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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 10-Q



(Mark One)

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



For the quarterly period ended July 31, 2005



OR



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



For the transition period from
 to



Commission file number 000-29665



EXCELSIOR VENTURE PARTNERS III, LLC

(Exact Name of Registrant as Specified in Its Charter)



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



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



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

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



Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.    Yes  x    No ̈



Indicate by check mark
whether the Registrant is an accelerated filer (as defined by Rule 12b-2 of the Act).     Yes ̈No  x



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



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##### Table of Contents

EXCELSIOR VENTURE PARTNERS III, LLC



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



|         |  |                                                                                                      |  |         
|-------- |  | ---------------------------------------------------------------------------------------------------- |  | --------
|         |  | INDEX                                                                                                |  | PAGE NO.
|         |  |                                                                                                     
|PART I.  |  | FINANCIAL INFORMATION                                                                                |  |         
|         |  |                                                                                                     
|Item 1.  |  | Financial Statements                                                                                 |  | 1       
|         |  |                                                                                                     
|         |  | Portfolios of Investments as of July 31, 2005 and October 31, 2004                                   |  | 2       
|         |  |                                                                                                     
|         |  | Statements of Assets and Liabilities at July 31, 2005 and October 31, 2004                           |  | 9       
|         |  |                                                                                                     
|         |  | Statements of Operations for the nine-month periods ended July 31, 2005 and July 31, 2004            |  | 10      
|         |  |                                                                                                     
|         |  | Statements of Operations for the three-month periods ended July 31, 2005 and July 31, 2004           |  | 11      
|         |  |                                                                                                     
|         |  | Statements of Changes in Net Assets for the nine-month periods ended July 31, 2005 and July 31, 2004 |  | 12      
|         |  |                                                                                                     
|         |  | Statements of Cash Flows for the nine-month periods ended July 31, 2005 and July 31, 2004            |  | 13      
|         |  |                                                                                                     
|         |  | Financial Highlights for the nine-month periods ended July 31, 2005 and July 31, 2004                |  | 14      
|         |  |                                                                                                     
|         |  | Notes to Financial Statements                                                                        |  | 15      
|         |  |                                                                                                     
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                |  | 21      
|         |  |                                                                                                     
|Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                                           |  | 24      
|         |  |                                                                                                     
|Item 4.  |  | Controls and Procedures                                                                              |  | 24      
|         |  |                                                                                                     
|PART II. |  | OTHER INFORMATION                                                                                    |  |         
|         |  |                                                                                                     
|Item 1.  |  | Legal Proceedings                                                                                    |  | 24      
|         |  |                                                                                                     
|Item 2.  |  | Changes in Securities and Use of Proceeds                                                            |  | 24      
|         |  |                                                                                                     
|Item 3.  |  | Defaults Upon Senior Securities                                                                      |  | 24      
|         |  |                                                                                                     
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                  |  | 24      
|         |  |                                                                                                     
|Item 5.  |  | Other Information                                                                                    |  | 24      
|         |  |                                                                                                     
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                                     |  | 25      



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##### Table of Contents

PART I. FINANCIAL INFORMATION



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



Excelsior Venture Partners III, LLC

Portfolio of Investments
(Unaudited)



|                                 |  |               |            |                      |        |  
|-------------------------------- |  | ------------- | ---------- | -------------------- | ------ | -
|                                 |  | July 31, 2005 |           
|                                 |  | Value         |            | Percent of NetAssets |       
|PORTFOLIO STRUCTURE              |  |               |            |                      |        |  
|SHORT-TERM INVESTMENTS:          |  |               |            |                      |        |  
|MONEY MARKET INSTRUMENTS         |  | $             | 28,814,645 |                      | 29.94  | %
|INVESTMENT COMPANIES             |  |               | 1,564,210  |                      | 1.63   | %
|                                 |  |               |            |                      |        |  
|TOTAL SHORT-TERM INVESTMENTS     |  |               | 30,378,855 |                      | 31.57  | %
|PRIVATE COMPANIES                |  |               | 57,196,131 |                      | 59.43  | %
|PRIVATE INVESTMENT FUNDS         |  |               | 7,882,841  |                      | 8.19   | %
|                                 |  |               |            |                      |        |  
|TOTAL INVESTMENTS                |  |               | 95,457,827 |                      | 99.19  | %
|OTHER ASSETS & LIABILITIES (NET) |  |               | 781,410    |                      | 0.81   | %
|                                 |  |               |            |                      |        |  
|NET ASSETS                       |  | $             | 96,239,237 |                      | 100.00 | %
|                                 |  |               |            |                      |        |  



Excelsior Venture Partners III, LLC

Portfolio of Investments



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



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



1



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments as of July 31, 2005 (Unaudited)



|                       |                                         |  |                                                                         |                     |                                |                |   |           
|---------------------- | --------------------------------------- |  | ----------------------------------------------------------------------- | ------------------- | ------------------------------ | -------------- | - | ----------
|PrincipalAmount/Shares |                                         |  |                                                                         | Acquisition Date ## |                                | Value (Note 1)
|                       | TOTAL MONEY MARKET INSTRUMENTS  29.94% |  |                                                                         |                     |                                |               
|$                      | 5,000,000                               |  | Danske Commercial Paper, 3.26%, 8/1/05 (Cost $5,000,000)                |                     |                                |                | $ | 5,000,000 
|                       | 5,165,000                               |  | UBS Financial Commercial Paper, 3.25%, 8/5/05 (Cost $5,163,135)         |                     |                                |                |   | 5,163,135 
|                       | 5,000,000                               |  | First Tennessee Bank CD, 3.31%, 8/10/05 (Cost $5,000,000)               |                     |                                |                |   | 5,000,000 
|                       | 1,000,000                               |  | Morgan Stanley Commercial Paper, 3.31%, 8/10/05 (Cost $999,172)         |                     |                                |                |   | 999,172   
|                       | 5,000,000                               |  | Dexia Delaware Commercial Paper, 3.29%, 8/12/05 (Cost $4,994,973)       |                     |                                |                |   | 4,994,973 
|                       | 1,000,000                               |  | Royal Bank of Scotland Commercial Paper, 3.28%, 8/12/05 (Cost $998,998) |                     |                                |                |   | 998,998   
|                       | 1,660,000                               |  | Federal Home Loan Bank Discount Note, 3.22%, 8/12/05 (Cost $1,658,367)  |                     |                                |                |   | 1,658,367 
|                       | 5,000,000                               |  | Washington Mutual Bank Note, 3.40%, 9/6/05 (Cost $5,000,000)            |                     |                                |                |   | 5,000,000 
|                       |                                         |  |                                                                         |                     |                                |                |   |           
|                       |                                         |  | TOTAL MONEY MARKET INSTRUMENTS (COST $28,814,645)                       |                     |                                |                |   | 28,814,645
|                       |                                         |  |                                                                         |                     |                                |                |   |           
|                       |                                         | 
|                       | PRIVATE COMPANIES **, #, @  59.43%     |  |                                                                         |                     |                                |               
|                       | Common Stocks  0.00%                   |  |                                                                         |                     |                                |               
|                       | Capital Equipment  0.00%               |  |                                                                         |                     |                                |               
|                       | 157,396                                 |  | MIDAS Vision Systems, Inc.                                              |                     | 03/03                          |                |   |          
|                       |                                         |  |                                                                         |                     |                                |                |   |           
|                       | Life Sciences  0.00%                   |  |                                                                         |                     |                                |               
|                       | 46,860                                  |  | Genoptix, Inc                                                           |                     | 07/03                          |                |   |          
|                       |                                         |  |                                                                         |                     |                                |                |   |           
|                       |                                         |  | TOTAL COMMON STOCKS (Cost $4,000,000)                                   |                     |                                |                |   |          
|                       |                                         |  |                                                                         |                     |                                |                |   |           
|                       | Preferred Stocks  50.65%               |  |                                                                         |                     |                                |               
|                       | Capital Equipment  0.00%               |  |                                                                         |                     |                                |               
|                       | 933,593                                 |  | MIDAS Vision Systems, Inc., Series A-1                                  |                     | 03/03                          |                |   |          
|                       |                                         |  |                                                                         |                     |                                |                |   |           
|                       | Enterprise Software  10.29%            |  |                                                                         |                     |                                |               
|                       | 19,995,000                              |  | ***Cydelity Inc., Series A (fka Datanautics, Inc.)                      |                     | 01/04                          |                |   |          
|                       | 8,532,883                               |  | LogicLibrary, Inc., Series A                                            |                     | 01/02, 08/03,05/04, 12/04,2/05 |                |   | 3,901,408 
|                       | 46,362,656                              |  | ***Pilot Software Inc., Series A                                        |                     | 05/02, 04/03,                  |                |   |           
|                       |                                         |  |                                                                         |                     | 05,05, 06/05                   |                |   | 6,000,000 
|                       |                                         |  |                                                                         |                     |                                |                |   |           
|                       |                                         |  |                                                                         |                     |                                |                |   | 9,901,408 
|                       |                                         |  |                                                                         |                     |                                |                |   |           
|                       | Information Services  0.00%            |  |                                                                         |                     |                                |               
|                       | 4,425                                   |  | Cenquest, Inc., Series 2                                                |                     | 7/01                           |                |   |          
|                       |                                         |  |                                                                         |                     |                                |                |   |           
|                       | Life Sciences  5.05%                   |  |                                                                         |                     |                                |               
|                       | 1,999,999                               |  | Archemix Corporation, Inc., Series A                                    |                     | 08/02,01/03, 11/03             |                |   | 1,999,999 
|                       | 466,666                                 |  | Archemix Corporation, Inc., Series B                                    |                     | 03/04 & 09/04                  |                |   | 466,666   
|                       | 942,481                                 |  | Genoptix, Inc., Series 1-A                                              |                     | 12/01                          |                |   | 501,400   
|                       | 1,403,696                               |  | Genoptix, Inc., Series 1-B                                              |                     | 07/03,09/03, 12/03             |                |   | 877,450   
|                       | 620,580                                 |  | Genoptix, Inc., Series 1-C                                              |                     | 08/04 & 01/05                  |                |   | 554,178   
|                       | 728,413                                 |  | Genoptix, Inc., Series 1-D                                              |                     | 05/05                          |                |   | 461,813   
|                       |                                         |  |                                                                         |                     |                                |                |   |           
|                       |                                         |  |                                                                         |                     |                                |                |   | 4,861,506 
|                       |                                         |  |                                                                         |                     |                                |                |   |           
|                       | Medical Technology  6.68%              |  |                                                                         |                     |                                |               
|                       | 4,166,667                               |  | Tensys Medical, Inc., Series C                                          |                     | 03/02                          |                |   | 5,000,000 
|                       | 1,187,500                               |  | Tensys Medical, Inc., Series D                                          |                     | 05/04                          |                |   | 1,425,000 
|                       |                                         |  |                                                                         |                     |                                |                |   |           
|                       |                                         |  |                                                                         |                     |                                |                |   | 6,425,000 
|                       |                                         |  |                                                                         |                     |                                |                |   |           
|                       | Optical  15.93%                        |  |                                                                         |                     |                                |               
|                       | 4,330,504                               |  | LightConnect, Inc., Series B                                            |                     | 07/01                          |                |   | 5,000,000 
|                       | 12,292,441                              |  | LightConnect, Inc., Series C                                            |                     | 12/02                          |                |   | 992,000   
|                       | 956,234                                 |  | NanoOpto Corporation, Series A-1                                        |                     | 10/01, 03/02                   |                |   |          
|                       | 3,023,399                               |  | NanoOpto Corporation, Series B                                          |                     | 09/03, 11/03,01/04, 07/04      |                |   | 1,655,119 



Notes to Financial
Statements are an Integral Part of these Financial Statements.



2



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments as of July 31, 2005 (Unaudited)  (continued)



|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|-------------------------------------- | -------------------------------------- | - |  | ----------------------------------------------------------- | ------------------- | ---------------------------------------------- | -------------- | - | ----------
|Principal Amount/Shares/ Percent Owned |                                        |   |  |                                                             | Acquisition Date ## |                                                | Value (Note 1)
|                                       | Optical  15.93% (continued)           |   |  |                                                             |                     |                                               
|                                       | 5,333,333                              |   |  | OpVista, Inc., Series B                                     |                     | 07/01                                          |                | $ |          
|                                       | 12,671,059                             |   |  | OpVista, Inc., Series C                                     |                     | 09/03                                          |                |   | 5,000,000 
|                                       | 10,368,483                             |   |  | OpVista, Inc., Series D                                     |                     | 11/04                                          |                |   | 1,058,000 
|                                       | 15,935,224                             |   |  | OpVista, Inc., Series E                                     |                     | 05/05 & 06/05                                  |                |   | 1,626,030 
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|                                       |                                        |   |  |                                                             |                     |                                                |                |   | 15,331,149
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|                                       | Semiconductor  4.93%                  |   |  |                                                             |                     |                                               
|                                       | 7,000,000                              |   |  | Chips & Systems, Inc., Series A                             |                     | 03/04                                          |                |   |          
|                                       | 2,211,898                              |   |  | Silverback Systems, Inc., Series B-1                        |                     | 02/02                                          |                |   | 450,052   
|                                       | 34,364,257                             |   |  | Silverback Systems, Inc., Series C                          |                     | 03/03, 09/03, 04/04                            |                |   | 4,298,896 
|                                       | 3,096,551                              |   |  | Virtual Silicon Technology, Inc., Series C                  |                     | 12/01                                          |                |   |          
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|                                       |                                        |   |  |                                                             |                     |                                                |                |   | 4,748,948 
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|                                       | Wireless  7.77%                       |   |  |                                                             |                     |                                               
|                                       | 4,433,333                              |   |  | Ethertronics, Inc., Series B                                |                     | 06/01, 09/02, 07/03, 05/04                     |                |   | 6,650,001 
|                                       | 722,232                                |   |  | Ethertronics, Inc., Series C                                |                     | 05/05                                          |                |   | 830,037   
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|                                       |                                        |   |  |                                                             |                     |                                                |                |   | 7,480,038 
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|                                       |                                        |   |  | TOTAL PREFERRED STOCKS (Cost $70,046,538)                   |                     |                                                |                |   | 48,748,049
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|                                       | Notes  8.78%                          |   |  |                                                             |                     |                                               
|                                       |                                        |  
|                                       | Enterprise Software  5.20%            |   |  |                                                             |                     |                                               
|$                                      | 2,000,000                              |   |  | ***Pilot Software, Inc., Bridge Note                        |                     | 08/04, 09/04,10/04, 11/04,12/04                |                |   | 2,000,000 
|$                                      | 3,000,000                              |   |  | ***Cydelity, Inc., Bridge Note                              |                     | 12/04, 01/05, 02/05,03/05, 04/05, 05/05, 07/05 |                |   | 3,000,000 
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|                                       |                                        |   |  |                                                             |                     |                                                |                |   | 5,000,000 
|                                       | Semiconductor  2.57 %                 |   |  |                                                             |                     |                                               
|$                                      | 506,580                                |   |  | Virtual Silicon Technology, Inc., Bridge Note               |                     | 10/04, 12/04, 02/05,05/05, 06/05               |                |   | 506,580   
|$                                      | 1,441,133                              |   |  | Chips & Systems, Inc., Bridge Note                          |                     | 11/04, 01/05,02/05                             |                |   |          
|$                                      | 1,969,206                              |   |  | Silverback Systems, Inc., Bridge Note                       |                     | 01/05, 04/05, 07/05                            |                |   | 1,969,206 
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|                                       |                                        |   |  |                                                             |                     |                                                |                |   | 2,475,786 
|                                       | Wireless  0.26 %                      |   |  |                                                             |                     |                                               
|$                                      | 250,000                                |   |  | Ethertronics, Inc., Bridge Note                             |                     | 01/05                                          |                |   | 250,000   
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|                                       | Optical  0.75 %                       |   |  |                                                             |                     |                                               
|$                                      | 722,101                                |   |  | NanoOpto Corporation, Bridge Note                           |                     | 12/04, 03/05                                   |                |   | 722,101   
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|                                       |                                        |   |  | TOTAL NOTES (Cost $9,889,020)                               |                     |                                                |                |   | 8,447,887 
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|                                       | Warrants  0.00%                       |   |  |                                                             |                     |                                               
|                                       |                                        |  
|                                       | Wireless  0.00%                       |   |  |                                                             |                     |                                               
|                                       | 100,000                                |   |  | Ethertronics, Inc. (expiration date 9/30/07)                |                     | 09/02                                          |                |   |          
|                                       | 115,000                                |   |  | Ethertronics, Inc. (expiration date 9/30/07)                |                     | 07/03                                          |                |   |          
|                                       | 66,667                                 |   |  | Ethertronics, Inc. (expiration date 9/30/07)                |                     | 08/03                                          |                |   |          
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |          
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|                                       | Semiconductor  0.00%                  |   |  |                                                             |                     |                                               
|                                       | 195                                    |   |  | Silverback Systems, Inc., Warrant (expiration date 1/11/12) |                     | 01/05, 04/05, 07/05                            |                |   | 195       
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|                                       |                                        |   |  | TOTAL WARRANTS (Cost $195)                                  |                     |                                                |                |   | 195       
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|                                       |                                        |   |  | TOTAL  PRIVATE COMPANIES (Cost $83,935,753)                |                     |                                                |                |   | 57,196,131
|                                       |                                        |   |  |                                                             |                     |                                                |                |   |           
|                                       | PRIVATE INVESTMENT FUNDS **, #  8.19% |   |  |                                                             |                     |                                               
|                                       | 0.40                                   | % |  | Advanced Technology Ventures VII, LP                        |                     | 08/01-07/05                                    |                |   | 789,898   
|                                       | 1.56                                   | % |  | Burrill Life Sciences Capital Fund                          |                     | 12/02-06/05                                    |                |   | 992,853   
|                                       | 1.35                                   | % |  | CHL Medical Partners II, LP                                 |                     | 01/02-11/04                                    |                |   | 588,026   
|                                       | 1.04                                   | % |  | CMEA Ventures Partners, LP                                  |                     | 12/03-06/05                                    |                |   | 395,114   



Notes to Financial
Statements are an Integral Part of these Financial Statements.



3



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments as of July 31, 2005 (Unaudited)  (continued)



|                                                   |  |                                                                                |  |                     |            |                |          
|-------------------------------------------------- |  | ------------------------------------------------------------------------------ |  | ------------------- | ---------- | -------------- | ---------
|PrincipalAmount/Shares/Percent Owned               |  |                                                                                |  | Acquisition Date ## |            | Value (Note 1)
|PRIVATE INVESTMENT FUNDS **, #  8.19% (continued) |  |                                                                                |  |                     |           
|0.36%                                              |  | Morgenthaler Partners VII, LP                                                  |  | 07/01-05/05         |            | $              | 1,504,117
|0.59%                                              |  | Prospect Venture Partners II, LP                                               |  | 06/01-07/05         |            |                | 1,631,933
|0.98%                                              |  | Sevin Rosen Fund VI, LP                                                        |  | 10/04-06/05         |            |                | 342,580  
|2.36%                                              |  | Tallwood II, LP                                                                |  | 12/02-04/05         |            |                | 957,932  
|1.70%                                              |  | Valhalla Partners II, LP                                                       |  | 10/03-07/05         |            |                | 680,388  
|                                                   |  |                                                                                |  |                     |            |                |          
|                                                   |  | TOTAL  PRIVATE INVESTMENT FUNDS (Cost $9,268,220)                             |  |                     |            |                | 7,882,841
|                                                   |  |                                                                                |  |                     |            |                |          
|                                                   |  |                                                                               
|INVESTMENT COMPANIES  1.63%                       |  |                                                                                |  |                     |           
|1,564,210                                          |  | Dreyfus Government Cash Management Fund Institutional Shares (Cost $1,564,210) |  |                     |            |                | 1,564,210
|                                                   |  |                                                                                |  |                     |            |                |          
|                                                   |  |                                                                               
|TOTAL INVESTMENTS (Cost $123,582,828)  99.19%     |  |                                                                                |  |                     | 95,457,827
|                                                   |  |                                                                               
|OTHER ASSETS & LIABILITIES (NET)  0.81%           |  |                                                                                |  |                     | 781,410   
|                                                   |  |                                                                                |  |                     |            |                |          
|                                                   |  |                                                                               
|NET ASSETS  100.00%                               |  |                                                                                |  | $                   | 96,239,237
|                                                   |  |                                                                                |  |                     |            |                |          

---

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



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



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



|@ | At July 31, 2005 the Company owned 5% or more of the companys outstanding voting shares thereby making the company an affiliate as defined by the Investment Company Act of
1940. Total value of affiliated securities owned at July 31, 2005 was $46,196,131.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|*** | At July 31, 2005, the Company owned 25% or more of the companys outstanding voting shares thereby making the company a controlled affiliate as defined by the Investment
Company Act of 1940. Total value of controlled affiliated securities owned at July 31, 2005 was $11,000,000.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



4



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments as of October 31, 2004



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



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



5



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments as of October 31, 2004 - (continued)



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



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



6



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments as of October 31, 2004 - (continued)



|                        |            |  |                                                             |                     |                           |                |   |           
|----------------------- | ---------- |  | ----------------------------------------------------------- | ------------------- | ------------------------- | -------------- | - | ----------
|Principal Amount/Shares |            |  |                                                             | Acquisition Date ## |                           | Value (Note 1)
|                        |            |  | PRIVATE COMPANIES **, #, @  (continued)                    |                     |                           |                |   |           
|                        |            |  | Preferred Stocks  (continued)                              |                     |                           |                |   |           
|                        |            |  | Semiconductor  11.93%                                      |                     |                           |                |   |           
|                        | 7,000,000  |  | Chips & Systems, Inc., Series A                             |                     | 03/04                     |                | $ | 3,500,000 
|                        | 3,333,333  |  | Monterey Design Systems, Inc., Series 2                     |                     | 06/03                     |                |   | 600,000   
|                        | 2,211,898  |  | Silverback Systems, Inc., Series B-1                        |                     | 02/02                     |                |   | 450,052   
|                        | 34,364,257 |  | Silverback Systems, Inc., Series C                          |                     | 03/03, 09/03, 04/04       |                |   | 4,298,896 
|                        | 3,096,551  |  | Virtual Silicon Technology, Inc., Series C                  |                     | 12/01                     |                |   | 5,000,000 
|                        |            |  |                                                             |                     |                           |                |   |           
|                        |            |  |                                                             |                     |                           |                |   | 13,848,948
|                        |            |  |                                                             |                     |                           |                |   |           
|                        |            |  | Wireless  5.73%                                            |                     |                           |                |   |           
|                        | 4,433,333  |  | Ethertronics, Inc., Series B                                |                     | 06/01, 09/02, 07/03,05/04 |                |   | 6,650,000 
|                        |            |  |                                                             |                     |                           |                |   |           
|                        |            |  | TOTAL PREFERRED STOCKS (Cost $69,300,611)                   |                     |                           |                |   | 59,226,770
|                        |            |  |                                                             |                     |                           |                |   |           
|                        |            |  | Notes  0.72%                                               |                     |                           |                |   |           
|                        |            |  | Enterprise Software  0.65%                                 |                     |                           |                |   |           
|$                       | 750,000    |  | ***Pilot Software Inc., Bridge Note, 9%, 04/22/05           |                     | 08/04 & 09/04, 10/04      |                |   | 750,000   
|                        |            |  | Semiconductor  0.07%                                       |                     |                           |                |   |           
|$                       | 88,738     |  | Virtual Silicon Technology, Inc., Bridge Note, 6%, 04/22/05 |                     | 10/04                     |                |   | 88,738    
|                        |            |  |                                                             |                     |                           |                |   |           
|                        |            |  | TOTAL NOTES (Cost $838,738)                                 |                     |                           |                |   | 838,738   
|                        |            |  |                                                             |                     |                           |                |   |           
|                        |            |  | Warrants  0.00%                                            |                     |                           |                |   |           
|                        |            |  | Wireless  0.00%                                            |                     |                           |                |   |           
|                        | 100,000    |  | Ethertronics, Inc. (expiration date 9/30/07)                |                     | 09/02                     |                |   |          
|                        | 115,000    |  | Ethertronics, Inc. (expiration date 9/30/07)                |                     | 07/03                     |                |   |          
|                        | 66,667     |  | Ethertronics, Inc. (expiration date 9/30/07)                |                     | 08/03                     |                |   |          
|                        |            |  |                                                             |                     |                           |                |   |           
|                        |            |  |                                                             |                     |                           |                |   |          
|                        |            |  | TOTAL WARRANTS (Cost $0)                                    |                     |                           |                |   |          
|                        |            |  |                                                             |                     |                           |                |   |           
|                        |            |  | TOTAL  PRIVATE COMPANIES (Cost $78,889,349)                |                     |                           |                |   | 60,065,508
|                        |            |  |                                                             |                     |                           |                |   |           



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



7



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments as of October 31, 2004 - (continued)



|                                       |  |                                                    |  |                     |  |                |          
|-------------------------------------- |  | -------------------------------------------------- |  | ------------------- |  | -------------- | ---------
|Percent Owned                          |  |                                                    |  | Acquisition Date ## |  | Value (Note 1)
|PRIVATE INVESTMENT FUNDS **, #  4.70% |  |                                                    |  |                     | 
|0.40%                                  |  | Advanced Technology Ventures VII, L.P.             |  | 08/01-04/04         |  | $              | 715,058  
|1.44%                                  |  | Burrill Life Sciences Capital Fund                 |  | 12/02-08/04         |  |                | 829,098  
|1.35%                                  |  | CHL Medical Partners II, L.P.                      |  | 01/02-02/04         |  |                | 482,377  
|1.04%                                  |  | CMEA Ventures, L.P.                                |  | 12/03-04/04         |  |                | 121,020  
|0.36%                                  |  | Morgenthaler Partners VII, L.P.                    |  | 07/01-07/04         |  |                | 1,076,400
|0.58%                                  |  | Prospect Venture Partners II, L.P.                 |  | 06/01-09/04         |  |                | 1,325,462
|0.90%                                  |  | Sevin Rosen Fund VI, L.P.                          |  | 10/04               |  |                | 90,000   
|2.36%                                  |  | Tallwood II, L.P.                                  |  | 12/02-09/04         |  |                | 597,891  
|1.70%                                  |  | Valhalla Partners, L.P.                            |  | 10/03-09/04         |  |                | 219,199  
|                                       |  |                                                    |  |                     |  |                |          
|                                       |  | TOTAL  PRIVATE INVESTMENT FUNDS (Cost $6,614,318) |  |                     |  |                | 5,456,505
|                                       |  |                                                    |  |                     |  |                |          



|                             |  |                                                                                |  |   |            
|---------------------------- |  | ------------------------------------------------------------------------------ |  | - | -----------
|Shares                       |  |                                                                                |  |  
|INVESTMENT COMPANIES  1.19% |  |                                                                                | 
|1,386,211                    |  | Dreyfus Government Cash Management Fund Institutional Shares (Cost $1,386,211) |  |   | 1,386,211  
|                             |  |                                                                                |  |   |            
|                             |  | TOTAL INVESTMENTS (Cost $137,529,863)  99.70%                                 |  |   | 115,731,136
|                             |  | OTHER ASSETS & LIABILITIES (NET)  0.30%                                       |  |   | 348,297    
|                             |  |                                                                                |  |   |            
|                             |  | NET ASSETS  100.00%                                                           |  | $ | 116,079,433
|                             |  |                                                                                |  |   |            



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



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



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



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



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



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



8



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##### Table of Contents

Excelsior Venture Partners III, LLC

Statements of Assets and Liabilities



|                                                                                                            |  |                           |             |   |                  |   |             |  
|----------------------------------------------------------------------------------------------------------- |  | ------------------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                                                            |  | July 31, 2005 (Unaudited) |             |   | October 31, 2004 |  
|ASSETS:                                                                                                     |  |                           |             |   |                  |   |             |  
|Investments in unaffiliated issuers, at value (Cost $39,647,075 and $52,140,514, respectively)              |  | $                         | 38,261,696  |   |                  | $ | 55,665,628  |  
|Investments in controlled affiliated issuers, at value (Cost $15,000,000 and $8,750,000, respectively)      |  |                           | 11,000,000  |   |                  |   | 8,750,000   |  
|Investments in non controlled affiliated issuers, at value (Cost $68,935,753 and $76,639,349, respectively) |  |                           | 46,196,131  |   |                  |   | 51,315,508  |  
|                                                                                                            |  |                           |             |   |                  |   |             |  
|Total Investments, at value (Cost $123,582,828 and $137,529,863, respectively) (Note 1)                     |  |                           | 95,457,827  |   |                  |   | 115,731,136 |  
|                                                                                                            |  |                           |             |   |                  |   |             |  
|Cash                                                                                                        |  |                           | 5,060       |   |                  |   |            |  
|Interest receivable                                                                                         |  |                           | 278,257     |   |                  |   | 10,575      |  
|Other receivables                                                                                           |  |                           | 1,070,780   |   |                  |   | 1,243,730   |  
|Prepaid insurance                                                                                           |  |                           | 17,921      |   |                  |   | 3,791       |  
|                                                                                                            |  |                           |             |   |                  |   |             |  
|Total Assets                                                                                                |  |                           | 96,829,845  |   |                  |   | 116,989,232 |  
|                                                                                                            |  |                           |             |   |                  |   |             |  
|LIABILITIES:                                                                                                |  |                           |             |   |                  |   |             |  
|Management fees payable (Note 2)                                                                            |  |                           | 485,151     |   |                  |   | 583,569     |  
|Administration fees payable (Note 2)                                                                        |  |                           | 51,155      |   |                  |   | 50,936      |  
|Professional fees payable                                                                                   |  |                           | 41,601      |   |                  |   | 184,559     |  
|Board of Managers fees payable (Note 2)                                                                     |  |                           | 4,877       |   |                  |   | 68,000      |  
|Other payables                                                                                              |  |                           | 7,824       |   |                  |   | 22,735      |  
|                                                                                                            |  |                           |             |   |                  |   |             |  
|Total Liabilities                                                                                           |  |                           | 590,608     |   |                  |   | 909,799     |  
|                                                                                                            |  |                           |             |   |                  |   |             |  
|NET ASSETS                                                                                                  |  | $                         | 96,239,237  |   |                  | $ | 116,079,433 |  
|                                                                                                            |  |                           |             |   |                  |   |             |  
|NET ASSETS consist of:                                                                                      |  |                           |             |   |                  |   |             |  
|Paid-in capital                                                                                             |  | $                         | 124,364,239 |   |                  | $ | 137,878,160 |  
|Unrealized depreciation on investments                                                                      |  |                           | (28,125,002 | ) |                  |   | (21,798,727 | )
|                                                                                                            |  |                           |             |   |                  |   |             |  
|Total Net Assets                                                                                            |  | $                         | 96,239,237  |   |                  | $ | 116,079,433 |  
|                                                                                                            |  |                           |             |   |                  |   |             |  
|Units of Membership Interest Outstanding (Unlimited number of no par value units authorized)                |  |                           | 295,210     |   |                  |   | 295,210     |  
|                                                                                                            |  |                           |             |   |                  |   |             |  
|NET ASSET VALUE PER UNIT                                                                                    |  | $                         | 326.00      |   |                  | $ | 393.21      |  
|                                                                                                            |  |                           |             |   |                  |   |             |  



Notes to Financial
Statements 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)



|                                                                 |  |                            |            |   |      |   |            |  
|---------------------------------------------------------------- |  | -------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                 |  | Nine Months Ended July 31, |           
|                                                                 |  | 2005                       |            |   | 2004 |  
|INVESTMENT INCOME:                                               |  |                            |            |   |      |   |            |  
|Interest income from unaffiliated investments                    |  | $                          | 708,354    |   |      | $ | 339,124    |  
|Interest income from affiliated investments                      |  |                            | 246,383    |   |      |   | 6,729      |  
|Dividend income                                                  |  |                            | 25,799     |   |      |   | 7,725      |  
|                                                                 |  |                            |            |   |      |   |            |  
|Total Income                                                     |  |                            | 980,536    |   |      |   | 353,578    |  
|                                                                 |  |                            |            |   |      |   |            |  
|EXPENSES:                                                        |  |                            |            |   |      |   |            |  
|Management fees (Note 2)                                         |  |                            | 1,613,160  |   |      |   | 1,818,491  |  
|Professional fees                                                |  |                            | 151,887    |   |      |   | 104,826    |  
|Administration fees (Note 2)                                     |  |                            | 103,174    |   |      |   | 104,195    |  
|Insurance expense                                                |  |                            | 47,528     |   |      |   | 59,624     |  
|Board of Managers fees (Note 2)                                  |  |                            | 44,877     |   |      |   | 44,959     |  
|Custodian fees                                                   |  |                            | 19,865     |   |      |   | 16,578     |  
|Miscellaneous fees                                               |  |                            | 12,390     |   |      |   | 11,988     |  
|                                                                 |  |                            |            |   |      |   |            |  
|Total Expenses                                                   |  |                            | 1,992,881  |   |      |   | 2,160,661  |  
|                                                                 |  |                            |            |   |      |   |            |  
|NET INVESTMENT LOSS                                              |  |                            | (1,012,345 | ) |      |   | (1,807,083 | )
|                                                                 |  |                            |            |   |      |   |            |  
|NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: (Note 1) |  |                            |            |   |      |   |            |  
|Net realized gain on investments on unaffiliated issuers         |  |                            | 1,587,218  |   |      |   | 4,210      |  
|Net realized loss on investments on affiliated issuers           |  |                            | (3,213,258 | ) |      |   | (3,850,000 | )
|Net change in unrealized depreciation on investments             |  |                            | (6,326,275 | ) |      |   | 6,030,164  |  
|                                                                 |  |                            |            |   |      |   |            |  
|NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS           |  |                            | (7,952,315 | ) |      |   | 2,184,374  |  
|                                                                 |  |                            |            |   |      |   |            |  
|NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS  |  | $                          | (8,964,660 | ) |      | $ | 377,291    |  
|                                                                 |  |                            |            |   |      |   |            |  



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



10



---

##### Table of Contents

Excelsior Venture Partners III, LLC

Statements of Operations (Unaudited)



|                                                                    |  |                             |             |   |      |   |            |  
|------------------------------------------------------------------- |  | --------------------------- | ----------- | - | ---- | - | ---------- | -
|                                                                    |  | Three Months Ended July 31, |            
|                                                                    |  | 2005                        |             |   | 2004 |  
|INVESTMENT INCOME:                                                  |  |                             |             |   |      |   |            |  
|Interest income from unaffiliated investments                       |  | $                           | 229,897     |   |      | $ | 105,461    |  
|Interest income from affiliated investments                         |  |                             | 137,754     |   |      |   |           |  
|Dividend income                                                     |  |                             | 11,064      |   |      |   | 5,378      |  
|                                                                    |  |                             |             |   |      |   |            |  
|Total Income                                                        |  |                             | 378,715     |   |      |   | 110,839    |  
|                                                                    |  |                             |             |   |      |   |            |  
|EXPENSES:                                                           |  |                             |             |   |      |   |            |  
|Management fees (Note 2)                                            |  |                             | 485,151     |   |      |   | 617,532    |  
|Professional fees                                                   |  |                             | 26,748      |   |      |   | 35,192     |  
|Administration fees (Note 2)                                        |  |                             | 32,400      |   |      |   | 34,732     |  
|Insurance expense                                                   |  |                             | 15,541      |   |      |   | 19,947     |  
|Board of Managers fees (Note 2)                                     |  |                             | 15,123      |   |      |   | 15,082     |  
|Custodian fees                                                      |  |                             | 10,298      |   |      |   | 5,708      |  
|Miscellaneous fees                                                  |  |                             | 4,456       |   |      |   | 4,021      |  
|                                                                    |  |                             |             |   |      |   |            |  
|Total Expenses                                                      |  |                             | 589,717     |   |      |   | 732,214    |  
|                                                                    |  |                             |             |   |      |   |            |  
|NET INVESTMENT LOSS                                                 |  |                             | (211,002    | ) |      |   | (621,375   | )
|                                                                    |  |                             |             |   |      |   |            |  
|NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: (Note 1)    |  |                             |             |   |      |   |            |  
|Net realized gain on investments on unaffiliated issuers            |  |                             |            |   |      |   | 4,210      |  
|Net realized gain/(loss) on investments on affiliated issuers       |  |                             | 3,932,996   |   |      |   | (3,850,000 | )
|Net change in unrealized appreciation/(depreciation) on investments |  |                             | (12,261,394 | ) |      |   | 7,108,546  |  
|                                                                    |  |                             |             |   |      |   |            |  
|NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS              |  |                             | (8,328,398  | ) |      |   | 3,262,756  |  
|                                                                    |  |                             |             |   |      |   |            |  
|NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS     |  | $                           | (8,539,400  | ) |      | $ | 2,641,381  |  
|                                                                    |  |                             |             |   |      |   |            |  



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



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Excelsior Venture Partners III, LLC

Statements of Changes in Net Assets (Unaudited)



|                                                                    |  |                            |             |   |      |   |             |  
|------------------------------------------------------------------- |  | -------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                    |  | Nine Months Ended July 31, |            
|                                                                    |  | 2005                       |             |   | 2004 |  
|OPERATIONS:                                                         |  |                            |             |   |      |   |             |  
|Net investment loss                                                 |  | $                          | (1,012,345  | ) |      | $ | (1,807,083  | )
|Net realized loss on investments                                    |  |                            | (1,626,040  | ) |      |   | (3,845,790  | )
|Net change in unrealized appreciation/(depreciation) on investments |  |                            | (6,326,275  | ) |      |   | 6,030,164   |  
|                                                                    |  |                            |             |   |      |   |             |  
|Net increase/(decrease) in net assets resulting from operations     |  |                            | (8,964,660  | ) |      |   | 377,291     |  
|                                                                    |  |                            |             |   |      |   |             |  
|DISTRIBUTIONS TO SHAREHOLDERS:                                      |  |                            |             |   |      |   |             |  
|Distributions                                                       |  |                            | (10,875,536 | ) |      |   |            |  
|                                                                    |  |                            |             |   |      |   |             |  
|NET INCREASE (DECREASE) IN NET ASSETS                               |  |                            | (19,840,196 | ) |      |   | 377,291     |  
|NET ASSETS:                                                         |  |                            |             |   |      |   |             |  
|Beginning of period                                                 |  |                            | 116,079,433 |   |      |   | 122,457,853 |  
|                                                                    |  |                            |             |   |      |   |             |  
|End of period                                                       |  | $                          | 96,239,237  |   |      | $ | 122,835,144 |  
|                                                                    |  |                            |             |   |      |   |             |  



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



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##### Table of Contents

Excelsior Venture Partners III, LLC

Statements of Cash Flows (Unaudited)



|                                                                                                                                       |  |                            |             |   |      |   |             |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                                                                                       |  | Nine Months Ended July 31, |            
|                                                                                                                                       |  | 2005                       |             |   | 2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                                  |  |                            |             |   |      |   |             |  
|Net increase/(decrease) in net assets resulting from operations                                                                        |  | $                          | (8,964,660  | ) |      | $ | 377,291     |  
|Adjustments to reconcile net increase/(decrease) in net assets from operations to net cash provided by/(used in) operating
activities: |  |                            |             |   |      |   |             |  
|Net change in unrealized depreciation on investments                                                                                   |  |                            | 6,326,275   |   |      |   | (6,030,164  | )
|Purchase of investments                                                                                                                |  |                            | (18,753,637 | ) |      |   | (14,289,421 | )
|Proceeds received from the sale of investments and distributions received from private investment funds                                |  |                            | 15,927,291  |   |      |   | 96,219      |  
|Sale of short-term investments - net                                                                                                   |  |                            | 15,147,341  |   |      |   | 12,286,514  |  
|Net realized loss on investments                                                                                                       |  |                            | 1,626,040   |   |      |   | 3,845,790   |  
|Increase in interest receivable                                                                                                        |  |                            | (267,682    | ) |      |   | (2,677      | )
|Decrease in other receivable                                                                                                           |  |                            | 172,950     |   |      |   |            |  
|Increase in prepaid insurance                                                                                                          |  |                            | (14,130     | ) |      |   | (20,783     | )
|(Decrease)/Increase in management fee payable                                                                                          |  |                            | (98,418     | ) |      |   | 210         |  
|(Decrease) in Board of Managers fees payable                                                                                           |  |                            | (63,123     | ) |      |   | (15,041     | )
|(Decrease)/Increase in other expenses payable                                                                                          |  |                            | (157,651    | ) |      |   | 13,908      |  
|                                                                                                                                       |  |                            |             |   |      |   |             |  
|Net cash provided by/(used in) operating activities                                                                                    |  |                            | 10,880,596  |   |      |   | (3,738,154  | )
|                                                                                                                                       |  |                            |             |   |      |   |             |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                                  |  |                            |             |   |      |   |             |  
|Cash distributions to unitholders                                                                                                      |  |                            | (10,875,536 | ) |      |   |            |  
|                                                                                                                                       |  |                            |             |   |      |   |             |  
|Net cash used in financing activities                                                                                                  |  |                            | (10,875,536 | ) |      |   |            |  
|                                                                                                                                       |  |                            |             |   |      |   |             |  
|Net increase/(decrease) in cash                                                                                                        |  |                            | 5,060       |   |      |   | (3,738,154  | )
|                                                                                                                                       |  |                            |             |   |      |   |             |  
|Cash at beginning of period                                                                                                            |  |                            |            |   |      |   | 3,738,154   |  
|                                                                                                                                       |  |                            |             |   |      |   |             |  
|Cash at end of period                                                                                                                  |  | $                          | 5,060       |   |      | $ |            |  
|                                                                                                                                       |  |                            |             |   |      |   |             |  
|SUPPLEMENTAL INFORMATION:                                                                                                              |  |                            |             |   |      |   |             |  
|Non-cash distributions received from private investment funds                                                                          |  | $                          | 47,971      |   |      | $ | 12,987      |  
|                                                                                                                                       |  |                            |             |   |      |   |             |  



Notes to Financial
Statements 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)



|                                                                   |  |                            |        |    |      |   |         |   
|------------------------------------------------------------------ |  | -------------------------- | ------ | -- | ---- | - | ------- | --
|                                                                   |  | Nine Months Ended July 31, |       
|                                                                   |  | 2005                       |        |    | 2004 |  
|NET ASSET VALUE, BEGINNING OF PERIOD                               |  | $                          | 393.21 |    |      | $ | 414.82  |   
|INCOME FROM INVESTMENT OPERATIONS:                                 |  |                            |        |    |      |   |         |   
|Net investment loss                                                |  |                            | (3.43  | )  |      |   | (6.12   | ) 
|Net realized and unrealized gain/(loss) on investment transactions |  |                            | (26.94 | )  |      |   | 7.39    |   
|                                                                   |  |                            |        |    |      |   |         |   
|Total from investment operations                                   |  |                            | (30.37 | )  |      |   | 1.27    |   
|                                                                   |  |                            |        |    |      |   |         |   
|FINANCING ACTIVITIES:                                              |  |                            |        |    |      |   |         |   
|Distribution to Members                                            |  |                            | (36.84 | )  |      |   |        |   
|                                                                   |  |                            |        |    |      |   |         |   
|NET (DECREASE)/INCREASE IN NET ASSETS:                             |  |                            | (67.21 | )  |      |   | 1.27    |   
|                                                                   |  |                            |        |    |      |   |         |   
|NET ASSET VALUE, END OF PERIOD                                     |  | $                          | 326.00 |    |      | $ | 416.09  |   
|                                                                   |  |                            |        |    |      |   |         |   
|TOTAL NET ASSET VALUE RETURN (3), (4)                              |  |                            | (8.49  | )% |      |   | 0.31    | % 
|RATIOS AND SUPPLEMENTAL DATA:                                      |  |                            |        |    |      |   |         |   
|Net assets, end of period (000s)                                  |  | $                          | 96,239 |    |      | $ | 122,835 |   
|Ratios to average net assets: (2)                                  |  |                            |        |    |      |   |         |   
|Net expenses                                                       |  |                            | 2.42   | %  |      |   | 2.37    | % 
|Net investment loss                                                |  |                            | (1.23  | )% |      |   | (1.98   | )%
|Portfolio Turnover Rate (3)                                        |  |                            | 22.44  | %  |      |   | 0.11    | % 



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



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



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



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



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



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EXCELSIOR VENTURE PARTNERS III, LLC



NOTES TO FINANCIAL STATEMENTS



July 31, 2005
(Unaudited)



Note 1  Significant Accounting Policies



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



As a BDC, the Company must be primarily engaged in the business of furnishing capital and making available managerial assistance to companies that
generally do not have ready access to capital through conventional financial channels. The Companys investment objective is to achieve long-term capital appreciation primarily by investing in domestic venture capital and other private
companies and, to a lesser extent, domestic and international private funds, negotiated private investments in public companies and international direct investments that the Investment Adviser (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 financial statements reflect all adjustments (consisting only of normal
recurring adjustments) that are, in the opinion of management, necessary for the fair statement of the results for the interim period. The results of operations for interim periods are not necessarily indicative of results for the entire year.



The following is a summary of the Companys significant
accounting policies. Such policies are in conformity with generally accepted accounting principles for investment companies and are consistently followed in the preparation of the financial statements. Generally accepted accounting principles in the
United States of America require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates. Certain amounts in the prior period
financial statements have been reclassified to conform to the current periods financial statements.



A. Investment Valuation:



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



The
value for securities for which no public market exists is difficult to determine. Generally, such investments will be valued on a going concern basis without giving effect to any disposition costs. There is a range of values that is
reasonable for such investments at any particular time. Initially, direct investments are valued based upon their original cost until developments provide a sufficient basis for use of a valuation other than cost. Upon the occurrence of developments
providing a sufficient basis for a change in valuation, direct investments will be valued by the private market or appraisal methods of valuation. The private market method shall only be used with respect to reliable third
party transactions by sophisticated, independent investors. The appraisal method shall be based upon such factors affecting the investee company such as earnings, net worth, reliable private sale prices of the investee companys securities, the
market prices for similar securities of comparable companies, an assessment of the investee companys



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##### Table of Contents

future prospects or, if appropriate, liquidation value. The values for the investments referred to in this paragraph will be estimated regularly by the
Investment Adviser or a committee of the Board of Managers under the supervision of the Board of Managers and, in any event, not less frequently than quarterly. However, there can be no assurance that such value will represent the return that might
ultimately be realized by the Company from the investments.



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



At July 31,
2005 and October 31, 2004, market quotations were not readily available for securities valued at $65,078,972 or 67.62% of net assets and $65,522,013 or 56.45% of net assets, respectively. Such securities were valued by the Investment Adviser, under
the supervision of the Board of Managers. Because of the inherent uncertainty of valuation, the estimated values may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences
could be material.



B. Security transactions and investment
income:



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



C. Income taxes:



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



The cost of the
private investment funds for federal tax purposes is based on amounts reported to the Company on Schedule K-1 from the private investment funds. As of July 31, 2005 and October 31, 2004, the Company had not received information to determine the tax
cost of the private investment funds as of those dates. The cost basis for federal tax purposes of the Companys other investments at July 31, 2005 was $114,314,608, and those investments had net depreciation on a tax basis at July 31, 2005 of
$26,739,622, consisting of gross appreciation of $17,549,460 and gross depreciation of $44,289,082. The cost basis for federal tax purposes of the Companys other investments at October 31, 2004 was $130,915,545, and those investments had net
depreciation on a tax basis at October 31, 2004 of $20,640,914, consisting of gross appreciation of $8,311,832 and gross depreciation of $28,952,746.



D. Dividends to members:



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



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



Prior to June 1, 2003, and pursuant to an Investment Advisory Agreement (the
Agreement), U.S. Trust Company served during the reporting period as the Investment Adviser to the Company pursuant to an Investment Advisory Agreement with the Company. Under the Agreement for the services provided, the Investment
Adviser is entitled to receive a management fee at an annual rate equal to 2.00% of the Companys end of 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
June 1, 2003, and pursuant to sub-advisory agreements among the Company, U.S. Trust Company, United States Trust Company of New York (U.S. Trust NY) and U.S. Trust Company, N.A., U.S. Trust NY and U.S. Trust Company (U.S.
Trust), N.A. served as the investment sub-advisers to the Company and received an investment management fee from the Investment Adviser. As of July 31, 2005 and October 31, 2004, $485,151 and $583,569, respectively, were payable to the
Investment Adviser.



16



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##### Table of Contents

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



In addition to the management fee, the Investment Adviser is entitled to allocations and distributions equal to the Incentive Carried Interest. The Incentive Carried Interest is an amount equal to 20% of the
Companys cumulative realized capital gains on Direct Investments, net of cumulative realized capital losses and current net unrealized capital depreciation on all of the Companys investments and cumulative net expenses of the Company.
Direct Investments means Company investments in domestic and foreign companies in which the equity is closely held by company founders, management, and/or a limited number of institutional investors and negotiated private investments in public
companies. The Incentive Carried Interest will be determined annually as of the end of each calendar year. For the nine month periods ended July 31, 2005 and July 31, 2004, 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 $15,000 for taxation services and (iii) reimburses PFPC for out-of-pocket expenses.



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



Each member of the Board of Managers receives $7,000 annually, $2,000 per
meeting attended and is reimbursed for expenses incurred for attending such meetings. No person who is an officer, manager or employee of U.S. Trust Corporation, or its subsidiaries, who serves as an officer, manager or employee of the Company
receives any compensation from the Company.



As of July 31,
2005 and October 31, 2004, Excelsior Venture Investors III, LLC had an investment in the Company of $61,095,827 and $73,691,035, respectively. This represents an ownership interest of 63.48% in the Company as of both dates.



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



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



17



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##### Table of Contents

Note 3  Purchases and Sales of Securities



Excluding short-term investments, the Companys purchases and sales of securities for the nine-month periods ended July
31, 2005, and July 31, 2004 were as follows:



|                                     |  |               |  |             
|------------------------------------ |  | ------------- |  | ------------
|Nine-Month Periods    Ended July 31, |  | Purchases ($) |  | Proceeds ($)
|2005                                 |  | 18,753,637    |  | 15,927,291  
|2004                                 |  | 14,289,421    |  | 96,219      



Note 4  Commitments



As of July 31, 2005, the Company had outstanding
investment commitments totaling $16,018,097.



Note 5  Transactions
with Affiliated Companies



An affiliated company is a
company in which the Company has ownership of more than 5% of the voting securities. The Company did not receive dividend income from affiliated companies during the nine months ended July 31, 2005 and 2004 and the year ended October 31, 2004.
Transactions with companies, which are or were affiliates, were as follows:



|                                                          |  |                                     |  |                        |           |                                         |   |                           |  |                   |   |                      |   |                                  |  |                              |   |  |            |  |   |           
|--------------------------------------------------------- |  | ----------------------------------- |  | ---------------------- | --------- | --------------------------------------- | - | ------------------------- |  | ----------------- | - | -------------------- | - | -------------------------------- |  | ---------------------------- | - |  | ---------- |  | - | ----------
|                                                          |  |                                     |  |                        |           | For the Nine Months Ended July 31, 2005 |   |                          
|Name of Investment                                        |  | Shares/Par Held at October 31, 2004 |  | October 31, 2004 Value |           | Purchases / Conversion Acquisitions     |   | Sale/ Conversion Proceeds |  | Interest Received |   | Realized Gain (Loss) |   | Shares/Par Held at July 31, 2005 |  | July 31, 2005 Value (Note 1)
|Controlled Affiliates                                     |  |                                     |  |                        |           |                                         |   |                           |  |                   |   |                      |   |                                  |  |                              |   |  |            |  |   |           
|Pilot Software Inc., Series A Preferred                   |  | 20,000,000                          |  | $                      | 4,000,000 |                                         | $ | 2,000,000                 |  | $                 |  |                      | $ |                                 |  | $                            |  |  | 46,362,656 |  | $ | 6,000,000 
|Pilot Software Inc., Bridge Note, 9%                      |  | 750,000                             |  |                        | 750,000   |                                         |   | 1,250,000                 |  |                   |  |                      |   | 134,014                          |  |                              |  |  | 2,000,000  |  |   | 2,000,000 
|Cydelity Inc., Series A Preferred (fka Datanautics, Inc.) |  | 19,995,000                          |  |                        | 4,000,000 |                                         |   |                          |  |                   |  |                      |   |                                 |  |                              |  |  | 19,995,000 |  |   |          
|Cydelity Inc., Bridge Note (fka Datanautics, Inc.)        |  |                                    |  |                        |          |                                         |   | 3,000,000                 |  |                   |  |                      |   | 63,038                           |  |                              |  |  | 3,000,000  |  |   | 3,000,000 
|                                                          |  |                                     |  |                        |           |                                         |   |                           |  |                   |   |                      |   |                                  |  |                              |   |  |            |  |   |           
|Total Controlled Affiliates                               |  |                                     |  | $                      | 8,750,000 |                                         | $ | 6,250,000                 |  | $                 |  |                      |   | 197,052                          |  | $                            |  |  |            |  | $ | 11,000,000
|                                                          |  |                                     |  |                        |           |                                         |   |                           |  |                   |   |                      |   |                                  |  |                              |   |  |            |  |   |           



|                                                     |  |                                     |  |                        |            |                                         |   |                           |  |                   |   |                      |   |        |                                  |   |                              |   |  |            |  |   |           
|---------------------------------------------------- |  | ----------------------------------- |  | ---------------------- | ---------- | --------------------------------------- | - | ------------------------- |  | ----------------- | - | -------------------- | - | ------ | -------------------------------- | - | ---------------------------- | - |  | ---------- |  | - | ----------
|                                                     |  |                                     |  |                        |            | For the Nine Months Ended July 31, 2005 |   |                          
|Name of Investment                                   |  | Shares/Par Held at October 31, 2004 |  | October 31, 2004 Value |            | Purchases / Conversion Acquisitions     |   | Sale/ Conversion Proceeds |  | Interest Received |   | Realized Gain (Loss) |   |        | Shares/Par Held at July 31, 2005 |   | July 31, 2005 Value (Note 1)
|Non Controlled Affiliates                            |  |                                     |  |                        |            |                                         |   |                           |  |                   |   |                      |   |        |                                  |   |                              |   |  |            |  |   |           
|Adeza Biomedical Corp., Series 5 Preferred           |  | 647,948                             |  | $                      | 3,000,000  |                                         | $ |                          |  | $                 |  |                      | $ |       |                                  | $ | 3,932,996                    |   |  |           |  | $ |          
|Archemix Corporation, Series A Preferred             |  | 1,999,999                           |  |                        | 1,999,999  |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 1,999,999  |  |   | 1,999,999 
|Archemix Corporation, Series B Preferred             |  | 466,666                             |  |                        | 466,666    |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 466,666    |  |   | 466,666   
|Cenqest, Inc., Series 2 Preferred                    |  | 4,425                               |  |                        |           |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 4,425      |  |   |          
|Chips & Systems, Inc. Series A Preferred             |  | 7,000,000                           |  |                        | 3,500,000  |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 7,000,000  |  |   |          
|Chips & Systems, Inc. Bridge Note                    |  |                                    |  |                        |           |                                         |   | 1,441,133                 |  |                   |  |                      |   | 2,545  |                                  |   |                             |   |  | 1,441,133  |  |   |          
|Ethertronics Inc., Series B Preferred                |  | 4,433,333                           |  |                        | 6,650,000  |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 4,433,333  |  |   | 6,650,001 
|Ethertronics Inc., Warrant                           |  | 281,667                             |  |                        |           |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 281,667    |  |   |          
|Ethertronics Inc., Bridge Note                       |  |                                    |  |                        |           |                                         |   | 250,000                   |  |                   |  |                      |   | 6,301  |                                  |   |                             |   |  | 250,000    |  |   | 250,000   
|Ethertronics Inc., Series C Preferred                |  |                                    |  |                        |           |                                         |   | 830,037                   |  |                   |  |                      |   |       |                                  |   |                             |   |  | 722,232    |  |   | 830,037   
|Genoptix, Inc., Series 1-A Preferred                 |  | 942,481                             |  |                        | 1,253,500  |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 942,481    |  |   | 501,400   
|Genoptix, Inc., Series 1-B Preferred                 |  | 1,403,696                           |  |                        | 1,250,000  |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 1,403,696  |  |   | 877,450   
|Genoptix, Inc., Common Stock                         |  | 46,860                              |  |                        |           |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 46,860     |  |   |          
|Genoptix, Inc., Series 1-C Preferred                 |  | 310,290                             |  |                        | 277,089    |                                         |   | 277,089                   |  |                   |  |                      |   |       |                                  |   |                             |   |  | 620,580    |  |   | 554,178   
|Genoptix, Inc., Series 1-D Preferred                 |  |                                    |  |                        |           |                                         |   | 461,814                   |  |                   |  |                      |   |       |                                  |   |                             |   |  | 728,413    |  |   | 461,814   
|LightConnect, Inc., Series B Preferred               |  | 4,330,504                           |  |                        | 5,000,000  |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 4,330,504  |  |   | 5,000,000 
|LightConnect, Inc., Series C Preferred               |  | 12,292,441                          |  |                        | 992,000    |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 12,292,441 |  |   | 992,000   
|LogicLibrary, Inc., Series A Preferred               |  | 7,454,720                           |  |                        | 3,408,450  |                                         |   | 492,958                   |  |                   |  |                      |   |       |                                  |   |                             |   |  | 8,532,883  |  |   | 3,901,408 
|MIDAS Vision Systems, Inc., Series A-1 Preferred     |  | 933,593                             |  |                        |           |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 933,593    |  |   |          
|MIDAS Vision Systems, Inc., Common Stock             |  | 157,396                             |  |                        |           |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 157,396    |  |   |          
|Monterey Design Systems, Inc., Common Stock          |  | 708,955                             |  |                        |           |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  |           |  |   |          
|Monterey Design Systems, Inc., Series 2 Preferred    |  | 3,333,333                           |  |                        | 600,000    |                                         |   |                          |  |                   |  |                      |   |       |                                  |   | (7,146,254                   | ) |  |           |  |   |          
|NanoOpto Corp., Series A-1 Preferred                 |  | 956,234                             |  |                        |           |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 956,234    |  |   |          
|NanoOpto Corp., Series B Preferred                   |  | 3,023,399                           |  |                        | 1,655,119  |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 3,023,399  |  |   | 1,655,119 
|NanoOpto Corp., Bridge Note                          |  |                                    |  |                        |           |                                         |   | 722,101                   |  |                   |  |                      |   |       |                                  |   |                             |   |  | 722,101    |  |   | 722,101   
|OpVista, Inc., Series B Preferred                    |  | 5,333,333                           |  |                        |           |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 5,333,333  |  |   |          
|OpVista, Inc., Series C Preferred                    |  | 12,671,059                          |  |                        | 5,000,000  |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 12,671,059 |  |   | 5,000,000 
|OpVista, Inc., Series D Preferred                    |  |                                    |  |                        |           |                                         |   | 1,058,000                 |  |                   |  |                      |   |       |                                  |   |                             |   |  | 10,368,483 |  |   | 1,058,000 
|OpVista, Inc., Series E Preferred                    |  |                                    |  |                        |           |                                         |   | 1,626,030                 |  |                   |  |                      |   |       |                                  |   |                             |   |  | 15,935,224 |  |   | 1,626,030 
|Silverback Systems, Inc., Series B-1 Preferred       |  | 2,211,898                           |  |                        | 450,051    |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 2,211,898  |  |   | 450,051   
|Silverback Systems, Inc., Series C Preferred         |  | 34,364,257                          |  |                        | 4,298,896  |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 34,364,257 |  |   | 4,298,896 
|Silverback Systems, Inc., Bridge Note                |  |                                    |  |                        |           |                                         |   | 1,969,206                 |  |                   |  |                      |   | 28,685 |                                  |   |                             |   |  | 1,969,206  |  |   | 1,969,206 
|Silverback Systems, Inc., Warrant                    |  |                                    |  |                        |           |                                         |   | 195                       |  |                   |  |                      |   |       |                                  |   |                             |   |  | 195        |  |   | 195       
|Tensys Medical, Inc., Series C Preferred             |  | 4,166,667                           |  |                        | 5,000,000  |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 4,166,667  |  |   | 5,000,000 
|Tensys Medical, Inc., Series D Preferred             |  | 1,187,500                           |  |                        | 1,425,000  |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 1,187,500  |  |   | 1,425,000 
|Virtual Silicon Technology, Inc., Series C Preferred |  | 3,096,551                           |  |                        | 5,000,000  |                                         |   |                          |  |                   |  |                      |   |       |                                  |   |                             |   |  | 3,096,551  |  |   |          
|Virtual Silicon Technology, Inc., Bridge Note        |  | 88,738                              |  |                        | 88,738     |                                         |   | 417,842                   |  |                   |  |                      |   | 11,800 |                                  |   |                             |   |  | 506,580    |  |   | 506,580   
|                                                     |  |                                     |  |                        |            |                                         |   |                           |  |                   |   |                      |   |        |                                  |   |                              |   |  |            |  |   |           
|Total Non Controlled Affiliates                      |  |                                     |  | $                      | 51,315,508 |                                         | $ | 9,546,405                 |  | $                 |  |                      | $ | 49,331 |                                  | $ | (3,213,258                   | ) |  |            |  | $ | 46,196,131
|                                                     |  |                                     |  |                        |            |                                         |   |                           |  |                   |   |                      |   |        |                                  |   |                              |   |  |            |  |   |           





18



---

##### Table of Contents

|                                        |  |                                     |  |                        |           |                                     |   |                           |  |   |                   |   |                      |   |                                     |  |                                 |   |  |            |  |   |          
|--------------------------------------- |  | ----------------------------------- |  | ---------------------- | --------- | ----------------------------------- | - | ------------------------- |  | - | ----------------- | - | -------------------- | - | ----------------------------------- |  | ------------------------------- | - |  | ---------- |  | - | ---------
|                                        |  |                                     |  |                        |           | For the Year Ended October 31, 2004 |   |                          
|Name of Investment                      |  | Shares/Par Held at October 31, 2003 |  | October 31, 2003 Value |           | Purchases / Conversion Acquisitions |   | Sale/ Conversion Proceeds |  |   | Interest Received |   | Realized Gain (Loss) |   | Shares/Par Held at October 31, 2004 |  | October 31, 2004 Value (Note 1)
|Controlled Affiliates                   |  |                                     |  |                        |           |                                     |   |                           |  |   |                   |   |                      |   |                                     |  |                                 |   |  |            |  |   |          
|Pilot Software Inc., Series A Preferred |  | 20,000,000                          |  | $                      | 4,000,000 |                                     | $ |                          |  | $ |                  |   |                      | $ |                                    |  | $                               |  |  | 20,000,000 |  | $ | 4,000,000
|Pilot Software Inc., Bridge Note, 9%    |  |                                    |  |                        |          |                                     |   | 750,000                   |  |   |                  |   |                      |   | 9,062                               |  |                                 |  |  | 750,000    |  |   | 750,000  
|Datanautics Inc., Series A Preferred    |  |                                    |  |                        |          |                                     |   | 4,000,000                 |  |   |                  |   |                      |   |                                    |  |                                 |  |  | 19,995,000 |  |   | 4,000,000
|Datanautics Inc., Promissory Note 3%    |  | 4,000,000                           |  |                        | 4,000,000 |                                     |   |                          |  |   | (4,000,000        | ) |                      |   |                                    |  |                                 |  |  |           |  |   |         
|                                        |  |                                     |  |                        |           |                                     |   |                           |  |   |                   |   |                      |   |                                     |  |                                 |   |  |            |  |   |          
|Total Controlled Affiliates             |  |                                     |  | $                      | 8,000,000 |                                     | $ | 4,750,000                 |  | $ | (4,000,000        | ) |                      | $ | 9,062                               |  | $                               |  |  |            |  | $ | 8,750,000
|                                        |  |                                     |  |                        |           |                                     |   |                           |  |   |                   |   |                      |   |                                     |  |                                 |   |  |            |  |   |          



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



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Note 6  Pending Litigation



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



The
Investment Adviser, and certain of its affiliates, have also been named in five class actions which allege that the Investment Adviser, certain of its affiliates, and others allowed certain parties to engage in illegal and improper mutual fund
trading practices, which allegedly caused financial injury to the shareholders of certain mutual funds managed by the Investment Adviser. Each seeks unspecified monetary damages and related equitable relief. The Investment Adviser, and certain of
its affiliates, have also been named in two derivative actions alleging breach of fiduciary duty in relation to allegedly illegal and improper mutual fund trading practices.



The class and derivative actions described above have been transferred to the United States District Court for the District
of Maryland for coordinated and consolidated pre-trial proceedings in a matter styled In Re Mutual Funds Investment Litigation, MDL Docket No. 1586. The five class actions were then consolidated and a single amended complaint was filed on or
about September 29, 2004. The two derivative actions were also consolidated into a new amended complaint, also filed on or about September 29, 2004. The defendants in the consolidated actions have moved to dismiss such actions. The defendants will
not be required to answer the complaints until such motions have been decided and discovery in the actions is currently stayed.



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



Note 7 
Guarantees



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



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##### Table of Contents

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



Nine-month and Three-month Periods Ended July 31, 2005 as Compared to the Similar Periods in 2004



Realized and Unrealized Gains and Losses from Portfolio Investments



For the nine-month periods ended July 31, 2005 and 2004, the Company had a
net realized loss on security transactions of ($1,626,040) and ($3,845,790), respectively. For the nine-month periods ended July 31, 2005 and 2004, the Company had a net change in unrealized (depreciation)/appreciation on investments of ($6,326,275)
and $6,030,164, respectively. The realized loss for the period ended July 31, 2005 was principally the result of the Companys sale of Monterey Design Systems during the period, and partially offset by the gain on the sale of Adeza Biomedical
Corporation common shares during the period. The net change in unrealized depreciation for the period ended July 31, 2005 was principally the combination of: i) the sale of Monterey Design Systems which resulted in a decrease in unrealized
depreciation of approximately $7,150,000 due to the reclassification from unrealized depreciation to realized loss, ii) the sale of Netlogic Microsystems common shares which resulted in a decrease in unrealized depreciation of $3,293,078, iii) the
sale of Senomyx common shares which resulted in an increase in unrealized depreciation of $1,476,005, iv) an increase of $4,941,133 due to the write down of Chips & Systems, v) an increase of $1,124,649 due to the write-down of Genoptix, vi) an
increase of $4,000,000 due to the write-down of Cydelity, Inc., and vii) an increase of $5,000,000 due to the write-down of Virtual Silicon Technology, Inc. The net change in unrealized depreciation for the period ended July 31, 2004 was principally
the result of a $2,483,711 increase in the overall valuation of the private and public company investments; mainly an increase in the valuation of LightConnect, Inc. offset in part by a decrease in the value of NetLogic Microsystems, Inc. (NASDAQ:
NETL). There was also an increase as the Company reclassified $3,850,000 of unrealized depreciation to net realized loss on its sale of investment in Ancile Pharmaceuticals.



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For the three-month periods ended July 31, 2005 and 2004, the Company had a net realized gain/(loss) on
security transactions of $3,932,996 and ($3,845,790), respectively. For the three-month periods ended July 31, 2005 and 2004, the Company had a net change in unrealized appreciation/ (depreciation) on investments of ($12,261,394) and $7,108,546
respectively. The realized gain for the period ended July 31, 2005 was principally the result of the Companys sale of Adeza Biochemical common shares during the period. The realized loss for the period ended July 31, 2004 was principally the
result of the conclusion of Ancile Pharmaceuticals general assignment for the benefit of creditors. The net change in unrealized depreciation for the period ended July 31, 2005 was principally the combination of: i) the sale of Adeza Biomedical
Common shares, which resulted in an increase in unrealized depreciation of $3,196,003, ii) an increase of $4,000,000 due to the write-down of Cydelity, Inc., and iii) an increase of $5,000,000 due to the write-down of Virtual Silicon Technology,
Inc. The net change in unrealized depreciation for the period ended July 31, 2004 was principally the result of an increase in the overall valuation of the private and public company investments, as well as an increase due to the realization of the
loss on Ancile Pharmaceuticals.



Investment Income and Expenses



For the nine-month period ended July 31, 2005, the
Company had investment income of $980,536 and operating expenses of $1,992,881, resulting in a net investment loss of ($1,012,345). In comparison, for the similar period ended July 31, 2004, the Company had investment income of $353,578 and
operating expenses of $2,160,661, resulting in a net investment loss of ($1,807,083). The decrease in investment loss resulted from higher interest income generated from a higher average level of short term investments. The decrease in operating
expenses was due primarily to a decline in management fees as a result of reduced net assets under management during the period.



For the three-month period ended July 31, 2005, the Company had investment income of $378,715 and operating expenses of $589,717, resulting in a net
investment loss of ($211,002). In comparison, for the similar period ended July 31, 2004, the Company had investment income of $110,839 and operating expenses of $732,214, resulting in a net investment loss of ($621,375). The decrease in investment
loss resulted from from higher interest income generated from a higher average level of short term investments. The decrease in operating expenses was due primarily to a decline in management fees which resulted from a reduced level of net assets
under management during the period.



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



For the nine-month periods ended July 31, 2005 and 2004, the Investment Advisers earned $1,613,160 and $1,818,491 in management fees, respectively.
Management fees declined over the period ended July 31, 2005 due to the decline in net assets under management. For the three-month periods ended July 31, 2005 and 2004, the Investment Advisers earned $485,151 and $617,532 in management fees,
respectively. Management fees recorded during the period ended July 31, 2005 decreased over the period ended July 31, 2004 due to a decline in net assets under management.



Net Assets



At July 31, 2005, the Companys net assets were $96,239,237, or a net asset value per unit of membership interest of $326.00. This represents a
decrease of $19,840,196, or net asset value per unit of membership interest of $67.21, from net assets of $116,079,433, or a net asset value per unit of membership interest of $393.21 at October 31, 2004. The decrease resulted principally from i) a
distribution to members of $10,875,536 or $36.84 per unit paid on April 22, 2005, ii) a net investment loss of ($1,012,345), or ($3.43) per unit, iii) a net realized loss on investment of ($1,626,040) or ($5.51) per unit, and iv) a net change in
unrealized depreciation of ($6,326,275) or ($21.43) per unit.



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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 July 31, 2005, the Company held $5,060 in cash and $30,378,855 in short-term investments as compared to $0 held in cash and $45,526,196 in short-term investments at October 31, 2004. The decrease in short-term investments from October
31, 2004 was due to new and follow-on investments in private companies, capital calls to private investment funds, and a distribution paid to members of $10,875,536. The Company during this period funded additional capital per its commitments to all
of its private investment funds. In connection with the Companys total commitments to private investment funds in the amount of $25,700,000 since inception, the Company, through July 31, 2005, has contributed $9,681,903 or 37.67% of the total
capital committed thus far. During the nine-month period ended July 31, 2005, the Company also participated in follow-on financing rounds for several of its private companies totaling $15,796,407.



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 67.62% of the Companys net assets. For the private investments
held at July 31, 2005, changes to these estimates, i.e. changes in the valuations of these private investments, resulted in a $15.4 million reduction in net asset value from October 31, 2004.



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



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



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



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



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|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 67.62% of net assets, which are not publicly traded. These investments are recorded at fair value as determined by the Investment Advisers in accordance with valuation guidelines adopted by the Board of Managers. This method
of valuation does not result in increases or decreases in the fair value of these securities in response to changes in market prices. Thus, these securities are not subject to equity price risk normally associated with public equity markets, except
that to the extent that the private investment funds hold underlying public securities, the Company is indirectly exposed to equity price risk associated with the public markets. At July 31, 2005, 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. At October 31, 2004, the Company
was exposed to equity price risk through its investments in the equity securities of two public companies, NetLogic Microsystems, Inc. (NASDAQ: NETL), and Senomyx, Inc. (NASDAQ: SNMX). At October 31, 2004, these publicly traded equity securities
were valued at $4,682,927, and a 30% discount to the closing market price at that date, representing 4.0% of the Companys net assets. Thus, there is exposure to equity price risk, estimated as the potential loss in fair value due to a
hypothetical 10% decrease in quoted market prices, representing a decrease in the value of these securities of $468,293.



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



(a) Evaluation of Disclosure Controls and Procedures. As of July 31, 2005 (the end of the period covered by this report), the Companys principal
executive officers and principal financial officer evaluated the effectiveness of the Companys disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have concluded that, based on such evaluation, the
Companys disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company was made known to them by others within those entities.



(b) Changes in Internal Controls. There were no changes in the Companys
internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the Companys last fiscal quarter that have materially affected, or are reasonably likely to materially affect,
the Companys internal control over financial reporting.



|PARTII. | OTHER INFORMATION
|------- | -----------------



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



None.



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



None.



|Item 3. | Defaults Upon Senior Securities.
|------- | --------------------------------



None.



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



None.



|Item 5. | Other Information.
|------- | ------------------



The following information is provided herein although it is not required to be filed on the Form 8-K.



At a meeting held on June 9, 2005, the Board of Managers (the
Board) of the Company, and those Managers (the Independent Managers) who are not interested persons of the Company as defined in the Investment Company Act of 1940, as amended, (the Act), voting
separately, approved the extension of the Companys investment advisory contract with the Investment Adviser. In connection with such action, the Investment Adviser presented detailed information to the Board requested by the Independent
Managers through their counsel. Such information included (i) information confirming the financial condition of the Investment Adviser and the Investment Advisers profitability derived from its relationship with the Company; (ii) a description
of the personnel and services provided by the Investment Adviser; (iii) comparative information on investment performance; and (iv) information regarding brokerage and portfolio transactions.



The Board reviewed and discussed financial information provided by the
Investment Adviser which included an annual report and financial statements for both U.S. Trust and its parent. The Board reviewed and considered the Investment Advisers profitability derived from its relationship with the Company.
Specifically, the Board reviewed and considered a profit contribution analysis of the Investment Adviser showing its fees, income, and expenses in connection with the Company and the methodology used in the analysis. The Board determined that the
Investment Adviser is solvent and sufficiently well capitalized to perform the ongoing responsibilities to the Company and to satisfy its obligations under the Act and the advisory agreement.



The Board reviewed the advisory fee and the effective investment advisory fee
rate paid by the Company and the appropriateness of such advisory fee. The Board reviewed and considered any economies of scale realized by the Company and how the current advisory fee for the Company reflects the economies of scale for the benefit
of the shareholders of the Company, noting that as a closed-end fund nearing the end of its investment period and distributing its assets economies of scale were not a significant factor. It was noted, however, that the management fee payable to the
Investment Adviser by the Company is reduced after the period of initial investment to reflect similar issues.



The Board also reviewed and considered the fees or other payments received by the Investment Adviser. Specifically, the Board reviewed and considered
comparison of fees charged by investment advisers to fund peers of the Company, noting that the Investment Advisers fees were at the lower end of a narrow range. The Board also considered and reviewed information regarding brokerage, observing
that the Company only occasionally engages in transactions in the public securities markets.



The Board reviewed and considered the qualifications of the current and anticipated portfolio managers to manage the portfolio of the Company, including their history managing private equity investments generally and
their prior involvement with companies in the Companys investment portfolio, and the background and expertise of the key personnel and amount of time they would be able to devote to the affairs of the Company. The Board concluded, in light of
the particular requirements of the Company and the relatively late stage of the investment program, that it was satisfied with the professional qualifications and overall commitment to the Company of the anticipated portfolio management team.



The Board considered the nature, extent and quality of
services rendered to the Company by the Investment Adviser and the investment performance of the Company based on the data provided which included comparisons with the public markets as evidenced by NASDAQ data, venture economics data, and data
concerning performance relative to other venture and private equity funds with generally similar objectives and management policies that had commenced investment operations at about the same time and for which detailed information was available. The
Board determined that in light of the data taken as a whole and the nature and stages of the investment program of the Company, the investment performance was reasonable and acceptable. The Board discussed the Investment Advisers
profitability, and it was noted that the profitability percentage was within ranges generally determined to be reasonable, given the services rendered and the Companys performance and services provided. The Board concluded that the
Companys fees paid to the Investment Adviser were reasonable in light of comparative performance and advisory fee information, costs of the services provided and profits to be realized and benefits derived by the Investment Adviser from the
relationship with the Company.



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



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



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



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



| | (1) | On June 22, 2005, the Company filed a Current Report on Form 8-K to report under Item 5.02 a departure of the chief executive officer and the appointment of co-chief executive
officers.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES



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



|                         |  |                                     |  |                                       
|------------------------ |  | ----------------------------------- |  | --------------------------------------
|                         |  | EXCELSIOR VENTURE PARTNERS III, LLC
|                         |  |                                    
|Date: September 14, 2005 |  | By:                                 |  | /s/ Timothy Leach                     
|                         |  |                                     |  | Timothy Leach                         
|                         |  |                                     |  | Co-Chief Executive Officer            
|                         |  |                                    
|Date: September 14, 2005 |  | By:                                 |  | /s/ Raghav V. Nandagopal              
|                         |  |                                     |  | Raghav V. Nandagopal                  
|                         |  |                                     |  | Co-Chief Executive Officer            
|                         |  |                                    
|Date: September 14, 2005 |  | By:                                 |  | /s/ Robert F. Aufenanger              
|                         |  |                                     |  | Robert F. Aufenanger                  
|                         |  |                                     |  | Treasurer(Principal Financial Officer)