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, 2001
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 (IRS Employer
Incorporation or Organization) Identification No.)
114 West 47th Street
New York, New York, 10036-1532
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (212) 852-1000
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]
The registrant's common stock is not listed on any exchange nor does it
trade on any established securities market or other market.
TABLE OF CONTENTS
Form 10-K
Item No. Report Page
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PART I
1. Business 1
2. Properties 3
3. Legal Proceedings 3
4. Submission of Matters to a Vote of Security Holders 4
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters 4
6. Selected Financial Data 4
7. Management's Discussion and Analysis of Financial Condition and Results of 4
Operations
7A. Quantitative and Qualitative Disclosures About Market Risk 5
8. Financial Statements and Supplementary Data 5
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure 17
PART III
10. Managers and Executive Officers of the Registrant 17
11. Executive Compensation 25
12. Security Ownership of Certain Beneficial Owners and Management 26
13. Certain Relationships and Related Transactions 26
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 26
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FACTORS THAT MAY AFFECT FUTURE RESULTS
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The Company's prospects 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 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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PART I
Item 1. Business.
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, 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"). 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.
United States Trust Company of New York (the "Investment
Sub-Advisor") and U.S. Trust Company (the "Investment Advisor") (together,
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"). The Investment Advisers are
subsidiaries of U.S. Trust Corporation. On May 31, 2000, U.S. Trust
Corporation became 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.
Portfolio Investments
Direct Investments
The Company expects that over the course of its life, more than
70% of its assets will be invested in private companies. Through October
31, 2001, the Company has invested $24.5 million across seven companies,
and expects to add another 15-20 companies to the portfolio. From the
hundreds of proposals the Company has reviewed thus far, the Company has
invested in the following seven companies in keeping with its investment
focus.
o Adeza Biomedical Corporation, Sunnyvale, CA, develops,
manufactures and markets diagnostic products and services for
women's reproductive healthcare. Adeza's primary focus is on
proprietary tests and services for the diagnosis of
pregnancy-related and female reproductive disorders, including
premature and late birth, preeclampsia, endometriosis and
infertility. The Company invested $3 million in Adeza. Enterprise
Partners and Asset Management are also investors in Adeza.
o Cenquest, Inc., Portland, OR, is an intermediary provider of
accredited business and management degree programs to large
corporations. Cenquest partners with recognized universities, such
as NYU Stern, Babson College and University of Texas in Austin, to
provide interactive graduate degree programs online. The Company
invested $2 million in Cenquest. Sevin Rosen is also an investor
in Cenquest.
o 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. The Company
invested $3.5 million in Ethertronics. Sevin Rosen is a
co-investor in Ethertronics.
o 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 Company invested $5
million in LightConnect. Other investors in LightConnect include
Sevin Rosen, Incubic, Morgenthaler and US Venture Partners.
o NanoOpto Corporation, Somerset, NJ, is a designer and manufacturer
of integrated optical components using nano-manufacturing
technology platforms. Based on years of research in Nano Imprint
Ligthography technologies, NanoOpto's products allow orders of
magnitude improvement in more rapid prototyping, higher
performance and lower, overall system cost. The Company invested
$2 million in NanoOpto. Bessemer Venture Partners, Morgenthaler
and New Enterprise Associates are also investors in NanoOpto.
o 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. The Company invested $5 million in NetLogic
Microsystems. Sevin Rosen is a co-investor in NetLogic
Microsystems.
o OpVista, Inc., Irvine, CA, develops, markets and manufactures
Dense Wavelength Division Multiplexing (DWDM)-based optical
networking equipment for deployment in long haul and regional
metro networks. OpVista's ultra-DWDM products allow service
providers to build flexible, scalable and cost-effective networks
while seamlessly integrating legacy networks. The Company invested
$4 million in OpVista. Sevin Rosen and Incubic are also investors
in OpVista.
Fund Investments
The Company's investment strategy includes an allocation of up to
30% of the Company's assets for investment in private equity and venture
capital funds managed by third parties. In committing capital to fund
investments, our objective is to seek funds that will generate top quartile
returns and create an active working relationship with the principals of
the fund in terms of deal sourcing and co-investing to leverage the
Company's direct investment activity. As of October 31, 2001, the Company
has made commitments to four private equity funds aggregating $11 million.
Thus far, 4.2% of the aggregate commitment has been drawn.
Below is a summary of each private fund in the portfolio,
including unfunded commitments. Each private fund is managed by experienced
investment professionals who the Company believes are capable of serving
the Company's objectives.
o Advanced Technology Ventures VII, LP is a $700 million fund
targeting varied-stage information technology, communications and
life sciences companies.
o CHL Medical Partners II, LP is a $125 million fund targeting start
up and early-stage medical technology and life sciences companies.
o Morgenthaler Venture Partners VII, LP is an $850 million fund
targeting varied-stage information technology, communications and
health care companies. Morgenthaler closed on $850 million in
committed capital.
o Prospect Venture Partners II, LP is a $500 million fund targeting
varied-stage life sciences companies
For additional information concerning the Company's investments,
see the financial statements beginning on page 8 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, 2001, 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. 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.
The Company has an unlimited number of no par value units
authorized. As of October 31, 2001, 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.
Dividends
Fiscal Year Ended October 31, 2001. On May 17, 2001, the Company
paid a dividend of $1.99 per unit of net investment income to holders of
record on May 11, 2001. 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.
In private sales pursuant to section 4(2) of the Securities Act,
the Company sold one unregistered unit of membership interest for $500 to
David I. Fann, the Company's President and Co-Chief Executive Officer on
July 7, 2000 and 46,094 unregistered units to Excelsior Venture Investors
III, LLC for $23,047,000 on May 11, 2001. No commissions were paid in
connection with these transactions.
Item 6. Selected Financial Data.
The information provided under Item 8 is incorporated by reference
herein.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Capital Resources
The Company closed its public offering on May 11, 2001. At October
31, 2001, the Company held $8,433,122 in cash and $139,676,495 in
investments as compared to $500 in cash and $0 in investments at October
31, 2000. At October 31, 2001, investments included $114,796,052 in U.S.
Government agency obligations, $380,445 in private investment funds and
$24,499,998 in private companies. At October 31, 2001, the Company had
committed $11,000,000 to private investment funds and approximately
$10,500,000 of this commitment remains outstanding.
Results of Operations
Investment Income and Expenses
For the fiscal year ended October 31, 2001, the Company had
interest 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. Net operating expenses were primarily comprised of management
fees, professional fees and organizational fees. 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. For the fiscal year ended October 31, 2001, the
Investment Advisers earned $1,377,259 in management fees. There were no
operations during the fiscal year ended October 31, 2000.
Net Assets
The Company's net asset value per unit was $495.99 at October 31,
2001, down $4.01 per unit from the net asset value per unit of $500.00 at
October 31, 2000. This decrease was primarily the result of expenses
incurred and deducted from contributions in connection with the offering of
the units, which was completed on May 11, 2001.
For the fiscal year ended October 31, 2001, the Company had a net
increase in net assets resulting from operations of $771,147 ($2.61 per
share), comprised of net investment income totaling $830,843 ($2.81 per
share), a net change in realized and unrealized loss on investments of
($59,696) (($0.20) per share).
At October 31, 2001, the Company's net assets were $146,420,778,
an increase of $146,420,278 from net assets of $500 at October 31, 2000.
This increase was the result of proceeds from units sold, net of offering
costs, and a net increase resulting from operations, offset by
distributions to shareholders during the period totaling $487,151.
Realized and Unrealized Gains and Losses from Portfolio Investments
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 on
investments for the fiscal year ended October 31, 2001 is primarily due to
sales of short-term securities.
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 market prices.
Thus, these equity securities are not subject to equity price risk. As of
October 31, 2001, the Company held no investments in the equity securities
of public companies.
Item 8. Financial Statements and Supplementary Data.
Independent Auditors' Report
Portfolio of Investments at October 31, 2001.
Statement of Assets and Liabilities as of October 31, 2001 and
October 31, 2000
Statement of Operations for the period April 5, 2001 (commencement
of operations) through October 31, 2001
Statement of Changes in Net Assets for the period April 5, 2001
(commencement of operations) through October 31, 2001
Statement of Cash Flows for the period April 5, 2001 (commencement
of operations) through October 31, 2001
Financial Highlights for the 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 "Fund") as of
October 31, 2001 and 2000, including the portfolio of investments at
October 31, 2001, and the related statements of operations, changes in net
assets, cash flows and the financial highlights for the period from April
5, 2001 (commencement of operations) to October 31, 2001. 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.
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, 2001 by correspondence with the custodian and
brokers, or other appropriate auditing procedures where replies from brokers
were not received. 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, 2001 and
2000, the results of its operations, changes in its net assets, cash flows and
the financial highlights for the period from April 5, 2001 to October 31,
2001 in conformity with accounting principles generally accepted in the
United States.
/s/ Ernst & Young LLP
New York, New York
December 10, 2001
Excelsior Venture Partners III, LLC
Portfolio of Investments
October 31, 2001
Principal Acquisition Value
Amount Date## (Note 1)
- --------- ----------- --------
U.S. GOVERNMENT AGENCY OBLIGATIONS-- 78.40%
$90,000,000 Federal Farm Credit Note 2.24%, 11/26/01.................... $ 89,860,000
25,000,000 Federal Home Loan Discount Note 3.50%, 12/05/01............. 24,936,052
------------
TOTAL-- U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $114,777,361)............ 114,796,052
------------
Shares
- ------
PRIVATE COMPANIES # -- 6.73%
647,948 Adeza Biomedical Corp. Series 5.............................. 10/01 2,999,998
44,247,788 Cenquest, Inc................................................ 8/01 2,000,000
2,333,333 Ethertronics Series B........................................ 7/01 3,500,000
4,330,504 LightConnect, Inc............................................ 7/01 5,000,000
857,143 NanoOpto Series 1-A.......................................... 10/01 2,000,000
1,538,461 NetLogic Microsystems Series D............................... 10/01 5,000,000
5,333,333 OpVista, Inc................................................. 7/01 4,000,000
------------
TOTAL-- PRIVATE COMPANIES (Cost $24,499,998) 24,499,998
------------
PRIVATE INVESTMENT FUNDS # -- 0.26%
75,000 Advanced Technology Ventures VII, LP......................... 8/01 55,702
150,000 Morgenthaler Venture Partners VII, LP........................ 8/01 138,204
240,429 Prospect Venture Partners II, LP............................. 8/01-10/01 186,539
------------
TOTAL-- PRIVATE INVESTMENT FUNDS (Cost $465,431).............. 380,445
TOTAL INVESTMENTS (Cost $139,742,790*)..................................... 95.39% 139,676,495
OTHER ASSETS & LIABILITIES (NET)........................................... 4.61 6,744,283
----------- ------------
NET ASSETS................................................................. 100.00% $ 146,420,778
* Aggregate cost for federal tax and book purposes.
# Restricted & non-income producing securities.
## Required disclosure for restricted securities.
Notes to Financial Statements are an integral part of this Statement.
Excelsior Venture Partners III, LLC
Statement of Assets and Liabilities
Year Ended October 31,
2001 2000
---- ----
ASSETS:
Investments, at market value (Cost $139,742,790) (Note 1). $ 139,676,495 $ --
Cash and cash equivalents.................................. 8,433,122 500
Receivable due from Distributor (Note 4)................... 50,000 --
Prepaid insurance.......................................... 43,070 --
Deferred offering cost..................................... -- 1,356,200
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Total Assets............................................. 148,202,687 1,356,700
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LIABILITIES:
Management fees payable (Note 2)........................... 1,377,259 --
Professional fees payable.................................. 221,430 --
Administration fees payable (Note 2)....................... 27,811 --
Offering cost payable (Note 1)............................. 45,000 --
Printing fees payable...................................... 15,000 --
Custodian fees payable..................................... 1,529 --
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Total Liabilities........................................ 1,781,909 1,356,200
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NET ASSETS................................................... $ 146,420,778 $ 500
============= ==========
NET ASSETS consist of:
Paid-in capital............................................ $ 146,136,782 $ 500
Net investment gain........................................ 343,692 --
Undistributed net realized gain............................ 6,599 --
Unrealized (depreciation) on investments................... (66,295) --
------------- ----------
Total Net Assets............................................. $ 146,420,778 $ 500
============= ==========
Units of Membership Interest Outstanding (Unlimited
number of no par value units authorized)................. 295,210 1
============= ==========
NET ASSET VALUE PER UNIT..................................... $ 495.99 $ 500.00
============= ==========
Notes to Financial Statements are an integral part of this Statement.
Excelsior Venture Partners III, LLC
Statement of Operations
For the period April 5, 2001 (commencement of operations) through
October 31, 2001
INVESTMENT INCOME:
Interest income............................................ $ 2,729,924
EXPENSES:
Management fees (Note 2)................................... 1,377,259
Professional fees.......................................... 241,385
Organizational fees (Note 4)............................... 154,976
Administration fees (Note 2)............................... 96,925
Trustees' fees (Note 2).................................... 45,000
Custodian fees............................................. 10,910
Printing fees.............................................. 15,000
Insurance.................................................. 7,626
Total Expenses........................................ 1,949,081
Reimbursement of Organizational fees from Distributor...... (50,000)
Net Expenses.............................................. 1,899,081
NET INVESTMENT INCOME......................................... 830,843
NET REALIZED AND UNREALIZED/(LOSS) ON
INVESTMENTS: (Note 1)
Net realized gain on investments........................... 6,599
Net change in unrealized (depreciation) on investments..... (66,295)
NET REALIZED AND UNREALIZED/(LOSS) ON
INVESTMENTS............................................... (59,696)
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $771,147
Notes to Financial Statements are an integral part of this Statement.
Excelsior Venture Partners III, LLC
Statement of Changes in Net Assets
For the period April 5, 2001 (commencement of operations) through
October 31, 2001
OPERATIONS:
Net investment income.................................. $ 830,843
Net realized gain on investments....................... 6,599
Net change in unrealized (depreciation) on investments. (66,295)
-------------
Net increase in net assets resulting from operations.. 771,147
-------------
TRANSACTIONS IN UNITS OF MEMBERSHIP INTERESTS:
Proceeds from units sold, net of offering costs...... 146,136,282
-------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................ (487,151)
Total distributions................................ (487,151)
-------------
Net Increase in Net Assets................................ 146,420,278
-------------
NET ASSETS:
Beginning of period.................................. 500
-------------
End of period........................................ $ 146,420,778
=============
Membership Interest Transactions:
Units issued......................................... 295,210
-------------
Net Increase in Units Outstanding......................... $ 295,210
============
Notes to Financial Statements are an integral part of this Statement.
Excelsior Venture Partners III, LLC
Statement of Cash Flows
For the period April 5, 2001 (commencement of operations) through
October 31, 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Increase in Net Assets resulting from Operations........................ $ 771,147
Adjustments to reconcile net increase in net assets from operations to net
cash used in operating activities:
Unrealized depreciation on investments.................................... 66,295
Increase in receivable due from Distributor............................... (50,000)
Purchase of investments................................................... (2,704,282,487)
Proceeds from sales of investments........................................ 2,564,539,697
Increase in prepaid insurance............................................. (43,070)
Increase in management fees payable....................................... 1,377,259
Increase in professional fees payable..................................... 221,430
Increase in administration fees payable................................... 27,811
Increase in offering cost payable......................................... 93,880
Increase in trustees' fees payable........................................ 45,000
Increase in printing fees payable......................................... 15,000
Increase in custodian fees payable........................................ 1,529
-----------------
Net cash used in operating activities................................... (137,216,509)
-----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from units sold, net of offering costs............................. 146,136,282
Distribution to shareholders................................................ (487,151)
-----------------
Net cash provided by financing activities............................... 145,649,131
-----------------
Net change in cash...................................................... 8,432,622
-----------------
Cash and cash equivalents at beginning of period...................... 500
Cash and cash equivalents at end of period............................ $ 8,433,122
=================
Notes to Financial Statements are an integral part of this statement.
Excelsior Venture Partners III, LLC
Financial Highlights
For the period April 5, 2001 (commencement of operations) through October 31, 2001
Per Unit Operating Performance:(1)
NET ASSET VALUE, BEGINNING OF PERIOD................ $ 500.00
Deduction of offering costs from contributions.... (4.97)
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................. 2.81
Net realized and unrealized (loss) on investment transactions. (0.20)
-------------
Total from investment operations................ 2.61
-------------
DISTRIBUTIONS:
Net Investment Income............................. (1.65)
-------------
Total Distributions............................. (1.65)
-------------
NET ASSET VALUE, END OF PERIOD...................... 495.99
TOTAL NET ASSET VALUE RETURN(3)..................... 0.52%
============
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000)................... 146,421
Ratios to average net assets:(2)
Gross expenses.................................. 1.35%
Net expenses.................................... 1.32%
Net investment income........................... 0.58%
Turnover........................................ 0.00%
(1) Selected data for a unit of membership interest outstanding through the period.
(2) Annualized
(3) Not annualized
Notes to Financial Statements are an integral part of this Statement.
EXCELSIOR VENTURE PARTNERS III, LLC
NOTES TO FINANCIAL STATEMENTS
October 31, 2001
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. The Company was established as a Delaware limited
liability company on February 18, 2000. The Company commenced operations on
April 5, 2001. As of October 31, 2001, the Company sold 295,210 units via a
public offering which closed on May 11, 2001. The duration of the Company
is ten years (subject to two, 2-year extensions) from the final subscription
closing, at which time the affairs of the Company will be wound up and its
assets distributed pro rata to members as soon as is practicable.
Certain costs incurred in connection with the initial offering of
units totaled $1,468,218. Each member's share of these costs was deducted
from his, her or its initial capital contribution.
The following is a summary of the Company's significant accounting
policies. Such policies are in conformity with generally accepted
accounting principles for investment companies and are consistently
followed in the preparation of the financial statements. Generally accepted
accounting principles in the United States require management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from these
estimates.
A. Investment Valuation:
The Company values portfolio securities quarterly and at such
other times as, in the Board of Managers' view, circumstances warrant.
Securities for which market quotations are readily available generally
will be valued at the last sale price on the date of valuation or, if
no sale occurred, at the mean of the latest bid and ask prices;
provided that, as to such securities that may have legal, contractual
or practical restrictions on transfer, a discount of 10% to 40% from
the public market price will be applied. Securities for which no
public market exists and other assets will be valued at fair value as
determined in good faith by the Investment Advisers or a committee of
the Board under the supervision of the Board pursuant to certain
valuation procedures summarized below. Securities having remaining
maturities of 60 days or less are valued at amortized cost.
The value for securities for which no public market exists is
difficult to determine. Generally, such investments will be valued on
a "going concern" basis without giving effect to any disposition
costs. There is a range of values that is reasonable for such
investments at any particular time. Initially, direct investments are
valued based upon their original cost, until developments provide a
sufficient basis for use of a valuation other than cost. Upon the
occurrence of developments providing a sufficient basis for a change
in valuation, direct investments will be valued by the "private
market" or "appraisal" method of valuation. The private market method
shall only be used with respect to reliable third party transactions
by sophisticated, independent 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 Advisers or a
committee of the Board and, in any event, not less frequently than
quarterly. However, there can be no assurance that such value will
represent the return that might ultimately be realized by the Company
from the investments.
B. Security transactions and investment income:
Security transactions are recorded on a trade date basis.
Realized gains and losses on investments sold are recorded on the
basis of identified cost. Interest income, adjusted for amortization
of premiums and discounts on investments, is earned from settlement
date and is recorded on the accrual basis. Dividend income is recorded
on the ex-dividend date.
C. Income taxes:
Under current law and based on certain assumptions and
representations, the Company intends to be treated as a partnership
for federal, state and local income tax purposes. By reason of this
treatment the Company will itself not be subject to income tax.
Rather, each member, in computing income tax, will include his, her or
its allocable share of Company items of income, gain, loss, deduction
and expense.
D. Dividends to shareholders:
Dividends from net investment income and distributions from net
realized capital gains, if any, will be declared and paid at least
once a year. Dividends from net investment income totaled $487,151 for
the period ended October 31, 2001.
E. Other:
The Company treats all highly-liquid financial instruments that
mature within three months as cash equivalents.
In November 2000, the American Institute of Certified Public
Accountants (AICPA) issued a revised version of the AICPA Audit and
Accounting Guide for Investment Companies (the Guide). The Guide is
effective for annual financial statements issued for fiscal years
beginning after December 15, 2000. Management of the Company does not
anticipate that the adoption of the Guide will have a significant
effect on the financial statements.
Note 2 -- Investment Advisory Fee and Related Party Transactions
U.S. Trust Company serves as the Investment Adviser to the Company
pursuant to an Investment Advisory Agreement with the Company. United
States Trust Company of New York ("U.S. Trust NY") serves as the Investment
Sub-Adviser to the Company pursuant to an Investment Sub-Advisory Agreement
among U.S. Trust NY, U.S. Trust Company and the Company. In return for its
services and expenses which U.S. Trust Company assumes under the Investment
Advisory Agreement, the Company will pay U.S. Trust Company, on a quarterly
basis, a management fee at an annual rate equal to 2.00% of the Company's
average quarterly net assets through the fifth anniversary of the first
closing date and 1.00% of net assets thereafter. In addition to the
management fee, U.S. Trust Company 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 net capital gains on investments other than private funds
determined net of cumulative realized capital losses current net unrealized
capital depreciation on all of the Company's investments and cumulative net
expenses of the company. The Incentive Carried Interest will be determined
annually as of the end of each calendar year. Pursuant to the Investment
Sub-Advisory Agreement, U.S. Trust Company pays an investment management
fee to U.S. Trust NY.
U.S. Trust Company is a Connecticut state bank and trust company.
U.S. Trust NY is a New York state-chartered bank and trust company and a
member of the Federal Reserve System. Each is 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"), an indirect wholly-owned
subsidiary of PNC Bank N.A., as administrator, accounting and investor
services agent. In addition, PFPC Trust Company serves as the Company's
custodian, and PFPC serves as transfer agent. 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 and payable monthly, subject
to a minimum quarterly fee of approximately $30,000, (ii) pays annual fees
of approximately $11,000 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. U.S. Trust Company paid the Distributor from its own assets an
amount equal to 0.02% of the total of all subscriptions received in this
offering. U.S. Trust Company or an affiliate will pay the Distributor an
on-going fee for the sale of units and the provision of ongoing investor
services in an amount equal to the annual rate of 0.45% of the average
quarterly net asset value of all outstanding units held by investors
introduced to the Company by the Distributor through the fifth anniversary
of the final subscription closing date and at the annual rate of 0.22%
thereafter, subject to elimination upon all such fees totaling 6.5% of the
gross proceeds received by the Company from this offering.
As of October 31, 2001, Excelsior Venture Investors III, LLC had
an investment in the Company of $92,952,716. This represents an ownership
interest of 64.30% in the Company.
Note 3 -- Purchases and Sales of Securities:
Excluding short-term investments, the Company had $24,965,427 in
purchases and $0 in sales of securities for the period ended October 31,
2001.
Note 4 -- Organizational Fees
The Company incurred organization fees totaling $154,976. As a result
of the Company's final closing held on May 11, 2001, the Company will be
reimbursed for $50,000 in organizational expenses from the Distributor.
Note 5 -- Commitments
As of October 31, 2001, the Company had committed $10,500,000 to
uncalled private fund investments.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
PART III
Item 10. Managers and Executive Officers of the Registrant.
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, 2001.
Served in Present Principal Occupation During Past 5 Years
Name and Age Position Capacity Since and Other Affiliations
------------ -------- ----------------- -----------------------------------------
David I. Fann, 37 President and July 20, 2000 Mr. Fann serves as President and Chief
Co-Chief Executive Executive Officer of UST Private Equity
Officer Investors Fund, Inc. and Excelsior
Private Equity Fund II, Inc. and as
Co-Chief Executive Officer and President
of Excelsior Venture Partners III, LLC
and Excelsior Venture Investors III,
LLC. He is a Managing Director of U.S.
Trust. He is focused on Direct
Investments in information services and
life sciences. Prior to joining U.S.
Trust in April 1994, Mr. Fann served in
various capacities for Citibank from
1986 through 1994, including, as a Vice
President of Citibank and its small
business investment company subsidiary,
Citicorp Venture Capital Ltd. from 1991
until 1994. While at Citicorp Venture
Capital Ltd., Mr. Fann invested in
buyout and venture capital transactions
and venture capital funds and served on
the board of directors of several of its
portfolio companies. Mr. Fann holds a
B.A.S. degree in Industrial Engineering
and Economics from Stanford University.
Mr. Fann serves on the United States
Trust Company of New York Portfolio
Policy Committee, Strategy Review
Committee and Special Fiduciary
Committee. Mr. Fann is on the boards of
Cenquest, Inc., Curon Medical, Inc. and
Protogene Laboratories, Inc.
Douglas A. Lindgren, Co-Chief Executive July 20, 2000 Mr. Lindgren serves as Executive Vice
39 Officer and Chief President of UST Private Equity
Investment Officer Investors Fund, Inc., Chief Investment
Officer and Executive Vice President of
Excelsior Private Equity Fund II, Inc.
and Co-Chief Executive Officer and Chief
Investment Officer of Excelsior Venture
Partners III, LLC and Excelsior Venture
Investors III, LLC. He is a Managing
Director of U.S. Trust. He is focused
on Direct Investments in information
technology, information services and
communications. Prior to joining U.S.
Trust in April 1995, Mr. Lindgren served
in various capacities for Inco Venture
Capital Management ("IVCM") from January
1988 through March 1995, including
President and Managing Principal from
January 1993 through March 1995. While
at IVCM, Mr. Lindgren invested in
venture capital and buyout transactions
and served on the board of directors of
several of its portfolio companies.
Before joining IVCM, Mr. Lindgren was
employed by Salomon Brothers Inc. and
Smith Barney, Harris Upham & Co., Inc.
He is an Adjunct Professor of Finance at
Columbia University's Graduate School of
Business, where he has taught courses on
venture capital since 1993. Mr.
Lindgren holds M.B.A. and B.A. degrees
from Columbia University. He serves on
the United States Trust Company of New
York Portfolio Policy Committee. Mr.
Lindgren is on the boards of Cross Media
Marketing, Inc., Ethertronics, Inc.,
Marketfirst Software, Inc., OpVista,
Inc. and PowerSmart, Inc.
Brian F. Chief Financial July 20, 2000 Chief Financial Officer of UST Private
Schmidt, 42 Officer Equity Investors Fund, Inc., Excelsior
Private Equity Fund II, Inc., Excelsior
Venture Partners III, LLC and Excelsior
Venture Investors III, LLC and Senior
Vice President of U.S. Trust, Mr.
Schmidt is the Division Manager of
Mutual Funds with U.S. Trust. He is
responsible for the operation and
administration of the Excelsior Family
of Funds and the U.S. Trust Co. Common
Trust Funds. Mr. Schmidt joined U.S.
Trust in 1991 from Prudential Insurance
Company of America, where he was
Director of Accounting. Prior to that
he was a senior accounting manager at
Dreyfus Corporation. Mr. Schmidt has 20
years of experience in financial
services, concentrating in mutual
funds. He received his B.S. degree from
Marist College. He is on the
Accountant's and Treasurer's Committee
of the Investment Company Institute.
Frank D. Treasurer July 20, 2000 Treasurer of UST Private Equity
Bruno, 41 Investors Fund, Inc., Excelsior Private
Equity Fund II, Inc., Excelsior Venture
Partners III, LLC and Excelsior Venture
Investors III, LLC and Vice President of
U.S. Trust, Mr. Bruno is a Vice
President in the Mutual Funds
Administration Department of an
affiliate of U.S. Trust. Prior to
joining U.S. Trust in March 1994 he
worked for the Dreyfus Corporation and
PriceWaterhouse. Mr. Bruno received his
B.S. degree from The Pennsylvania State
University.
Lee A. Vice President July 20, 2000 Vice President of UST Private Equity
Gardella, 34 Investors Fund, Inc., Excelsior Private
Equity Fund II, Inc., Excelsior Venture
Partners III, LLC, Excelsior Venture
Investors III, LLC and U.S. Trust, Mr.
Gardella joined U.S. Trust in September
1997. He is focused on Direct
Investments in information technology
companies and on fund investments. Mr.
Gardella currently has monitoring
responsibilities for several portfolio
companies including Captura Software,
Inc. and LogicVision, Inc. From July
1994 to September 1997, Mr. Gardella
held several positions with the Edison
Venture Fund, an expansion-stage venture
capital firm in Lawrenceville, N.J. In
addition, Mr. Gardella has worked at
Wilshire Associates and National Steel
Corporation. Mr. Gardella has served as
a director of the Greater Philadelphia
Venture Group. He received a M.B.A.
degree from the University of Notre Dame
and a B.S.B.A. degree in Finance from
Shippensburg University. Mr. Gardella
is a Chartered Financial Analyst. Mr.
Gardella is on the board of ClearOrbit,
Inc.
James F. Vice President July 20, 2000 Vice President of UST Private Equity
Rorer, 31 Investors Fund, Inc., Excelsior Private
Equity Fund II, Inc., Excelsior Venture
Partners III, LLC and Excelsior Venture
Investors III, LLC and U.S. Trust, Mr.
Rorer is focused on Direct Investments
in information services and life
sciences. Prior to joining U.S. Trust in
May 1999, he worked at Bain & Company
("Bain"), a leading global strategic
consulting firm, from September 1996
until April 1999. He was a consultant in
the Private Equity Practice, providing
strategic due diligence services to
large private equity firms. In addition,
Mr. Rorer also spent time in Bain's
standard consulting practice, working
with companies on a variety of strategic
issues in a number of different
industries including automotive,
electric power, telecommunications,
consumer products and financial
services. Mr. Rorer was an investment
banking analyst at CS First Boston from
1992 to 1994, where he worked on mergers
and acquisitions and financing for banks
and consumer finance companies. Mr.
Rorer graduated from Duke University,
Phi Beta Kappa, with a degree in
Economics and Mathematics. He holds a
M.B.A. degree from Harvard Business
School.
James F. Dorment, 28 Chief July 20, 2000 to Mr. Dorment served as Chief
Administrative September 11, 2001 Administrative Officer and Secretary of
Officer and Security UST Private Equity Investors Fund, Inc.,
Excelsior Private Equity Fund II, Inc.,
Excelsior Venture Partners III, LLC and
Excelsior Venture Investors III, LLC
from July 2000 until September 2001. He
has served as Assistant Vice President
of U.S. Trust from December 1997. Mr.
Dorment was involved in all areas of
investment analysis and
decision-making. From August 1995
through November 1997, he worked in the
wealth management division of U.S.
Trust. Mr. Dorment graduated from Bates
College with a B.A. degree in
Economics. He is a Chartered Financial
Analyst and a member of the New York
Society of Security Analysts and the
Association for Investment Management
and Research.
Cynthia Chief September 12, 2001 Chief Administrative Officer and
Englert, 37 Administrative Secretary of UST Private Equity
Officer and Investors Fund, Inc., Excelsior Private
Secretary Equity Fund II, Inc., Excelsior Venture
Partners III, LLC and Excelsior Venture
Investors III, LLC. Ms. Englert joined
U.S. Trust as Vice President of Finance
and Administration in August 2001. She
has held positions in fund accounting
and administration at Whitney & Co. and
various management reporting and
financial analysis positions at
Greenwich Capital Markets, Inc. Ms.
Englert graduated from Holy Cross
College with a B.A. degree in English.
She holds a M.B.A. degree from the
University of Connecticut.
Raghav V. Vice President September 11, 2000 Mr. Nandagopal is a Vice President of
Nandagopal, 39 United States Trust Company of New York,
Excelsior Venture Partners III, LLC and
Excelsior Venture Investors III, LLC. He
is focused on direct investments in
information technology and communica-
tions. Prior to joining United
States Trust Company of New York in
February 2001, Mr. Nandagopal was Chief
Business Development Officer of
Globeshaker, a seed venture capital
investment company based in Stamford, CT
and Oxford, UK. From September 1998 to
September 2000, Mr. Nandagopal was an
Engagement Manager with McKinsey &
Company, where he advised clients in
defining strategies, improving
operations, identifying acquisitions and
defining technology capabilities for
telecom, wireless, financial services
and healthcare companies. From October
1994 to July 1998, he held several
positions including Chief Information
Officer at AT&T Capital - Automotive
Services. Prior to AT&T Capital, Mr.
Nandagopal held a variety of operational
and technology management positions with
BGE, Andersen Consulting and Pfizer. In
addition, he has been an Adjunct
Professor of Computer Information
Systems at Villa Julie College, where he
has taught courses on broadband
technologies, networking, distributed
computing and programming languages. Mr.
Nandagopal received his B.S. degree from
the University of Madras, M.A. and
M.B.A. degrees from the University of
Bombay and a M.S. degree from Penn.
State University.
Jean-Noel Vice President September 11, 2000 Mr. Odier is a Vice President of United
Odier, 29 States Trust Company of New York,
Excelsior Venture Partners III, LLC and
Excelsior Venture Investors III, LLC. He
is focused on foreign direct investments
and fund investments. Prior to joining
United States Trust Company of New York
in November 2000, Mr. Odier worked at
Lombard Odier & Cie in Geneva since
March of 1999. After having covered
European small and mid-cap companies in
Geneva, he was sent to Merrill Lynch in
London where he did various research
works on European Internet equities. In
July 2000, Mr. Odier went back to
Lombard Odier & Cie, where he joined the
company's private equity unit in Zurich.
Alan M. Braverman, 40 Vice President September 11, 2000 Mr. Braverman served as Executive Vice
to President of Excelsior Venture Partners
September 25, 2001 III, LLC, Excelsior Venture Investors
III, LLC and as a Managing Director of
United States Trust Company of New York.
He was focused on direct investments in
information technology, information
services and communications. Prior to
joining United States Trust Company of
New York in September 2000, Mr.
Braverman served as President,
Business-to-Business at NBCi since
November 1999. Previously, Mr. Braverman
was Head of Internet Research at several
top-level Wall Street firms. Mr.
Braverman was also ranked by
Institutional Investor and the Wall
Street Journal as one of the top
Internet research analysts on Wall
Street. Mr. Braverman worked at Banc of
America Securities and held the position
of Senior Managing Director and Head of
Internet Research there until November
1999. Mr. Braverman was Managing
Director and Head of Internet Research
at Deutsche Bank Securities, the
investment banking arm of Deutsche Bank
Group. From July 1996 to July 1998, he
was the senior Internet analyst at
Credit Suisse First Boston. From 1995 to
July 1996, Mr. Braverman was Vice
President, Internet Analysis at Hanifen
Imhoff. From 1991 to 1995, Mr. Braverman
served as a senior executive at U.S.
West as well as General Manager for
CityKey Online, where he oversaw the
national roll-out for the company's
online business. Mr. Braverman earned a
B.B.A. degree in Finance and Strategy
from The Wharton School of the
University of Pennsylvania and a M.B.A.
degree in Finance, Strategy and
Marketing from Northwestern University's
Kellogg Graduate School of Management.
John C. Chairman of the May 26, 2000 Mr. Hover retired as an Executive Vice
Hover II, 58 Board and Manager President/Director of U.S. Trust in 1998
after 22 years of service. He was
responsible for the Personal Asset
Management and Private Banking Group and
served as Chairman of U.S. Trust
International. Prior to joining U.S.
Trust, he was a commercial banker with
Chemical Bank. Mr. Hover received his
B.A. degree in English Literature from
the University of Pennsylvania and a
M.B.A. degree in Marketing from The
Wharton School. He is a trustee of the
University of Pennsylvania, and is
Chairman of the Board of Overseers of
the University's Museum of Archaeology
and Anthropology. He is a trustee and
Vice President of the Penn Club of New
York. Mr. Hover serves as chairman of
the board of directors or managers of
UST Private Equity Investors Fund, Inc.,
Excelsior Private Equity Fund II, Inc.,
Excelsior Venture Partners III, LLC and
Excelsior Venture Investors III, LLC.
Gene M. Bernstein, 54 Manager, May 26, 2000 Mr. Bernstein is the Dean of the
Member of the Audit Skodneck Business Development Center at
Committee Hofstra University in Hempstead, New
York. Prior to that, he worked at (and
remains a principal of) Northville
Industries Corp., a third generation
privately held petroleum marketing,
trading, storage and distribution
company since 1994. While at
Northville, he held positions ranging
from Vice President to President to
Vice-Chairman. Prior to working at
Northville Industries, he taught at the
University of Notre Dame. He is
Chairman of the Board of Trustees at his
alma mater, Alfred University, from
which he holds a B.A. degree in English
Literature. He also has a M.A. degree
in English Literature from the
University of Wisconsin and a Ph.D. in
English Literature from the University
of Massachusetts. Mr. Bernstein serves
as a director or manager of UST Private
Equity Investors Fund, Inc., Excelsior
Private Equity Fund II, Inc., Excelsior
Venture Partners III, LLC, Excelsior
Venture Investors III, LLC and the
Excelsior Hedge Fund of Funds I, LLC.
Stephen V. Murphy, 56 Manager, May 26, 2000 Since 1991, Mr. Murphy has been
Member of the Audit President of S. V. Murphy & Co., Inc.,
Committee an investment banking firm that
specializes in mergers and acquisitions,
divestitures and strategic and
capital-related advisory services for
financial and other institutions. From
1988 until 1990, he was Managing
Director of Merrill Lynch Capital
Markets in charge of the Financial
Institutions Mergers and Acquisitions
Department. Prior to 1988, Mr. Murphy
was Managing Director of The First
Boston Corporation where he headed up
its Investment Banking Department's
Commercial Bank Group. Mr. Murphy holds
a B.S.B.A. degree from Georgetown
University and a M.B.A. degree from
Columbia University. Mr. Murphy serves
as a director or manager of UST Private
Equity Investors Fund, Inc., Excelsior
Private Equity Fund II, Inc., Excelsior
Venture Partners III, LLC, Excelsior
Venture Investors III, LLC and the
Excelsior Hedge Fund of Funds I, LLC.
Victor F. Imbimbo, 49 Manager, May 26, 2000 Mr. Imbimbo was the founder of Bedrock
Jr., Member of the Audit Communications, Inc., a consulting
Committee company addressing the merger of
traditional and digital communications
solutions in 1996. He was also the
founder of the Hadley Group, a
promotional marketing company, in 1985,
which he ran until 1996. Mr. Imbimbo
serves as a director or manager of UST
Private Equity Investors Fund, Inc.,
Excelsior Private Equity Fund II, Inc.,
Excelsior Venture Partners III, LLC,
Excelsior Venture Investors III, LLC and
the Excelsior Hedge Fund of Funds I,
LLC.
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
advisory agreement, the investment adviser employs and compensates all of
the personnel of the Company, and also furnishes 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 adviser, 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, 2001.
Aggregate Total Compensation
Compensation from the Company
from and Fund Complex *
Name of Person/Position the Company Paid to Directors
----------------------- ------------- -------------------
John C. Hover II
Manager $17,000 $53,250 (4 Funds)
Gene M. Bernstein
Manager $17,000 $67,750 (5 Funds)
Stephen V. Murphy
Manager $17,000 $67,750 (5 Funds)
Victor F. Imbimbo, Jr.
Manager $17,000 $67,750 (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
Hedge Fund of Funds I, 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, 2001, Mr. Fann, the Co-Chief Executive Officer
and President, was the owner of one unit of membership interest of the
Company.
Amount and Nature
of Beneficial
Title of Class Name and Address of Beneficial Owner Ownership Percent of Class
- -------------- ------------------------------------ ---------- ----------------
Units of David I. Fann 1 unit *
membership c/o U.S. Trust Company, N.A.
interest 5 Palo Alto Square, 9th Floor
3000 Camino Real
Palo Alto, CA 94303
Managers and executive officers 1 unit *
as a group (1 person)
* Less than one percent.
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.
PART IV
Item 14. 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)
(23) Consent of Independent Auditors
(99)(a) Audit Committee Charter (3)
(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 Annual Report on
Form 10-K as filed with the Securities and Exchange Commission on
January 29, 2000 (File No. 814-00209).
(b) 1. Reports on Form 8-K
None
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 25, 2002 By: /s/ DAVID I. FANN
--------------------------------
David I. Fann, Co-Chief Executive Officer
and President
(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/ DAVID I. FANN
- ---------------------------
David I. Fann Co-Chief Executive Officer and President January 25, 2002
(principal executive officer)
/s/ DOUGLAS A. LINDGREN
- ---------------------------
Douglas A. Lindgren Co-Chief Executive Officer and January 25, 2002
Chief Investment Officer
(principal executive officer)
/s/ BRIAN F. SCHMIDT
- ---------------------------
Brian F. Schmidt Chief Financial Officer January 25, 2002
(principal financial and accounting officer)
/s/ JOHN C. HOVER II January 29, 2002
- ---------------------------
John C. Hover II Chairman of the Board and Manager
/s/ GENE M. BERNSTEIN January 29, 2002
- ---------------------------
Gene M. Bernstein Manager
/s/ STEPHEN V. MURPHY January 29, 2002
- ---------------------------
Stephen V. Murphy Manager
/s/ VICTOR F. IMBIMBO, JR January 29, 2002
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Victor F. Imbimbo, Jr. Manager
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated December 10,
2001, included in this Annual Report (Form 10-K No. 000-29665), for the
year ended October 31, 2001, of Excelsior Venture Partners III, LLC.
ERNST & YOUNG LLP
New York, New York
January 29, 2002