  

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



9



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##### Table of Contents

Excelsior Venture Partners III, LLC

Statements of Operations (Unaudited)



|                                                                 |  |                              |            |   |      |   |            |  
|---------------------------------------------------------------- |  | ---------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                 |  | Three Months Ended April 30, |           
|                                                                 |  | 2007                         |            |   | 2006 |  
|INVESTMENT INCOME:                                               |  |                              |            |   |      |   |            |  
|Interest income from unaffiliated investments                    |  | $                            | 196,940    |   |      | $ | 280,907    |  
|Interest income from affiliated investments                      |  |                              | (45,171    | ) |      |   | 106,304    |  
|Dividend income                                                  |  |                              | 13,160     |   |      |   | 5,693      |  
|                                                                 |  |                              |            |   |      |   |            |  
|Total Investment Income                                          |  |                              | 164,929    |   |      |   | 392,904    |  
|                                                                 |  |                              |            |   |      |   |            |  
|EXPENSES:                                                        |  |                              |            |   |      |   |            |  
|Management fees (Note 2)                                         |  |                              | 162,403    |   |      |   | 378,063    |  
|Professional fees                                                |  |                              | 79,460     |   |      |   | 65,978     |  
|Administration fees (Note 2)                                     |  |                              | 37,916     |   |      |   | 32,652     |  
|Board of Managers fees (Note 2)                                 |  |                              | 22,000     |   |      |   | 14,630     |  
|Insurance Expense                                                |  |                              | 7,648      |   |      |   | 10,610     |  
|Custodian fees                                                   |  |                              | 7,500      |   |      |   | 12,375     |  
|Miscellaneous fees                                               |  |                              | 7,500      |   |      |   | 12,358     |  
|                                                                 |  |                              |            |   |      |   |            |  
|Total Expenses                                                   |  |                              | 324,427    |   |      |   | 526,666    |  
|                                                                 |  |                              |            |   |      |   |            |  
|NET INVESTMENT LOSS                                              |  |                              | (159,498   | ) |      |   | (133,762   | )
|                                                                 |  |                              |            |   |      |   |            |  
|NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: (Note 1) |  |                              |            |   |      |   |            |  
|                                                                 |  |                             
|Net realized gain on investments on affiliated investments       |  |                              | 3,292,793  |   |      |   | 683        |  
|Net realized (loss) on investments on unaffiliated investments   |  |                              | (686       | ) |      |   | (6,550     | )
|Net change in unrealized (depreciation) on investments           |  |                              | (1,915,488 | ) |      |   | (2,024,990 | )
|                                                                 |  |                              |            |   |      |   |            |  
|NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS           |  |                              | 1,376,619  |   |      |   | (2,030,857 | )
|                                                                 |  |                              |            |   |      |   |            |  
|NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS  |  | $                            | 1,217,121  |   |      | $ | (2,164,619 | )
|                                                                 |  |                              |            |   |      |   |            |  

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



10



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##### Table of Contents

Excelsior Venture Partners III, LLC

Statements of Changes in Net Assets (Unaudited)



|                                                                                                        |  |                            |            |   |      |   |            |  
|------------------------------------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                                        |  | Six Months Ended April 30, |           
|                                                                                                        |  | 2007                       |            |   | 2006 |  
|OPERATIONS:                                                                                             |  |                            |            |   |      |   |            |  
|                                                                                                        |  |                           
|Net investment loss                                                                                     |  | $                          | (324,961   | ) |      | $ | (331,789   | )
|Net realized (loss)/gain on investments                                                                 |  |                            | (4,109,593 | ) |      |   | 9,846      |  
|Net change in unrealized appreciation/(depreciation) on investments                                     |  |                            | 3,741,560  |   |      |   | (2,938,770 | )
|                                                                                                        |  |                            |            |   |      |   |            |  
|Net (decrease) in net assets resulting from operations                                                  |  |                            | (692,994   | ) |      |   | (3,260,713 | )
|                                                                                                        |  |                            |            |   |      |   |            |  
|DISTRIBUTIONS TO SHAREHOLDERS:                                                                          |  |                            |            |   |      |   |            |  
|                                                                                                        |  |                           
|Return of Capital                                                                                       |  |                            | (8,265,880 | ) |      |   |           |  
|                                                                                                        |  |                            |            |   |      |   |            |  
|Total Distributions                                                                                     |  |                            | (8,265,880 | ) |      |   |           |  
|                                                                                                        |  |                            |            |   |      |   |            |  
|NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:                                                 |  |                            | (8,958,874 | ) |      |   | (3,260,713 | )
|                                                                                                        |  |                            |            |   |      |   |            |  
|NET ASSETS:                                                                                             |  |                            |            |   |      |   |            |  
|                                                                                                        |  |                           
|Beginning of period                                                                                     |  |                            | 75,562,092 |   |      |   | 93,348,847 |  
|                                                                                                        |  |                            |            |   |      |   |            |  
|End of period (including accumulated net investment (loss) of ($324,961) and ($331,789), respectively). |  | $                          | 66,603,218 |   |      | $ | 90,088,134 |  
|                                                                                                        |  |                            |            |   |      |   |            |  

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



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Excelsior Venture Partners III, LLC

Statements of Cash Flows (Unaudited)



|                                                                                                                                       |  |                            |            |   |      |   |            |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                                                                       |  | Six Months Ended April 30, |           
|                                                                                                                                       |  | 2007                       |            |   | 2006 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                                  |  |                            |            |   |      |   |            |  
|Net (decrease) in net assets resulting from operations                                                                                 |  | $                          | (692,994   | ) |      | $ | (3,260,713 | )
|Adjustments to reconcile net increase/(decrease) in net assets from operations to net cash provided by/(used in) operating
activities: |  |                            |            |   |      |   |            |  
|Net change in unrealized (appreciation)/depreciation on investments                                                                    |  |                            | (3,741,560 | ) |      |   | 2,938,770  |  
|                                                                                                                                       |  |                           
|Purchase of investments                                                                                                                |  |                            | (4,508,490 | ) |      |   | (6,536,725 | )
|                                                                                                                                       |  |                           
|Proceeds received from the sale of investments and distributions received from private investment funds                                |  |                            | 14,577,254 |   |      |   | 505,822    |  
|Sale of short-term investments  Net                                                                                                   |  |                            | 3,276,123  |   |      |   | 5,646,602  |  
|                                                                                                                                       |  |                           
|Net realized loss/(gain) on investments                                                                                                |  |                            | 4,109,593  |   |      |   | (9,846     | )
|Decrease/(increase) in interest receivable                                                                                             |  |                            | 12,186     |   |      |   | (113,551   | )
|(Increase)/decrease in sale of investment receivable                                                                                   |  |                            | (4,604,587 | ) |      |   | 419,679    |  
|(Increase) in prepaid insurance                                                                                                        |  |                            | (15,365    | ) |      |   | (17,634    | )
|(Decrease) in management fee payable                                                                                                   |  |                            | (28,056    | ) |      |   | (91,232    | )
|(Decrease) in professional fees payable                                                                                                |  |                            | (10,735    | ) |      |   | (43,108    | )
|Increase/(decrease) in administration fees payable                                                                                     |  |                            | 23,678     |   |      |   | (8,844     | )
|Increase in Board of Managers fees payable                                                                                            |  |                            | 22,000     |   |      |   | 1,254      |  
|Increase in other expenses payable                                                                                                     |  |                            | 8,970      |   |      |   | 1,306      |  
|                                                                                                                                       |  |                            |            |   |      |   |            |  
|Net cash provided by/(used in) operating activities                                                                                    |  |                            | 8,428,017  |   |      |   | (568,220   | )
|                                                                                                                                       |  |                           
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                                                   |  |                            |            |   |      |   |            |  
|                                                                                                                                       |  |                           
|Cash Distributions to Unit holders                                                                                                     |  |                            | (8,265,880 | ) |      |   |           |  
|                                                                                                                                       |  |                            |            |   |      |   |            |  
|Net (cash used) in financing activities                                                                                                |  |                            | (8,265,880 | ) |      |   |           |  
|                                                                                                                                       |  |                            |            |   |      |   |            |  
|Net increase/(decrease) in cash                                                                                                        |  |                            | 162,137    |   |      |   | (568,220   | )
|                                                                                                                                       |  |                            |            |   |      |   |            |  
|Cash and cash equivalents at beginning of period                                                                                       |  |                            | 2,934      |   |      |   | 574,146    |  
|                                                                                                                                       |  |                            |            |   |      |   |            |  
|Cash and cash equivalents at end of period                                                                                             |  | $                          | 165,071    |   |      | $ | 5,926      |  
|                                                                                                                                       |  |                            |            |   |      |   |            |  

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



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Excelsior Venture Partners III, LLC

Financial Highlights (Unaudited)

Per Unit Operating Performance: (1)



|                                                       |  |                            |        |    |      |   |        |   
|------------------------------------------------------ |  | -------------------------- | ------ | -- | ---- | - | ------ | --
|                                                       |  | Six Months Ended April 30, |       
|                                                       |  | 2007                       |        |    | 2006 |  
|NET ASSET VALUE, BEGINNING OF PERIOD                   |  | $                          | 255.96 |    |      | $ | 316.21 |   
|                                                       |  |                           
|INCOME FROM INVESTMENT OPERATIONS:                     |  |                            |        |    |      |   |        |   
|Net investment loss                                    |  |                            | (1.10  | )  |      |   | (1.12  | ) 
|Net realized and unrealized (loss) on investments      |  |                            | (1.25  | )  |      |   | (9.92  | ) 
|                                                       |  |                            |        |    |      |   |        |   
|Net (decrease) in net assets resulting from operations |  |                            | (2.35  | )  |      |   | (11.04 | ) 
|                                                       |  |                            |        |    |      |   |        |   
|FINANCING ACTIVITIES                                   |  |                            |        |    |      |   |        |   
|Distribution to Members                                |  |                            | (28.00 | )  |      |   |       |   
|                                                       |  |                           
|NET DECREASE IN NET ASSETS:                            |  |                            | (30.35 | )  |      |   | (11.04 | ) 
|                                                       |  |                           
|NET ASSET VALUE, END OF PERIOD                         |  | $                          | 225.61 |    |      | $ | 305.17 |   
|                                                       |  |                            |        |    |      |   |        |   
|TOTAL NET ASSET VALUE RETURN(3), (4)                   |  |                            | (0.92  | )% |      |   | (3.49  | )%
|                                                       |  |                           
|RATIOS AND SUPPLEMENTAL DATA (5)                       |  |                            |        |    |      |   |        |   
|Net assets, end of period (000s)                      |  | $                          | 66,603 |    |      | $ | 90,088 |   
|Ratios to average net assets: (2)                      |  |                            |        |    |      |   |        |   
|Net expenses                                           |  |                            | 1.96   | %  |      |   | 2.42   | % 
|Net investment loss                                    |  |                            | 0.90   | %  |      |   | 0.72   | % 
|Portfolio Turnover Rate (3)                            |  |                            | 7.83   | %  |      |   | 0.76   | % 

---

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

|(2) | Annualized for periods less than a year.
|--- | ----------------------------------------

|(3) | Not annualized for periods less than a year.
|--- | --------------------------------------------

|(4) | Total net asset value return based on per unit net asset value reflects the effects of changes in net asset value based on the performance of the Company during the period, and
assumes dividends and distributions, if any, were reinvested. The Companys units were issued in a private placement and are not publicly traded. Therefore, the value total investment return is not presented.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Income and expense ratios do not reflect the Companys proportionate share of net investment income/(loss) and expenses, including any performance-based fees, of the Private
Investment Funds.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



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##### Table of Contents

EXCELSIOR VENTURE PARTNERS III, LLC

NOTES TO FINANCIAL STATEMENTS (Unaudited)

April 30, 2007

Note
1  Organization and 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 (as defined below) believes offer significant long-term capital appreciation potential. Venture capital
and private investment companies are companies in which the equity is closely held by company founders, management and/or a limited number of institutional investors. The Company does not have the right to demand that such equity securities be
registered.

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

The following is a summary of
the Companys significant accounting policies. Such policies are in conformity with 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.

The interim financial data as of April 30, 2007 and for the three and six months ended April 30, 2007 and April 30, 2006
is unaudited; however, in the opinion of the Company, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods.

A. Cash and Cash Equivalents:

Cash and cash equivalents consist of deposits with bank and highly liquid investments with original maturities of 90 days or less.

B. Investment Valuation:

The Company values portfolio
securities quarterly and at such other times as, in the Companys Board of Managers (the Board or Board of Managers or Managers) view, circumstances warrant. Securities for which market quotations are
readily available generally will be valued at the last sale price on the date of valuation or, if no sale occurred, at the mean of the latest bid and ask prices; provided that, as to such securities that may have legal, contractual or practical
restrictions on transfer, a discount of 10% to 40% from the public market price will be applied. Securities for which no public market exists and other assets will be valued at fair value as determined in good faith by the Investment Adviser or a
committee of the Board of Managers or both under the supervision of the Board of Managers pursuant to certain valuation procedures summarized below. Securities having remaining maturities of 60 days or less from the date of purchase are valued at
amortized cost.



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##### Table of Contents

B. Investment Valuation (continued)

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

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

At April 30, 2007 and October 31, 2006, market quotations were not readily available for securities valued at $51,029,580 or 76.62% of net assets and $61,466,377 or 81.35% 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.

C. 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.

D. 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, 2007 and October 31, 2006, 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, 2007 was $79,601,585, and those investments had net depreciation on a tax basis at April 30, 2007 of $32,252,121. The
cost basis for federal tax purposes of the Companys other investments at October 31, 2006 was $100,558,894 and those investments had net depreciation on a tax basis at October 31, 2006 of $38,794,561.



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##### Table of Contents

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

UST Advisers, Inc. (USTA) which has its principal offices at 225 High
Ridge Road, Stamford, Connecticut 06905, is a Delaware corporation and registered investment adviser (the Investment Adviser). The Investment Adviser is a wholly-owned subsidiary of United States Trust Company, National Association
(USTC-NA). USTC-NA is a wholly-owned subsidiary of U.S. Trust Corporation (U.S. Trust), a registered financial holding company, which has its principal offices at 114 West 47thStreet, New York, New York 10036-1532, and which is, in turn, a wholly-owned subsidiary of The Charles Schwab Corporation (Schwab), which has its
principal offices at 120 Kearney Street, San Francisco, California 94108.

Prior to December 16, 2005, U.S. Trust
Company, N.A., on behalf of its Asset Management Division served as the investment adviser to the Company (the former Investment Adviser) pursuant to an Investment Advisory Agreement (the Agreement). Effective
December 16, 2005, USTA assumed the duties of the former Investment Adviser.

Under the Agreement for the services
provided, the Investment Adviser is entitled to receive a management fee at an annual rate equal to 2.00% of the Companys end of the quarter net assets through the fifth anniversary of the first closing date of April 5, 2001, and 1.00% of
net assets thereafter. Prior to December 16, 2005 and pursuant to a sub-advisory agreement (the Sub-Advisory Agreement) among the Company, the former Investment Adviser, and United States Trust Company of New York (U.S. Trust
NY), U.S. Trust NY served as the investment sub-adviser (the Investment Sub-Adviser) to the Company and received an investment management fee from the former Investment Adviser and Investment Adviser. As of April 30, 2007 and
October 31, 2006, $162,402 and $190,458 were incurred and payable to the Investment Adviser and former Investment Adviser, respectively.

Prior to March 31, 2006, USTA was a wholly owned subsidiary of U.S. Trust Company, N.A. (UST-NA) and UST-NA and U.S. Trust NY were wholly-owned subsidiaries of U.S. Trust. Effective March 31,
2006, U.S. Trust NY converted into a national bank named United States Trust Company, National Association (USTC-NA) and UST-NA merged into USTC-NA. USTC-NA is the surviving entity and remains a wholly-owned subsidiary of U.S. Trust.

In addition to the management fee, the Investment Adviser is entitled to allocations and distributions equal to the Incentive Carried
Interest. The Incentive Carried Interest is an amount equal to 20% of the excess, if any, of the Companys cumulative realized capital gains on Direct Investments, over the sum of (a) cumulative realized capital losses on investments of
any type (b) cumulative gross unrealized capital depreciation on investments of any type (c) cumulative net expenses. Direct Investments means Company investments in domestic and foreign companies in which the equity is closely held by
company founders, management, and/or a limited number of institutional investors and negotiated private investments in public companies. As of April 30, 2007 and October 31, 2006, there was no Incentive Carried Interest earned by the
Investment Adviser.

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
$36,667 for taxation services and (iii) reimburses PFPC for out-of-pocket expenses.

Charles Schwab & Co.,
Inc. (the Distributor), the principal subsidiary of Schwab, serves 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 a $10,000 annual retainer and the Chairman of the Board receives an additional $1,000 annual retainer. Also, each member of the Board will receive $2,000 per quarterly meeting attended. In addition, each Board
member will receive $500 per quarterly telephonic meeting and $500 for any telephonic special



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##### Table of Contents

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

meeting. For each audit committee meeting attended, Board members will receive $1,500, while the Chairman of the Audit Committee will
receive an additional $1,000 retainer. Each member of the Board is reimbursed for expenses incurred for attending meetings. No person who is an officer, manager or employee of U.S. Trust, or its subsidiaries, who serves as an officer, manager or
employee of the Company receives any compensation from the Company.

As of April 30, 2007 and October 31, 2006,
Excelsior Venture Investors III, LLC, a non-diversified, closed end feeder fund to the company, had an investment in the Company of $42,281,909 and $47,969,297, respectively. This represents an ownership interest of 63.48% in the Company as of
both dates.

On December 16, 2004, Schwab entered into an agreement with the Company and other funds managed by the
former Investment Adviser whereby Schwab has funded 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.

On
November 20, 2006, Schwab announced an agreement to sell U.S. Trust, a wholly-owned subsidiary of Schwab, to Bank of America (the Sale). The Sale of U.S. Trust includes all of U.S. Trusts subsidiaries, including UST Advisers,
Inc., the Companys Investment Adviser. The Sale is subject to Federal Reserve Board and other regulatory approvals.

USTA will continue to serve as the investment adviser to the Company after the Sale, although U.S. Trust N.Y. will cease to serve as the Investment Sub-Adviser. However, due to the change in ownership of USTA and U.S. Trust N.Y., the Sale
may have the effect of terminating the existing investment advisory agreement between the Company and USTA. Accordingly, it is anticipated that the Company will enter into a new investment advisory agreement with USTA upon consummation of the Sale
(collectively, the New Advisory Agreement). The Board of Managers approved the New Advisory Agreement at its special meeting held on January 11, 2007. The proposed New Advisory Agreement was submitted to the members of the Company
for approval and a proxy statement providing further details with respect to the Sale and the proposed New Advisory Agreement was mailed to the members of the Company on or about February 8, 2007. At a special meeting held on March 15,
2007, the members of the Company approved the New Advisory Agreement and reelected the current members of the Board of Managers.

Note
3  Purchases and Sales of Securities

Excluding short-term investments, the Companys purchases and
sales of securities for the six months ended April 30, 2007, and April 30, 2006 were as follows:



|                          |  |               |  |             
|------------------------- |  | ------------- |  | ------------
|Six Month Ended April 30, |  | Purchases ($) |  | Proceeds ($)
|2007                      |  | 4,508,490     |  | 14,577,254  
|2006                      |  | 6,536,725     |  | 505,822     

Note 4  Commitments

As of April 30, 2007, the Company had outstanding investment commitments totaling $8,157,826.



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##### Table of Contents

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 dividends from affiliated companies during the six months ended April 30, 2007 and the year ended October 31, 2006. Transactions with companies, which are or were affiliates, were as follows:



|                                                 |  |                                                  |  |                       |                            |                                  |                  |                                                     |                     |                              |                                              |  |   |   |  |   |           |  |            |  |   |           
|------------------------------------------------ |  | ------------------------------------------------ |  | --------------------- | -------------------------- | -------------------------------- | ---------------- | --------------------------------------------------- | ------------------- | ---------------------------- | -------------------------------------------- |  | - | - |  | - | --------- |  | ---------- |  | - | ----------
|                                                 |  | Shares/Principal Amount Held at October 31, 2006 |  | October 31,2006
Value |                            | Purchases
/ConversionAcquisition |                  | For the Six Months Ended April 30, 2007 (Unaudited) |                     | April 30, 2007 Value(Note 1)
|Name of Investment                               |  |                                                  |  |                       | Sales Proceeds /Conversion |                                  | InterestReceived |                                                     | RealizedGain/(Loss) |                              | Shares/Principal Amount Held atApril 30 2007 | 
|Controlled Affiliates                            |  |                                                  |  |                       |                            |                                  |                  |                                                     |                     |                              |                                              |  |   |   |  |   |           |  |            |  |   |           
|Pilot Software Inc., Series A Preferred          |  | 46,362,656                                       |  | $                     | 8,110,096                  |                                  | $                |                                                    |                     | $                            | 11,450,000                                   |  | $ |  |  | $ | 2,943,761 |  |           |  | $ |          
|Pilot Software Inc., Bridge Note, 9%             |  | 1,404,600                                        |  |                       | 1,404,600                  |                                  |                  |                                                    |                     |                              | 1,357,489                                    |  |   |  |  |   | 349,032   |  |           |  |   |          
|LogicLibrary, Inc., Series A Preferred           |  | 7,762,821                                        |  |                       | 3,549,296                  |                                  |                  | 277,548                                             |                     |                              |                                             |  |   |  |  |   |          |  | 8,369,880  |  |   | 3,826,844 
|LogicLibrary, Inc., Series A-1 Preferred         |  | 3,080,464                                        |  |                       | 1,408,450                  |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 3,080,464  |  |   | 1,408,450 
|Cydelity Inc. Series A Preferred                 |  | 19,995,000                                       |  |                       |                           |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 19,995,000 |  |   |          
|Cydelity Inc. Series A-1 Preferred               |  | 19,702,277                                       |  |                       | 3,940,456                  |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 19,702,277 |  |   |          
|Cydelity Inc. Series A-2 Preferred               |  | 25,535,051                                       |  |                       | 2,500,009                  |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 25,535,051 |  |   | 1,600,000 
|Cydelity Inc., Common Stock                      |  | 1,000,000                                        |  |                       |                           |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 1,000,000  |  |   |          
|                                                 |  |                                                  |  |                       |                            |                                  |                  |                                                     |                     |                              |                                              |  |   |   |  |   |           |  |            |  |   |           
|Total Controlled Affiliates                      |  |                                                  |  | $                     | 20,912,907                 |                                  | $                | 277,548                                             |                     | $                            | 12,807,489                                   |  | $ |  |  | $ | 3,292,793 |  |            |  | $ | 6,835,294 
|                                                 |  |                                                  |  |                       |                            |                                  |                  |                                                    
|Non-Controlled Affiliates                        |  |                                                  |  |                       |                            |                                  |                  |                                                     |                     |                              |                                              |  |   |   |  |   |           |  |            |  |   |           
|                                                 |  |                                                  |  |                       |                            |                                  |                  |                                                    
|Chips & Systems, Inc., Series A Preferred        |  | 7,000,000                                        |  |                       |                           |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 7,000,000  |  |   |          
|Chips & Systems, Inc. Bridge Note                |  | 1,441,133                                        |  |                       |                           |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 1,441,133  |  |   |          
|Ethertronics, Inc., Series B Preferred           |  | 4,433,333                                        |  |                       | 6,650,000                  |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 4,433,333  |  |   | 6,650,000 
|Ethertronics, Inc., Series B Warrants            |  | 281,667                                          |  |                       |                           |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 281,667    |  |   |          
|Ethertronics, Inc., Series C Warrants            |  | 214,073                                          |  |                       |                           |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 214,073    |  |   |          
|Ethertronics, Inc., Series C Preferred           |  | 1,316,793                                        |  |                       | 1,975,190                  |                                  |                  | 571,746                                             |                     |                              |                                             |  |   |  |  |   |          |  | 1,697,957  |  |   | 2,546,936 
|Genoptix, Inc., Series 1-A Preferred             |  | 942,481                                          |  |                       | 950,822                    |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 942,481    |  |   | 950,822   
|Genoptix, Inc., Series 1-B Preferred             |  | 1,403,696                                        |  |                       | 950,822                    |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 1,403,696  |  |   | 950,822   
|Genoptix, Inc., Common Stock                     |  | 46,860                                           |  |                       |                           |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 46,860     |  |   |          
|Genoptix, Inc., Series 1-C Preferred             |  | 620,580                                          |  |                       | 554,178                    |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 620,580    |  |   | 554,178   
|Genoptix, Inc., Series 1-D Preferred             |  | 728,413                                          |  |                       | 461,815                    |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 728,413    |  |   | 461,815   
|MIDAS Vision Systems, Inc., Series A-1 Preferred |  | 933,593                                          |  |                       |                           |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 933,593    |  |   |          
|MIDAS Vision Systems, Inc., Common Stock         |  | 157,396                                          |  |                       |                           |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 157,396    |  |   |          
|NanoOpto Corp., Series A-1 Preferred             |  | 956,234                                          |  |                       | 840,912                    |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 956,234    |  |   | 840,912   
|NanoOpto Corp., Series B Preferred               |  | 3,023,399                                        |  |                       | 1,286,155                  |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 3,023,399  |  |   | 1,286,155 
|NanoOpto Corp., Series C Preferred               |  | 1,682,470                                        |  |                       | 733,389                    |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 1,682,470  |  |   | 733,389   
|NanoOpto Corp., Series C Warrants                |  | 229,410                                          |  |                       |                           |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 229,410    |  |   |          
|NanoOpto Corp., Series D Preferred               |  | 1,234,263                                        |  |                       | 382,622                    |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 1,234,263  |  |   | 382,622   
|NanoOpto Corp., Bridge Note                      |  |                                                 |  |                       |                           |                                  |                  | 237,321                                             |                     |                              |                                             |  |   |  |  |   |          |  | 237,321    |  |   | 237,321   
|OpVista, Inc., Series AA Preferred               |  | 5,089,790                                        |  |                       | 5,367,967                  |                                  |                  | 526,227                                             |                     |                              |                                             |  |   |  |  |   |          |  | 5,683,907  |  |   | 6,742,193 
|OpVista, Inc., Common Stock                      |  | 1,079,541                                        |  |                       | 1,138,542                  |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 1,079,541  |  |   | 1,280,541 
|OpVista, Inc., Series BB Convertible Preferred   |  |                                                 |  |                       |                           |                                  |                  | 491,800                                             |                     |                              |                                             |  |   |  |  |   |          |  | 433,399    |  |   | 514,094   
|Silverback Systems, Inc., Series B               |  |                                                 |  |                       | 1,600,000                  |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  |           |  |   |          
|Tensys Medical, Inc., Bridge Note                |  | 52,017                                           |  |                       | 52,017                     |                                  |                  | 59,039                                              |                     |                              |                                             |  |   |  |  |   |          |  | 52,017     |  |   | 111,056   
|Tensys Medical, Inc., Series C Preferred         |  | 4,166,667                                        |  |                       | 1,887,160                  |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 4,166,667  |  |   | 1,887,160 
|Tensys Medical, Inc., Series D Preferred         |  | 1,187,500                                        |  |                       | 537,840                    |                                  |                  |                                                    |                     |                              |                                             |  |   |  |  |   |          |  | 1,187,500  |  |   | 537,840   
|                                                 |  |                                                  |  |                       |                            |                                  |                  |                                                     |                     |                              |                                              |  |   |   |  |   |           |  |            |  |   |           
|Total Non-Controlled Affiliates                  |  |                                                  |  | $                     | 25,369,431                 |                                  | $                | 1,886,133                                           |                     | $                            |                                             |  | $ |  |  | $ |          |  |            |  | $ | 26,667,856
|                                                 |  |                                                  |  |                       |                            |                                  |                  |                                                     |                     |                              |                                              |  |   |   |  |   |           |  |            |  |   |           



18



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##### Table of Contents

|                                                 |  |                                               |  |                        |                             |                                     |   |                                               |  |                                |             |   |                                                  |   |        |  |   |            |   |  |            |  |   |           
|------------------------------------------------ |  | --------------------------------------------- |  | ---------------------- | --------------------------- | ----------------------------------- | - | --------------------------------------------- |  | ------------------------------ | ----------- | - | ------------------------------------------------ | - | ------ |  | - | ---------- | - |  | ---------- |  | - | ----------
|                                                 |  | Shares/PrincipalAmount Held atOctober 31,2005 |  | October 31, 2005 Value |                             | Purchases / Conversion Acquisitions |   | For the Year Ended October 31, 2006 (Audited) |  | October 31,2006 Value (Note 1)
|Name of Investment                               |  |                                               |  |                        | Sales / Conversion Proceeds |                                     |   | InterestReceived                              |  | Realized Gain (Loss)           |             |   | Shares/Principal Amount Held at October 31, 2006 |  
|Controlled Affiliates                            |  |                                               |  |                        |                             |                                     |   |                                               |  |                                |             |   |                                                  |   |        |  |   |            |   |  |            |  |   |           
|Pilot Software Inc., Series A Preferred          |  | 46,362,656                                    |  | $                      | 8,110,096                   |                                     | $ |                                              |  | $                              |            |   |                                                  | $ |       |  | $ |           |   |  | 46,362,656 |  | $ | 8,110,096 
|Pilot Software Inc., Bridge Note, 9%             |  |                                              |  |                        |                            |                                     |   | 1,404,600                                     |  |                                |            |   |                                                  |   | 19,484 |  |   |           |   |  | 1,404,600  |  |   | 1,404,600 
|LogicLibrary, Inc., Series A Preferred           |  | 6,530,581                                     |  |                        | 2,985,916                   |                                     |   | 563,380                                       |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 7,762,821  |  |   | 3,549,296 
|LogicLibrary, Inc., Series A-1 Preferred         |  | 3,080,464                                     |  |                        | 1,408,450                   |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 3,080,464  |  |   | 1,408,450 
|Cydelity Inc. Series A Preferred                 |  | 19,995,000                                    |  |                        |                            |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 19,995,000 |  |   |          
|Cydelity Inc. Series A-1 Preferred               |  |                                              |  |                        |                            |                                     |   | 3,940,456                                     |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 19,702,277 |  |   | 3,940,456 
|Cydelity Inc. Series A-2 Preferred               |  |                                              |  |                        |                            |                                     |   | 2,500,009                                     |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 25,535,051 |  |   | 2,500,009 
|Cydelity Inc. Common Stock                       |  | 1,000,000                                     |  |                        |                            |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 1,000,000  |  |   |          
|Cydelity Inc. Series A Warrants                  |  | 7,500,000                                     |  |                        |                            |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  |           |  |   |          
|Cydelity Inc., Bridge Note, 8%                   |  | 3,000,000                                     |  |                        | 3,000,000                   |                                     |   | 700,000                                       |  |                                | (3,700,000  | ) |                                                  |   |       |  |   |           |   |  |           |  |   |          
|                                                 |  |                                               |  |                        |                             |                                     |   |                                               |  |                                |             |   |                                                  |   |        |  |   |            |   |  |            |  |   |           
|Total Controlled Affiliates                      |  |                                               |  | $                      | 15,504,462                  |                                     | $ | 9,108,445                                     |  | $                              | (3,700,000  | ) |                                                  | $ | 19,484 |  | $ |           |   |  |            |  | $ | 20,912,907
|                                                 |  |                                               |  |                        |                             |                                     |   |                                              
|Non-Controlled Affiliates                        |  |                                               |  |                        |                             |                                     |   |                                               |  |                                |             |   |                                                  |   |        |  |   |            |   |  |            |  |   |           
|Chips & Systems, Inc., Series A Preferred        |  | 7,000,000                                     |  | $                      |                            |                                     | $ |                                              |  | $                              |            |   |                                                  |   |       |  | $ |           |   |  | 7,000,000  |  | $ |          
|Chips & Systems, Inc. Bridge Note                |  | 1,441,133                                     |  |                        |                            |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 1,441,133  |  |   |          
|Ethertronics, Inc., Series B Preferred           |  | 4,433,333                                     |  |                        | 6,650,000                   |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 4,433,333  |  |   | 6,650,000 
|Ethertronics, Inc., Series B Warrants            |  | 281,667                                       |  |                        |                            |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 281,667    |  |   |          
|Ethertronics, Inc., Series C Warrants            |  | 163,580                                       |  |                        |                            |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 214,073    |  |   |          
|Ethertronics, Inc., Bridge Note                  |  |                                              |  |                        |                            |                                     |   | 500,000                                       |  |                                | (500,000    | ) |                                                  |   |       |  |   |           |   |  |           |  |   |          
|Ethertronics, Inc., Series C Preferred           |  | 980,172                                       |  |                        | 1,470,258                   |                                     |   | 504,932                                       |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 1,316,793  |  |   | 1,975,190 
|Genoptix, Inc., Series 1-A Preferred             |  | 942,481                                       |  |                        | 950,822                     |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 942,481    |  |   | 950,822   
|Genoptix, Inc., Series 1-B Preferred             |  | 1,403,696                                     |  |                        | 950,822                     |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 1,403,696  |  |   | 950,822   
|Genoptix, Inc., Common Stock                     |  | 46,860                                        |  |                        |                            |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 46,860     |  |   |          
|Genoptix, Inc., Series 1-C Preferred             |  | 620,580                                       |  |                        | 554,178                     |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 620,580    |  |   | 554,178   
|Genoptix, Inc., Series 1-D Preferred             |  | 728,413                                       |  |                        | 461,815                     |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 728,413    |  |   | 461,815   
|LightConnect, Inc., Series B Preferred           |  | 4,330,504                                     |  |                        | 5,000,000                   |                                     |   |                                              |  |                                | (5,000,000  | ) |                                                  |   |       |  |   | (3,771,140 | ) |  |           |  |   |          
|LightConnect, Inc., Series C Preferred           |  | 12,292,441                                    |  |                        | 992,000                     |                                     |   |                                              |  |                                | (992,000    | ) |                                                  |   |       |  |   | (748,194   | ) |  |           |  |   |          
|MIDAS Vision Systems, Inc., Series A-1 Preferred |  | 933,593                                       |  |                        |                            |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 933,593    |  |   |          
|MIDAS Vision Systems, Inc., Common Stock         |  | 157,396                                       |  |                        |                            |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 157,396    |  |   |          
|NanoOpto Corp., Series A-1 Preferred             |  | 956,234                                       |  |                        | 1,116,350                   |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 956,234    |  |   | 840,912   
|NanoOpto Corp., Series B Preferred               |  | 3,023,399                                     |  |                        | 1,286,155                   |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 3,023,399  |  |   | 1,286,155 
|NanoOpto Corp., Series C Preferred               |  | 1,682,470                                     |  |                        | 733,389                     |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 1,682,470  |  |   | 733,389   
|NanoOpto Corp., Series C Warrants                |  | 229,410                                       |  |                        |                            |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 229,410    |  |   |          
|NanoOpto Corp., Series D Preferred               |  |                                              |  |                        |                            |                                     |   | 382,622                                       |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 1,234,263  |  |   | 382,622   
|OpVista, Inc., Series AA Preferred               |  |                                              |  |                        |                            |                                     |   | 4,508,179                                     |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 5,089,790  |  |   | 5,367,967 
|OpVista, Inc., Series B Preferred                |  | 5,333,333                                     |  |                        |                            |                                     |   |                                              |  |                                | (4,000,000  | ) |                                                  |   |       |  |   |           |   |  |           |  |   |          
|OpVista, Inc., Series C Preferred                |  | 12,671,059                                    |  |                        | 5,000,000                   |                                     |   |                                              |  |                                | (2,500,000  | ) |                                                  |   |       |  |   |           |   |  |           |  |   |          
|OpVista, Inc., Series D Preferred                |  | 10,368,483                                    |  |                        | 1,058,000                   |                                     |   | 1,058,000                                     |  |                                | (1,058,000  | ) |                                                  |   |       |  |   |           |   |  |           |  |   |          
|OpVista, Inc., Series E Preferred                |  | 15,935,224                                    |  |                        | 1,626,030                   |                                     |   | 1,626,030                                     |  |                                | (1,626,031  | ) |                                                  |   |       |  |   |           |   |  |           |  |   |          
|OpVista, Inc., Common Stock                      |  |                                              |  |                        |                            |                                     |   | 9,184,031                                     |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 1,079,541  |  |   | 1,138,542 
|OpVista, Inc., 8% Bridge Note                    |  |                                              |  |                        |                            |                                     |   | 1,727,599                                     |  |                                | (1,727,599  | ) |                                                  |   |       |  |   |           |   |  |           |  |   |          
|OpVista, Inc., Warrants                          |  |                                              |  |                        |                            |                                     |   | 8,681                                         |  |                                | (8,681      | ) |                                                  |   |       |  |   | (8,681     | ) |  |           |  |   |          
|Silverback Systems, Inc., Common                 |  |                                              |  |                        |                            |                                     |   | 4,759,081                                     |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 40,026     |  |   |          
|Silverback Systems, Inc., Series B               |  |                                              |  |                        |                            |                                     |   | 1,500,781                                     |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 559,993    |  |   | 1,600,000 
|Silverback Systems, Inc., Series A-2 Preferred   |  |                                              |  |                        |                            |                                     |   | 2,070,310                                     |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 772,503    |  |   |          
|Silverback Systems, Inc., Series C Preferred     |  | 34,364,257                                    |  |                        | 3,333,333                   |                                     |   |                                              |  |                                | (3,343,467  | ) |                                                  |   |       |  |   |           |   |  |           |  |   |          
|Silverback Systems, Inc., 5% Bridge Notes        |  | 1,969,206                                     |  |                        | 1,969,206                   |                                     |   | 300,000                                       |  |                                | (2,269,206  | ) |                                                  |   |       |  |   |           |   |  |           |  |   |          
|Silverback Systems, Inc., Series C Warrant       |  | 4,173,033                                     |  |                        | 196                         |                                     |   |                                              |  |                                | (196        | ) |                                                  |   |       |  |   | (195       | ) |  |           |  |   |          
|Tensys Medical, Inc., Bridge Note                |  |                                              |  |                        |                            |                                     |   | 52,017                                        |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 52,017     |  |   | 52,017    
|Tensys Medical, Inc., Series C Preferred         |  | 4,166,667                                     |  |                        | 1,887,160                   |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 4,166,667  |  |   | 1,887,160 
|Tensys Medical, Inc., Series D Preferred         |  | 1,187,500                                     |  |                        | 537,840                     |                                     |   |                                              |  |                                |            |   |                                                  |   |       |  |   |           |   |  | 1,187,500  |  |   | 537,840   
|                                                 |  |                                               |  |                        |                             |                                     |   |                                               |  |                                |             |   |                                                  |   |        |  |   |            |   |  |            |  |   |           
|Total Non-Controlled Affiliates                  |  |                                               |  | $                      | 36,993,169                  |                                     | $ | 28,182,263                                    |  | $                              | (24,440,795 | ) |                                                  | $ | 0      |  | $ | (4,528,210 | ) |  |            |  | $ | 25,369,431
|                                                 |  |                                               |  |                        |                             |                                     |   |                                               |  |                                |             |   |                                                  |   |        |  |   |            |   |  |            |  |   |           



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Note 6  Pending Litigation

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

The class and
derivative actions described above were transferred to the United States District Court for the District of Maryland for coordinated and consolidated pre-trial proceedings. In November 2005, the Maryland court dismissed many of the plaintiffs
claims in both the class action and derivative lawsuits. Several affiliates of the former Investment Adviser and individual defendants have also been dismissed. Plaintiffs claims under Sections 10(b) and 20(a) of the Securities Exchange Act of
1934, as amended, and under Section 36(b) and 48(a) of the Investment Company Act of 1940, as amended, however, have not been dismissed.

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

Note 7  Guarantees

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

Note
8  New Accounting Pronouncements

The Financial Accounting Standards Board (FASB) issued Interpretation
48 in July 2006, Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position must meet before
being recognized in the financial statements. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is in the process of evaluating the effects of the adoption of FIN 48 on the financial statements.

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

FASB issued Statement No. 159 in February 2007, the Fair Value Option for Financial Assets and Financial Liabilities, which is effective for Financial Statements issued for fiscal year
beginning after November 15, 2007. SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value, with changes in fair value recognized in earnings. The Company intends to early adopt SFAS 159
as of January 1, 2007. The Company is reviewing the statement and its impact on the financial statements.



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##### Table of Contents

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

For the Six
months and Three months Ended April 30, 2007 as Compared to the Similar Periods in 2006

Realized and Unrealized Gains and Losses from Portfolio
Investments

For the six months ended April 30, 2007 and 2006, respectively the Company had a net realized
(loss)/gain on security transactions of ($4,109,593) and $9,846, respectively. For the six months ended April 30, 2007 and 2006, respectively the Company had a net change in unrealized appreciation/(depreciation) on investments of $3,741,560
and ($2,938,770), respectively. The net realized loss for the six months ended April 30, 2007 was principally the result of the Companys sale of Silverback Systems, Inc, a private company investment which resulted in a realized loss of
($7,580,196). This loss was partially offset by a realized gain of $3,292,793 from the Companys sale of Pilot Software Inc., another private company investment. The net realized gain for the six months ended April 30, 2006 was principally
the result of the Companys additional distribution received from the Companys sale of Gyration, a private company investment which was partially offset by realized loss from the sale of stock distributed by the Companys private
investment funds. The net change in unrealized appreciation for the six months ended April 30, 2007 was principally the combination of: i) the sale of Silverback Systems Inc., a private company investment, which resulted in a decrease in
unrealized depreciation of $6,730,172 due to the reclassification from an unrealized loss to realized loss; ii) a decrease of $4,840,465 due to the write-down of Cydelity, Inc a private company investment; and iii) an increase of $1,012,291 due to
the write-up of OpVista Inc., a private company investment. The net change in unrealized depreciation for the period ended April 30, 2006 was principally the result of a decrease in the valuation of Nano Opto Corporation of ($873,732), and
Silverback Systems, Inc of ($2,134,094) both private company investments.

For the three months ended April 30, 2007
and 2006, respectively the Company had a net realized gain/(loss) on security transactions of $3,292,107 and ($5,867), respectively. For the three months ended April 30, 2007 and 2006, respectively the Company had a net change in unrealized
(depreciation) on investments of ($1,915,488) and ($2,024,990), respectively. The net realized gain for the three-month period ended April 30, 2007 was principally the result of a distribution of $3,292,793 from the Companys sale of Pilot
Software Inc., another private company investment. The net realized loss for the three months ended April 30, 2006 was principally the result of the sale of stock distributed by the Companys private investment funds. The net change in
unrealized depreciation for the period ended April 30, 2007 was principally the result of a reclassification of $3,736,394 of unrealized appreciation on the Companys investment in Pilot Software Inc. to realized gains. This change was
offset by an increase in unrealized appreciation of $1,012,291 due to the write-up of OpVista Inc., a private company investment. The net change in unrealized depreciation for the three months ended April 30, 2006 was principally the result of
a decrease in the valuation of Silverback Systems, Inc. of ($2,134,094), a private company investment.

Investment Income and Expenses

For the six months ended April 30, 2007, the Company had investment income of $380,078 and operating expenses of $705,039,
resulting in a net investment loss of ($324,961). In comparison, for the similar period ended April 30, 2006, the Company had investment income of $779,273 and operating expenses of $1,111,062, resulting in a net investment loss of ($331,789).
The decrease in net investment income resulted from a decrease in short-term investments purchased and matured during the period. 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 and was slightly offset by increases in other operating expenses.

For the three months ended April 30, 2007, the Company had investment income of $164,929 and net operating expenses of $324,427
resulting in a net investment loss of ($159,498). In comparison, for the similar period ended April 30, 2006, the Company had investment income of $392,904 and net operating expenses of $526,666, resulting in a net investment loss of
($133,762). The decrease in net investment income for the three months ended April 30, 2007 was a result of a decrease in short-term interest income. The decrease in operating expenses was primarily due to a decline in management fees which
resulted from a reduced level of net assets under management during the period and was slightly offset by increases in other operating expenses.



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Investment Income and Expenses (continued)

USTA and the Investment Sub-Adviser, provide investment management and administrative services required for the operation of the Company.
In consideration of the services rendered by the Investment Adviser and the Investment Sub-Adviser, 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 months ended April 30, 2007 and 2006,
the Investment Adviser, the former Investment Adviser and the Investment Sub-Adviser earned $348,046 and $843,118 in management fees, respectively. Management fees, recorded during the six months ended April 30, 2007 decreased over the six
months ended April 30, 2006 due to a decrease in net assets. For the three months ended April 30, 2007 and 2006, the Investment Advisers earned $162,402 and $378,063 in management fees, respectively. Management fees recorded during the
three months ended April 30, 2007 decreased over the three months ended April 30, 2006 due to a decline in net assets under management.

Net
Assets

At April 30, 2007, the Companys net assets were $66,603,218, or a net asset value per unit of
membership interest of $225.61. This represents a decrease of $8,958,874 bringing net assets to $75,562,092, or a net asset value per unit of membership interest of $255.96, at October 31, 2006. The decrease resulted principally from a
distribution to shareholders of $28.00 per share, which ultimately reduced net assets by $8,265,880.

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, 2007, the Company held $165,071 in cash and
cash equivalents and $11,146,315 in short-term investments as compared to $2,934 held in cash and cash equivalents and $14,422,438 in short-term investments at October 31, 2006. The decrease in short-term investments from October 31, 2006
was principally due to follow-on investments in private companies as well as capital calls for private investment funds. The Company, during this period funded additional capital, totaling $2,344,809, per its commitments to the 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, 2007, has contributed $17,542,174 or 68.3 % of the total capital committed since
inception. The Company also participated in follow-on financing rounds, totaling $2,163,682, for several of its private companies.

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 76.62% of the Companys net assets. For the private investments held at April 30, 2007, changes to these estimates, i.e. changes in the
valuations of these private investments, resulted in a $3,741,560 increase in net asset value from October 31, 2006.

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.



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Application of Critical Accounting Policies (continued)

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, both under the supervision of the Board, and, in any event, not less frequently than quarterly. However, there can be no
assurance that such value will represent the return that might ultimately be realized by the Company from the investments.

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

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Equity Price Risk

The Company anticipates that a majority of its investment portfolio will consist of securities in private companies and private investment
funds, currently representing 76.62% of net assets, which are not publicly traded. These investments are recorded at fair value as determined by the Investment Adviser in accordance with valuation guidelines adopted by the Board of Managers. This
method of valuation does not result in increases or decreases in the fair value of these securities in response to changes in market prices. Thus, these securities are not subject to equity price risk normally associated with public equity markets,
except that to the extent that the private investment funds hold underlying public securities, the Company is indirectly exposed to equity price risk associated with the public markets. At April 30, 2007 and October 31, 2006 the Company
was not subject to equity price risk normally associated with public equity markets, except to the extent that the private investment funds that the Company has invested in has, from time to time, interests in securities which may be publicly
traded.

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and
Procedures. As of April 30, 2007 (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 the Securities Exchange Act of 1934 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.



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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 2. Changes in Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

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

A special meeting of members of the Company was held at the
offices of the Company, 225 High Ridge Road, Stamford, Connecticut 06905 on March 15, 2007 (the Meeting). Of the 295,210 units of interest outstanding as of January 12, 2007, the record date for the Meeting, 236,309 were
present or represented by proxy at the Meeting. Members of the Company approved the following matter: election of each of Mr. Hover, Mr. Bernstein, Mr. Murphy and Mr. Imbimbo as Managers of the Company. The results of the voting
for this proposal were as follows:



|                       |  |             |  |          
|---------------------- |  | ----------- |  | ---------
|                       |  | For         |  | Withheld 
|Gene M. Bernstein      |  | 233,400.121 |  | 2,908.879
|John C. Hover II       |  | 233,400.121 |  | 2,908.879
|Stephen V. Murphy      |  | 233,400.121 |  | 2,908.879
|Victor F. Imbimbo, Jr. |  | 233,400.121 |  | 2,908.879

Item 5. Other Information.

None.

Item 6. Exhibits and Reports on Form 8-K.



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



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



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



| | 32 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
| | -- | -----------------------------------------------------------------------------------------------------------------------



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

On February 2, 2007, the Company filed a
Current Report on Form 8-K to report under Item 4.01 certain disclosures.

On February 16, 2007, the Company filed a Current Report on Form 8-K
to report under Items 4.01 and 9.01 certain disclosures.

On March 29, 2007, the Company filed a Current Report on Form 8-K to report under
Item 5.02 a departure of the chief financial officer.

On April 17, 2007, the Company filed a Current Report on Form 8-K to report under
Item 5.02 the appointment of a chief financial officer.



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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, 2007 |  |  |  | By:                                 |  | /s/ David R. Bailin        
|                    |  |  |  |                                     |  | David R. Bailin            
|                    |  |  |  |                                     |  | Co-Chief Executive Officer 
|                    |  |  | 
|Date: June 14, 2007 |  |  |  | By:                                 |  | /s/ Raghav V. Nandagopal   
|                    |  |  |  |                                     |  | Raghav V. Nandagopal       
|                    |  |  |  |                                     |  | Co-Chief Executive Officer 
|                    |  |  | 
|Date: June 14, 2007 |  |  |  | By:                                 |  | /s/ Steven L. Suss         
|                    |  |  |  |                                     |  | Steven L. Suss             
|                    |  |  |  |                                     |  | Principal Financial Officer



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