<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   ----------

                                    FORM 10-Q

(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
-
    ACT OF 1934.

For the quarterly period ended July 31, 2003
                               -------------------------------------------------

                                       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)

<TABLE>
<S>                                                                  <C>
DELAWARE                                                                          13-4102528
------------------------------------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation or Organization)       (I.R.S. Employer Identification No.)

114 West 47th Street, New York, NY                                                10036-1532
------------------------------------------------------------------------------------------------------------
(Address of Principal Executive Offices)                                          (Zip Code)
</TABLE>

Registrant's Telephone Number, Including Area Code (212) 852-1000
                                                   -----------------------------

--------------------------------------------------------------------------------
   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___
                                             ---

<PAGE>

                       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.

     The interim financial statements contained in this quarterly report 10Q
have been reviewed by Ernst & Young LLP, the Company's independent public
accountants.

<TABLE>
<CAPTION>
                 INDEX                                                                         PAGE NO.
                 -----                                                                         --------
<S>              <C>                                                                           <C>
PART I.          FINANCIAL INFORMATION

  Item 1.        Financial Statements.                                                               1

                 Portfolio of Investments as of July 31, 2003.                                       2

                 Statement of Assets and Liabilities at July 31, 2003 and October 31, 2002.          4

                 Statement of Operations for the nine-month periods ended July 31, 2003 and
                 July 31, 2002.                                                                      5

                 Statement of Operations for the three-month periods ended July 31, 2003 and
                 July 31, 2002.                                                                      6

                 Statement of Changes in Net Assets for the nine-month periods ended July
                 31, 2003 and July 31, 2002.                                                         7

                 Statement of Cash Flows for the nine-month periods ended July 31, 2003 and
                 July 31, 2002.                                                                      8

                 Financial Highlights for the nine-month periods ended July 31, 2003 and
                 July 31, 2002.                                                                      9

                 Notes to Financial Statements.                                                     10

                 Independent Accountants' Review Report.                                            13

  Item 2.        Management's Discussion and Analysis of Financial Condition and Results of         14
                 Operations.

  Item 3.        Quantitative and Qualitative Disclosures about Market Risk.                        16

  Item 4.        Controls and Procedures.                                                           17

PART II.         OTHER INFORMATION

  Item 1.        Legal Proceedings.                                                                 17

  Item 2.        Changes in Securities and Use of Proceeds.                                         17

  Item 3.        Defaults Upon Senior Securities.                                                   17

  Item 4.        Submission of Matters to a Vote of Security Holders.                               17
</TABLE>

<PAGE>

<TABLE>
<S>              <C>                                                                                <C>
  Item 5.        Other Information.                                                                 17

  Item 6.        Exhibits and Reports on Form 8-K.                                                  17

SIGNATURES                                                                                          18
</TABLE>

<PAGE>

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Excelsior Venture Partners III, LLC
Portfolio of Investments (Unaudited)

                                                      July 31, 2003
                                                 ----------------------
                                                   Value       Percent of Net
                                                                   Assets
                                              --------------   --------------
PORTFOLIO STRUCTURE
-------------------

    SHORT-TERM INVESTMENTS:

         AGENCY OBLIGATIONS                   $   65,000,000           53.13%
         INVESTMENT COMPANIES                      1,734,639            1.42%

    PRIVATE COMPANIES                             52,858,564           43.21%

    PRIVATE INVESTMENT FUNDS                       2,742,650            2.24%

                                              --------------   --------------

    TOTAL INVESTMENTS                            122,335,853          100.00%
      OTHER ASSETS & LIABILITIES (NET)                 2,215            0.00%
                                              --------------   --------------

    NET ASSETS                                $  122,338,068          100.00%
                                              ==============   ==============

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

                                       1

<PAGE>

Excelsior Venture Partners III, LLC
Portfolio of Investments (Unaudited)

<TABLE>
<CAPTION>
                                                                                           July 31, 2003
                                                                                           -------------

  Principal                                                                       Acquisition           Value
Amount/Shares                                                                       Date ##            (Note 1)
-------------                                                                       -------            --------
<S>                                                                             <C>                 <C>
  AGENCY OBLIGATIONS - 53.13%
  $65,000,000   Federal Home Loan Mortgage Corporation Discount Notes 1.00%,
                 8/1/03 (Cost $65,000,000)                                                          $   65,000,000
                                                                                                    --------------

  PRIVATE COMPANIES **, #, @ - 43.21%
   Common & Preferred Stocks - 43.21%
      647,948   Adeza Biomedical Corporation, Series 5 Preferred                     09/01               3,000,000
    2,419,355   Ancile Pharmaceuticals, Inc., Series D Preferred                     11/01                       -
    1,314,285   Archemix Corporation, Series A Preferred                         08/02 & 01/03           1,314,285
   44,247,788   Cenquest, Inc., Series 1 Preferred                                   07/01                       -
    3,766,666   Ethertronics, Inc., Series B Preferred                          06/01,09/02&07/03        5,650,000
       46,860   Genoptix, Inc., Common Stock                                         07/03                       -
      942,481   Genoptix, Inc., Series B-1 Preferred                                 07/03               1,253,500
      500,883   Genoptix, Inc., Series B-2 Preferred                                 07/03                 443,787
    1,523,810   Gyration, Inc., Series C-2 Preferred                                 03/03               4,000,000
    4,330,504   LightConnect, Inc., Series B Preferred                               07/01                 948,562
   12,292,441   LightConnect, Inc., Series C Preferred                               01/03                 992,000
    4,374,256   LogicLibrary, Inc., Series A Preferred                               01/02               2,000,000
      933,593   MIDAS Vision Systems, Inc., Series A-1 Preferred                     03/03               1,477,178
      157,396   MIDAS Vision Systems, Inc., Common Stock                             03/03                  71,183
      708,955   Monterey Design Systems, Inc., Common Stock                          06/03                       -
    3,333,333   Monterey Design Systems, Inc., Series 2 Preferred Stock              06/03               6,600,000
      956,234   NanoOpto Corporation, Series A-1 Preferred                       10/01& 03/02              892,454
    1,538,461   NetLogic Microsystems, Inc., Series D Preferred                      08/01               5,000,000
    5,333,333   OpVista, Inc., Series B Preferred                                    07/01                 800,000
   20,000,000   Pilot Software Acquisition Corp., Series A Preferred             5/02 & 04/03            4,000,000
      517,260   Senomyx, Inc., Series E Preferred                                    11/01               1,500,000
    2,211,898   Silverback Systems, Inc., Series B Preferred                         02/02               1,415,615
   15,463,918   Silverback Systems, Inc., Series C Preferred                         03/03               1,500,000
    4,166,667   Tensys Medical, Inc., Series C Preferred                             03/02               5,000,000
    3,096,551   Virtual Silicon Technology, Inc., Series C Preferred                 12/01               5,000,000
                                                                                                    --------------
                                                                                                        52,858,564

  Notes - 0.00%
      850,000   Ancile Pharmaceuticals, Inc., Bridge Note 6%                     10/02 & 01/03                   -
                                                                                                    --------------

  Warrants - 0.00%
            2   Ancile Pharmaceuticals, Inc.                                     10/02 & 01/03                   -
      115,000   Ethertronics, Inc.                                                   09/02                       -
      100,000   Ethertronics, Inc.                                                   07/03                       -
                                                                                                    --------------
                                                                                                                 -

      Total - Private Companies (Cost $73,201,857)                                                      52,858,564
                                                                                                    --------------
</TABLE>

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

                                       2

<PAGE>

Excelsior Venture Partners III, LLC
Portfolio of Investments (Unaudited) Continued

<TABLE>
<CAPTION>
                                                                                           July 31, 2003
                                                                                           -------------
  <S>                                                                            <C>                <C>
  PRIVATE INVESTMENT FUNDS **, # - 2.24%
                Advanced Technology Ventures VII, L.P.                           08/01-05/03        $      487,023
                Burrill Life Sciences Capital Fund                                   12/02                 235,389
                CHL Medical Partners II, L.P.                                    01/02-07/03               432,840
                Morgenthaler Partners VII, L.P.                                  07/01-04/03               610,735
                Prospect Venture Partners II, L.P.                               06/01-07/03               737,861
                Tallwood II, L.P.                                                12/02-02/03               238,802
                                                                                                    --------------
      Total - Private Investment Funds (Cost $3,355,429)                                                 2,742,650
                                                                                                    --------------

  INVESTMENT COMPANIES - 1.42%

    1,734,639   Dreyfus Government Cash Management Account (Cost $1,734,639)                             1,734,639
                                                                                                    --------------

  TOTAL INVESTMENTS (Cost $143,291,925*) - 100.00%                                                  $  122,335,853
  OTHER ASSETS & LIABILITIES (NET) - 0.00%                                                                   2,215
                                                                                                    --------------
  NET ASSETS - 100.00%                                                                              $  122,338,068
                                                                                                    ==============
</TABLE>

*  Aggregate cost for federal tax and book purposes.
** Restricted as to public resale. Acquired between June 1, 2001 and July 31,
   2003. Total cost of restricted securities at July 31, 2003 aggregated
   $76,557,286. Total market value of restricted securities owned at July 31,
   2003 was $55,601,214 or 45.45% of net assets.
#  Non-income producing securities.
## Required disclosure for restricted securities only.
@  At July 31, 2003 the Company owned 5% or more of the company's outstanding
   shares thereby making the company an affiliate as defined by the Investment
   Company Act of 1940. Total market value of affiliated securities owned at
   July 31, 2003 was $52,858,564.

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

                                       3

<PAGE>

Excelsior Venture Partners III, LLC
Statement of Assets and Liabilities

<TABLE>
<CAPTION>
                                                 July 31, 2003        October 31, 2002
                                                 -------------        ----------------
                                                  (Unaudited)
<S>                                              <C>                  <C>
ASSETS:

Investment Securities, at Cost                   $ 143,291,925          $ 144,846,435
                                                 =============          =============

Investment Securities, at Value                  $ 122,335,853          $ 138,512,604

Cash and Cash Equivalents                              809,356                      -
Receivables:
     Interest                                            1,414                  1,933
     Other Receivables                                   1,945                996,290
Prepaid Assets                                          20,406                 64,783
                                                 -------------          -------------

         Total Assets                              123,168,974            139,575,610
                                                 -------------          -------------

LIABILITIES:

Management Fees Payable (Note 2)                       616,718                697,027
Professional Fees Payable                               99,582                202,991
Administration Fees Payable (Note 2)                    48,107                 38,960
Board of Managers' Fees Payable (Note 2)                44,876                 60,000
Other Payables                                          21,623                 81,617
                                                 -------------          -------------

         Total Liabilities                             830,906              1,080,595
                                                 -------------          -------------

NET ASSETS                                       $ 122,338,068          $ 138,495,015
                                                 =============          =============

NET ASSETS consist of:

Accumulated Undistributed Net Investment Loss    $  (2,849,989)         $  (1,315,299)
Accumulated Net Realized Gain on Investments             7,347                  7,363
Net Unrealized Depreciation on Investments         (20,956,072)            (6,333,831)
Paid in Capital                                    146,136,782            146,136,782
                                                 -------------          -------------

         Total Net Assets                        $ 122,338,068          $ 138,495,015
                                                 =============          =============

Units of Membership Interest Outstanding               295,210                295,210
                                                 -------------          -------------

NET ASSET VALUE PER UNIT                         $      414.41          $      469.14
                                                 =============          =============
</TABLE>

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

                                       4

<PAGE>

Excelsior Venture Partners III, LLC
Statement of Operations (Unaudited)

                                                     Nine Months Ended July 31,

                                                         2003           2002
                                                     ------------   -----------
INVESTMENT INCOME:
Interest Income                                      $    683,066   $ 1,371,465
Dividend Income                                             9,638             -
                                                     ------------   -----------
         Total Income                                     692,704     1,371,465
                                                     ------------   -----------

EXPENSES:

Management Fees (Note 2)                                1,913,518     2,184,803
Organizational Expenses                                         -       (93,880)
Administration Fees (Note 2)                              112,185       120,755
Professional Fees                                          70,921       214,661
Insurance Expense                                          51,420        19,276
Board of Managers' Fees (Note 2)                           44,876        67,876
Custodian Fees                                             15,773        13,463
Miscellaneous Fees                                         18,701        18,702
                                                     ------------   -----------
         Total Expenses                                 2,227,394     2,545,656

NET INVESTMENT LOSS                                    (1,534,690)   (1,174,191)
                                                     ------------   -----------

REALIZED AND UNREALIZED GAIN
  (LOSS) ON INVESTMENTS

Net Realized Gain (Loss) on Security Transactions             (16)          764

Change in Unrealized Depreciation on Investments      (14,622,241)   (2,620,380)
                                                     ------------   -----------

NET REALIZED AND UNREALIZED
  LOSS ON INVESTMENTS                                 (14,622,257)   (2,619,616)
                                                     ------------   -----------

NET DECREASE IN NET
   ASSETS RESULTING FROM OPERATIONS                  $(16,156,947)  $(3,793,807)
                                                     ============   ===========

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

                                       5

<PAGE>

Excelsior Venture Partners III, LLC
Statement of Operations (Unaudited)

                                                     Three Months Ended July 31,

                                                          2003          2002
                                                      -----------   -----------
INVESTMENT INCOME:

Interest Income                                       $   183,586   $   382,719
Dividend Income                                             4,757             -
                                                      -----------   -----------
         Total Income                                     188,343       382,719
                                                      -----------   -----------

EXPENSES:

Management Fees (Note 2)                                  616,718       734,343
Professional Fees                                          46,126        72,197
Administration Fees (Note 2)                               36,791        40,607
Insurance Expense                                          17,897         6,496
Board of Managers' Fees (Note 2)                           15,123        15,123
Custodian Fees                                              5,263         4,537
Miscellaneous Fees                                          6,302         6,304
                                                      -----------   -----------
         Total Expenses                                   744,220       879,607

NET INVESTMENT LOSS                                      (555,877)     (496,888)
                                                      -----------   -----------

REALIZED AND UNREALIZED LOSS ON INVESTMENTS

Net Realized Loss on Security Transactions                      -             -

Change in Unrealized Depreciation on Investments       (5,954,448)   (2,547,538)
                                                      -----------   -----------

NET UNREALIZED LOSS ON INVESTMENTS                     (5,954,448)   (2,547,538)
                                                      -----------   -----------

NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS  $(6,510,325)  $(3,044,426)
                                                      ===========   ===========

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

                                        6

<PAGE>

Excelsior Venture Partners III, LLC
Statement of Changes in Net Assets (Unaudited)

<TABLE>
<CAPTION>
                                                                   Nine Months Ended July 31,

                                                                  2003                         2002
                                                         ----------------------       ----------------------
<S>                                                      <C>                          <C>
OPERATIONS:

Net Investment Loss                                      $         (1,534,690)        $         (1,174,191)
Net Realized Gain (Loss) on Investments                                   (16)                         764
Change in Unrealized Depreciation on Investments                  (14,622,241)                  (2,620,380)
                                                         ----------------------       ----------------------
Net Decrease in Net Assets Resulting from Operations              (16,156,947)                  (3,793,807)
                                                         ----------------------       ----------------------

NET DECREASE IN NET ASSETS                                        (16,156,947)                  (3,793,807)

NET ASSETS:

Beginning of Period                                               138,495,015                  146,420,778
                                                         ----------------------       ----------------------

End of Period                                            $        122,338,068         $        142,626,971
                                                         ======================       ======================
</TABLE>

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

                                        7

<PAGE>

Excelsior Venture Partners III, LLC
Statement of Cash Flows (Unaudited)

<TABLE>
<CAPTION>
                                                                                           Nine Months Ended July 31,

                                                                                          2003                    2002
                                                                              ---------------------------------------------
   <S>                                                                        <C>                     <C>
   CASH FLOWS FROM OPERATING ACTIVITIES:
    Net Decrease in Net Assets Resulting from Operations ....................   $       (16,156,947)  $        (3,793,807)
   Adjustments to reconcile net decrease in net assets resulting from
    operations to net cash provided by/used in operating activities:
      Change in unrealized depreciation on investments ......................            14,622,241             2,620,380
      Purchase of investments ...............................................           (15,481,459)          (33,306,827)
      Change in short-term investments ......................................            17,035,969            27,342,642
      Decrease (increase) in interest receivable ............................                   519                (7,833)
      Decrease in other receivable ..........................................               994,345                48,729
      Decrease in prepaid insurance .........................................                44,377                12,870
      Decrease in expenses payable ..........................................              (249,689)             (720,705)
                                                                                --------------------- ---------------------

       Net cash provided by/used in operating activities ....................               809,356            (7,804,551)
                                                                                --------------------- ---------------------

       Net change in cash ...................................................               809,356            (7,804,551)
                                                                                --------------------- ---------------------

        Cash at beginning of period .........................................                    --             8,433,122
                                                                                --------------------- ---------------------
        Cash at end of period ...............................................   $           809,356   $           628,571
                                                                                ===================== =====================
</TABLE>

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

                                        8

<PAGE>

Excelsior Venture Partners III, LLC
Financial Highlights (Unaudited)

Per Unit Operating Performance: (1)

<TABLE>
<CAPTION>
                                                                Nine Months Ended July 31,

                                                                2003                   2002
                                                          ----------------       ----------------
   <S>                                                    <C>                    <C>
   NET ASSET VALUE, BEGINNING OF PERIOD ................          $ 469.14               $ 495.99

   INCOME FROM INVESTMENT OPERATIONS:
     Net investment loss ...............................             (5.20)                 (3.98)
     Net realized and unrealized loss on investment
      transactions .....................................            (49.53)                 (8.87)
                                                                  --------               --------
       Total from investment operations ................            (54.73)                (12.85)
                                                                  --------               --------

   NET ASSET VALUE, END OF PERIOD ......................          $ 414.41               $ 483.14
   TOTAL NET ASSET VALUE RETURN (3), (4) ...............            (11.67)%                (2.59)%
                                                                  ========               ========

   RATIOS AND SUPPLEMENTAL DATA:
     Net assets, end of period (000's) .................          $122,338               $142,627
     Ratios to average net assets: (2)
       Gross expenses ..................................              2.27%                  2.42%
       Net expenses ....................................              2.27%                  2.34%
       Net investment loss .............................             (1.57)%                (1.08)%
     Portfolio Turnover Rate (3) .......................              0.00%                  0.00%
</TABLE>

(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
     calculated.

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

                                        9

<PAGE>

                       Excelsior Venture Partners III, LLC

                    Notes to Financial Statements (Unaudited)

                                  July 31, 2003

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, two-year extensions) from
the final subscription closing, 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.

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

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

     The financial information for the Company as of July 31, 2003 and 2002 and
for the three and nine-month periods then ended is unaudited, but includes all
adjustments (consisting only of normal recurring accruals) which, in the opinion
of management are necessary in order to make the financial statements not
misleading at such dates and for those periods. These financial statements have
been prepared in accordance with the instructions for Form 10-Q and, therefore,
do not include all information and footnotes required by accounting principles
generally accepted in the United States. These financial statements should be
read in conjunction with the audited financial statements and related notes
included in the Company's Form 10-K for the year ended October 31, 2002.
Operating results for the three or nine months ended July 31, 2003 are not
necessarily indicative of the results that may be expected for the entire year.

     A. Investment Valuation:

          The Company values portfolio securities quarterly and at such other
     times as, in the Board of Managers' view, circumstances warrant. Securities
     for which market quotations are readily available generally will be valued
     at the last sale price on the date of valuation or, if no sale occurred, at
     the mean of the latest bid and ask prices; provided that, as to such
     securities that may have legal, contractual or practical restrictions on
     transfer, a discount of 10% to 40% from the public market price will be
     applied. Securities for which no public market exists and other assets will
     be valued at fair value as determined in good faith by the Investment
     Advisers (as defined below) or a committee of the Board under the
     supervision of the Board pursuant to certain valuation procedures
     summarized below. Securities having remaining maturities of 60 days or less
     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" method of valuation. The
     private market method shall only be used with respect to reliable third
     party transactions by sophisticated, independent

                                       10

<PAGE>

     investors. The appraisal method shall be based upon 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 Advisers
     or a committee of the Board and, in any event, not less frequently than
     quarterly. However, there can be no assurance that such value will
     represent the return that might ultimately be realized by the Company from
     the investments.

          The valuation of the Company's private funds is based upon 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 Advisers,
     the Investment Advisers, under supervision of the Board, shall determine
     such value based on its judgment of fair value on the appropriate date,
     less applicable charges, if any.

          At July 31, 2003, market quotations were not readily available for
     securities valued at $55,601,214. Such securities were valued by the
     Investment Advisers, 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 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.

          At July 31, 2003, the cost of investments for Federal income tax
     purposes was $143,291,925. At July 31, 2003, the net unrealized
     depreciation amounted to $20,956,072, which is comprised of gross
     unrealized appreciation of $4,022,218 and aggregate gross unrealized
     depreciation of $24,978,290.

     D. Dividends to members:

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

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

     Prior to June 1, 2003, and pursuant to an Investment Advisory Agreement
(the "Agreement"),U.S. Trust Company served during the reporting period as the
Investment Adviser to the Company pursuant to an Investment Advisory Agreement
with the Company. Under the Agreement for the services provided, the Investment
Adviser is entitled to receive a management fee at an annual rate equal to 2.00%
of the Company's average quarterly net assets through the fifth anniversary of
the first closing date and 1.00% of net assets thereafter. Prior to June 1,
2003, and pursuant to sub-advisory agreements among the Company, U.S. Trust
Company, United States Trust Company of New York ("U.S. Trust NY") and U.S.
Trust Company, N.A., U.S. Trust NY and U.S. Trust Company, N.A. served as the
investment sub-advisers to the Company and received an investment management fee
from the Investment Adviser.

                                       11

<PAGE>

     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.

     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. has 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, 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 will have no impact on
the management or operations of the investment advisory functions performed for
the Company, and does 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 an
indirect wholly-owned subsidiary of The Charles Schwab Corporation ("Schwab").

     Pursuant to an Administration, Accounting and Investor Services Agreement,
the Company retains PFPC Inc. ("PFPC"), a majority-owned subsidiary of The PNC
Financial Services Group, as administrator, accounting and investor services
agent. In addition, PFPC Trust Company serves as the Company's custodian. In
consideration for its services, the Company (i) pays PFPC a variable fee between
0.105% and 0.07%, based on average quarterly net assets, payable monthly,
subject to a minimum quarterly fee of approximately $30,000, (ii) pays annual
fees of approximately $15,000 for taxation services and (iii) reimburses PFPC
for out-of-pocket expenses.

     Charles Schwab & Co., Inc. (the "Distributor"), the principal subsidiary of
Schwab, serves as the Company's distributor for the offering of units. The
Investment Adviser paid the Distributor from its own assets an amount equal to
0.02% of the total of all subscriptions received in this 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 this
offering.

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

     As of July 31, 2003, Excelsior Venture Investors III, LLC had an investment
in the Company of $77,664,164. This represents an ownership interest of 63.48%
in the Company.

Note 3 -- Purchases and Sales of Securities:

     Excluding short-term investments, the Company had $15,481,459 in purchases
and $0 in sales of securities for the nine-month period ended July 31, 2003.
Excluding short-term investments, the Company had $33,306,827 in purchases and
$0 in sales of securities for the nine-month period ended July 31, 2002.

Note 4 -- Commitments

     As of July 31, 2003, the Company had outstanding investment commitments
totaling $16,644,571.

                                       12

<PAGE>

Note 5 -- Transactions with Affiliated Portfolio Companies

     An affiliated company is a company in which the Company has ownership of at
least 5% of the voting securities. The Company did not receive dividend or
interest income from affiliated companies during the period ended July 31, 2003.
Transactions with companies, which are or were affiliates were as follows:

<TABLE>
<CAPTION>
                                                                      For the Nine-Month Period Ended July 31, 2003
                                                                      ---------------------------------------------
                                                                                                                Cumulative
                                                        October 31,                 Sale/Merger    Realized        Value
Affiliate                                               2002 Value     Purchases      Proceeds    Gain (Loss)    (Note 1)
----------------------------------------------------    -----------   -----------   -----------   -----------   -----------
<S>                                                     <C>           <C>           <C>           <C>           <C>
Archemix Corporation, Series A Preferred                $   628,571   $   685,714            --            --   $ 1,314,285
Ancile Pharmaceuticals, Inc., Bridge Notes 6%               600,000       250,000            --            --            --
Ancile Pharmaceuticals, Inc., Warrant                            --            --            --            --            --
Ethertronics Inc., Series B Preferred                            --     1,000,000            --            --     1,000,000
Ethertronics Inc., Warrant                                       --            --            --            --            --
Genoptix, Inc., Bridge Note 6%                                   --       443,787       443,787            --            --
Genoptix, Inc., Series B Preferred                        2,500,000            --     2,500,000            --            --
Genoptix, Inc., Series B-1 Preferred                             --     2,500,000            --            --     1,253,500
Genoptix, Inc., Series B-2 Preferred                             --       443,787            --            --       443,787
Genoptix, Inc., Common Stock                                     --            --            --            --            --
Gyration, Inc., Series C2 Preferred                              --     4,000,000            --            --     4,000,000
LightConnect, Inc., Series B Preferred                      948,562            --            --            --       948,562
LightConnect, Inc., Series C Preferred                           --       992,000            --            --       992,000
MIDAS Vision Systems, Inc., Series A-1 Preferred                 --     1,054,960            --            --     1,477,178
MIDAS Vision Systems, Inc., Series C Preferred            4,000,000            --     4,000,000            --            --
MIDAS Vision Systems, Inc., Common Stock                         --     4,000,000            --            --        71,183
Monterey Design Systems, Inc., Series 1 Preferred         4,750,000            --     4,750,000            --            --
Monterey Design Systems, Inc., Common Stock                      --     4,750,000            --            --            --
Monterey Design Systems, Inc., Series 2 Preferred                --     3,000,000            --            --     6,600,000
Pilot Software Acquisition Corp., Series A Preferred      3,000,000     1,000,000            --            --     4,000,000
Silverback Systems, Inc., Series B Preferred              1,415,614            --            --            --     1,415,615
Silverback Systems, Inc., Series C Preferred                     --     1,500,000            --            --     1,500,000
                                                        -----------   -----------   -----------    ----------   -----------
      Total                                             $17,842,747   $25,620,248   $11,693,787            --   $25,016,110
                                                        -----------   -----------   -----------    ----------   -----------
</TABLE>


                     Independent Accountants' Review Report

To the Members and Board of Managers of
Excelsior Venture Partners III, LLC

We have reviewed the accompanying statement of assets and liabilities of
Excelsior Venture Partners III, LLC ("the Fund"), including the portfolio of
investments, as of July 31, 2003, the related statements of operations for the
three-month and nine-month periods ended July 31, 2003 and 2002, and the
statement of changes in net assets, the statement of

                                       13

<PAGE>

cash flows, and the financial highlights for the nine-month periods ended July
31, 2003 and 2002. These financial statements and financial highlights are the
responsibility of the Fund's management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States,
which will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed financial statements and financial
highlights referred to above for them to be in conformity with accounting
principles generally accepted in the United States.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the statement of assets and liabilities,
including the portfolio of investments, as of October 31, 2002, the related
statements of operations and cash flows for the year then ended, the statement
of changes in net assets and the financial highlights for the period from April
5, 2001 (commencement of operations) to October 31, 2002 (not presented herein)
and in our report dated December 17, 2002, we expressed an unqualified opinion
on those financial statements and financial highlights. In our opinion, the
information set forth in the accompanying condensed balance sheet as of October
31, 2002, is fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.

                                                               ERNST & YOUNG LLP

Boston, Massachusetts
September 5, 2003


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

Nine-month Period Ended July 31, 2003 as Compared to the Similar Period in 2002

Realized and Unrealized Gains and Losses from Portfolio Investments

     For the nine-month periods ended July 31, 2003 and 2002, the Company had a
net realized gain/(loss) on security transactions of ($16) and $764,
respectively. For the nine-month periods ended July 30, 2003 and 2002, the
Company had a net change in unrealized depreciation on investments of
($14,622,241) and ($2,620,380), respectively. The realized gains/(losses) were
principally the result of the Company's sale of short-term investments during
these periods. The change in unrealized depreciation was principally the result
of write-downs taken on private company investments during the period ended July
31, 2003. For the period ended July 31, 2002, the change in unrealized
depreciation was principally the result of a decline in the value of private
investments.

Investment Income and Expenses

     For the nine-month period ended July 31, 2003, the Company had investment
income of $692,704 and net operating expenses of $2,227,394, resulting in a net
investment loss of ($1,534,690). In comparison, for the similar period ended
July 31, 2002, the Company had investment income of $1,371,465 and net operating
expenses of $2,545,656, resulting in a net investment loss of ($1,174,191). This
decrease in net investment income resulted from the negative impact of the
decline in short-term interest rates, along with a decrease in assets invested
in short-term instruments. The decrease in operating expenses was due to a
decline in management fees as a result of reduced net assets during the period.

                                       14

<PAGE>

     For the three-month period ended July 31, 2003, the Company had investment
income of $188,343 and net operating expenses of $744,220, resulting in a net
investment loss of ($555,877). In comparison, for the similar period ended July
31, 2002, the Company had investment income of $382,719 and net operating
expenses of $879,607 resulting in a net investment loss of ($496,888). This
decrease in net investment income also resulted from the negative impact of the
decline in short-term interest rates, along with a decrease in assets invested
in short-term instruments. The decrease in operating expenses was also due to a
decline in management fees as a result of reduced net assets 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. Such fee is determined and payable quarterly. For
the nine-month periods ended July 31, 2003 and 2002, the Investment Advisers
earned $1,913,518 and $2,184,803 in management fees, respectively. Management
fees declined over the period ended July 31, 2003 due to the decline in net
assets.

Net Assets

     At July 31, 2003, the Company's net assets were $122,338,068, or a net
asset value per unit of membership interest of $414.41. This represents a
decrease of ($16,156,947) from net assets of $138,495,015, or a net asset value
per unit of membership interest of $469.14, at October 31, 2002. The decrease
resulted from (i) a $3,850,000 write-off of Ancile Pharmaceuticals, Inc., (ii) a
$3,506,599 write-down of MIDAS Vision Systems, Inc., (iii) a $1,338,758
write-down of NanoOpto Corporation, (iv) a $1,246,500 write-down of Genoptix,
Inc., (v) a $1,150,000 write-down of Monterey Design Systems, Inc., (vi) a
$3,200,000 write-down of OpVista, Inc., and (vii) operating expenses exceeding
investment income during the period primarily due to a decline in net investment
income and the management fee accrual

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 companies. The Company invests its available cash in short-term
investments of marketable securities pending distribution to investors.

     At July 31, 2003, the Company held $809,356 in cash and $66,734,639 in
short-term investments as compared to $0 in cash and $83,770,608 in short-term
investments at October 31, 2002. The decrease in short-term investments from
October 31, 2002 was due to new and follow-on investments in private companies
as wells as capital calls for private investment funds. The Company, during this
period funded additional capital per its commitments to Advanced Technology
Ventures VII, L.P., Burrill Life Sciences Capital Fund, CHL Medical Partners II,
L.P., Morgenthaler Partners VII, L.P., Prospect Venture Partners II, L.P., and
Tallwood Venture Partners II, L.P., each a private investment fund. The Company
has also committed capital to Valhalla Partners, L.P. In connection with the
Company's total commitments to private funds in the amount of $20,000,000 since
inception, the Company, through July 31, 2003, has contributed $3,355,429 or
16.8% of the total capital committed thus far.

     The Company participated in follow-on financing rounds for 9 of its private
companies: i) LightConnect, Inc. for $992,000, ii) Ancile Pharmaceuticals bridge
note for $250,000, iii) Archemix Corporation for $685,714, iv) MIDAS Vision
Systems Series A-1 preferred for $1,054,960, v) Pilot Software Series A
preferred for $1,000,000, vi) Silverback Systems Series C preferred for
$1,500,000, vii) Ethertronics Series B preferred for $1,000,000, viii) Genoptix
bridge note for $443,787, and ix) Monterey Designs Series 2 preferred for
$3,000,000. The Company also closed and funded 1 new private company investment
in Gyration, Inc. Series C2 preferred for $4,000,000.

                                       15

<PAGE>

     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 Advisers
make 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 they currently
represent 45.5% of the Company's net assets. During the nine-month period ended
July 31, 2003, changes to these estimates, i.e. changes in the valuations of
private investments, resulted in a $14.6 million decrease in net asset value.

     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 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 Advisers, the Investment Advisers, under
supervision of the Board, shall determine such value based on its judgment of
fair value on the appropriate date, less applicable charges, if any.

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

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

Equity Price Risk

     The Company anticipates that a majority of its investment portfolio will
consist of securities in private companies and private investment funds,
currently representing 45.5% 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. As of July 31, 2003, the Company
directly held no investments in the securities of public companies.

                                       16

<PAGE>

Item 4.  Controls and Procedures.

         (a) Evaluation of Disclosure Controls and Procedures. Our principal
executive officers and principal financial officer, after evaluating the
effectiveness of our disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this
Quarterly Report on Form 10-Q, have concluded that, based on such evaluation,
our disclosure controls and procedures were adequate and effective to ensure
that material information relating to us, including our consolidated
subsidiaries, was made known to them by others within those entities,
particularly during the period in which this Quarterly Report on Form 10-Q was
being prepared.

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

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.

         None.

Item 2.  Changes in Securities and Use of Proceeds.

         None.

Item 3.  Defaults Upon Senior Securities.

         None.

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

         None.

Item 5.  Other Information.

         None.

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

(a)      Exhibits.

         15       Independent Accountants' Acknowledgement Letter.

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

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

         31.3     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.

         None.

                                       17

<PAGE>

                                   SIGNATURES

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

                                       EXCELSIOR VENTURE PARTNERS III, LLC

Date: September 15, 2003                    By: /s/ David I. Fann
                                               ---------------------------------
                                            David I. Fann
                                            Co-Chief Executive Officer

Date: September 15, 2003                    By: /s/ Douglas A. Lindgren
                                               ---------------------------------
                                            Douglas A. Lindgren
                                            Co-Chief Executive Officer

Date: September 15, 2003                    By: /s/ Robert F. Aufenanger
                                               ---------------------------------
                                            Robert F. Aufenanger
                                            Treasurer
                                            (Principal Financial Officer)

                                       18