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 under the Investment Company Act of 1940 ("Investment Company Act"), as amended, 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, serves 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 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 (including one share purchased for $500 as of July 7, 2000 by David I. Fann, the Company's President and Co-Chief Executive Officer). 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.
The following is a summary of the Company's investment portfolio over its life.
Investments Held -- Private
.. Adeza Biomedical Corporation, Sunnyvale, CA, develops, manufactures, and markets diagnostic products for women's reproductive healthcare. Through September 2003, Adeza has had six consecutive quarters of profitability and over 50% year-to-year revenue growth. The company's primary focus is on proprietary diagnostic tests to help physicians and patients determine the likelihood of pre-term delivery. The company's product, the ffN test, is considered the "Gold Standard of care" by the American College of Obstetricians and Gynecologists, and is now used in over 1000 U.S. hospitals. The company is developing several other products, including those addressing infertility and cancer detection. The Fund invested $3.0 million in September 2001. Enterprise Partners, and Sprout Asset Management are also investors in Adeza.
.. Archemix Corporation, Cambridge, MA, seeks to discover aptamer-based therapeutics in the inflammation and oncology areas using proprietary selected nucleic acid technology. The company expects to have its first product in clinical trials in 2004. In 2003, the company brought on a world class biotechnology entrepreneur, Errol De Souza, to further advance the company's development. The Fund's investment was staged into three tranches. The first tranche of $0.6 million was invested in August 2002 and the second tranche of $0.7 million was drawn in January 2003. Subsequent to the fiscal year-end, the third tranche of $0.7 million was invested in November 2003. Schroder Ventures Life Sciences, Atlas Venture, Prospect Venture Partners, Care Capital, MDS Capital, and POSCO Bio Venture also invested in Archemix.
.. Datanautics, Inc., Fremont, CA, develops and markets web analytics and data management software that provides detailed information about visitors on a corporate or commerce website, including paths taken and usage behavior. This technology allows for more effective online merchandising and marketing. Currently, the company has over forty active customers including Citibank, Knight Ridder, and Macy's. The Fund invested $0.5 million in August 2003 and $3.5 million in September 2003.
.. Ethertronics, Inc., San Diego, CA, develops and manufactures embedded antennas for personal mobile devices. Its internal antenna technologies significantly enhance the signal quality, increase the range, and help extend the battery life of mobile devices. Embedded antennas are used by mobile phone, PDA, laptop, GPS, Bluetooth and Wireless LAN device manufacturers. In 2003, Ethertronics had a number of key design wins. The Fund initially invested $3.5 million in June 2001, and invested an additional $1.2 million in the company in September 2002 and $1.0 million in July 2003. Sevin Rosen is a co-investor in Ethertronics.
.. Genoptix, Inc., San Diego, CA, is developing a personalized medicine diagnostics platform using a proprietary laser-based platform for analyzing, sorting and manipulating living cells without the need for any dyes or labels. The company is also creating diagnostics at the cellular level, addressing the personalized medical trend. The Fund invested $2.5 million in December 2001 and has invested an additional $0.4 million in July 2003 and $0.3 million in September 2003. Other investors include Alliance Technology Ventures, Enterprise Partners, Lotus Biosciences Investment Holdings, and Tullis-Dickerson & Co., Inc.
.. Gyration, Inc., Saratoga, CA is a manufacturer and marketer of high-end wireless accessories for computers, multi-media, and home entertainment segments using patented gyroscope technology. The company's products are carried by major retailers such as Best Buy, Staples, Circuit City, Office Depot, Office Max and others. The Fund made an initial investment of $4.0 million in March 2003. Subsequent to the fiscal year-end, the Fund invested an additional $2.8 million in Gyration as an extension of the original financing round. Other investors include Huntington Ventures and NY Life Capital Partners.
.. LightConnect, Inc., Newark, CA, designs and manufactures MEMS (micro electro-mechanical systems) components for optical networks. LightConnect's product is meeting the need for configurability in optical networks by enabling rapid dynamic bandwidth and circuit provisioning. The Fund invested $5.0 million in LightConnect in July 2001 and made a $1.0 million follow-on investment in December 2002. The other investors in LightConnect are Sevin Rosen, Incubic, Morgenthaler, and US Venture Partners.
.. LogicLibrary, Inc., Pittsburgh, PA, is a provider of software and services that help enterprises develop better software applications and integrate them faster. The company's patent-pending technology provides software development organizations with comprehensive, intuitive tools for effectively and efficiently capturing, understanding, leveraging and managing their software development assets. In 2003, the Company entered into a partnership with Microsoft. The Fund invested $2.0 million in LogicLibrary in January 2002 and invested an additional $0.7 million in August 2003. Birchmere Ventures, Novak Biddle Venture Partners, and The Future Fund also invested in the company.
.. Monterey Design Systems, Inc., Sunnyvale, CA, develops advanced physical design software solutions for the semiconductor industry. Leading semiconductor companies have adopted Monterey's products to dramatically increase their design productivity. The Fund invested $3.0 million in the company in December 2001, and made a follow-on investment in the amount of $4.8 million in the company in June 2003. Other investors include Sevin Rosen Funds, US Venture Partners, Rho Capital Partners, Vertex Partners, Information Technology Ventures, and LSI Logic.
.. NanoOpto Corporation, Somerset, NJ, is a designer and manufacturer of integrated optical components using nanotechnology manufacturing technology 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. The Fund initially invested $2.0 million in NanoOpto in October 2001, and has followed on with two additional $0.2 million investments in March 2002 and September 2003. Bessemer Venture Partners, Morgenthaler, and New Enterprise Associates are co-investors in NanoOpto.
.. NetLogic Microsystems, Inc., Mountain View, CA, defines, designs, and markets highly differentiated data plane solutions that enable the global infrastructure of networking and optical communications to achieve the highest performance and functionality. NetLogic also provides multi-processor search interfaces and software drivers that accelerate design and development of leading-edge networking equipment. In 2003, the company had design wins and is shipping product to several large data communications suppliers. The Fund invested $5.0 million in August 2001 in NetLogic Microsystems. Sevin Rosen is a co-investor in NetLogic Microsystems.
.. OpVista, Inc., Irvine, CA, develops, markets and manufactures Dense Wavelength Division Multiplexing (DWDM)-based optical networking equipment for deployment in long haul, regional metro networks carriers, and cable companies. OpVista's ultra-DWDM products allow service providers to build flexible, scalable, and cost-effective networks while seamlessly integrating legacy networks. The company's products are being successfully used by Time Warner cable. The Fund invested $4.0 million in OpVista in July 2001 and subsequently, a follow-on investment in the amount of $2.5 million was made in September 2003. Sevin Rosen and Incubic are investors in OpVista.
.. Pilot Software, Inc., Mountain View, CA, develops and markets enterprise business performance management and business intelligence analytics software. Pilot currently has over 400 active customers including several Global 1000 companies such as United States Government GSA, Swiss Life, Nokia, and Noro Nordisk. The Fund's initial investment of $3.0 in May 2002 was followed by a $1.0 million investment in April 2003. Other investors include G51.
.. Senomyx, Inc., La Jolla, CA, seeks to be the leader in discovering new and improved proprietary flavor and fragrance molecules for use in a wide range of consumer products. The Company has four strategic collaborations with Coca Cola, Nestle, Kraft Foods, and Campbell Soup. The Fund invested $1.5 million in Senomyx in November 2001. Other investors include Prospect Venture Partners, Rho Ventures, Merrill Lynch, Avalon Ventures, Domain Associates, and Bay City Capital.
.. Silverback Systems, Inc., Campbell, CA, provides silicon and software solutions that enable IP-based storage area networks and data center systems. Initially, the Fund invested $1.4 million in Silverback in February 2002. Subsequent rounds of financing include a $1.5 million follow-on investment in March 2003, and a $1.5 million follow-on investment in September 2003. Other investors include J.P. Morgan Partners, Newbury Ventures, Pitango Venture Capital, and Gemini Israel Funds.
.. Tensys Medical, Inc., San Diego, CA, has developed and is commercializing the first practical, continuous, non-invasive arterial blood pressure monitoring system used in the surgical environment. Since the company's product launch in May 2003, the company has over forty hospitals as customers including Northwestern University, MD Anderson, and Stanford University. The Fund invested $5.0 million in Tensys in March 2002. Other investors include Crosspoint Venture Partners, Enterprise Partners, Versant Ventures, and Sofinnova Ventures.
.. Virtual Silicon Technology, Inc., Sunnyvale, CA, is a supplier of semiconductor intellectual property and process technology to manufacturers and designers of systems-on-chip. Virtual Silicon has licensed and delivered its Silicon Ready(R) library products to hundreds of customers including semiconductor manufacturers, foundries, ASSP designers, and systems developers. The Fund invested $5.0 million in the company in December 2001. Infinity Capital, Walden International, Gemini Investors, Pacific Venture Group, and SCP Private Equity Partners are also investors in Virtual Silicon.
Investments Held -- Third-Party Investment Funds
.. Advanced Technology Ventures VII, L.P. ("ATV") is a $700 million venture capital fund targeting varied-stage information technology, communications and life sciences companies. As of October 31, 2003, ATV has drawn 20% of the Fund's $3 million capital commitment, and is being carried at a value of $0.5 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, 2003, Burrill has drawn 10% of the Fund's $3 million capital commitment, and is being carried at a value of $0.2 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, 2003, CHL has drawn 25% of the Fund's $2 million capital commitment, and is being carried at a value of $0.4 million.
.. CMEA Ventures VI, L.P. ("CMEA") is a $100 million venture capital fund targeting both early life science and information technology companies. The Fund committed $3 million in September 2003, but as of October 31, 2003, CMEA has not called capital to make an investment.
.. Morgenthaler Venture Partners VII, L.P. ("Morgenthaler") is an $850 million venture capital fund targeting varied-stage information technology, communications, and health care companies. As of October 31, 2003, Morgenthaler has drawn 30% of the Fund's $3 million capital commitment, and is being carried at a value of $0.7 million.
.. Prospect Venture Partners II, L.P. ("Prospect") is a $500 million venture capital fund targeting varied-stage life sciences companies. As of October 31, 2003, Prospect has drawn 33% of the Fund's $3 million capital commitment, and is being carried at a value of $0.8 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, 2003, Tallwood has drawn 15% of the Fund's $3 million capital commitment, and is being carried at a value of $0.3 million.
.. Valhalla Partners, L.P. ("Vahalla") 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, 2003, Valhalla has drawn 4% of the Fund's $3 million capital commitment, and is being carried at a value of $0.1 million.
Investments Written Off
.. Ancile Pharmaceuticals, Inc., San Diego, CA, was a specialized pharmaceutical company focusing on the development and commercialization of prescription botanical drugs for major chronic disease conditions. In 2003, the data for Ancile Phase IIb trial did not show clear efficacy. As a result, the investors chose not to continue funding the company. On August 1, 2003, Ancile voluntarily executed a General Assignment for the Benefit of Creditors to the San Diego Credit Association for the purpose of conducting an orderly corporate liquidation. The Fund invested a total of $3.9 million in Ancile in November 2001, October 2002 and January 2003. Morgenthaler Venture Partners and Domain Associates were also investors in the company.
.. Cenquest, Inc., Portland, OR, is an intermediary provider of accredited business and management degree programs to large corporations. The Fund has written off its $2.0 million investment, made in July 2001, in Cenquest because of the company's changing business model and limited prospects.
.. MIDAS Vision Systems, Inc., Foxboro, MA, is a developer of automated optical inspection systems for advanced substrates and microelectronics packaging industries. The company has been unable to reverse sales declines and as a result, the Fund has written off its $5.1 million investment, made in December 2001 and March 2003, in MIDAS Vision. North Atlantic Capital Corporation, PNC Technology Investors, and SpaceVest are also investors in MIDAS Vision.
For additional information concerning the Company's investments, see the financial statements beginning on page 9 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, 2003, 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.
ITEM 2.
ITEM 2. PROPERTIES.
The Company does not own or lease any physical properties.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5.
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, 2003, 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 451 holders of units of membership interest as of December 31, 2003.
Dividends and Distributions
Fiscal Year Ended October 31, 2003. There were no dividends or distributions paid during fiscal year 2003.
Fiscal Year Ended October 31, 2002. There were no dividends or distributions paid during fiscal year 2002.
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.
ITEM 6. SELECTED FINANCIAL DATA.
($ in 000's except for per unit data)
Fiscal Year Ended 10/31/03 10/31/02 10/31/01
Financial Position Investments in securities 119,500 138,513 139,676 Other Assets 3,744 1,063 8,527 Total Assets 123,244 139,576 148,203 Liabilities 786 1,081 1,782
Net Assets 122,458 138,495 146,421
Changes in Net Assets Net investment income (loss) (2,077) (1,659) 831 Net gain (loss) on investments (13,960) (6,267) (60) Dividends -- -- 487
Per Unit Data Net Assets 414.82 469.14 495.99 Dividends Paid -- -- 1.65
ITEM 7.
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, 2003, the Company held $3,738,154 in cash and cash equivalents and $53,514,005 in short-term investments as compared to $0 in cash and cash equivalents and $83,770,608 in short-term investments at October 31, 2002. The decrease in short-term investments from October 31, 2002 was due to new and follow-on investments in private companies as wells as capital invested in private investment funds. The Company, during this period funded additional capital per its commitments to Advanced Technology Ventures VII, L.P., Burrill Life Sciences Capital Fund, CHL Medical Partners II, L.P., Morgenthaler Partners VII, L.P., Prospect Venture Partners II, L.P., Tallwood Venture Partners II, L.P., and Valhalla Partners, L.P., each a private investment fund. The Company has also committed capital to CMEA Ventures VI, L.P. during fiscal year ended October 31, 2003. In connection with the Company's total commitments to private funds in the amount of $23,000,000 since inception, the Company, through October 31, 2003, has contributed $3,835,429 or 16.7% of the total capital committed to eight private investment funds.
The Company participated in follow-on financing rounds for 12 of its private companies: i) LightConnect, Series C Preferred for $992,000, ii) Ancile Pharmaceuticals bridge note for $250,000, iii) Archemix Series A for $685,714, iv) MIDAS Vision Systems Series A-1 preferred for $1,054,960, v) Pilot Software Series A preferred for $1,000,000, vi) Silverback Systems Series C preferred for $3,010,133, vii) Ethertronics Series B preferred for $1,000,000, viii) Genoptix bridge note for $443,787, subsequently converted to Series B-2, and Series B-2 for $291,064, ix) Monterey Designs Series 2 preferred for $3,000,000, x) Logic Library Series A for $704,225, xi) NanoOpto Series B for $237,499, and xii) OpVista for $2,500,000. The Company also closed and funded 2 new private company investments: i) in Gyration Series C-2 preferred for $4,000,000, and ii) in promissory notes of Datanautics in the amount of $4,000,000.
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, 2003, the Company had investment income of $844,930 primarily from investments in short-term securities and net operating expenses of $2,922,068, resulting in a net investment loss of ($2,077,138) as compared to investment income of $1,742,304 and net operating expenses of $3,401,295, resulting in a net investment loss of ($1,658,991) for the period ended October 31, 2002. For the fiscal year ended October 31, 2001, the Company had investment income of $2,729,924 from investments in short-term securities and net operating expenses of $1,899,081, resulting in net investment income of $830,843. 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 2003 compared to fiscal 2002 due to reduced management fees paid to the Investment Advisers, as well as a reduction in legal fees year over year.
For the fiscal year ended October 31, 2003, the Investment Advisers earned $2,530,840 in management fees, whereas for the year ended October 31, 2002, the Investment Advisers earned $2,881,830 in management fees. This decrease is a result of the fact that net assets for the periods of calculation of management fees during fiscal 2003 were lower than those for similar periods during the fiscal year ended October 31, 2002. For the period ended October 31, 2001, the Investment Advisers earned $1,377,259 in management fees. This variance is a result of the fact that the Company commenced operations on April 5, 2001 and therefore, management fees were not incurred for the entire period ended October 31, 2001. 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.
Net Assets
The Company's net asset value per unit was $414.82 at October 31, 2003, down ($54.32) per unit from the net asset value per unit of $469.14 at October 31, 2002. This decline in net asset value per unit is comprised of a net investment loss totaling ($2,077,138) or ($7.04) per unit and a net change in realized and unrealized depreciation on investments of ($13,960,024) or ($47.28) per unit, which is the result of the negative valuation impact of the Company's investments on unrealized depreciation
The net change in unrealized depreciation of ($13,960,068) or ($47.28) per unit is due to the write-off of Ancile Pharmaceuticals and MIDAS Vision Systems, together totaling $8,904,960 or $30.16 per unit. 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 $3.9 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 $5.1 million investment in MIDAS Vision Systems due impaired performance and prospects for the company. Genoptix, Monterey Design Systems and NanoOpto were each written down by $1.2 million, $1.2 million and $1.0 million, respectively. These write-downs were due to recent financing events which effectively reduced the valuation of the Company's investment. The net investment loss of ($2,077,138) or ($7.04) per unit resulted from operating expenses of $2,922,068 exceeding investment income of $844,930.
For the fiscal year ended October 31, 2002, the Company's net asset value per unit was $469.14, down ($26.85) per unit from the net asset value per unit of $495.99 at October 31, 2001. This decline in net asset value per unit is comprised of a net investment loss totaling ($1,658,991) or ($5.62) per unit and a net change in realized and unrealized depreciation on investments of ($6,266,772) or ($21.23) per unit.
Realized and Unrealized Gains and Losses from Portfolio Investments
For the fiscal year ended October 31, 2003, the Company had a ($13,960,024) net realized and unrealized loss from investments, comprised of a $44 net realized gain on investments and a ($13,960,068) net change in unrealized depreciation of investments due to the Company's write-off of Ancile Pharmaceuticals and MIDAS Vision Systems, as well as the write-downs of Genoptix, Monterey Design Systems and NanoOpto. For the fiscal year ended October 31, 2002, the Company had a ($6,266,772) net realized and unrealized loss from investments, comprised of a $764 net realized gain on investments and a ($6,267,536) net change in unrealized depreciation of investments due to the Company's write-off of Cenquest, Inc. and write-down of LightConnect, Inc. For the fiscal year ended October 31, 2001, the Company had a ($59,696) net realized and unrealized loss from investments, comprised of a $6,599 net realized gain on investments and a ($66,295) net change in unrealized depreciation of investments. The net realized gain and net unrealized depreciation on investments for the fiscal year ended October 31, 2001 is due to short-term securities purchases and sales.
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 53.9% of the Company's net assets. For the private investments held at October 31, 2003, changes to these estimates, i.e. changes in the valuations of these private investments, resulted in a $14.0 million decrease in net asset value from October 31, 2002.
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, 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.
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.
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 equity securities in private companies and private investment funds, 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 equity securities in response to changes in public market prices. Thus, these equity securities are not subject to equity price risk. At October 31, 2003, the Company held no investments in the equity securities of public companies.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Independent Auditors' Report
Portfolios of Investments at October 31, 2003 and October 31, 2002
Statements of Assets and Liabilities at October 31, 2003, and October 31, 2002
Statements of Operations for the year ended October 31, 2003, October 31, 2002 and period April 5, 2001 (commencement of operations) through October 31, 2001
Statements of Changes in Net Assets for the year ended October 31, 2003, October 31, 2002 and period April 5, 2001 (commencement of operations) through October 31, 2001
Statements of Cash Flows for the year ended October 31, 2003, October 31, 2002 and period April 5, 2001 (commencement of operations) through October 31, 2001
Financial Highlights for the year ended 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.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Members and Board of Managers Excelsior Venture Partners III, LLC
We have audited the accompanying statements of assets and liabilities of Excelsior Venture Partners III, LLC (the "Company"), including the portfolios of investments, as of October 31, 2003 and 2002, the related statements of operations, changes in net assets, cash flows and financial highlights for each of the periods presented in the three years ended October 31, 2003. These financial statements and financial highlights are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2003 and 2002, by correspondence with the custodian, the general partners of the private investment funds and the private investment companies. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
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 at October 31, 2003 and 2002, the results of its operations, its changes in net assets, its cash flows and financial highlights for each of the periods presented in the three years ended October 31, 2003, in conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts December 22, 2003
Excelsior Venture Partners III, LLC Portfolio of Investments October 31, 2003
Excelsior Venture Partners III, LLC Portfolio of Investments October 31, 2003 --(continued)
- ---------- ** Restricted as to public resale. Acquired between June 1, 2001 and October 31, 2003. Total cost of restricted securities at October 31, 2003 aggregated $86,280,207. Total value of restricted securities owned at October 31, 2003 was $65,986,308 or 53.88% of net assets. # Non-income producing securities. ## Required disclosure for restricted securities only. @ At October 31, 2003, 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, 2003 was $62,905,542. *** At October 31, 2003, the Company owned 25% or more of the company's outstanding voting shares thereby making the company a controlled affiliate as defined by the Investment Company Act of 1940. Total value of controlled affiliated securities owned at October 31, 2003 was $8,000,000.
Notes to Financial Statements are an integral part of these Financial Statements.
Excelsior Venture Partners III, LLC Portfolio of Investments October 31, 2002
** Restricted as to public resale. Acquired between June 1, 2001 and October 31, 2002. Total cost of restricted securities at October 31, 2002 aggregated $61,075,827. Total market value of restricted securities owned at October 31, 2002 was $54,741,996 or 39.53% of net assets. *** At October 31, 2002, the Company owned 25% or more of the company's outstanding voting shares thereby making the company a controlled affiliate as defined by the Investment Company Act of 1940. Total value of controlled affiliated securities owned at October 31, 2002 was $3,000,000. # Non-income producing securities.
## Required disclosure for restricted securities only. @ At October 31, 2002 the Company owned 5% or more of the company's outstanding shares thereby making the company an affiliate as defined by the Investment Company Act of 1940. Total market value of affiliated securities owned at October 31, 2002 was $53,223,960.
Notes to Financial Statements are an integral part of these Financial Statessments.
Excelsior Venture Partners III, LLC Statements of Assets and Liabilities
Notes to Financial Statements are an integral part of these Financial Statements.
Excelsior Venture Partners III, LLC Statements of Operations
Notes to Financial Statements are an integral part of these Financial Statements.
Excelsior Venture Partners III, LLC Statements of Changes in Net Assets
Notes to Financial Statements are an integral part of these Financial Statements.
Excelsior Venture Partners III, LLC Statements of Cash Flows
Notes to Financial Statements are an integral part of these Financial Statements.
Excelsior Venture Partners III, LLC Financial Highlights
Per Unit Operating Performance:(1)
(1) Selected data for a unit of membership interest outstanding through each period. (2) Annualized (3) Not annualized (4) Net of organization expense reversal (5) Total investment return based on per share 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 shares were issued in a private placement and are not traded. Therefore the market value total investment return is not presented.
Notes to Financial Statements are an integral part of these Financial Statements.
EXCELSIOR VENTURE PARTNERS III, LLC
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
Note 1 -- Significant Accounting Policies
Excelsior Venture Partners III, LLC (the "Company") is a non-diversified, closed-end management investment company which has elected to be treated as a business development company or "BDC" under the Investment Company Act of 1940, as amended. The Company was established as a Delaware limited liability company on February 18, 2000. The Company commenced operations on April 5, 2001. The duration of the Company is ten years (subject to two 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. Certain amounts in the prior years' financial statements have been reclassified to conform with the current year's financial statements.
A. Investment Valuation:
The Company values portfolio securities quarterly and at such other times as, in the Board of Managers' view, circumstances warrant. Securities for which market quotations are readily available generally will be valued at the last sale price on the date of valuation or, if no sale occurred, at the mean of the latest bid and ask prices; provided that, as to such securities that may have legal, contractual or practical restrictions on transfer, a discount of 10% to 40% from the public market price will be applied. Securities for which no public market exists and other assets will be valued at fair value as determined in good faith by the Investment Adviser (as defined below) or a committee of the Board of Managers or both under the supervision of the Board of Managers pursuant to certain valuation procedures summarized below. Securities having remaining maturities of 60 days or less from the date of purchase are valued at amortized cost.
The value for securities for which no public market exists is difficult to determine. Generally, such investments will be valued on a "going concern" basis without giving effect to any disposition costs. There is a range of values that is reasonable for such investments at any particular time. Initially, direct investments are valued based upon their original cost until developments provide a sufficient basis for use of a valuation other than cost. Upon the occurrence of developments providing a sufficient basis for a change in valuation, direct investments will be valued by the "private market" or "appraisal" methods of valuation. The private market method shall only be used with respect to reliable third party transactions by sophisticated, independent investors. The appraisal method shall be based upon such factors affecting the investee company such as earnings, net worth, reliable private sale prices of the investee company's securities, the market prices for similar securities of comparable companies, an assessment of the investee company's future prospects or, if appropriate, liquidation value. The values for the investments referred to in this paragraph will be estimated regularly by the Investment Adviser or a committee of the Board under the supervision of the Board of Managers and, in any
event, not less frequently than quarterly. However, there can be no assurance that such value will represent the return that might ultimately be realized by the Company from the investments.
The valuation of the Company's Private Investment Funds is based upon its pro-rata share of the value of the net assets of the Private Investment Fund as determined by such Private Investment Fund, in accordance with its partnership agreement, constitutional or other documents governing such valuation, on the valuation date. If such valuation with respect to the Company's investments in Private Investment Funds is not available by reason of timing or other event on the valuation date, or are deemed to be unreliable by the Investment Adviser, the Investment Adviser, under supervision of the Board of Managers, shall determine such value based on its judgment of fair value on the appropriate date, less applicable charges, if any.
At October 31, 2003 and October 31, 2002, market quotations were not readily available for securities valued at $65,986,308 or 53.9% of net assets and $54,741,996 or 39.5% of net assets, respectively. Such securities were valued by the Investment Advisers, under the supervision of the Board of Managers. Because of the inherent uncertainty of valuation, the estimated values may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material.
B. Security transactions and investment income:
Security transactions are recorded on a trade date basis. Realized gains and losses on investments sold are recorded on the basis of identified cost. Interest income, adjusted for amortization of premiums and discounts on 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.
In accordance with the accounting guidance provided in the AICPA Audit and Accounting Guide, "Audits of Investment Companies", the Company reclassified certain amounts from undistributed net investment income or loss and accumulated net realized gains to net capital contributions. The Company reclassified $(2,077,138) and $(1,658,991) of undistributed net investment income (loss) for the periods ended October 31, 2003 and 2002, respectively. The Company reclassified $44 and $764, of accumulated realized gains for the same periods, respectively. These reclassifications were to reflect, as adjustments to paid-in capital, the amounts of taxable income or loss that have been allocated to the members and had no effect on net assets.
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, 2003 and 2002, the Company had not received information to determine the tax cost of the Private Investment Funds as of those dates. The cost basis for federal tax purposes of the Company's other investments at October 31, 2003 was $135,958,784, and those investments had net depreciation on a tax basis at October 31, 2003 of $19,531,237, consisting of gross appreciation of $6,506,176 and gross depreciation of $26,045,413. The cost basis for federal tax purposes of the Company's other investments at October 31, 2002 was $143,406,006, and those investments had net depreciation on a tax basis at October 31, 2002 of $6,051,438, consisting of gross appreciation of $0 and gross depreciation of $6,051,438.
D. Dividends to members:
The Company will distribute all cash that the Investment Adviser does not expect to use in the operation of the Company. Due to the nature of the Company's investments, investors should not expect distributions of cash or property during the first several years of the Company's operations.
Note 2 -- Investment Advisory Fee, Administration Fee and Related Party Transactions
Prior to June 1, 2003, and pursuant to an Investment Advisory Agreement (the "Agreement"), U.S. Trust Company served during the reporting period as the Investment Adviser to the Company pursuant to an Investment Advisory Agreement with the Company. Under the Agreement for the services provided, the Investment Adviser is entitled to receive a management fee at an annual rate equal to 2.00% of the Company's average quarterly net assets through the fifth anniversary of the first closing date of April 5, 2001, and 1.00% of net assets thereafter. Prior to June 1, 2003, and pursuant to sub-advisory agreements among the Company, U.S. Trust Company, United States Trust Company of New York ("U.S. Trust NY") and U.S. Trust Company, N.A., U.S. Trust NY and U.S. Trust Company, N.A. served as the investment sub-advisers to the Company and received an investment management fee from the Investment Adviser. As of October 31, 2003, and 2002, $617,322 and $697,027 were payable to the Investment Adviser.
In addition to the management fee, the Investment Adviser is entitled to allocations and distributions equal to the Incentive Carried Interest. The Incentive Carried Interest is an amount equal to 20% of the Company's cumulative realized capital gains on Direct Investments, net of cumulative realized capital losses and current net unrealized capital depreciation on all of the Company's investments and cumulative net expenses of the Company. Direct Investments means Company investments in domestic and foreign companies in which the equity is closely held by company founders, management, and/or a limited number of institutional investors and negotiated private investments in public companies. The Incentive Carried Interest will be determined annually as of the end of each calendar year. As of, and for the years ended, October 31, 2003 and 2002 and for the period ended October 31, 2001, there was no Incentive Carried interest earned by the Investment Adviser.
U.S. Trust NY is a New York state-chartered bank and trust company and a member of the Federal Reserve System. Effective June 1, 2003, U.S. Trust Company merged into U.S. Trust Company, N.A., a nationally chartered bank. Pursuant to an assumption agreement dated June 1, 2003, U.S. Trust Company, N.A. assumed the duties and obligations of U.S. Trust Company under the Agreement. As a result, U.S. Trust Company, N.A., acting through its registered investment advisory division, U.S. Trust Company, N.A. Asset Management Division, now serves as Investment Adviser to the Company with U.S. Trust NY, acting through its registered investment advisory division, U.S. Trust--New York Asset Management Division, serving as a sub-investment adviser. The merger had no impact on the management or operations of the investment advisory functions performed for the Company, and did not constitute a change in control. U.S. Trust NY and U.S. Trust Company, N.A. are each a wholly-owned subsidiary of U.S. Trust Corporation, a registered bank holding company. U.S. Trust Corporation is an indirect wholly-owned subsidiary of The Charles Schwab Corporation ("Schwab").
Pursuant to an Administration, Accounting and Investor Services Agreement, the Company retains PFPC Inc. ("PFPC"), a majority-owned subsidiary of The PNC Financial Services Group, as administrator, accounting and investor services agent. In addition, PFPC Trust Company serves as the Company's custodian. In consideration for its services, the Company (i) pays PFPC a variable fee between 0.105% and 0.07%, based on average quarterly net assets, payable monthly, subject to a minimum quarterly fee of approximately $30,000, (ii) pays annual fees of approximately $15,000 for taxation services and (iii) reimburses PFPC for out-of-pocket expenses.
Charles Schwab & Co., Inc. (the "Distributor"), the principal subsidiary of Schwab, serves as the Company's distributor for the offering of units. The Investment Adviser paid the Distributor from its own assets an amount equal to 0.02% of the total of all subscriptions received in the offering. The Investment Adviser or an affiliate will pay the Distributor an on-going fee for the sale of units and the provision of ongoing investor services in an amount equal to the annual rate of 0.45% of the average quarterly net asset value of all outstanding units held by investors introduced to the Company by the Distributor through the fifth anniversary of the final subscription closing date and at the annual rate of 0.22% thereafter, subject to elimination upon all such fees totaling 6.5% of the gross proceeds received by the Company from the offering.
Each member of the Board of Managers receives $7,000 annually, $2,000 per meeting attended and is reimbursed for expenses incurred for attending meetings. No person who is an officer, manager or employee of U.S. Trust Corporation, or its subsidiaries, who serves as an officer, manager or employee of the Company receives any compensation from the Company.
As of October 31, 2003 and 2002, Excelsior Venture Investors III, LLC had an investment in the Company of $77,740,266 and $87,921,182, respectively. This represents an ownership interest of 63.48% in the Company as of both dates.
Note 3 -- Purchases and Sales of Securities
Excluding short-term investments, the Company had $25,204,380, $36,110,398 and $24,965,427 in purchases and $0, $0 and $0 in sales of securities for the periods ended October 31, 2003, October 31, 2002 and October 31, 2001, respectively.
Note 4 -- Organization Fees
The Company originally estimated organization fees totaling $154,976, which were expensed in the fiscal period ended October 31, 2001. As a result of the Company's final closing held on May 11, 2001, the Company was reimbursed for $50,000 in organizational expenses from the Distributor during 2002. Certain anticipated organizational expenses totaling $93,880 were ultimately not incurred. As a result, the Company reversed $93,880 of organizational expense in 2002, as reflected in the Statement of Operations.
Note 5 -- Commitments
As of October 31, 2003, the Company had outstanding investment commitments totaling $19,164,574.
Note 6 -- 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 or interest income from affiliated companies during the year ended October 31, 2003 and 2002. Transactions with companies, which are or were affiliates were as follows:
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures. As of October 31, 2003 (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.
PART III
ITEM 10.
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 executive officers of the Company as of October 31, 2003.
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, 2003, 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 filed as Exhibit 14 to 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.
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.
The following chart provides certain information about the fees received by the managers in the fiscal year ended October 31, 2003.
Aggregate Total Compensation Compensation From the Company From And Fund Complex * Name of Person/Position The Company Paid to Managers - ----------------------- ------------ ------------------ John C. Hover II Manager $15,000 $53,750 (4 Funds)
Gene M. Bernstein Manager $15,000 $74,250 (5 Funds)
Stephen V. Murphy Manager $15,000 $74,250 (5 Funds)
Victor F. Imbimbo, Jr. Manager $15,000 $74,250 (5 Funds)
* The "Fund Complex" consists of UST Private Equity Investors Fund, Inc., 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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of October 31, 2003, 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.
* Less than one percent.
ITEM 13.
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.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements
The financial statements listed in Item 8, "Financial Statements and Supplementary Data," beginning on page 8 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 8 are filed as part of this report.
3. Exhibits
(3)(a) Certificate of Formation of Limited Liability Company (1)
(3)(b) Certificate of Amendment (1)
(3)(c) Form of Limited Liability Company Operating Agreement (1)
(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 units (1)
(10)(a) Form of Investment Advisory Agreement (l)
(10)(b) Form of Investment Sub-Advisory Agreement (1)
(10)(c) Form of Distribution Agreement (1)
(10)(d) Form of Selling Agent Agreement (l)
(10)(e) Form of Custodian Agreement (1)
(10)(f) Form of Administration, Accounting and Investor Services Agreement (1)
(10)(g) Form of Escrow Agreement (1)
(10)(h) Form of Subscription Agreement for investment in units of the Company (1)
(10)(i) Form of Subscription Agreement with Charles Schwab & Co., Inc. for investment in units of the Company (1)
(10)(j) Amended and Restated Agreement with respect to Seed Capital (2)
(10)(k) Form of Subscription Agreement between the Company and Excelsior Venture Investors III, LLC (1)
(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)
(14) Code of Ethics
(31.1) Certification of Co-Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31.2) Certification of Co-Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31.3) 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 (4)
(b) Reports on Form 8-K
None.
(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 29, 2000.
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 29, 2004 By: /s/ DOUGLAS A. LINDGREN ------------------------------------------- Douglas A. Lindgren, Co-Chief Executive Officer and Chief Investment Officer (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: