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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-K



FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



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



For the fiscal year ended October 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) |  | (IRS Employer Identification No.)



225 High Ridge Road

Stamford, CT 06905

(Address of Principal Executive Offices)



Registrants telephone number, including area code: (203) 352-4400



Securities registered pursuant to Section 12(b) of the Act: NONE



Securities registered pursuant to Section 12(g) of the Act:



UNITS OF MEMBERSHIP INTEREST WITHOUT PAR VALUE

(Title of Class)



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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K.  x



Indicate by check mark
whether the registrant is an accelerated filer (as defined in 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



The registrants common stock is not listed on any exchange nor does it trade on any established securities market or other market.



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TABLE OF CONTENTS



|         |  |                                                                                       |  |                      
|-------- |  | ------------------------------------------------------------------------------------- |  | ---------------------
|Item No. |  |                                                                                       |  | Form 10-K Report Page
|         |  | PART I                                                                                |  |                      
|         |  |                                                                                      
|1.       |  | Business                                                                              |  | 1                    
|2.       |  | Properties                                                                            |  | 8                    
|3.       |  | Legal Proceedings                                                                     |  | 8                    
|4.       |  | Submission of Matters to a Vote of Security Holders                                   |  | 8                    
|         |  |                                                                                      
|         |  | PART II                                                                               |  |                      
|         |  |                                                                                      
|5.       |  | Market for Registrants Common Equity and Related Stockholder Matters                 |  | 8                    
|6.       |  | Selected Financial Data                                                               |  | 8                    
|7.       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 9                    
|7A.      |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 12                   
|8.       |  | Financial Statements and Supplementary Data                                           |  | 12                   
|9.       |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 35                   
|9A       |  | Controls and Procedures                                                               |  | 35                   
|         |  |                                                                                      
|         |  | PART III                                                                              |  |                      
|         |  |                                                                                      
|10.      |  | Managers and Executive Officers of the Registrant                                     |  | 36                   
|11.      |  | Executive Compensation                                                                |  | 38                   
|12.      |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 39                   
|13.      |  | Certain Relationships and Related Transactions                                        |  | 40                   
|14.      |  | Principal Accountant Fees and Services                                                |  | 40                   
|         |  |                                                                                      
|         |  | PART IV                                                                               |  |                      
|         |  |                                                                                      
|15.      |  | Exhibits and Financial Statement Schedules                                            |  | 41                   



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FACTORS THAT MAY AFFECT FUTURE RESULTS



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



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##### Table of Contents

PART I



|ITEM 1. | BUSINESS.
|------- | ---------



Overview



Excelsior
Venture Partners III, LLC (the Company or the Fund) is a Delaware limited liability company organized on February 18, 2000. The Company is a non-diversified, closed-end management investment company operating as a
business development company (BDC) under the Investment Company Act of 1940, as amended (Investment Company Act), , and, in connection with its initial offering of units, registered said offering of units under the Securities
Act of 1933, as amended (the Securities Act). BDCs are a special type of Investment Company, as defined and regulated by the Investment Company Act, which focus primarily on investing in the privately issued securities of eligible
portfolio companies, as defined by the Investment Company Act. A BDC must also make available significant managerial assistance to such companies. The Companys investment objective is to achieve long-term capital appreciation 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 Advisers (defined
herein) believe offer significant long-term capital appreciation.



U.S. Trust Company, N.A., acting through its registered investment advisory division, U.S. Trust Company, N.A. Asset Management Division, has served as Investment Adviser to the Company. United States Trust Company of New York, acting
through its registered investment advisory division, U.S. TrustNew York Asset Management Division, serves as Investment Sub-Adviser to the Company (together, the Investment Advisers). The Investment Advisers provide investment
management services to the Company pursuant to an investment advisory agreement dated September 8, 2000 and an investment sub-advisory agreement dated September 8, 2000 (together the Investment Agreements). U.S. Trust Company,
N.A. and United States Trust Company of New York 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. All
officers of the Company are employees and/or officers of the Investment Advisers. The Investment Advisers are responsible for performing the management and administrative services necessary for the operation of the Company.



Pursuant to a Registration Statement on Form N-2 (File 333-30986), which was
originally declared effective on September 7, 2000, the Company was authorized to offer an unlimited number of units of membership interest with no par value. The Company sold 295,210 units via a public offering, which closed on May 11,
2001, for gross proceeds totaling $147,605,000. .Units of the Company were made available through Charles Schwab & Co., Inc., the Companys principal distributor (the Distributor).



The Company incurred offering costs associated with the public offering
totaling $1,468,218. Net proceeds to the Company from the public offering, after offering costs, totaled $146,136,782.



The Companys Certificate of Formation provides that the duration of the Company will be ten years from the final subscription closing date, subject
to the rights of the Board of Managers to extend the term for up to two additional two-year periods.



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The following is a summary of the Companys investment portfolio.



LOGO



|* | This amount represents money market instruments and other cash equivalents held to fund follow-on investments in private companies, to meet contractual commitments to private
investment funds and operation expense requirements of the Fund.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Investments Held  Private



Archemix Corporation(Archemix)



Description: Archemix is a biopharmaceutical company leading the development of aptamers as a new class of directed therapeutics for
the prevention and treatment of chronic and acute disease. Aptamers can be used in a wide range of disease areas, including many of those currently addressed by protein-based therapeutics, and can be produced quickly and economically. With a
portfolio of over 300 patents and patent applications, Archemix holds the key to the development of aptamer technology and its implications for the pharmaceutical industry. Archemix is focused on using its expertise to aggressively pursue drug
discovery and development in a variety of areas. As of October 31, 2005 the Fund has invested $2.5 million in Archemix.



2005 Activity and Outlook: Archemix is actively working with its initial development partners Eyetech (in the field of ophthalmology) and Nuvelo (for an
anticoagulant) to further the development of two compounds. The partnerships with Eyetech and Nuvelo apply to the research, development and eventual marketing of aptamer-based therapies. The company will also continue to seek additional aptamer
development and marketing relationships in other therapeutic areas.



Cydelity(Cydelity, formerly Datanautics, Inc.)



Description: In August 2004, the company was repositioned to develop products for the high growth area of Internet Security and Online Fraud Management and was subsequently named Cydelity. This market opportunity is a logical
extension to the companys existing web analytics technology, as it has a number of capabilities that can be applied to this rapidly emerging market segment. The decision to reposition the company was driven primarily by significant market need
to proactively avoid some of the recent high profile security infringements. The specific focus area for Cydelitys technology is in controlling and monitoring fraudulent access and behavior by individuals who have (or appear to have) valid
system/network credentials. As of October 31, 2005 the Fund has invested $3.0 million in Cydelity, and had previously invested $4 million in Datanautics.



2005 Activity and Outlook: Cydelity is exceeding investor milestones in product development, hiring employees and managing cash. The company has six beta
customers and is well positioned to introduce a new commercial product in 2006.



Ethertronics, Inc. (Ethertronics)



Description: Ethertronics designs and manufactures the industrys only Isolated Magnetic DipoleTM(IMD) internal antennas for wireless devices. Used in cellular and wireless LAN applicationsphones, notebooks, LAN cards, PDAs, Bluetooth devices and GPS receiversIMD antennas provide longer-range, increased signal
strength and improved voice/data quality inside buildings, particularly in noisy environments and in fringe network coverage areas. As of October 31, 2005 the Fund has invested $8.1 million in Ethertronics.



2005 Activity and Outlook: In 2005, Intel selected Ethertronics technology as
the RF/antenna specification for its CentrinoTMWireless LAN chipset. Known for their outstanding performance, high
isolation and small form factors, Ethertronics technology is viewed as perfect for the fast growing notebook computer market, where mobility is key. Likewise, HP selected the Ethertronics Isolated Magnetic Dipole Technology for their
expanding line of notebook computers.



Genoptix, Inc.
(Genoptix)



Description: Genoptix provides
Personalized Medicine Services through its CLIA- and CAP-certified laboratory to hematologists and oncologists in order to resolve management dilemmas in the treatment of blood and bone marrow malignancies. Genoptixs Personalized Medicine
Services combines proprietary and exclusive tests with advanced clinical techniques to provide comprehensive evaluation to individual patients. The companys tests monitor an individual patients response to chemotherapeutic agents in
leukemia and other blood-related cancers. These services help physicians deliver personalized patient management which results in accurate diagnoses, more effective treatment, reduced adverse effects, enhanced monitoring and improved outcomes. As of
October 31, 2005 the Fund has invested $4.8 million in Genoptix.



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2005 Activity and Outlook: In August 2005, Genoptix completed a $17.3 million Series 1-D financing round, led by a
new investor, Chicago Growth Partners. These funds will help Genoptix to accelerate expansion of its sales and marketing team, add capacity to its laboratory and grow its revenues.



LightConnect, Inc. (LightConnect)



Description: Designer and manufacturer of innovative MEMS (micro electro-mechanical systems) components and modules for next
generation, dynamically configurable optical networks. LightConnects product is meeting the need for configurability in optical networks by enabling rapid dynamic bandwidth and circuit provisioning. LightConnect builds new optical components
based on a unique technology know as diffractive MEMS. This approach, combined with advanced packaging and manufacturing, results in a new category of MEMS components that provide industry-leading performance, compactness, manufacturability and
reliability. As of October 31, 2005 the Fund has invested $6.0 million in LightConnect.



2005 Activity and Outlook: LightConnect is now the market leader for MEMS-based components and modules. Its goal for 2005 is to further increase its leadership by providing its customers with the most reliable
and cost-effective product. Also, in March 2005, LightConnect announced that its latest product, the Fast Variable Optical Attenuator Series 5000 (VOA), successfully passed the strict reliability guidelines listed in Telcordia GR-1209 and
GR-1221the standard for meeting requirements in this industry. This was the last hurdle for the industrys smallest MEMS VOA before worldwide field deployment, as several large system companies have already qualified this component in
their systems.



LogicLibrary, Inc. (LogicLibrary)



Description: LogicLibrary is the leading provider of a software
system that enables the management and reuse of software development assets for large enterprises and IT environments. The companys patent-pending technology provides a comprehensive and collaborative approach for creating, migrating and
integrating enterprise applications for use in service-oriented architecture, web services and other software development initiatives. As of October 31, 2005 the Fund has invested $4.4 million in LogicLibrary.



2005 Activity and Outlook: Over the past four quarters, the company has experienced
strong customer acquisition growth and greater demand for its products. We believe this is occurring due to the growing recognition of the importance of service-oriented architectures and software reuse in enhancing IT development efficiency. The
company developed an add-in that allows users to launch its product directly from the Microsoft Visual Studio 2005 System, resulting in improved productivity, reduced costs and streamlined projects for developers and architects.



NanoOpto Corporation(NanoOpto)



Description: NanoOpto designs and manufactures integrated optical components using
nanotechnology manufacturing platforms. The company is replacing todays discrete, costly, space-hungry bulk optics with a coherent family of functional optical building blocks called Modular Nano-Optics. Both individually and with industry
partners, NanoOpto uses its technology to produce superior versions of standard optical components and new classes of integrated optical subassemblies for both custom and general applications. As of October 31, 2005 the Fund has invested $4.3
million in NanoOpto.



2005 Activity and Outlook: In 2005, the company
focused on its core products and its core large customers. NanoOpto anticipates delivering significant revenue growth during the next several quarters and is currently scaling its manufacturing capacity to meet these expectations.



OpVista, Inc. (OpVista)



Description: OpVista provides advanced optical network solutions for advanced video
and IP services. The companys reconfigurable optical transport systems are uniquely suited to deliver triple play convergence, especially advanced video and IP services, for cable and communications service providers. As of October 31,
2005 the Fund has invested $9.2 million in OpVista.



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2005 Activity and Outlook: In 2005, the company continued as an important supplier to Cox Communications and Time
Warner Cable. OpVista is actively bidding on a number of projects with additional cable companies and Telco service providers. The company has begun exploring the possibility of pursuing international market opportunities.



Pilot Software, Inc. (Pilot)



Description: Pilot provides operational performance management solutionsa
combination of domain expertise, a proven approach and award-winning softwarethat enable organizations to rapidly achieve objectives by aligning execution with strategy. Pilot currently has over 400 active customers, including several Global
1000 companies such as the United States Government GSA, Swiss Life, Nokia and JetBlue Airways. As of October 31, 2005 the Fund has invested $8.1 million in Pilot.



2005 Activity and Outlook: Pilot continued to show strong revenue growth by acquiring new customers and expanding their installations
at existing clients. Its maintenance legacy business continues to track according to plan. Operational performance management is an increasingly important priority among the large commercial enterprises and state and local government IT
organizations that Pilot is targeting.



Silverback Systems, Inc.
(Silverback)



Description: Silverback designs,
manufactures and markets components which enable IP storage solutions and true network convergence for SAN, NAS and LAN. Silverback accelerates the design and performance of storage networking equipment through a comprehensive package of silicon,
firmware and drivers. Also, because the company offers a complete development program, they accelerate the adoption of IP storage by helping equipment vendors provide a cost effective deployment solution for small, medium and eventually large
enterprises. As of October 31, 2005 the Fund has invested $6.7 million in Silverback.



2005 Activity and Outlook: The Companys products gained further recognition in 2005, and Silverback is planning to leverage its technology differentiation in 1G network storage product to introduce 10G
products in 2006.



Tensys Medical, Inc.(Tensys)



Description: Tensys designs, develops, manufactures and markets a
continuous, non-invasive arterial blood pressure management system. This method is more effective than intermittent cuff-based systems and far less invasive than arterial cannulation. As of October 31, 2005 the Fund has invested $6.4 million in
Tensys.



2005 Activity and Outlook: Tensys launched its
second-generation product to provide real-time, beat-to beat blood pressure in surgeries where, currently, a blood pressure cuff is used. Further development efforts will be focused on improving the ease of use of the companys products. During
the quarter, the Fund wrote down $4 million of its investment in Tensys. This writedown was primarily the result of operational and execution issues within the company.



Exits



The Fund liquidated its interest in six of its portfolio companies since inception. As a result of these exits, the Fund realized proceeds of $24 million. Total cost for
these six companies was $29.7 million:



The Fund liquidated its interest in
Adeza Biomedical Corporation(Adeza), a developer of diagnostic products for womens healthcare. In liquidating this investment, the Fund realized proceeds of $6.9 million on its original $3.0 million investment in Adeza.



The Fund sold its interest in NetLogic Microsystems(NetLogic), a manufacturer of products that enable the global infrastructure of networking and optical communications to achieve their highest performance. As a result of the sale, the Fund realized proceeds of $4.4 million on its
original $5.0 million investment in NetLogic.



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The Fund liquidated Gyration, a provider of hardware and software solutions for business communication, PC and
gaming markets. The Fund received proceeds of $7.6 million on its original $6.8 million investment following the liquidation of the Gyration.



The Fund sold its interest in Senomyx, a developer of flavors, flavor enhancers and taste modulators for the packaged food and beverage industry. The Fund realized
proceeds of $3.7 million on its original $1.5 million investment in Senomyx.



Monterey Design Systems(Monterey), a developer of advanced physical software solutions for the semiconductor industry, was sold in the second quarter. As a result of the sale, the Fund received proceeds of $0.8 million
on its original $7.8 million investment in Monterey.



The Fund sold its
interest in Virtual Silicon Technologies(VST). The investment in VST was written down in response to two events during 2005, including a material change in the VSTs senior management team and a simultaneous lack of
follow-on funding support from VSTs largest investor. The interest was subsequently sold in the fourth quarter for proceeds of $0.6 million. The Fund originally invested $5.6 million in VST.



Since its inception, the Fund has written four investments down to zero. These write downs
represent a collective $15.9 million in total cost across the four investments:



The Fund made a $4.9 million investment in Chips and Systems, of which the initial investment was made in March 2004. Later in 2004, the original lead investor decided not to continue to fund the company. The investment available
from the other existing investors was not sufficient to allow the company to continue to operate. Chips and Systems is currently in bankruptcy proceedings and will attempt to wind up its affairs by year-end 2005. There is a possibility that
creditors, including the Fund via bridge notes, may receive a small cash distribution before Chips and Systems dissolution.



Ancile Pharmaceuticals (Ancile) was a specialized pharmaceutical company focused on the development of prescription botanical drugs. Since the data for
a new drug trial did not show clear efficacy, investors chose not to continue funding the company. The Fund invested a total of $3.9 million in Ancile.



A $2.0 million investment in Cenquest, Inc. (Cenquest) was written down due to the companys disappointing execution in a highly competitive
industry. Cenquest was focused on the corporate training industry by acting as an intermediary provider of accredited business and management degree programs to large corporations.



MIDAS Vision Systems, Inc. (MIDAS), a developer of automated optical inspection systems, was unable to reverse sales
declines due to the significant drop-off in capital expenditure spending in the semiconductor industry in 2001-2002. As a result, the Fund wrote down its $5.1 million investment, made in December 2001 and March 2003.



Investments Held  Third Party Investment Funds



Advanced Technology Ventures VII, L.P. (ATV) is a $700 million venture capital
fund targeting multi-stage information technology, communications and life sciences companies. As of October 31, 2005, ATV has drawn a net of approximately $1.4 million of the Funds $2.7 million capital commitment. At October 31,
2005, the total value (fair market value plus net distributions) of this investment was $1.2 million.



Burrill Life Sciences Capital Fund (Burrill) is a $200 million venture capital fund established to invest primarily in innovative, early-stage life science venture opportunities. As of October 31,
2005, Burrill has drawn a net of approximately $1.2 million of the Funds $3.0 million capital commitment. At October 31, 2005, the total value (fair market value plus net distributions) of this investment was $1.0 million.



CHL Medical Partners II, L.P. (CHL) is a $125 million venture capital fund
targeting start-up and early-stage medical technology and life sciences companies. As of October 31, 2005, CHL has drawn a net of



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approximately $0.9 million of the Funds $2.0 million capital commitment. At October 31, 2005, the total value (fair market value plus net
distributions) of this investment was $0.8 million.



CMEA Ventures VI, L.P.
(CMEA) is a $250 million venture capital fund targeting both early life science and information technology companies. As of October 31, 2005, CMEA has drawn a net of approximately $0.6 million of the Funds $3.0 million capital
commitment. At October 31, 2005, the total value (fair market value plus net distributions) of this investment was $0.5 million.



Morgenthaler Venture Partners VII, L.P. (Morgenthaler) is an $850 million venture capital fund targeting multi-stage information technology, communications
and health care companies. As of October 31, 2005, Morgenthaler has drawn a net of approximately $2.0 million of the Funds $3.0 million capital commitment. At October 31, 2005, the total value (fair market value plus net
distributions) of this investment was $1.7 million.



Prospect Venture Partners
II, L.P. (Prospect) is a $500 million venture capital fund targeting multi-stage life sciences companies. As of October 31, 2005, Prospect has drawn a net of approximately $2.0 million of the Funds $3.0 million capital
commitment. At October 31, 2005, the total value (fair market value plus net distributions) of this investment was $1.9 million.



Sevin Rosen IX, L.P. (Sevin Rosen) is a top-tier early-stage venture capital firm, which closed a $305 million venture capital fund dedicated to early-stage
technology investments. As of October 31, 2005, Sevin Rosen has drawn a net of approximately $0.7 million of the Funds $3.0 million capital commitment. At October 31, 2005, the total value (fair market value plus net distributions)
of this investment was $0.7 million.



Tallwood II, L.P. (Tallwood)
is a $150 million venture capital fund established to invest in attractive, early-stage growth companies possessing leading-edge technology in the semiconductor industry. As of October 31, 2005, Tallwood has drawn a net of approximately $1.4
million of the Funds $3.0 million capital commitment. At October 31, 2005, the total value (fair market value plus net distributions) of this investment was $1.1 million.



Valhalla Partners, L.P. (Valhalla) is a $200 million venture capital fund established to invest in attractive early-stage
venture capital investments in information technology companies in the Mid-Atlantic region. As of October 31, 2005, Valhalla has drawn a net of approximately $1.0 million of the Funds $3.0 million capital commitment. At October 31,
2005, the total value (fair market value plus net distributions) of this investment was $0.9 million.



For additional information concerning the Companys investments, see the financial statements beginning on page 12 of this report.



Competition



The Company encounters competition from other entities and individuals having similar investment objectives. Primary
competition for desirable investments comes from investment partnerships, venture capital affiliates of large industrial and financial companies, investment companies and wealthy individuals. Some of the competing entities and individuals have
investment managers or advisers with greater experience, resources and managerial capabilities than the Company and may therefore be in a stronger position than the Company to obtain access to attractive investments. To the extent that the Company
can compete for such investments, it may not be able to do so on terms as favorable as those obtained by larger, more established investors.



Employees



At October 31, 2005, the Company had no full-time employees. All personnel of the Company are employed by and compensated by the Investment Advisers
pursuant to the Investment Agreements.



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|ITEM 2. | PROPERTIES.
|------- | -----------



The Company does not own or lease any physical properties.



|ITEM 3. | LEGAL PROCEEDINGS.
|------- | ------------------



None.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
|------- | ----------------------------------------------------



None.



PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
|------- | ----------------------------------------------------------------------



Market Information



The Company has an unlimited number of no par value units authorized. As of October 31, 2005, 295,210 units of
membership interest were issued and outstanding. There is no established public trading market for the Companys units of membership interest.



Holders



There were 255 holders of units of membership interest as of December 31, 2005.



Dividends and Distributions



Fiscal Year Ended October 31, 2005. A distribution of $36.84 per share was made to unitholders during the fiscal year ended October 31,
2005.



Fiscal Year Ended October 31, 2004. There
were no dividends or distributions paid during fiscal year 2004.



For additional information concerning the payment of dividends, see Significant Accounting Policies in the notes to the financial statements of the Company included in Item 8 hereof.



|ITEM 6. | SELECTED FINANCIAL DATA.
|------- | ------------------------



($ in 000s except for per unit data)



|                             |  |          |         |   |          |   |         |          |  |   |          |   |  |          |         |   |  |   |         |  
|---------------------------- |  | -------- | ------- | - | -------- | - | ------- | -------- |  | - | -------- | - |  | -------- | ------- | - |  | - | ------- | -
|Fiscal Year Ended            |  | 10/31/05 |         |   | 10/31/04 |   |         | 10/31/03 |  |   | 10/31/02 |   |  | 10/31/01 |        
|Financial Position           |  |          |         |   |          |   |         |          |  |   |          |   |  |          |         |   |  |   |         |  
|Investments in securities    |  | $        | 92,593  |   |          | $ | 115,731 |          |  | $ | 119,500  |   |  | $        | 138,513 |   |  | $ | 139,676 |  
|Other Assets                 |  |          | 1,362   |   |          |   | 1,258   |          |  |   | 3,744    |   |  |          | 1,063   |   |  |   | 8,527   |  
|Total Assets                 |  |          | 93,955  |   |          |   | 116,989 |          |  |   | 123,244  |   |  |          | 139,576 |   |  |   | 148,203 |  
|Liabilities                  |  |          | 606     |   |          |   | 910     |          |  |   | 786      |   |  |          | 1,081   |   |  |   | 1,782   |  
|Net Assets                   |  |          | 93,349  |   |          |   | 116,079 |          |  |   | 122,458  |   |  |          | 138,495 |   |  |   | 146,421 |  
|Changes in Net Assets        |  |          |         |   |          |   |         |          |  |   |          |   |  |          |         |   |  |   |         |  
|Net investment income (loss) |  |          | (1,311  | ) |          |   | (2,318  | )        |  |   | (2,077   | ) |  |          | (1,659  | ) |  |   | 831     |  
|Net (loss) on investments    |  |          | (10,544 | ) |          |   | (4,060  | )        |  |   | (13,960  | ) |  |          | (6,267  | ) |  |   | (60     | )
|Dividends                    |  |          | 10,876  |   |          |   |        |          |  |   |         |   |  |          |        |   |  |   | 487     |  
|Per Unit Data                |  |          |         |   |          |   |         |          |  |   |          |   |  |          |         |   |  |   |         |  
|Net Assets                   |  |          | 316.21  |   |          |   | 393.21  |          |  |   | 414.82   |   |  |          | 469.14  |   |  |   | 495.99  |  
|Dividends Paid               |  |          | 36.84   |   |          |   |        |          |  |   |         |   |  |          |        |   |  |   | 1.65    |  



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|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|------- | --------------------------------------------------------------------------------------



Liquidity and Capital Resources



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



At October 31, 2005,
the Company held $574,146 in cash and cash equivalents and $28,598,294 in short-term investments as compared to $0 in cash and cash equivalents and $45,526,196 in short-term investments at October 31, 2004. The decrease in cash and short-term
investments from October 31, 2004 was primarily due to new and follow-on investments in private companies as well as capital invested in private investment funds and a distribution paid to members of $10,875,536. This was partially offset by
proceeds received from the sale of investments and distribution received from the private investment funds. The Company during this period funded additional capital per its commitments to all of its private investment funds. In connection with the
Companys total commitments to private funds in the amount of $25,700,000 since inception, the Company, through October 31, 2005, has contributed $11,143,654 or 43.4% of the total capital committed to nine private investment funds. During
the fiscal year ended October 31, 2005, the Company also participated in follow-on financing rounds for several of its private companies totaling $16,751,272.



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.



Results of Operations



Investment Income and Expenses



For the fiscal year ended October 31, 2005, the Company had investment
income of $1,299,082, primarily from investments in short-term securities, and net operating expenses of $2,609,971, resulting in a net investment loss of ($1,310,889). For the fiscal year ended October 31, 2004, the Company had investment
income of $540,784, primarily from investments in short-term securities, and net operating expenses of $2,859,165, net of expenses reimbursed by the Investment Advisor of $99,275, resulting in a net investment loss of ($2,318,381) as compared to
investment income of $844,930 and net operating expenses of $2,922,068 resulting in a net investment loss of ($2,077,138) for the fiscal year ended October 31, 2003. The increase in investment income for the year ended October 31, 2005 is
due to increase in interest income from investment in the private companies and from increase in interest earned on short-term securities. The decrease in operating expenses was primarily due to a decline in management fees which resulted from a
reduced level of net assets under management during the period. For fiscal 2004, the decline in investment income is due to a decline in interest earned on short-term securities, as well as a decrease in the level of assets invested in short-term
securities due to the Companys investment in private companies and private investment funds. Net operating expenses decreased during fiscal 2004 compared to fiscal 2003 due primarily to reduced management fees paid to the Investment Advisers.



For the fiscal year ending October 31, 2005, 2004 and
2003 the Investment Advisers earned $2,082,454, $2,402,059 and $2,530,840 in management fees respectively. This decrease is a result of the fact that net assets for the periods of calculation of management fees during fiscal 2005 were lower than
those for similar periods during the fiscal years ended October 31, 2004 and October 31, 2003. The Investment Advisers provide investment management and administrative services required for the operation of the Company. 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. This fee is determined and payable quarterly.



9



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##### Table of Contents

Net Assets



The Companys net assets were $93,348,847, or a net asset value per unit of $316.21, at October 31, 2005. This represents a decline of
($22,730,586), or ($77.00) per unit, from net assets of $116,079,433, or $393.21 per unit, at October 31, 2004. The decrease resulted principally from i) a distribution to members of $10,875,536 or $36.84 paid on April 22, 2005, ii) a net
investment loss of ($1,310,889), or ($4.44) per unit, iii) a net realized loss on investment as describe below, of ($8,527, 063) or ($28.89) per unit, and iii) a net change in unrealized depreciation as described below, of ($2,017,098) or ($6.83)
per unit.



The Companys net assets were $116,079,433, or
a net asset value per unit of $393.21, at October 31, 2004. This represents a decline of $6,378,420, or ($21.61) per unit, from net assets of $122,457,853, or $414.82 per unit, at October 31, 2003. This decline in net asset value per unit
is comprised of a net investment loss totaling ($2,318,381), or ($7.85) per unit, and a net change in realized and unrealized depreciation on investments of ($4,060,039), or ($13.76) per unit. The net realized loss of ($2,555,211), or ($8.66) per
unit, was attributable to Gyration, Inc. and Ancile Pharmaceuticals. The net change in unrealized depreciation of ($1,504,828), or ($5.10) per unit, was principally the result of declines in the valuations of Monterey Design Systems and NetLogic
Microsystems, Inc. (NASDAQ: NETL), offset by unrealized appreciation related to Ancile Pharmaceuticals, LightConnect, and Senomyx (NASDAQ: SNMX), as described below.



Realized and Unrealized Gains and Losses from Portfolio Investments



The realized loss of ($8,527,063) for the fiscal year ended October 31, 2005 was principally the result of i) the
Companys sale of Monterey Design Systems which resulted in a realized loss of ($6,968,823) ii) the sale of Virtual Silicon Technology, Inc resulting in a realized loss of ($4,885,416) and iii) the reclassification of Cenquest Inc., from
unrealized depreciation to realized loss of ($2,000,000). The realized loss was partially offset by the realized gain of $3,932,996 on the sale of Adeza Biomedical Corporation common shares and a realized gain of $2,160,665 on the sale of Senomyx,
Inc. common shares.



The net change in unrealized
(depreciation) of ($2,017,098) for the year ended October 31, 2005 was principally the combination of: i) the sale of Monterey Design Systems, a private company investment, which resulted in a decrease in unrealized depreciation of
approximately $7,150,000 ii) the sale of Netlogic Microsystems common shares, a public company investment, which resulted in a decrease in unrealized depreciation of $3,293,078, iii) the sale of Senomyx common shares, a public company investment,
which resulted in an increase in unrealized depreciation of $1,476,005, iv) an increase of $4,941,133 due to the write-down of Chips & Systems, a private company investment, vi) an increase of $605,357 due to the write-down of Genoptix, a
private company investment, vii) an increase of $4,000,000 due to the write-down of Cydelity, Inc., viii) an increase of $4,000,000 due to the write-down of Tensys Medical Inc., a private company investment, ix) a decrease of $747,387 due to the
write-up of NanoOpto Corporation, a private company investment and x) the reclassification of Cenquest, Inc from unrealized depreciation to realized loss of $2,000,000.



The realized loss for the fiscal year ended October 31, 2004 was principally the result of the conclusion of Ancile
Pharmaceuticals general assignment for the benefit of creditors, where the assets of the business have been sold and its affairs wound up. The Company received no further distributions and accordingly reclassified $3,850,000 of unrealized
depreciation to net realized loss on investments. This loss was offset by one of the Companys investments, Gyration, Inc., which entered into a merger agreement. On August 19, 2004, the Company received proceeds totaling $6,948,069 as a
cash consideration for its investment in Gyration, Inc., and as of October 31 2005 the company received an additional $700,346 that was held in escrow. In August 2004, the Company recorded a realized gain on the transaction of $1,284,391.



10



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##### Table of Contents

The net change in unrealized depreciation for the fiscal year ended October 31, 2004 was principally
the result of a decrease in the valuation of Monterey Design Systems, a private company investment, by ($4,800,000), a decrease in the value of NetLogic Microsystems, Inc. (NASDAQ: NETL) by ($3,293,078), a decrease in the valuation of OpVista, a
private company investment, by ($1,500,000), and other net unrealized losses related to the Companys investments totaling ($1,289,192). Offsetting the losses was the reclassification of $3,850,000 of unrealized depreciation to net realized
loss on its investment in Ancile Pharmaceuticals. In addition, the Company recorded unrealized appreciation in the amount of $4,051,437 related to its investment in LightConnect and $1,476,005 related to Senomyx (NASDAQ: SNMX), a public company
investment. The Company utilized a discount of 30% in the valuation of both of its public holdings as of October 31, 2004. The discount utilized reflects the inability of the Company to sell its shares due to contractual lock-up agreements in
place after initial public offerings of common shares of both companies.



The realized gain of $44 for the fiscal year ended October 31, 2003 was principally the result of sales of short-term securities. The net change in unrealized depreciation of ($13,960,068) for the fiscal year
ended October 31, 2003 is due to the write-off of Ancile Pharmaceuticals and MIDAS Vision Systems, together totaling ($8,904,960). The Company also recorded write-downs of Genoptix, Monterey Design Systems and NanoOpto, all private company
investments, during the fiscal year ended October 31, 2003. The Companys $3,850,000 million investment in Ancile Pharmaceuticals was written off as the company is currently conducting an orderly liquidation of its assets through a
voluntary General Assignment for the Benefit of Creditors. The Company also wrote off its $5,054,960 million investment in MIDAS Vision Systems due impaired performance and prospects for the company. Genoptix, Monterey Design Systems and NanoOpto
were each written down as well. These write-downs were due to financing events which effectively reduced the valuation of the Companys investment.



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 in total, they currently
represent 68.55% of the Companys net assets. For the private investments held at October 31, 2005, changes to these estimates, i.e. changes in the valuations of these private investments, resulted in a $18.1 million decrease 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, (the
Board) both under the supervision of the Board, and, in any event, not less frequently than quarterly. However, there can be no assurance that such value will represent the return that might ultimately be realized by the Company from the
investments.



The valuation of the Companys private funds
is based upon 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.



11



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##### Table of Contents

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 7A. | 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 68.55% 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 October 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). During the fiscal year ended October 31, 2004, both of these companies successfully
completed public offerings of their common stock. 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 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
|------- | --------------------------------------------



Report of Independent Registered Public Accounting Firm



Portfolios of Investments at October 31, 2005 and October 31, 2004



Statements of Assets and Liabilities at October 31, 2005, and October 31, 2004



Statements of Operations for the years ended October 31,
2005, October 31, 2004 and October 31, 2003



Statements of Changes in Net Assets for the years ended October 31, 2005, October 31, 2004 and October 31, 2003



Statements of Cash Flows for the years ended October 31, 2005, October 31, 2004 and October 31, 2003



Financial Highlights for the years ended October 31,
2005, October 31, 2004, October 31, 2003, October 31, 2002 and period April 5, 2001 (commencement of operations) through October 31, 2001



Notes to Financial Statements



Note - All other schedules are omitted because of the absence of conditions under which they are required or because the required information is included
in the financial statements or the notes thereto.



12



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Members and Board of Managers of

Excelsior Venture Partners III, LLC



We have audited the accompanying statement of assets and liabilities of Excelsior Venture Partners III, LLC (the Fund), including the portfolio of
investments, as of October 31, 2005, and the related statements of operations and cash flows for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for
each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements and financial
highlights based on our audits. The financial highlights for the year ended October 31, 2002 and for the period April 5, 2001 (commencement of operations) to October 31, 2001 were audited by other auditors whose report, dated
December 17, 2002, expressed an unqualified opinion on such financial highlights.



We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2005, by correspondence with the custodian and the management of the private investment
funds; where replies were not received for the private investment funds, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.



As discussed in Note 1(A), the financial statements include investment securities valued at $63,994,789 as of October 31, 2005,
representing 68.55% of net assets, whose values have been estimated by the Investment Adviser, under the supervision of the Board of Managers, in the absence of readily ascertainable market values. We have reviewed the procedures used by the
Investment Adviser in preparing the valuations of investment securities and have inspected the underlying documentation, and in the circumstances we believe the procedures are reasonable and the documentation appropriate. However, in the case of
those securities with no readily ascertainable market value, because of the inherent uncertainty of valuation, the Investment Advisers estimate of values may differ significantly from the values that would have been used had a ready market
existed for the securities and the differences could be material.



In our
opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Excelsior Venture Partners III, LLC as of October 31, 2005, the results of its operations and its
cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.



|                  
|------------------
|                  
|LOGO              
|                  
|New York, New York
|December 23, 2005 



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments at October 31, 2005



|                       |            |  |                                                                |                     |                            |                |   |           
|---------------------- | ---------- |  | -------------------------------------------------------------- | ------------------- | -------------------------- | -------------- | - | ----------
|PrincipalAmount/Shares |            |  |                                                                | Acquisition Date ## |                            | Value (Note 1)
|                       |            |  | MONEY MARKET INSTRUMENTS  29.44%                              |                     |                            |                |   |           
|$                      | 7,000,000  |  | Federal Farm Credit Bank Discount Note 3.67%, 11/2/05          |                     |                            |                | $ | 6,999,286 
|$                      | 4,000,000  |  | Danske Commercial Paper 3.82%, 11/7/05                         |                     |                            |                |   | 3,997,453 
|$                      | 7,500,000  |  | Federal Home Loan Bank Discount Note 3.68%, 11/07/05           |                     |                            |                |   | 7,495,400 
|$                      | 5,000,000  |  | Federal Home Loan Mortgage Corp. Discount Note 3.72%, 11/08/05 |                     |                            |                |   | 4,996,383 
|$                      | 4,000,000  |  | Morgan Stanley Commercial Paper 3.84%, 11/08/05                |                     |                            |                |   | 3,997,013 
|                       |            |  |                                                                |                     |                            |                |   |           
|                       |            |  | TOTAL MONEY MARKET INSTRUMENTS (Cost $27,485,535)              |                     |                            |                |   | 27,485,535
|                       |            |  |                                                                |                     |                            |                |   |           
|                       |            |  | PRIVATE COMPANIES **  58.88%                                  |                     |                            |                |   |           
|                       |            |  | Common Stocks # , @ 0.00%                                     |                     |                            |                |   |           
|                       |            |  | Capital Equipment  0.00%                                      |                     |                            |                |   |           
|                       | 157,396    |  | MIDAS Vision Systems, Inc.                                     |                     | 03/03                      |                |   |          
|                       |            |  |                                                                |                     |                            |                |   |           
|                       |            |  | Enterprise Software  0.00%                                    |                     |                            |                |   |           
|                       | 1,000,000  |  | ***Cydelity, Inc.                                              |                     | 01/04                      |                |   |          
|                       |            |  |                                                                |                     |                            |                |   |           
|                       |            |  | Life Sciences  0.00%                                          |                     |                            |                |   |           
|                       | 46,860     |  | Genoptix, Inc.                                                 |                     | 07/03                      |                |   |          
|                       |            |  |                                                                |                     |                            |                |   |           
|                       |            |  | TOTAL COMMON STOCKS (Cost $5,247,500)                          |                     |                            |                |   |          
|                       |            |  |                                                                |                     |                            |                |   |           
|                       |            |  | Preferred Stocks #  53.56%                                    |                     |                            |                |   |           
|                       |            |  | Capital Equipment @  0.00%                                    |                     |                            |                |   |           
|                       | 933,593    |  | MIDAS Vision Systems, Inc., Series A-1                         |                     | 03/03                      |                |   |          
|                       |            |  |                                                                |                     |                            |                |   |           
|                       |            |  | Enterprise Software @  13.40%                                 |                     |                            |                |   |           
|                       | 19,995,000 |  | ***Cydelity, Inc., Series A                                    |                     | 01/04                      |                |   |          
|                       | 6,530,581  |  | ***LogicLibrary, Inc., Series A                                |                     | 01/02, 12/04,02/05 & 08/05 |                |   | 2,985,916 
|                       | 3,080,464  |  | ***LogicLibrary, Inc., Series A-1                              |                     | 08/03 & 05/04              |                |   | 1,408,450 
|                       | 46,362,656 |  | ***Pilot Software Inc., Series A                               |                     | 05/02, 04/03,06/05         |                |   | 8,110,096 
|                       |            |  |                                                                |                     |                            |                |   |           
|                       |            |  |                                                                |                     |                            |                |   | 12,504,462
|                       |            |  |                                                                |                     |                            |                |   |           
|                       |            |  | Life Sciences  5.76%                                          |                     |                            |                |   |           
|                       | 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 1-A @                                   |                     | 08/04                      |                |   | 950,822   
|                       | 1,403,696  |  | Genoptix, Inc., Series 1-B @                                   |                     | 08/04                      |                |   | 950,822   
|                       | 620,580    |  | Genoptix, Inc., Series 1-C @                                   |                     | 08/04, 01/05               |                |   | 554,178   
|                       | 728,413    |  | Genoptix, Inc., Series 1-D @                                   |                     | 05/05                      |                |   | 461,815   
|                       |            |  |                                                                |                     |                            |                |   |           
|                       |            |  |                                                                |                     |                            |                |   | 5,384,302 
|                       |            |  |                                                                |                     |                            |                |   |           



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



14



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments at October 31, 2005



|                       |            |  |                                                   |                     |                                              |                |   |           
|---------------------- | ---------- |  | ------------------------------------------------- | ------------------- | -------------------------------------------- | -------------- | - | ----------
|Shares/PrincipalAmount |            |  |                                                   | Acquisition Date ## |                                              | Value (Note 1)
|                       |            |  | PRIVATE COMPANIES **, @  (continued)             |                     |                                              |                |   |           
|                       |            |  | Preferred Stocks #  (continued)                  |                     |                                              |                |   |           
|                       |            |  | Medical Technology @ 2.60%                       |                     |                                              |                |   |           
|                       | 4,166,667  |  | Tensys Medical, Inc., Series C                    |                     | 03/02                                        |                |   | 1,887,160 
|                       | 1,187,500  |  | Tensys Medical, Inc., Series D                    |                     | 05/04                                        |                |   | 537,840   
|                       |            |  |                                                   |                     |                                              |                |   |           
|                       |            |  |                                                   |                     |                                              |                |   | 2,425,000 
|                       |            |  |                                                   |                     |                                              |                |   |           
|                       |            |  | Optical @  18.01%                                |                     |                                              |                |   |           
|                       | 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                                 |                |   | 1,116,350 
|                       | 3,023,399  |  | NanoOpto Corporation, Series B                    |                     | 09/03, 11/03,01/04, 07/04                    |                |   | 1,286,155 
|                       | 1,682,470  |  | NanoOpto Corporation, Series C                    |                     | 03/05                                        |                |   | 733,389   
|                       | 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 
|                       |            |  |                                                   |                     |                                              |                |   |           
|                       |            |  |                                                   |                     |                                              |                |   | 16,811,924
|                       |            |  |                                                   |                     |                                              |                |   |           
|                       |            |  | Semi-Conductor @  5.09%                          |                     |                                              |                |   |           
|                       | 7,000,000  |  | Chips & Systems, Inc., Series A                   |                     | 03/04                                        |                |   |          
|                       | 2,211,898  |  | Silverback Systems, Inc., Series B-1              |                     | 03/03 & 09/03                                |                |   | 1,415,615 
|                       | 34,364,257 |  | Silverback Systems, Inc., Series C                |                     | 03/03, 09/03,04/04                           |                |   | 3,333,333 
|                       |            |  |                                                   |                     |                                              |                |   |           
|                       |            |  |                                                   |                     |                                              |                |   | 4,748,948 
|                       |            |  |                                                   |                     |                                              |                |   |           
|                       |            |  | Wireless @  8.70%                                |                     |                                              |                |   |           
|                       | 4,433,333  |  | Ethertronics, Inc., Series B                      |                     | 06/01, 09/02,07/03, 05/04                    |                |   | 6,650,000 
|                       | 980,172    |  | Ethertronics, Inc., Series C                      |                     | 05/05, 10/05                                 |                |   | 1,470,258 
|                       |            |  |                                                   |                     |                                              |                |   |           
|                       |            |  |                                                   |                     |                                              |                |   | 8,120,258 
|                       |            |  |                                                   |                     |                                              |                |   |           
|                       |            |  | TOTAL PREFERRED STOCKS (COST $65,779,204)         |                     |                                              |                |   | 49,994,894
|                       |            |  |                                                   |                     |                                              |                |   |           
|                       |            |  | Notes @  5.32%                                   |                     |                                              |                |   |           
|                       |            |  | Enterprise Software  3.21%                       |                     |                                              |                |   |           
|$                      | 3,000,000  |  | ***Cydelity, Inc., 8.00% Bridge Note, March, 2006 |                     | 12/04, 01/05,02/05, 03/05,04/05, 05/05,07/05 |                |   | 3,000,000 
|                       |            |  |                                                   |                     |                                              |                |   |           



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



15



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments October 31, 2005  (continued)



|                       |           |   |  |                                                                     |                    |                     |                |   |           
|---------------------- | --------- | - |  | ------------------------------------------------------------------- | ------------------ | ------------------- | -------------- | - | ----------
|Shares/PrincipalAmount |           |   |  |                                                                     | AcquisitionDate ## |                     | Value (Note 1)
|                       |           |   |  | PRIVATE COMPANIES **, @  (continued)                               |                    |                     |                |   |           
|                       |           |   |  | Notes  (continued)                                                 |                    |                     |                |   |           
|                       |           |   |  | Semi-Conductor  2.11%                                              |                    |                     |                |   |           
|$                      | 1,441,133 |   |  | Chips & Systems, Inc., 6.00% Bridge Note, March 2005 #              |                    | 11/04, 01/05,02/05  |                |   |          
|$                      | 1,333,335 |   |  | Silverback Systems, Inc., 5.00% Bridge Note, January 2006           |                    | 01/05 & 04/05       |                |   | 1,333,335 
|$                      | 635,871   |   |  | Silverback Systems, Inc., 5.00% Bridge Note, July 2006              |                    | 07/05               |                |   | 635,871   
|                       |           |   |  |                                                                     |                    |                     |                |   |           
|                       |           |   |  |                                                                     |                    |                     |                |   | 1,969,206 
|                       |           |   |  | TOTAL NOTES (COST $6,410,339)                                       |                    |                     |                |   | 4,969,206 
|                       |           |   |  |                                                                     |                    |                     |                |   |           
|                       |           |   |  | Warrants #, @  0.00%                                               |                    |                     |                |   |           
|                       |           |   |  | Enterprise Software  0.00%                                         |                    |                     |                |   |           
|                       | 7,500,000 |   |  | ***Cydelity, Inc. Series A (expiration dates 12/08 and 07/09)       |                    | 12/04 & 07/05       |                | $ |          
|                       |           |   |  | Optical  0.00%                                                     |                    |                     |                |   |           
|                       | 229,410   |   |  | NanoOpto Corp. Series C (expiration date 12/09)                     |                    | 12/04               |                |   |          
|                       |           |   |  | Semiconductor  0.00%                                               |                    |                     |                |   |           
|                       | 4,173,033 |   |  | Silverback Systems, Inc. Series C (expiration date 01/12 and 07/12) |                    | 01/05, 04/05, 07/05 |                |   | 196       
|                       |           |   |  | Wireless  0.00%                                                    |                    |                     |                |   |           
|                       | 281,667   |   |  | Ethertronics, Inc. Series B (expiration date 09/07)                 |                    | 09/02, 07/03, 08/03 |                |   |          
|                       | 163,580   |   |  | Ethertronics, Inc. Series C (expiration date 01/09)                 |                    | 05/05 & 10/05       |                |   |          
|                       |           |   |  |                                                                     |                    |                     |                |   |           
|                       |           |   |  | TOTAL WARRANTS (Cost $196)                                          |                    |                     |                |   | 196       
|                       |           |   |  |                                                                     |                    |                     |                |   |           
|                       |           |   |  | TOTAL  PRIVATE COMPANIES (Cost $77,437,239)                        |                    |                     |                |   | 54,964,296
|                       |           |   |  |                                                                     |                    |                     |                |   |           
|                       |           |   | 
|PercentOwned           |           |   |  |                                                                     |                    |                     |               
|                       |           |   |  | PRIVATE INVESTMENT FUNDS **, #  9.68%                              |                    |                     |                |   |           
|                       | 0.39      | % |  | Advanced Technology Ventures VII, L.P.                              |                    | 08/01-10/05         |                |   | 919,392   
|                       | 1.55      | % |  | Burrill Life Sciences Capital Fund                                  |                    | 12/02-10/05         |                |   | 988,026   
|                       | 1.35      | % |  | CHL Medical Partners II, L.P.                                       |                    | 01/02-08/05         |                |   | 630,925   
|                       | 1.04      | % |  | CMEA Ventures, L.P.                                                 |                    | 12/03-10/05         |                |   | 532,630   
|                       | 0.36      | % |  | Morgenthaler Partners VII, L.P.                                     |                    | 07/01-08/05         |                |   | 1,505,173 
|                       | 0.57      | % |  | Prospect Ventures Partners II, L.P.                                 |                    | 06/01-10/05         |                |   | 1,756,519 
|                       | 0.98      | % |  | Sevin Rosen Fund IX, L.P.                                           |                    | 10/04-10/05         |                |   | 705,979   
|                       | 2.36      | % |  | Tallwood II, L.P.                                                   |                    | 12/02-08/05         |                |   | 1,072,808 
|                       | 1.70      | % |  | Valhalla Partners, L.P.                                             |                    | 10/03-10/05         |                |   | 919,041   
|                       |           |   |  |                                                                     |                    |                     |                |   |           
|                       |           |   |  | TOTAL PRIVATE INVESTMENT FUNDS (Cost $10,373,375)                   |                    |                     |                |   | 9,030,493 
|                       |           |   |  |                                                                     |                    |                     |                |   |           



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



16



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##### Table of Contents

|          |  |                                                                                |  |            
|--------- |  | ------------------------------------------------------------------------------ |  | -----------
|Shares    |  |                                                                                |  |            
|          |  | INVESTMENT COMPANIES  1.19%                                                   |  |            
|1,112,759 |  | Dreyfus Government Cash Management Fund Institutional Shares (Cost $1,112,759) |  | 1,112,759  
|          |  |                                                                                |  |            
|          |  | TOTAL INVESTMENTS (Cost $116,408,908)  99.19%                                 |  | 92,593,083 
|          |  | OTHER ASSETS & LIABILITIES (NET)  0.81%                                       |  | 755,764    
|          |  |                                                                                |  |            
|          |  | NET ASSETS  100.00%                                                           |  | $93,348,847
|          |  |                                                                                |  |            

---

|** | Restricted as to public resale. Acquired between June 1, 2001 and October 31, 2005. Total cost of restricted securities at October 31, 2005 aggregated $87,810,614.
Total value of restricted securities owned at October 31, 2005 was $63,994,789 or 68.55% of net assets.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|@ | At October 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 October 31, 2005 (including investments in controlled affiliates) was $52,497,631.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|*** | At October 31, 2005, 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, 2005 was $15,504,462.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



17



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments October 31, 2004



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



18



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments October 31, 2004 - (continued)



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



19



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments October 31, 2004  (continued)



|                                      |            |  |                                                             |                  |                           |                |   |           
|------------------------------------- | ---------- |  | ----------------------------------------------------------- | ---------------- | ------------------------- | -------------- | - | ----------
|PrincipalAmount/Shares/ Percent Owned |            |  |                                                             | 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.                                          |                  | 09/02                     |                |   |          
|                                      | 115,000    |  | Ethertronics, Inc.                                          |                  | 07/03                     |                |   |          
|                                      | 66,667     |  | Ethertronics, Inc.                                          |                  | 08/03                     |                |   |          
|                                      |            |  |                                                             |                  |                           |                |   |           
|                                      |            |  |                                                             |                  |                           |                |   |          
|                                      |            |  | TOTAL WARRANTS (Cost $0)                                    |                  |                           |                |   |          
|                                      |            |  |                                                             |                  |                           |                |   |           
|                                      |            |  | TOTAL  PRIVATE COMPANIES (Cost $78,889,349)                |                  |                           |                |   | 60,065,508
|                                      |            |  |                                                             |                  |                           |                |   |           



20



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments October 31, 2004  (continued)



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



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



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



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



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



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



21



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Excelsior Venture Partners III, LLC

Statements of Assets and Liabilities



|                                                                                             |  |             |             |   |      |   |             |  
|-------------------------------------------------------------------------------------------- |  | ----------- | ----------- | - | ---- | - | ----------- | -
|                                                                                             |  | October 31, |            
|                                                                                             |  | 2005        |             |   | 2004 |  
|ASSETS:                                                                                      |  |             |             |   |      |   |             |  
|Unaffiliated Issuers at value (Cost $41,438,334 and $52,140,514, respectively)               |  | $           | 40,095,452  |   |      | $ | 55,665,628  |  
|Controlled Affiliated Issuers at value (Cost $19,504,462 and $8,750,000, respectively)       |  |             | 15,504,462  |   |      |   | 8,750,000   |  
|Non Controlled Affiliated Issuers at value (Cost $55,466,112 and $76,639,349, respectively)  |  |             | 36,993,169  |   |      |   | 51,315,508  |  
|                                                                                             |  |             |             |   |      |   |             |  
|Investments, at value (Cost $116,408,908 and $137,529,863, respectively) (Note 1)            |  |             | 92,593,083  |   |      |   | 115,731,136 |  
|                                                                                             |  |             |             |   |      |   |             |  
|Cash and cash equivalents                                                                    |  |             | 574,146     |   |      |   |            |  
|Distributions receivable                                                                     |  |             | 600,031     |   |      |   | 1,142,510   |  
|Receivable from affiliate (Note 2)                                                           |  |             |            |   |      |   | 99,275      |  
|Interest receivable                                                                          |  |             | 182,860     |   |      |   | 10,575      |  
|Other receivables                                                                            |  |             | 1,945       |   |      |   | 1,945       |  
|Prepaid insurance                                                                            |  |             | 2,380       |   |      |   | 3,791       |  
|                                                                                             |  |             |             |   |      |   |             |  
|Total Assets                                                                                 |  |             | 93,954,445  |   |      |   | 116,989,232 |  
|                                                                                             |  |             |             |   |      |   |             |  
|LIABILITIES:                                                                                 |  |             |             |   |      |   |             |  
|Management fees payable (Note 2)                                                             |  |             | 469,295     |   |      |   | 583,569     |  
|Professional fees payable                                                                    |  |             | 64,255      |   |      |   | 184,559     |  
|Board of Managers fees payable (Note 2)                                                     |  |             | 8,000       |   |      |   | 68,000      |  
|Administration fees payable (Note 2)                                                         |  |             | 53,861      |   |      |   | 50,936      |  
|Other payables                                                                               |  |             | 10,187      |   |      |   | 22,735      |  
|                                                                                             |  |             |             |   |      |   |             |  
|Total Liabilities                                                                            |  |             | 605,598     |   |      |   | 909,799     |  
|                                                                                             |  |             |             |   |      |   |             |  
|NET ASSETS                                                                                   |  | $           | 93,348,847  |   |      | $ | 116,079,433 |  
|                                                                                             |  |             |             |   |      |   |             |  
|NET ASSETS consist of:                                                                       |  |             |             |   |      |   |             |  
|Paid-in capital                                                                              |  | $           | 117,164,672 |   |      | $ | 137,878,160 |  
|Unrealized (depreciation) on investments                                                     |  |             | (23,815,825 | ) |      |   | (21,798,737 | )
|                                                                                             |  |             |             |   |      |   |             |  
|Total Net Assets                                                                             |  | $           | 93,348,847  |   |      | $ | 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                                                                     |  | $           | 316.21      |   |      | $ | 393.21      |  
|                                                                                             |  |             |             |   |      |   |             |  



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



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Excelsior Venture Partners III, LLC

Statements of Operations



|                                                               |  |                           |             |   |                           |   |            |                           |  |   |             |  
|-------------------------------------------------------------- |  | ------------------------- | ----------- | - | ------------------------- | - | ---------- | ------------------------- |  | - | ----------- | -
|                                                               |  | Year EndedOctober 31,2005 |             |   | Year EndedOctober 31,2004 |   |            | Year EndedOctober 31,2003 | 
|INVESTMENT INCOME:                                             |  |                           |             |   |                           |   |            |                           |  |   |             |  
|Interest income from unaffiliated investments                  |  | $                         | 962,657     |   |                           | $ | 510,260    |                           |  | $ | 833,408     |  
|Interest income from affiliated investments                    |  |                           | 299,031     |   |                           |   | 15,791     |                           |  |   | 0           |  
|Dividend income                                                |  |                           | 37,394      |   |                           |   | 14,733     |                           |  |   | 11,522      |  
|                                                               |  |                           |             |   |                           |   |            |                           |  |   |             |  
|Total Income                                                   |  |                           | 1,299,082   |   |                           |   | 540,784    |                           |  |   | 844,930     |  
|                                                               |  |                           |             |   |                           |   |            |                           |  |   |             |  
|EXPENSES:                                                      |  |                           |             |   |                           |   |            |                           |  |   |             |  
|Management fees (Note 2)                                       |  |                           | 2,082,454   |   |                           |   | 2,402,059  |                           |  |   | 2,530,840   |  
|Professional fees                                              |  |                           | 224,021     |   |                           |   | 231,291    |                           |  |   | 77,463      |  
|Administration fees (Note 2)                                   |  |                           | 134,829     |   |                           |   | 139,525    |                           |  |   | 147,498     |  
|Board of Managers fees (Note 2)                               |  |                           | 60,000      |   |                           |   | 68,000     |                           |  |   | 60,000      |  
|Insurance                                                      |  |                           | 63,069      |   |                           |   | 79,607     |                           |  |   | 68,833      |  
|Custodian fees                                                 |  |                           | 29,175      |   |                           |   | 21,948     |                           |  |   | 21,366      |  
|Miscellaneous fees                                             |  |                           | 16,423      |   |                           |   | 16,010     |                           |  |   | 16,068      |  
|                                                               |  |                           |             |   |                           |   |            |                           |  |   |             |  
|Total Expenses                                                 |  |                           | 2,609,971   |   |                           |   | 2,958,440  |                           |  |   | 2,922,068   |  
|Less expense reimbursed by affiliate (Note 2)                  |  |                           |            |   |                           |   | (99,275    | )                         |  |   |            |  
|Net Expenses                                                   |  |                           | 2,609,971   |   |                           |   | 2,859,165  |                           |  |   | 2,922,068   |  
|                                                               |  |                           |             |   |                           |   |            |                           |  |   |             |  
|NET INVESTMENT (LOSS)                                          |  |                           | (1,310,889  | ) |                           |   | (2,318,381 | )                         |  |   | (2,077,138  | )
|                                                               |  |                           |             |   |                           |   |            |                           |  |   |             |  
|NET REALIZED AND UNREALIZED GAIN/(LOSS) ONINVESTMENTS:(Note 1) |  |                           |             |   |                           |   |            |                           |  |   |             |  
|Net realized gain (loss) on affiliated investments             |  |                           | (10,112,825 | ) |                           |   | 4,210      |                           |  |   | 44          |  
|Net realized gain (loss) on unaffiliated investments           |  |                           | 1,585,762   |   |                           |   | (2,559,421 | )                         |  |   |             |  
|Net change in unrealized (depreciation) on investments         |  |                           | (2,017,098  | ) |                           |   | (1,504,828 | )                         |  |   | (13,960,068 | )
|                                                               |  |                           |             |   |                           |   |            |                           |  |   |             |  
|NET REALIZED AND UNREALIZED (LOSS) ONINVESTMENTS               |  |                           | (10,544,161 | ) |                           |   | (4,060,039 | )                         |  |   | (13,960,024 | )
|                                                               |  |                           |             |   |                           |   |            |                           |  |   |             |  
|NET (DECREASE) IN NET ASSETS RESULTINGFROM OPERATIONS          |  | $                         | (11,855,050 | ) |                           | $ | (6,378,420 | )                         |  | $ | (16,037,162 | )
|                                                               |  |                           |             |   |                           |   |            |                           |  |   |             |  



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



|                                                       |  |                           |             |   |                           |   |             |                           |  |   |             |  
|------------------------------------------------------ |  | ------------------------- | ----------- | - | ------------------------- | - | ----------- | ------------------------- |  | - | ----------- | -
|                                                       |  | Year EndedOctober 31,2005 |             |   | Year EndedOctober 31,2004 |   |             | Year EndedOctober 31,2003 | 
|OPERATIONS:                                            |  |                           |             |   |                           |   |             |                           |  |   |             |  
|Net investment (loss)                                  |  | $                         | (1,310,889  | ) |                           | $ | (2,318,381  | )                         |  | $ | (2,077,138  | )
|Net realized (loss)/gain on investments                |  |                           | (8,527,063  | ) |                           |   | (2,555,211  | )                         |  |   | 44          |  
|Net change in unrealized (depreciation) on investments |  |                           | (2,017,098  | ) |                           |   | (1,504,828  | )                         |  |   | (13,960,068 | )
|                                                       |  |                           |             |   |                           |   |             |                           |  |   |             |  
|Net (decrease) in net assets resulting from operations |  |                           | (11,855,050 | ) |                           |   | (6,378,420  | )                         |  |   | (16,037,162 | )
|                                                       |  |                           |             |   |                           |   |             |                           |  |   |             |  
|DISTRIBUTIONS TO UNITHOLDERS:                          |  |                           |             |   |                           |   |             |                           |  |   |             |  
|Distributions                                          |  |                           | (10,875,536 | ) |                           |   |            |                           |  |   |            |  
|                                                       |  |                           |             |   |                           |   |             |                           |  |   |             |  
|Net (Decrease) in Net Assets                           |  |                           | (22,730,586 | ) |                           |   | (6,378,420  | )                         |  |   | (16,037,162 | )
|                                                       |  |                           |             |   |                           |   |             |                           |  |   |             |  
|NET ASSETS:                                            |  |                           |             |   |                           |   |             |                           |  |   |             |  
|Beginning of period                                    |  |                           | 116,079,433 |   |                           |   | 122,457,853 |                           |  |   | 138,495,015 |  
|                                                       |  |                           |             |   |                           |   |             |                           |  |   |             |  
|End of period                                          |  | $                         | 93,348,847  |   |                           | $ | 116,079,433 |                           |  | $ | 122,457,853 |  
|                                                       |  |                           |             |   |                           |   |             |                           |  |   |             |  



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



|                                                                                                                                |  |                           |             |   |                           |   |             |                           |  |   |             |  
|------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ----------- | - | ------------------------- | - | ----------- | ------------------------- |  | - | ----------- | -
|                                                                                                                                |  | Year EndedOctober 31,2005 |             |   | Year EndedOctober 31,2004 |   |             | Year EndedOctober 31,2003 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                           |  |                           |             |   |                           |   |             |                           |  |   |             |  
|Net (decrease) in net assets resulting from operations                                                                          |  | $                         | (11,855,050 | ) |                           | $ | (6,378,420  | )                         |  | $ | (16,037,162 | )
|Adjustments to reconcile net (decrease) in net assets from operations to net cash (used in) / provided by operating
activities: |  |                           |             |   |                           |   |             |                           |  |   |             |  
|Net change in unrealized depreciation on investments                                                                            |  |                           | 2,017,098   |   |                           |   | 1,504,828   |                           |  |   | 13,960,068  |  
|Purchase of investments                                                                                                         |  |                           | (21,298,464 | ) |                           |   | (16,483,800 | )                         |  |   | (25,204,380 | )
|Proceeds received from the sale of investments and distributions from private investment funds                                  |  |                           | 16,964,454  |   |                           |   | 8,205,129   |                           |  |   |            |  
|Realized loss on sale of investments- net                                                                                       |  |                           | 8,527,063   |   |                           |   | 2,555,211   |                           |  |   |            |  
|Change in short-term investments- net                                                                                           |  |                           | 16,927,902  |   |                           |   | 7,987,809   |                           |  |   | 30,256,603  |  
|Decrease (increase) in receivable from affiliate                                                                                |  |                           | 99,275      |   |                           |   | (99,275     | )                         |  |   |            |  
|Decrease (increase) in receivable due from distributor                                                                          |  |                           | 542,479     |   |                           |   | (1,142,510  | )                         |  |   |            |  
|Decrease (increase) in interest receivable                                                                                      |  |                           | (172,285    | ) |                           |   | (10,168     | )                         |  |   | 1,526       |  
|Decrease (increase) in other receivable                                                                                         |  |                           |            |   |                           |   |            |                           |  |   | 994,345     |  
|Decrease (increase) in prepaid insurance                                                                                        |  |                           | 1,411       |   |                           |   | (799        | )                         |  |   | 61,791      |  
|(Decrease) in management fee payable                                                                                            |  |                           | (114,274    | ) |                           |   | (33,753     | )                         |  |   | (79,705     | )
|Increase (decrease) in Board of Managers fees payable                                                                          |  |                           | (60,000     | ) |                           |   | 8,000       |                           |  |   |            |  
|Increase (decrease) in other expenses payable                                                                                   |  |                           | (129,927    | ) |                           |   | 149,594     |                           |  |   | (214,932    | )
|                                                                                                                                |  |                           |             |   |                           |   |             |                           |  |   |             |  
|Net cash (used in) / provided by operating activities                                                                           |  |                           | 11,449,682  |   |                           |   | (3,738,154  | )                         |  |   | 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 change in cash                                                                                                              |  |                           | 574,146     |   |                           |   | (3,738,154  | )                         |  |   | 3,738,154   |  
|                                                                                                                                |  |                           |             |   |                           |   |             |                           |  |   |             |  
|Cash at beginning of period                                                                                                     |  |                           |            |   |                           |   | 3,738,154   |                           |  |   |            |  
|                                                                                                                                |  |                           |             |   |                           |   |             |                           |  |   |             |  
|Cash at end of period                                                                                                           |  | $                         | 574,146     |   |                           | $ |            |                           |  | $ | 3,738,154   |  
|                                                                                                                                |  |                           |             |   |                           |   |             |                           |  |   |             |  
|SUPPLEMENTAL INFORMATION:                                                                                                       |  |                           |             |   |                           |   |             |                           |  |   |             |  
|Non-cash distributions received from private investment funds:                                                                  |  | $                         | 88,121      |   |                           | $ | 0           |                           |  | $ | 0           |  



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



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##### Table of Contents

Excelsior Venture Partners III, LLC

Financial Highlights  Selected Per Unit Data and Ratios



Per Unit Operating Performance:(1)



|                                                              |  |                           |        |    |                           |   |         |                           |  |   |                           |    |  |                                                             |         |      |  |   |         |      
|------------------------------------------------------------- |  | ------------------------- | ------ | -- | ------------------------- | - | ------- | ------------------------- |  | - | ------------------------- | -- |  | ----------------------------------------------------------- | ------- | ---- |  | - | ------- | -----
|                                                              |  | Year EndedOctober 31,2005 |        |    | Year EndedOctober 31,2004 |   |         | Year EndedOctober 31,2003 |  |   | Year EndedOctober 31,2002 |    |  | April 5, 2001(Commencementof Operations) toOctober 31, 2001 |        
|NET ASSET VALUE, BEGINNING OF PERIOD                          |  | $                         | 393.21 |    |                           | $ | 414.82  |                           |  | $ | 469.14                    |    |  | $                                                           | 495.99  |      |  | $ | 500.00  |      
|Deduction of offering cost from contributions                 |  |                           |       |    |                           |   |        |                           |  |   |                          |    |  |                                                             |        |      |  |   | (4.97   | )    
|INCOME FROM INVESTMENT OPERATIONS:                            |  |                           |        |    |                           |   |         |                           |  |   |                           |    |  |                                                             |         |      |  |   |         |      
|Net investment income (loss)                                  |  |                           | (4.44  | )  |                           |   | (7.85   | )                         |  |   | (7.04                     | )  |  |                                                             | (5.62   | )    |  |   | 2.81    |      
|Net realized and unrealized (loss) on investment transactions |  |                           | (35.72 | )  |                           |   | (13.76  | )                         |  |   | (47.28                    | )  |  |                                                             | (21.23  | )    |  |   | (0.20   | )    
|                                                              |  |                           |        |    |                           |   |         |                           |  |   |                           |    |  |                                                             |         |      |  |   |         |      
|Total from investment operations                              |  |                           | (40.16 | )  |                           |   | (21.61  | )                         |  |   | (54.32                    | )  |  |                                                             | (26.85  | )    |  |   | 2.61    |      
|                                                              |  |                           |        |    |                           |   |         |                           |  |   |                           |    |  |                                                             |         |      |  |   |         |      
|DISTRIBUTIONS                                                 |  |                           | (36.84 | )  |                           |   |        |                           |  |   |                          |    |  |                                                             |        |      |  |   | (1.65   | )    
|                                                              |  |                           |        |    |                           |   |         |                           |  |   |                           |    |  |                                                             |         |      |  |   |         |      
|Total Distributions                                           |  |                           | (36.84 | )  |                           |   |        |                           |  |   |                          |    |  |                                                             |        |      |  |   | (1.65   | )    
|                                                              |  |                           |        |    |                           |   |         |                           |  |   |                           |    |  |                                                             |         |      |  |   |         |      
|NET ASSET VALUE, END OF PERIOD                                |  | $                         | 316.21 |    |                           | $ | 393.21  |                           |  | $ | 414.82                    |    |  | $                                                           | 469.14  |      |  | $ | 495.99  |      
|                                                              |  |                           |        |    |                           |   |         |                           |  |   |                           |    |  |                                                             |         |      |  |   |         |      
|TOTAL NET ASSET VALUE RETURN(5)                               |  |                           | (11.24 | )% |                           |   | (5.21   | )%                        |  |   | (11.58                    | )% |  |                                                             | (5.41   | )%   |  |   | (0.41   | )%(3)
|                                                              |  |                           |        |    |                           |   |         |                           |  |   |                           |    |  |                                                             |         |      |  |   |         |      
|RATIOS AND SUPPLEMENTAL DATA (7):                             |  |                           |        |    |                           |   |         |                           |  |   |                           |    |  |                                                             |         |      |  |   |         |      
|Net Assets, End of Period (000s)                             |  | $                         | 93,349 |    |                           | $ | 116,079 |                           |  | $ | 122,458                   |    |  | $                                                           | 138,495 |      |  | $ | 146,421 |      
|Ratios to Average Net Assets:                                 |  |                           |        |    |                           |   |         |                           |  |   |                           |    |  |                                                             |         |      |  |   |         |      
|Gross Expenses                                                |  |                           | 2.45   | %  |                           |   | 2.45    | %                         |  |   | 2.27                      | %  |  |                                                             | 2.43    | %    |  |   | 1.35    | %(2) 
|Net Expenses                                                  |  |                           | 2.45   | %  |                           |   | 2.37    | %(6)                      |  |   | 2.27                      | %  |  |                                                             | 2.36    | %(4) |  |   | 1.32    | %(2) 
|Net Investment Income (Loss)                                  |  |                           | (1.23  | )% |                           |   | (1.92   | )%                        |  |   | (1.61                     | )% |  |                                                             | (1.15   | )%   |  |   | 0.58    | %(2) 
|Portfolio Turnover Rate                                       |  |                           | 24     | %  |                           |   | 11      | %                         |  |   | 0                         | %  |  |                                                             | 0       | %    |  |   | 0       | %    



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



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



|(3) | Not annualized. Percentage includes the impact of the deduction of offering costs from contributions.
|--- | -----------------------------------------------------------------------------------------------------



|(4) | Net of organization expense reversal.
|--- | -------------------------------------



|(5) | 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 market value total investment return is not calculated.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Net of reimbursement from affiliate. See Note 2.
|--- | ------------------------------------------------



|(7) | Income and expense ratios do not reflect the Companys proportional share of net investment income (loss) and expenses, including any performance-based fees, of the Underlying
Funds.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



October 31, 2005



Note 1  Significant Accounting Policies



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



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



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



The 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.



A. Investment
Valuation:



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



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



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The appraisal method shall be based upon such factors affecting the investee company such as earnings, net worth, reliable private sale prices of the
investee companys securities, the market prices for similar securities of comparable companies, an assessment of the investee companys future prospects or, if appropriate, liquidation value. The values for the investments referred to in
this paragraph will be estimated regularly by the Investment Adviser or a committee of the Board 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 October 31, 2005 and October 31,
2004, market quotations were not readily available for the Companys portfolio of securities valued at $63,994,789 or 68.55% 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 October 31, 2005, the Company has not received information to determine the tax cost of the Private Investment Funds as of October 31, 2005. At December 31, 2004, the Private Investment Funds had a cost basis for tax
purposes of $6,388,718. Based on values of the Private Investment Funds as of October 31, 2005, and after adjustment for purchases and sales between December 31, 2004 and October 31, 2005, these results in net unrealized depreciation
for tax purposes on the Private Investment Funds of $161,598, consisting of gross appreciation of $221,256 and gross depreciation of $382,854. The cost basis for federal tax purposes of the Companys other investments is $106,035,533, and those
investments had net depreciation on a tax basis at October 31, 2005 of $22,472,943, consisting of gross appreciation of $0 and gross depreciation of $22,472,943. 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.



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



Prior to June 1, 2003, and pursuant to an Investment Advisory Agreement
(the Agreement), U.S. Trust Company served during the reporting period as the Investment Adviser to the Company pursuant to an Investment Advisory Agreement with the Company. Under the Agreement for the services provided, the Investment
Adviser is entitled to receive a management fee at an annual rate equal to 2.00% of the Companys average quarterly net assets through the fifth anniversary of the first closing date of April 5, 2001, and 1.00% of net assets thereafter.
Prior to June 1, 2003, and pursuant to sub-advisory agreements among the Company, U.S. Trust Company, United States Trust Company of New York (U.S. Trust NY) and U.S. Trust Company, N.A., U.S. Trust NY and U.S. Trust Company, N.A.
served as the investment sub-advisers to the Company and received an investment management fee from the Investment Adviser.



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 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. As of, and for the years ended, October 31, 2005, 2004 and 2003 there was no
Incentive Carried interest earned by the Investment Adviser.



U.S. Trust NY is a New York state-chartered bank and trust company and a member of the Federal Reserve System. Effective June 1, 2003, U.S. Trust Company merged into U.S. Trust Company, N.A., a nationally chartered bank. Pursuant to an
assumption agreement dated June 1, 2003, U.S. Trust Company, N.A. has assumed the duties and obligations of U.S. Trust Company under that 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 (USTAMD), 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 (NYAMD), serving as a sub-investment adviser. The merger has 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). As of
October 31, 2005, and 2004, $469,295 and $583,569 were respectively payable to 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. Administration fees for the year ended October 31, 2005 amounted to $134,829, of which $53,861 was payable at October 31, 2005. Administration fees for the year ended October 31, 2004 amounted to $139,525,
of which $50,936 was payable at October 31, 2004. Administration fees for the year ended October 31, 2003 amounted to $147,498.



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



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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. For the year ended October 31, 2005, the Board of Managers fees totaled $60,000, of which $8,000 was still payable at October 31, 2005. For the year ended October 31, 2004, the Board of Managers fees totaled
$68,000, all of which was still payable at October 31, 2004. For the year ended October 31, 2003, the Board of Managers fees totaled $60,000.



As of October 31, 2005, and 2004 Excelsior Venture Investors III, LLC had an investment in the Company of $59,260,913 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 independent registered public accounting firm for the fiscal year ended October 31, 2004,
replacing Ernst & Young LLP (E&Y), the Companys prior independent registered public accounting firm. 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 were the result of certain real estate consulting services performed by E&Y on a contingent fee basis for Charles
Schwab & Co., Inc., an affiliate of the Companys Investment Adviser.



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



As a result of the
agreement with Schwab, the Company has recorded a reimbursement amount of $89,275 in the Statement of Operations for the year ended October 31, 2004 as a reduction of expenses. This $89,275 amount reflects the reimbursement of certain expenses
recorded in the Statement of Operations for the year ended October 31, 2004 which relate to termination of E&Y costs paid and accrued. These costs include legal fees, audit fees (related to re-audit and re-review services of D&T), and
directors fees and expenses of $14,000, $69,275, and $6,000, respectively.



Note 3  Purchases and Sales of Securities



Excluding short-term investments, the Company had $21,298,464, $16,483,800, $25,204,380 in purchases and $16,964,454, $8,205,129, $0 in sales of securities for the periods ending October 31,
2005, October 31, 2004 and October 31, 2003, respectively.



Note 4  Commitments



As of
October 31, 2005, the Company had outstanding investment commitments totaling $14,556,346.



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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 year ended October 31, 2005 and October 31, 2004. Transactions with companies, which are or were affiliates were as
follows:



|                                           |  |                                               |  |                       |            |                                  |   |                                     |  |   |                  |   |                     |   |         |                                               |   |                                 |   |  |            |  |   |           
|------------------------------------------ |  | --------------------------------------------- |  | --------------------- | ---------- | -------------------------------- | - | ----------------------------------- |  | - | ---------------- | - | ------------------- | - | ------- | --------------------------------------------- | - | ------------------------------- | - |  | ---------- |  | - | ----------
|                                           |  |                                               |  |                       |            |                                  |   | For the Year Ended October 31, 2005 |  |  
|Name of Investment                         |  | Shares/PrincipalAmount Held atOctober 31,2004 |  | October 31,2004 Value |            | Purchases/ConversionAcquisitions |   | Sale/Conversion Proceeds            |  |   | InterestReceived |   | RealizedGain (Loss) |   |         | Shares/PrincipalAmount Held atOctober 31,2005 |   | October 31, 2005 Value (Note 1)
|Controlled Affiliates                      |  |                                               |  |                       |            |                                  |   |                                     |  |   |                  |   |                     |   |         |                                               |   |                                 |   |  |            |  |   |           
|Pilot Software Inc., Series A Preferred    |  | 20,000,000                                    |  | $                     | 4,000,000  |                                  | $ | 4,110,096                           |  | $ |                 |   |                     | $ |        |                                               | $ |                                |   |  | 46,362,656 |  | $ | 8,110,096 
|Pilot Software Inc., Bridge Note, 9%       |  | 750,000                                       |  |                       | 750,000    |                                  |   | 1,500,000                           |  |   | (2,250,000       | ) |                     |   | 101,034 |                                               |   |                                |   |  |           |  |   |          
|LogicLibrary, Inc., Series A Preferred     |  | 4,374,256                                     |  |                       | 2,000,000  |                                  |   | 985,916                             |  |   |                 |   |                     |   |        |                                               |   |                                |   |  | 6,530,581  |  |   | 2,985,916 
|LogicLibrary, Inc., Series A-1 Preferred   |  | 3,080,464                                     |  |                       | 1,408,450  |                                  |   |                                    |  |   |                 |   |                     |   |        |                                               |   |                                |   |  | 3,080,464  |  |   | 1,408,450 
|Cydelity Inc. Series A Preferred           |  | 19,995,000                                    |  |                       | 4,000,000  |                                  |   |                                    |  |   |                 |   |                     |   |        |                                               |   |                                |   |  | 19,995,000 |  |   |          
|Cydelity Inc. Common Stock                 |  | 1,000,000                                     |  |                       |           |                                  |   |                                    |  |   |                 |   |                     |   |        |                                               |   |                                |   |  | 1,000,000  |  |   |          
|Cydelity Inc. Series A Warrants            |  |                                              |  |                       |           |                                  |   |                                    |  |   |                 |   |                     |   |        |                                               |   |                                |   |  | 7,500,000  |  |   |          
|Cydelity Inc., Bridge Note, 8%             |  |                                              |  |                       |           |                                  |   | 3,000,000                           |  |   |                 |   |                     |   | 123,531 |                                               |   |                                |   |  | 3,000,000  |  |   | 3,000,000 
|                                           |  |                                               |  |                       |            |                                  |   |                                     |  |   |                  |   |                     |   |         |                                               |   |                                 |   |  |            |  |   |           
|Total Controlled Affiliates                |  |                                               |  | $                     | 12,158,450 |                                  | $ | 9,596,012                           |  | $ | (2,250,000       | ) |                     | $ | 224,565 |                                               | $ |                                |   |  |            |  | $ | 15,504,462
|Non-Controlled Affiliates                  |  |                                               |  |                       |            |                                  |   |                                     |  |   |                  |   |                     |   |         |                                               |   |                                 |   |  |            |  |   |           
|Adeza Biomedical Corp., Series 5 Preferred |  | 647,948                                       |  | $                     | 3,000,000  |                                  | $ |                                    |  | $ | (6,932,996       | ) |                     | $ |        |                                               | $ | 3,932,996                       |   |  |           |  | $ |          
|Cenquest, Inc., Series 2 Preferred         |  | 4,425                                         |  |                       |           |                                  |   |                                    |  |   |                 |   |                     |   |        |                                               |   | (2,000,000                      | ) |  |           |  |   |          
|Chips & Systems, Inc., Series A Preferred  |  | 7,000,000                                     |  |                       | 3,500,000  |                                  |   |                                    |  |   |                 |   |                     |   |        |                                               |   |                                |   |  | 7,000,000  |  |   |          
|Chips & Systems, Inc. Bridge Note          |  |                                              |  |                       |           |                                  |   | 1,441,133                           |  |   |                 |   |                     |   | 4,084   |                                               |   |                                |   |  | 1,441,133  |  |   |          
|Ethertronics, Inc., Series B Preferred     |  | 4,433,333                                     |  |                       | 6,650,000  |                                  |   |                                    |  |   |                 |   |                     |   |        |                                               |   |                                |   |  | 4,433,333  |  |   | 6,650,000 
|Ethertronics, Inc., Series B Warrants      |  | 281,667                                       |  |                       |           |                                  |   |                                    |  |   |                 |   |                     |   |        |                                               |   |                                |   |  | 281,667    |  |   |          
|Ethertronics, Inc., Series C Warrants      |  |                                              |  |                       |           |                                  |   |                                    |  |   |                 |   |                     |   |        |                                               |   |                                |   |  | 163,580    |  |   |          
|Ethertronics, Inc., Bridge Note            |  |                                              |  |                       |           |                                  |   | 250,000                             |  |   | (250,000         | ) |                     |   | 3,311   |                                               |   |                                |   |  |           |  |   |          
|Ethertronics, Inc., Series C Preferred     |  |                                              |  |                       |           |                                  |   | 1,470,258                           |  |   |                 |   |                     |   |        |                                               |   |                                |   |  | 980,172    |  |   | 1,470,258 
|Genoptix, Inc., Series 1-A Preferred       |  | 942,481                                       |  |                       | 1,253,500  |                                  |   |                                    |  |   |                 |   |                     |   |        |                                               |   |                                |   |  | 942,481    |  |   | 950,822   
|Genoptix, Inc., Series 1-B Preferred       |  | 1,403,696                                     |  |                       | 1,250,000  |                                  |   |                                    |  |   |                 |   |                     |   |        |                                               |   |                                |   |  | 1,403,696  |  |   | 950,822   
|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       |  |                                              |  |                       |           |                                  |   | 461,815                             |  |   |                 |   |                     |   |        |                                               |   |                                |   |  | 728,413    |  |   | 461,815   
|LightConnect, Inc., Series B Preferred     |  | 4,330,504                                     |  |                       | 5,000,000  |                                  |   |                                    |  |   |                 |   |                     |   |        |                                               |   |                                |   |  | 4,330,504  |  |   | 5,000,000 



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|                                                     |  |            |  |   |            |  |   |           |  |   |            |   |  |   |        |  |   |            |   |  |            |  |   |           
|---------------------------------------------------- |  | ---------- |  | - | ---------- |  | - | --------- |  | - | ---------- | - |  | - | ------ |  | - | ---------- | - |  | ---------- |  | - | ----------
|LightConnect, Inc., Series C Preferred               |  | 12,292,441 |  |   | 992,000    |  |   |          |  |   |           |   |  |   |       |  |   |           |   |  | 12,292,441 |  |   | 992,000   
|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    |  |   |           |  |   |          |  |   |           |   |  |   |       |  |   | (4,750,000 | ) |  |           |  |   |          
|Monterey Design Systems, Inc., Series 2 Preferred    |  | 3,333,333  |  |   | 600,000    |  |   |          |  |   | (781,176   | ) |  |   |       |  |   | (2,218,825 | ) |  |           |  |   |          
|NanoOpto Corp., Series A-1 Preferred                 |  | 956,234    |  |   |           |  |   |          |  |   |           |   |  |   |       |  |   |           |   |  | 956,234    |  |   | 1,116,350 
|NanoOpto Corp., Series B Preferred                   |  | 3,023,399  |  |   | 1,655,119  |  |   |          |  |   |           |   |  |   |       |  |   |           |   |  | 3,023,399  |  |   | 1,286,155 
|NanoOpto Corp., Bridge Note                          |  |           |  |   |           |  |   | 500,000   |  |   | (511,288   | ) |  |   | 11,288 |  |   |           |   |  |           |  |   |          
|NanoOpto Corp., Series C Preferred                   |  |           |  |   |           |  |   |          |  |   |           |   |  |   |       |  |   |           |   |  | 1,682,470  |  |   | 733,389   
|NanoOpto Corp., Series C Warrants                    |  |           |  |   |           |  |   |          |  |   |           |   |  |   |       |  |   |           |   |  | 229,410    |  |   |          
|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  |  |   | 1,415,615 
|Silverback Systems, Inc., Series C Preferred         |  | 34,364,257 |  |   | 4,298,896  |  |   |          |  |   |           |   |  |   |       |  |   |           |   |  | 34,364,257 |  |   | 3,333,333 
|Silverback Systems, Inc., 5% Bridge Notes            |  |           |  |   |           |  |   | 1,969,206 |  |   |           |   |  |   | 55,783 |  |   |           |   |  | 1,969,206  |  |   | 1,969,206 
|Silverback Systems, Inc., Series C Warrant           |  |           |  |   |           |  |   | 196       |  |   |           |   |  |   |       |  |   |           |   |  | 4,173,033  |  |   | 196       
|Tensys Medical, Inc., Series C Preferred             |  | 4,166,667  |  |   | 5,000,000  |  |   |          |  |   |           |   |  |   |       |  |   |           |   |  | 4,166,667  |  |   | 1,887,160 
|Tensys Medical, Inc., Series D Preferred             |  | 1,187,500  |  |   | 1,425,000  |  |   |          |  |   |           |   |  |   |       |  |   |           |   |  | 1,187,500  |  |   | 537,840   
|Virtual Silicon Technology, Inc., Series C Preferred |  | 3,096,551  |  |   | 5,000,000  |  |   |          |  |   | (607,446   | ) |  |   |       |  |   | (4,392,554 | ) |  |           |  |   |          
|Virtual Silicon Technology, Inc., Bridge Note        |  | 88,738     |  |   | 88,738     |  |   | 492,862   |  |   |           |   |  |   |       |  |   | (492,862   | ) |  |           |  |   |          
|                                                     |  |            |  |   |            |  |   |           |  |   |            |   |  |   |        |  |   |            |   |  |            |  |   |           
|Total Non -Controlled Affiliates                     |  |            |  | $ | 45,440,393 |  | $ | 9,546,589 |  | $ | (9,082,906 | ) |  | $ | 74,466 |  | $ | (9,921,245 | ) |  |            |  | $ | 36,993,169
|                                                     |  |            |  |   |            |  |   |           |  |   |            |   |  |   |        |  |   |            |   |  |            |  |   |           



|                                        |  |                                                  |  |                        |           |                                     |   |                                     |  |   |                   |   |                      |   |                                                  |  |                                 |   |  |   |            |  |   |          
|--------------------------------------- |  | ------------------------------------------------ |  | ---------------------- | --------- | ----------------------------------- | - | ----------------------------------- |  | - | ----------------- | - | -------------------- | - | ------------------------------------------------ |  | ------------------------------- | - |  | - | ---------- |  | - | ---------
|                                        |  |                                                  |  |                        |           |                                     |   | For the Year Ended October 31, 2004 |  |  
|Name of Investment                      |  | Shares/Principal Amount Held at October 31, 2003 |  | October 31, 2003 Value |           | Purchases / Conversion Acquisitions |   | Sale/ Conversion Proceeds           |  |   | Interest Received |   | Realized Gain (Loss) |   | Shares/Principal Amount 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



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|                                                  |  |                                                  |            |                       |   |                                     |  |                                     |           |  |                   |            |                      |  |   |                                                  |  |                                 |            |   |  |   |            |  |   |          
|------------------------------------------------- |  | ------------------------------------------------ | ---------- | --------------------- | - | ----------------------------------- |  | ----------------------------------- | --------- |  | ----------------- | ---------- | -------------------- |  | - | ------------------------------------------------ |  | ------------------------------- | ---------- | - |  | - | ---------- |  | - | ---------
|                                                  |  |                                                  |            |                       |   |                                     |  | For the Year Ended October 31, 2004 |           | 
|Name of Investment                                |  | Shares/Principal Amount Held at October 31, 2003 |            | October 31,2003 Value |   | Purchases / Conversion Acquisitions |  | Sale/ Conversion Proceeds           |           |  | Interest Received |            | Realized Gain (Loss) |  |   | Shares/Principal Amount 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  
|Cenquest, 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., Warrants                       |  |                                                  | 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  



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|                                                     |  |            |  |   |            |  |   |            |  |   |            |   |  |   |       |  |   |            |   |  |   |            |  |   |           
|---------------------------------------------------- |  | ---------- |  | - | ---------- |  | - | ---------- |  | - | ---------- | - |  | - | ----- |  | - | ---------- | - |  | - | ---------- |  | - | ----------
|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  |  |   | 1,655,118 
|NetLogic Microsystems, Inc., Series D Preferred      |  | 1,538,461  |  |   | 5,000,000  |  |   |           |  |   | (5,000,000 | ) |  |   |      |  |   |           |   |  |   |           |  |   |          
|NetLogic Microsystems, Inc., Common Stock            |  |           |  |   |           |  |   | 5,000,000  |  |   |           |   |  |   |      |  |   |           |   |  |   | 384,615    |  |   | 1,706,922 
|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 
|Senomyx, Inc., Series E Preferred                    |  | 517,260    |  |   | 1,500,000  |  |   |           |  |   | (1,500,000 | ) |  |   |      |  |   |           |   |  |   |           |  |   |          
|Senomyx, Inc., Common Stock                          |  |           |  |   |           |  |   | 1,500,000  |  |   |           |   |  |   |      |  |   |           |   |  |   | 428,572    |  |   | 2,976,005 
|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                      |  |            |  | $ | 54,905,543 |  | $ | 19,344,569 |  | $ | 14,590,579 |   |  | $ | 6,729 |  | $ | (2,559,421 | ) |  |   |            |  | $ | 55,998,434
|                                                     |  |            |  |   |            |  |   |            |  |   |            |   |  |   |       |  |   |            |   |  |   |            |  |   |           



As of October 31, 2005, Archemix
Corporation is no longer considered to be an affiliated company. LogicLibrary, Inc. has also been reclassified from a non-controlled affiliate to a controlled affiliate.



In addition, $191,580 of a receivable for the liquidation of Gyration, Inc. securities (which was a non-controlled affiliate prior to the
Companys disposition of those securities) during the year ended October 31, 2004 was written off as a realized loss during the year ended October 31, 2005.



Note 6  Pending Litigation



The Investment Adviser was contacted in September 2003 by the Office of the New York State Attorney General (the NYAG) and the Securities
and Exchange Commission (the SEC) and later by the Attorney General of the State of West Virginia, in connection with their investigations of practices in the mutual fund industry identified as market timing and late
trading of mutual fund shares (the Investigations). The Investment Adviser has been providing full cooperation with respect to these Investigations and continues to review the facts and circumstances relevant to the Investigation.
As disclosed previously by the Investment Adviser and its affiliates, these Investigations have been focusing on circumstances in which a small number of parties were permitted to engage in short-term trading of shares 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, certain of its affiliates and others 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, certain of its affiliates and others have also been named in two derivative actions
alleging breach of fiduciary duty in relation to allegedly illegal and improper mutual fund trading practices.



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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 November 2005, the Maryland court dismissed many of the plaintiffs claims in both the investor class action suits and in the derivative suits.
Plaintiffs claims under Sections 10(b) and 20 of the Securities Exchange Act and under Section 36(b) of the Investment Company Act, however, have not been dismissed. Currently, these rulings are subject to reconsideration motions by the
parties. It is anticipated that discovery will commence soon with respect to plaintiffs remaining claims.



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 nor party to
the lawsuits described above.



Note 7  Guarantees



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



Note 8  Subsequent Event



On December 15, 2005, the Board of Managers of the
Company approved an assumption agreement pursuant to which UST Advisers, Inc. (USTA) has assumed all of the former Investment Advisors obligations under the Investment Agreements. Effective December 16, 2005, USTA serves as
Investment Adviser to the Company.



USTA, a Delaware
corporation that is a wholly-owned subsidiary of U.S. Trust Company, N.A., is registered as an investment adviser with the Securities and Exchange Commission.



|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|------- | -------------------------------------------------------------------------------------



There has been a change in the Companys independent registered public accounting firm (see Note 2 to the financial
statements), however there were no disagreements or reportable events.



|ITEM 9A. | CONTROLS AND PROCEDURES.
|-------- | ------------------------



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



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PART III



|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
|-------- | ---------------------------------------------------



Managers and Officers



Set forth below are names, ages, positions and certain other information concerning the current managers and certain officers of the Company as of
October 31, 2005.



|                                                                                                          |  |                                                          |  |                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                     
|--------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------- |  | -------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------
|Name, Address and Age                                                                                     |  | Position(s) Heldwith theCompany                          |  | Term of Officeand Length ofTime Served |  | Principal Occupation During Past Five Years                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | Number ofPortfoliosin FundComplexOverseenby Director
|Disinterested Managers                                                                                   
|                                                                                                          |  |                                                          |  |                                       
|Mr. Gene M. Bernstein, 58 United States Trust Company of New York 114 West 47th Street New York, NY
10036 |  | Manager and Member of the Audit and Valuation Committees |  | Since Company inception                |  | Director of NIC Holding Corp; Dean of the Skodneck Business Development Center at Hofstra University from 2000-2001; prior to that Mr. Bernstein was President and Vice Chairman at Northville
Industries, a petroleum marketing, distribution, trading and storage company and wholly-owned subsidiary of NIC Holding Corp. Mr. Bernstein serves as a director or manager of Excelsior Private Equity Fund II, Inc., Excelsior Venture Partners III,
LLC, Excelsior Venture Investors III, LLC and the Excelsior Directional Hedge Fund of Funds, LLC.                                     |  | 4                                                   
|                                                                                                          |  |                                                          |  |                                       
|Mr. Victor F. Imbimbo, 53 United States
Trust Company of New York 114 West 47th Street New York, NY 10036 |  | Manager and Member of the Audit and Valuation Committees |  | Since Company inception                |  | Since October 2002, Mr. Imbimbo has directed healthcare marketing in the United States for TBWA\Chiat\Day, a division of the global marketing agency TBWA. Prior to this, he was President of
Bedrock Communications, Inc., a consulting company addressing the merger of traditional and digital communications solutions for the general and healthcare markets. Mr. Imbimbo serves as a director or manager of Excelsior Private Equity Fund II,
Inc., Excelsior Venture Partners III, LLC, Excelsior Venture Investors III, LLC and the Excelsior Directional Hedge Fund of Funds, LLC. |  | 4                                                   
|                                                                                                          |  |                                                          |  |                                       
|Mr. Stephen V. Murphy, 60 United States Trust Company of New
York 114 West 47th Street New York, NY 10036 |  | Manager and Member of the Audit and Valuation Committees |  | Since Company inception                |  | President of S.V. Murphy & Co., Inc., an investment banking firm. Mr. Murphy serves as a director or manager of Excelsior Private Equity Fund II, Inc., Excelsior Venture Partners III, LLC,
Excelsior Venture Investors III, LLC and the Excelsior Directional Hedge Fund of Funds, LLC. Mr. Murphy also serves on the board of directors of The First of Long Island Corporation and The First National Bank of Long Island.                                                                                                                                                              |  | 4                                                   
|                                                                                                         
|Interested Manager                                                                                       
|                                                                                                          |  |                                                          |  |                                       
|Mr. John C. Hover II, 62 United States Trust Company of New York 114 West 47th Street New York, NY 10036  |  | Manager and Chairman of the Board                        |  | Since Company inception                |  | Executive Vice President of U.S. Trust (retired since 1998). Mr. Hover serves as chairman of the board of directors or managers of Excelsior Private Equity Fund II, Inc., Excelsior Venture
Partners III, LLC and Excelsior Venture Investors III, LLC. Mr. Hover also serves on the board of directors of Tweedy, Brown Fund, Inc.                                                                                                                                                                                                                                                        |  | 3                                                   



Mr. Hover is considered an
interested person, as defined by the 1940 Act, of the Company due to the fact that he holds securities of The Charles Schwab Corporation, a parent company of the Investment Adviser.



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Officers



|                                                                                       |  |                                  |  |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-------------------------------------------------------------------------------------- |  | -------------------------------- |  | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name, Address and Age                                                                  |  | Position(s) Held withthe Company |  | Length of TimeServed    |  | Principal Occupation During Past Five Years                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                       |  |                                  | 
|Mr. Robert Aufenanger, 52 U.S. Trust
Company 225 High Ridge Road Stamford, CT 06905    |  | Treasurer                        |  | Since April 2003        |  | Senior Vice President, U.S. Trust; prior to U.S. Trust, Mr. Aufenanger worked as a consultant to various clients in the fund industry and prior to this was Chief Financial Officer for Icon
Holdings Corp.                                                                                                                                                                                                                                                                    
|                                                                                       |  |                                  | 
|Mr. Timothy Leach, 50* U.S. Trust
Company 114 W. 47thStreet New York, NY 10036         |  | Co-Chief Executive Officer       |  | Since June 2005         |  | Head of U.S. Trust Western Region (10/05 to present); Executive Vice President and Chief Investment Officer of U.S. Trust (5/04 to 10/05); Executive Vice President and Chief Investment Officer
of Wells Fargo Private Client Services, Chief Executive Officer of Wells Fargo Alternative Asset Management, and Chief Executive Officer of and President of Wells Fargo Private Investment Advisors (5/99 to 12/03); Board of Trustees of Aquila Mutual
Funds (2/00 to 6/02).
|                                                                                       |  |                                  | 
|Mr. Raghav V. Nandagopal, 43 U.S. Trust
Company 225 High Ridge Road Stamford, CT 06905 |  | Co-Chief Executive Officer       |  | Since June 2005         |  | Senior Vice President, U.S. Trust; prior to U.S.Trust, Mr. Nandagopal held positions at McKinsey & Company and AT&T Capital.                                                                                                                                                                                                                                                                                                                                                   
|                                                                                       |  |                                  | 
|Mr. Lee A. Gardella, 38 U.S. Trust
Company 225 High Ridge Road Stamford, CT 06905      |  | Vice President                   |  | Since Company Inception |  | Senior Vice President, U.S. Trust                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                       |  |                                  | 
|Ms. Sharon Davison, 51** U.S. Trust
Company 114 W. 47thStreet New York, NY 10036       |  | Chief Compliance Officer         |  | Since October 2004      |  | Director of Securities & Corporate Compliance, U.S. Trust Company; prior to U.S. Trust, Ms. Davison served as Director of Special Investigations at the New York Stock Exchange and as Senior
Counsel in the Division of Market Surveillance at the New York Stock Exchange.                                                                                                                                                                                                   



All
officers of the Company are employees and/or officers of the Investment Adviser.



Officers of the Company are elected by the directors and hold office until they resign, are removed or are otherwise disqualified to serve.



|* | On December 15, 2005, Mr. Leach resigned as the Companys Co-Chief Executive Officer. On December 15, 2005, Leo P. Grohowski was appointed by the Board of
Managers to be the Companys Co-Chief Executive Officer.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|** | Sharon Davison resigned as the Companys Chief Compliance Officer, effective as of the close of business on November 28, 2005. On December 15, 2005, Stefanie Firtell
was selected to be the Companys Chief Compliance Officer.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Audit Committee Financial Expert



Mr. Murphy is the audit committee financial expert as defined by SEC rules and is independent, as the term
is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934.



Code of Ethics



As of
the end of the period, October 31, 2005, the Company has adopted a code of ethics, which complies with the criteria provided in SEC rules, and applies to its principal executive officer, the principal financial officer and any other officers
who serve a similar function. A copy of the code of ethics is incorporated herein by reference in Item 15 of this Form 10-K.



Section 16(a) Beneficial Ownership Reporting Compliance



Under the federal securities laws, the Companys managers and executive officers and any persons holding more than 10% of the Companys
outstanding units are required to report their ownership of units and any changes in the ownership of the Companys units to the Company and the Securities and Exchange Commission. To the best of the Companys knowledge, the Companys
managers and executive officers have satisfied these filings.



|ITEM 11. | EXECUTIVE COMPENSATION.
|-------- | -----------------------



The Company has no full-time employees. Pursuant to the Investment Agreements, the Investment Advisers employ and compensate all of the personnel of the
Company, and also furnish all office facilities, equipment, management and other administrative services required for the operation of the Company. In consideration of the services rendered by the Investment Advisers, the Company will pay a
management fee based upon average quarterly net assets and an incentive fee based in part on a percentage of realized capital gains of the Company.



Managers receive compensation of $7,000 annually and $2,000 per meeting attended plus reasonable expenses. The Company does not have a stock option plan,
other long-term incentive plan, retirement plan or other retirement benefits.



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##### Table of Contents

The following chart provides certain information about the fees received by the managers in the fiscal
year ended October 31, 2005.



|                        |  |                                         |        |                                                                         |   |                 
|----------------------- |  | --------------------------------------- | ------ | ----------------------------------------------------------------------- | - | ----------------
|Name of Person/Position |  | Aggregate Compensation From The Company |        | Total Compensation From the Company And Fund Complex * Paid to Managers
|John C. Hover II        |  |                                         |        |                                                                         |   |                 
|Manager                 |  | $                                       | 14,500 |                                                                         | $ | 32,250 (3 Funds)
|Gene M. Bernstein       |  |                                         |        |                                                                         |   |                 
|Manager                 |  | $                                       | 16,000 |                                                                         | $ | 56,250 (4 Funds)
|Stephen V. Murphy       |  |                                         |        |                                                                         |   |                 
|Manager                 |  | $                                       | 16,000 |                                                                         | $ | 56,250 (4 Funds)
|Victor F. Imbimbo, Jr.  |  |                                         |        |                                                                         |   |                 
|Manager                 |  | $                                       | 16,000 |                                                                         | $ | 56,250 (4 Funds)



|* | The Fund Complex includes Excelsior Private Equity Fund II, Inc., Excelsior Venture Partners III, LLC, Excelsior Venture Investors III, LLC and Excelsior Directional
Hedge Fund of Funds, LLC. The parenthetical number represents the number of investment companies (including the Company) from which such person receives compensation that is considered a part of the same Fund Complex as the Company.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
|-------- | ---------------------------------------------------------------



As of October 31, 2005, certain beneficial owners, the directors, the Chief Executive Officer and the directors and executive officers as a group
held of record the following shares. Except as set forth below, to the Companys knowledge and based solely on a review of Forms 13D and 13G filed with the Securities and Exchange Commission (or the lack of such filings, as the case may be), no
other person beneficially owned more than 5% of the Companys shares.



|                             |  |                                                                                                               |  |                                           |  |                 
|---------------------------- |  | ------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------- |  | ----------------
|Title of Class               |  | Name and Address of Beneficial Owner                                                                          |  | Amount and Nature of Beneficial Ownership |  | Percent of Class
|                             |  |                                                                                                               | 
|Units of membership Interest |  | Excelsior Venture Investors III, LLC 225 High Ridge Road Stamford, CT 06905                                   |  | 187,409 units                             |  | 63.5%           
|                             |  |                                                                                                               | 
|Units of membership Interest |  | John C. Hover II c/o United States Trust Company of New York, 114 West 47th Street, New York, NY 10036 1532.  |  | 200 units                                 |  | *               
|                             |  |                                                                                                               | 
|Units of membership Interest |  | Gene M. Bernstein c/o United States Trust Company of New York, 114 West 47th Street, New York, NY 10036 1532. |  | 300 units                                 |  | *               
|                             |  |                                                                                                               | 
|Units of membership Interest |  | Stephen V. Murphy c/o United States Trust Company of New York, 114 West 47th Street, New York, NY 10036 1532. |  | 200 units                                 |  | *               
|                             |  |                                                                                                               | 
|Units of membership Interest |  | Managers and executive officers as a group (3 persons)                                                        |  | 700 units                                 |  | *               



|* | Less than one percent.
|- | ----------------------



39



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##### Table of Contents

|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
|-------- | -----------------------------------------------



The Company has engaged in no transactions with the managers or executive officers other than as described above or in the notes to the financial
statements.



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES.
|-------- | ---------------------------------------



Audit Fees



| | (a) | The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrants annual
financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $121,000 for 2004 and $94,650 for 2005.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Audit-Related Fees



| | (b) | The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the
audit of the registrants financial statements and are not reported under paragraph (a) of this Item are $0 for 2004 and $0 for 2005.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Tax Fees



| | (c) | The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $0
for 2004 and $0 for 2005.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



All
Other Fees



| | (d) | The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs
(a) through (c) of this Item are $0 for 2004 and $0 for 2005.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
|-------- | -------------------------------------------



|    |  |    |  |                                                                                                                                                          
|--- |  | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | 1. |  | Financial Statements                                                                                                                                     
|    |  |   
|    |  |    |  | The financial statements listed in Item 8, Financial Statements and Supplementary Data, beginning on page 12 are filed as part of this report.         
|    |  |   
|    |  | 2. |  | Financial Statement Schedules                                                                                                                            
|    |  |   
|    |  |    |  | The financial statement schedules listed in Item 8, Financial Statements and Supplementary Data, beginning on page 12 are filed as part of this report.
|    |  |   
|    |  | 3. |  | Exhibits                                                                                                                                                 



|        |  |                                                                                                                                                                              
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | 
|(3)(a)  |  | Certificate of Formation of Limited Liability Company1                                                                                                                       
|        | 
|(3)(b)  |  | Certificate of Amendment1                                                                                                                                                    
|        | 
|(3)(c)  |  | Form of Limited Liability Company Operating Agreement1                                                                                                                       
|        | 
|(4)     |  | For instruments defining the rights of security holders see Exhibits (3)(a), (b) and (c), (10)(h),(i),(j) and (k) hereto and the Specimen Certificate of the Companys units1
|        | 
|(10)(a) |  | Form of Investment Advisory Agreement1                                                                                                                                       
|        | 
|(10)(b) |  | Form of Investment Sub-Advisory Agreement1                                                                                                                                   
|        | 
|(10)(c) |  | Form of Distribution Agreement1                                                                                                                                              
|        | 
|(10)(d) |  | Form of Selling Agent Agreement1                                                                                                                                             
|        | 
|(10)(e) |  | Form of Custodian Agreement1                                                                                                                                                 
|        | 
|(10)(f) |  | Form of Administration, Accounting and Investor Services Agreement1                                                                                                          
|        | 
|(10)(g) |  | Form of Escrow Agreement1                                                                                                                                                    
|        | 
|(10)(h) |  | Form of Subscription Agreement for investment in units of the Company1                                                                                                       
|        | 
|(10)(i) |  | Form of Subscription Agreement with Charles Schwab & Co., Inc. for investment in units of the Company1                                                                       
|        | 
|(10)(j) |  | Amended and Restated Agreement with respect to Seed Capital2                                                                                                                 
|        | 
|(10)(k) |  | Form of Subscription Agreement between the Company and Excelsior Venture Investors III, LLC1                                                                                 
|        | 
|(10)(l) |  | Investment Sub-Advisory Agreement dated December 21, 2001 among the Company, U.S. Trust Company and U.S. Trust Company, N.A.3                                                



41



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##### Table of Contents

|        |  |                                                                                                                       
|------- |  | ----------------------------------------------------------------------------------------------------------------------
|        | 
|(14)    |  | Code of Ethics4                                                                                                       
|        | 
|(31.1)  |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                   
|        | 
|(31.2)  |  | Certification of Treasurer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                 
|        | 
|(32.1)  |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|        | 
|(99)(a) |  | Audit Committee Charter                                                                                               



|1 | Incorporated by reference to the Companys Registration Statement on Form N-2/A as filed with the Securities and Exchange Commission on August 10, 2000
(File No. 333-30986).
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2 | Incorporated by reference to the Companys Registration Statement on Form N-2/A as filed with the Securities and Exchange Commission on November 14, 2000
(File No. 333-30986).
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3 | Incorporated by reference to the Companys Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission on March 18, 2002.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------



|4 | Incorporated by reference to the Companys Annual Report on Form 10-K as filed with the Securities and Exchange Commission on January 27, 2005.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------



42



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##### Table of Contents

SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, 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: January 27, 2006 |  |  |  | By:                                 |  | /S/    LEO P. GROHOWSKI    
|                       |  |  |  |                                     |  |                             |  | Leo P. GrohowskiCo-Chief Executive Officer(co-principal executive officer)
|                       |  |  | 
|Date: January 27, 2006 |  |  |  | By:                                 |  | /S/    RAGHAV V. NANDAGOPAL
|                       |  |  |  |                                     |  |                             |  | Raghav V. Nandagopal                                                      
|                       |  |  |  |                                     |  |                             |  | Co-Chief Executive Officer                                                
|                       |  |  |  |                                     |  |                             |  | (co-principal executive officer)                                          



Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:



|                                                    |  |                                                             |  |                 
|--------------------------------------------------- |  | ----------------------------------------------------------- |  | ----------------
|Signature                                           |  | Title                                                       |  | Date            
|                                                    |  |                                                            
|/S/    LEO P. GROHOWSKILeo P. Grohowski             |  | Co-Chief Executive Officer (co-principal executive officer) |  | January 27, 2006
|                                                    |  |                                                            
|/S/    RAGHAV V. NANDAGOPALRaghav V. Nandagopal     |  | Co-Chief Executive Officer (co-principal executive officer) |  | January 27, 2006
|                                                    |  |                                                            
|/S/    ROBERT F. AUFENANGERRobert F. Aufenanger     |  | Treasurer (principal financial officer)                     |  | January 27, 2006
|                                                    |  |                                                            
|/S/    JOHN C. HOVER IIJohn C. Hover II             |  | Chairman of the Board and Director                          |  | January 27, 2006
|                                                    |  |                                                            
|/S/    GENE M. BERNSTEINGene M. Bernstein           |  | Director                                                    |  | January 27, 2006
|                                                    |  |                                                            
|/S/    STEPHEN V. MURPHYStephen V. Murphy           |  | Director                                                    |  | January 27, 2006
|                                                    |  |                                                            
|/S/    VICTOR F. IMBIMBO,
JR.Victor F. Imbimbo, Jr. |  | Director                                                    |  | January 27, 2006



43