EXCELSIOR VENTURE PARTNERS III LLC, N-2/A, 2000-04-27

EXCELSIOR VENTURE PARTNERS III LLC
N-2/A, 2000-04-27

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As filed with the Securities and Exchange Commission on April 27, 2000

Registration No. 333-30986
============================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

----------------------
FORM N-2A
----------------------

|_| REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
|X| Pre-Effective Amendment No. 1
|_| Post-Effective Amendment No.
and/or
|_| REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
|_| Amendment No. 1

EXCELSIOR VENTURE PARTNERS III, LLC
(Exact name of registrant as specified in charter)

114 WEST 47TH STREET, NEW YORK, NEW YORK 10036-1532
(Address of Principal Executive Offices (Number, Street, City, State, Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 852-3125

DAVID I. FANN
DOUGLAS A. LINDGREN
EXCELSIOR VENTURE PARTNERS III, LLC
114 WEST 47TH STREET, NEW YORK NEW YORK 10036-1532
(Name and Address of Agents for Service)

COPIES TO:

THOMAS A. DECAPO, ESQ. RONALD A. SCHWARTZ, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER UNITED STATES TRUST COMPANY
& FLOM LLP OF NEW YORK
ONE BEACON STREET 114 WEST 47TH STREET
BOSTON, MA 02108-3194 NEW YORK, NEW YORK 10036-1532
PHONE NO.: (617) 573-4814 PHONE NO.: (212) 852-1315
FAX NO.: (617) 573-4822 FAX NO.: (212) 852-1310

Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis in reliance on Rule 415 under the
Securities Act of 1933, other than securities offered in connection with a
dividend reinvestment plan, check the following box.....................|X|

<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
=======================================================================================
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Securities being Offering Price Aggregate Registration
being Registered Registered Per Unit* Offering Price* Fee*
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Membership Interests 500,000 units $1,000 $500,000,000 $132,000
(without par value)
=======================================================================================
* Estimated solely for the purpose of calculating the registration fee;
previously paid.
</TABLE>

The registrant hereby amends this Registration Statement under the
Securities Act of 1933 on such date or dates as may be necessary to delay
its effective date until the registrant shall file a further amendment
which specifically states that this Registration Statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of
1933 or until this Registration Statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may
determine.

CROSS REFERENCE SHEET

PART A
ITEM NUMBER LOCATION IN PROSPECTUS
- ----------- ----------------------
Item 1. Outside Front Cover................ Outside Front Cover
Item 2. Cover Pages; Other Offering
Information...................... Inside Front and Outside Back
Cover Page
Item 3. Fee Table and Synopsis............. Fee Table; Prospectus Summary
Item 4. Financial Highlights............... Not applicable
Item 5. Plan Of Distribution............... The Offering; Selling
Arrangements
Item 6. Selling Shareholders............... Not applicable
Item 7. Use of Proceeds.................... Use Of Proceeds
Item 8. General Description of the
Registrant....................... Outside Front Cover; The
Company; Investment Objective
and Policies; Risk Factors
Item 9. Management......................... Management
Item 10. Capital Stock, Long-Term Debt,
and Other Securities............. Description of Units
Item 11. Defaults and Arrears on Senior
Securities....................... Notiapplicable
Item 12. Legal Proceedings.................. Not applicable
Item 13. Table of Contents of the Statement
of Additional Information........ Not applicable

PART B
ITEM NUMBER
- -----------
Item 14. Cover Page......................... Not applicable
Item 15. Table of Contents.................. Not applicable
Item 16. General Information and History.... Not applicable
Item 17. Investment Objectives and
Policies......................... Investment Objective and
Policies
Item 18. Management......................... Management
Item 19. Control Persons and Principal
Holders of Securities............ Management
Item 20. Investment Advisory and Other
Services......................... Management
Item 21. Brokerage Allocation and Other
Practices........................ Brokerage Allocation and Other
Practices
Item 22. Tax Status......................... Certain Federal Income Tax
Considerations
Item 23. Financial Statements............... Financial Statements

[FLAG]

The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS
Subject to completion, dated April 26, 2000
EXCELSIOR VENTURE PARTNERS III, LLC
$400,000,000
Units of Membership Interest
Minimum Subscription -- $25,000

Excelsior Venture Partners III, LLC, or the Company, is a newly
organized closed-end investment company. We have elected to be treated as a
business development company under the Investment Company Act. Our
investment objective is to achieve long-term capital appreciation. We will
pursue our objective 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 our Investment Adviser believes offer
significant long-term capital appreciation potential. [Excelsior Venture
Management LLC], an affiliate of U.S. Trust Company, is the Investment
Adviser to the Company and is responsible for selecting our investments and
for management of our day-to-day affairs. The duration of the Company will
be ten years from the final subscription closing (not later than [October
31, 2010]), subject to extension as described below. See "Summary of the
Limited Liability Company Operating Agreement--Term, Dissolution And
Liquidation."

This Prospectus contains information you should know before
investing, including risk information. Please read it before you invest and
keep it for future reference. Additional information about the Registrant
has been filed with the Securities and Exchange Commission (the
"Commission") and is available upon written or oral request without charge.
In addition, the Commission maintains a Web site (http://www.sec.gov) that
contains material incorporated by reference and other information regarding
registrants that file electronically with the Commission. You may also
request a free copy by writing or calling the Company at 114 West 47th
Street, New York, New York 10036-1532, (212) 852-3125.

AN INVESTMENT IN THE COMPANY WILL BE ILLIQUID UNTIL ITS UNDERLYING
INVESTMENTS ARE DISTRIBUTED OR LIQUIDATED. INVESTORS MUST BE WILLING AND
ABLE TO BEAR THE RISKS OF AN INVESTMENT IN THE COMPANY UNTIL THAT TIME.

THESE ARE SPECULATIVE SECURITIES. YOU SHOULD INVEST ONLY IF YOU
CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT. SEE "RISK FACTORS."

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

==============================================================================================================
PRICE TO SALES LOAD PROCEEDS
PUBLIC TO COMPANY(1)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Unit (25 Unit Minimum) $1,000 None $1,000
- --------------------------------------------------------------------------------------------------------------

Total Minimum (250,000 Units) $250,000,000 None $250,000,000
- --------------------------------------------------------------------------------------------------------------
Total Maximum (400,000 Units) $400,000,000 None $400,000,000
==============================================================================================================

(1) The Company expects to incur organizational and offering expenses of approximately $_____.
</TABLE>

Units are made available through _______, the Company's principal
distributor. A first subscription closing will be held on or about the
fifth business day after receipt by the Company of subscriptions totaling
$250,000,000. The Company may continue to offer for sale the remaining
unsold Units and accept subscriptions for such Units from time to time at
subsequent subscription closings until [October 31, 2000]. See "Selling
Arrangements." The Company reserves the right to withdraw, cancel or modify
the offering and to reject any subscription in whole or in part.

The subscription price of $1,000 per Unit is required to be paid
in two equal installments: $500 per Unit upon subscription and $500 on the
first anniversary of the final subscription closing. Investors who breach
their agreement to pay the remainder of their subscription price will be
subject to legal action and various remedies of the Company, including
total forfeiture of their interest in the Company, resulting in a total
loss by the breaching investor of amounts previously paid. Funds paid by
investors will be deposited in an interest-bearing bank escrow account with
United States Trust Company of New York pending each closing.

The date of this Prospectus is May __, 2000.

FEE TABLE

Unitholder Transaction Expenses

SALES LOAD (as a percentage of offering price)......................... None

ANNUAL EXPENSES (as a percentage of net assets attributable to Units)
Management Fees.................................................. 2.00%*
Other Expenses................................................... 0.__%**
Total Annual Expenses............................................ _____%

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

* The Management Fee through the fifth anniversary of the final
subscription closing date is 2.00% of the Company's net assets,
determined as of the end of each fiscal quarter. Thereafter, the
Management Fee will be 1.00% of the Company's net assets, determined
at the end of each fiscal quarter. The Investment Adviser has agreed
to waive its fee during the subscription period, which will end on the
final subscription closing date (not later than [October 31, 2000]).
The Management Fee is referred to throughout this Prospectus as the
"Advisory Fee". The Investment Adviser is also entitled to an
Incentive Carried Interest in 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
and current net unrealized capital depreciation on all of the
Company's investments). See "Management" and "Allocations and
Distributions."

** "Other Expenses" are based on estimated amounts for the current
fiscal.

EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming a 5% annual return:
Example 1 (1)......................................................... $ $ $____ $____
Example 2 (2)......................................................... $___ $___ $____ $____
</TABLE>

THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN IN THE EXAMPLES.

The purpose of the above table is to assist the investor in
understanding the various costs and expenses that an investor in the
Company will bear directly or indirectly. To the extent that the Company
invests in other private funds, you will also indirectly through the
Company bear your pro rata share of the fees, expenses and any carried
interest or incentive compensation paid by such funds. For a more complete
description of the various costs and expenses, see "Management" and
"Allocations and Distributions."

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

(1) Assumes Advisory Fee of 2.00% of the Company's net assets in years 1-5
and 1.00% thereafter and other expenses of 0.__% of the Company's net
assets and does not include the Incentive Carried Interest.

(2) Assumes Advisory Fee of 2.00% of the Company's net assets in years 1-5
and 1.00% thereafter and other expenses of 0.__% of the Company's net
assets and includes the Incentive Carried Interest. These expense
estimates are based on the assumption that the entire 5% annual return
is the result of realized capital gains on investments other than
private funds.

PROSPECTUS SUMMARY

This summary is qualified in its entirety by reference to the more
detailed information included in this Prospectus and to the Operating
Agreement attached hereto as Exhibit A.

THE COMPANY

The Company is a Delaware limited liability company formed on
February 18, 2000. We have elected to be treated as a business development
company, or BDC, under the Investment Company Act. We provide investors
with the opportunity to participate, with a minimum investment of $25,000,
in direct private equity investments and privately offered investment funds
managed by third parties. These investment opportunities are generally not
available to the public and typically require substantially larger
commitments than the minimum investment in the Company. Other advantages
that may otherwise be unavailable to investors if they were to invest
directly in private equity investments include professional management,
portfolio diversification and administrative convenience. We operate more
like a private venture capital fund than a traditional closed-end
investment company. See "The Company," "Regulation," "Risk Factors," "The
Offering" and "Description of Units."

INVESTMENT OBJECTIVE AND POLICIES

The Company's investment objective is to achieve long-term capital
appreciation. Current income is not an objective. We will pursue long-term
capital appreciation primarily by investing in private domestic venture
capital companies and other private companies (collectively, "Venture
Capital Investments"). Venture Capital Investments are domestic companies
in which the equity is closely held by company founders, management and/or
a limited number of institutional investors. We also intend to invest to a
lesser extent in domestic and international venture capital, buyout and
other private equity funds managed by third parties ("Private Funds"),
negotiated private investments in public companies ("Private Placements in
Public Companies") and foreign companies in which the equity is closely
held by company founders, management and/or a limited number of
institutional investors ("International Venture Capital Investments"). We
refer to Venture Capital Investments, Private Placements in Public
Companies and International Venture Capital Investments as Direct
Investments. Pending investment, for operating purposes and for temporary
or emergency purposes, we will make liquid investments in short-term
securities.

We currently intend to make investments in companies engaged in
businesses that are consistent with the general investment philosophy used
by U.S. Trust in its investment management advisory business. The Company
is not, however, constrained or limited in any way to investments in such
strategies and themes. U.S. Trust follows a long-term investment philosophy
and uses a growth strategy and a transaction value strategy to guide
investment decision making. The growth strategy seeks to identify
industries and companies that can provide solutions to or otherwise benefit
from markets that are growing in response to underlying trends. The
transaction value strategy involves a comparison of a company's real
underlying asset value with similar assets changing ownership in the
market. It is based on a belief that differences between a company's real
asset value and the price of its shares correct over time. U.S. Trust
applies these strategies together with a focus on longer-term investment
themes that U.S. Trust believes represent long-term trends. U. S. Trust
currently believes that the following themes represent strong and
inexorable trends:

o Communications and Information
o Productivity Enhancers
o Infrastructure Development
o Early Life Cycle Companies
o Demographics/Rising Living Standards
o Globalization Forces
o Business and Industrial Restructuring

Each of these is described in greater detail under the caption "Investment
Objective and Policies - Investment Strategies."

We may from time to time borrow funds in an amount up to 25% of
our total assets (after giving effect to the borrowing) in order to make
additional investments in existing portfolio companies (referred to as
follow-on investments), to maintain various regulatory qualifications, to
pay contingencies and expenses or in anticipation of the receipt of funds
from capital contributions or the disposition of investments. We do not
intend to borrow in order to make the initial investment in a company. We
will not borrow to pay the advisory fee payable to the Investment Adviser.

There can be no assurance that we will achieve our investment
objective. See "Investment Objective and Policies" and "Risk Factors."

MANAGEMENT AND COMPENSATION

The Investment Adviser is responsible pursuant to the Investment
Advisory Agreement for identifying, evaluating, structuring, monitoring and
disposing of our investments and providing, or arranging for third parties
to provide, any and all management and administrative services reasonably
necessary for the operation of the Company and the conduct of its business.

Affiliates of the Investment Adviser have served as the investment
advisers to UST Private Equity Investors Fund, Inc. ("Fund I") and
Excelsior Private Equity Fund II, Inc. ("Fund II"), each a registered
business development company, since their inceptions in September 1994 and
March 1997, respectively. The investment management personnel of the
Investment Adviser consist of the same persons that perform the investment
management functions for Fund I and Fund II. The Company's investment
objective and policies are similar to those of Fund I and Fund II, although
the Investment Adviser expects to employ an investment strategy more
similar to that of Fund II. As of January 31, 2000, Fund I had made
investments in 12 portfolio companies and 6 private funds with an aggregate
of approximately $40 million of invested and/or committed capital. As of
January 31, 2000, Fund II had made investments in 17 portfolio companies
and 13 private funds with an aggregate of approximately $156 million of
invested and/or committed capital.

Through the fifth anniversary of the final subscription closing
date, the Company will pay the Investment Adviser an advisory fee equal to
2.00% of net assets, determined as of the end of each fiscal quarter.
Thereafter, the advisory fee will be 1.00% of net assets, determined as of
the end of each fiscal quarter. The Investment Adviser has agreed to waive
its advisory fee during the subscription period, which will end on the
final subscription closing date (not later than [October 31, 2000]).

The Investment Adviser also will be 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 all Direct Investments determined net of:

o cumulative realized capital losses on all investments of any
type and

o current net unrealized capital depreciation on all
investments of any type.

The Incentive Carried Interest will be determined annually as of the end of
each year. The Investment Adviser's allocations and distributions will be
made net of, respectively, all prior allocations and all prior
distributions made of the Incentive Carrier Interest to the Investment
Adviser.

THE OFFERING

The Company is offering investors the opportunity to subscribe to
make capital contributions to the Company in exchange for membership
interests in the Company. The Company is offering up to 400,000 units of
membership interests at a price per unit of $1,000 (the "Units"). Units
are made available through ___________, as principal distributor (the
"Distributor") to investors who meet the investor suitability standards set
forth herein. Units may be sold by the Distributor to investors through
financial intermediaries acting as broker or agent ("Selling Agent") for
their customers. The Investment Adviser or an affiliate may compensate from
its own assets Selling Agents who sell Units of the Company to investors.
The offering will terminate on [June 30, 2000] or such other subsequent
date not later than [October 31, 2000] as the Company may determine (the
"Termination Date"). If a minimum of $250,000,000 has not been subscribed
for by the Termination Date, the offering will terminate and all proceeds
from the offering will be refunded to investors with any interest earned
thereon. See "Risk Factors -- Minimum Proceeds; Portfolio Diversification."

We expect to have our first closing (the "first subscription
closing") approximately five business days after we have received
subscriptions for at least $250,000,000. The Company may continue to accept
subscriptions for Units from time to time at subsequent closings (each a
"subsequent subscription closing") until the Termination Date. In the event
that the Company receives subscriptions of more than $400,000,000 by the
Termination Date, the Company may, if approved by the Board of Managers and
the Investment Adviser, increase the offering, provided that in no event
will the Company accept subscriptions totaling more than $600,000,000.

Each subscriber will be required to complete, execute and deliver
to the Company an executed copy of the Subscription Agreement attached
hereto as Exhibit B (the "Subscription Agreement"), which will form a
binding contract of the investor. Funds paid by subscribers will be
deposited in an interest-bearing bank escrow account with United States
Trust Company of New York pending each closing. Organizational and offering
costs of approximately $____ ($____ per Unit assuming the minimum of 250,000
Units are sold, or $_____per Unit assuming all 400,000 Units are sold) have
been incurred by U.S. Trust and will be reimbursed by the Company on or
shortly after the final subscription closing. Each investor's share of
organizational and offering costs will be deducted from his or her capital
account on or shortly after the final subscription closing. Any change in
the price of the Units will be set forth in a supplement to this
Prospectus. See "The Offering." The Company has registered the Units under
the Securities Act of 1933, as amended (the "Securities Act").

Pursuant to the Subscription Agreement, the subscription price of
$1,000 per Unit is required to be paid in two equal installments: $500 upon
subscription and $500 on the first anniversary of the final subscription
closing (not later than [October 31, 2001]). If you breach your agreement
in the Subscription Agreement to pay the remainder of the subscription
price, you will be subject to legal action and various remedies of the
Company, including total forfeiture of your interest in the Company. This
would result in your total loss of amounts previously paid.

Investors will be required to represent in the Subscription
Agreement that they are not employee benefit plans.

MINIMUM INVESTMENTS

The minimum subscription amount is $25,000. We have the right to
waive the minimum, at our discretion. See "The Offering."

USE OF PROCEEDS

We intend to apply the net proceeds of this offering to make
investments in furtherance of our investment objective and policies. We
anticipate that there will be a significant period of time (up to four
years) before the Company becomes fully invested. Although the Company
intends to invest or commit to invest at least 50% of the proceeds from
this offering in Venture Capital Investments within approximately two years
after the receipt of such proceeds, a delay is common for BDCs because of
the competition for investments in entities that meet the requirements for
"qualifying assets" under the Investment Company Act. See "Use of Proceeds."

RISK FACTORS

These are speculative securities. Units of the Company are not
deposits or obligations of, or guaranteed or endorsed by, U.S. Trust, and
the Units are not insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other agency or person.

RISKS RELATED TO THE COMPANY

Unspecified Use of Proceeds. Since the Company has not identified
the particular uses for the net proceeds from this offering, prospective
investors must rely on the ability of the Investment Adviser to identify
and make portfolio investments consistent with the Company's investment
objective.

Lack of Operating History. While the key personnel of the
Investment Adviser and its affiliates have considerable experience in
venture capital and private equity investing, the Company has recently been
formed and has no operating history of its own upon which an investor may
base an evaluation of the likely performance of the Company.

Minimum Proceeds; Portfolio Diversification. To the extent that
the Company makes fewer investments, it may be subject to greater risks
from developments adversely affecting one or a limited number of issuers.
If the Company sells only the minimum number of Units, it will have less
assets to invest and will likely acquire fewer investments than it would if
it sold more Units. This would increase the Company's volatility and risk.

Reliance on the Investment Adviser. The investment decisions of
the Company will be made exclusively by the Investment Adviser. Investors
will have no right to take part in the management of the Company.

Incentive Carried Interest. The Incentive Carried Interest is
based on 20% of the net realized capital gain of the Company and may create
an incentive for the Investment Adviser to cause the Company to make
investments that are riskier or more speculative than would be the case in
the absence of the Incentive Carried Interest.

Transactions with Affiliates; Potential Conflicts of Interest. The
Investment Company Act prohibits certain transactions between the Company
and its affiliates unless the Company first obtains an exemption order from
the Commission. Other transactions between the Company and its affiliates
require the approval of a majority of the members of the Board of Managers
of the Company who are not interested persons of the Company and do not
require an exemptive order. These transactions may not be the result of
arms-length negotiations although the Company will not enter into
affiliated transactions unless it believes that they are fair to the
Company and are not the result of over-reaching by any person. To the
extent that an exemptive order is required, delays and costs involved in
obtaining necessary approvals may decrease the profitability of
transactions or make them impracticable or impossible to consummate, and
there can be no assurance that the Commission will grant exemption orders.
Conflicts of interest may arise in allocating investment and disposition
opportunities, management time, services or functions between the Company
and other entities for which the Investment Adviser and its affiliates may
provide similar services.

Liabilities of Members. Except as described below, you will not be
liable for any obligations of the Company in excess of your capital, plus
your share of undistributed profits. However, if you receive a distribution
from the Company and after such distribution the liabilities of the Company
exceed the fair value of the Company's assets (and you had knowledge of
this fact at the time of the distribution) you may be required to return
such distribution to the Company. The company has no intention of making
such distributions. You will also be obligated to make your full
subscription payment. You will not have the right to a return of your
capital contribution except in accordance with the distribution provisions
of the Operating Agreement.

Capital Call. Failure to make your full subscription payment as
required by the Subscription Agreement may result in the forfeiture of your
entire interest in the Company.

No Public or Other Market for Units. The Company is a newly
organized entity. A member may transfer Units only by operation of law
pursuant to the death, bankruptcy, insolvency or dissolution of the member
or otherwise, or with the written consent of the Company (which it may
withhold in its sole and absolute discretion and will grant, if at all,
only in extenuating circumstances) or in connection with a transfer to a
family trust or another entity that does not result in a change of
beneficial ownership. Any permitted transferees will not, however, be
allowed to become substituted members in the Company without the consent of
the Company, which consent may be withheld in our sole and absolute
discretion. No member will have the right to require the Company to redeem
his, her or its Units. In addition, none of the Company, the Investment
Adviser or the Distributor (nor any of their respective affiliates) will
make offers to repurchase Units, and Units will not be traded on any
securities exchange or other market.

FOR THESE VARIOUS REASONS, AN INVESTMENT IN THE COMPANY WILL BE
ILLIQUID UNTIL ITS UNDERLYING INVESTMENTS ARE DISTRIBUTED OR LIQUIDATED.
INVESTORS MUST BE WILLING AND ABLE TO BEAR THE RISKS OF AN INVESTMENT IN
THE COMPANY UNTIL THAT TIME.

Tax Status. At the first subscription closing, the Company will
receive an opinion of its counsel to the effect that, under current law and
based on certain assumptions and representations, the Company will be
treated as a partnership and not as a publicly traded partnership that is
treated as a corporation for federal income tax purposes. Such opinion will
be based upon the maintenance of certain factual and other conditions, the
continuation of which cannot be assured. No ruling has been or will be
sought from the Internal Revenue Service ("IRS") regarding the status of
the Company as a partnership. An opinion of counsel is not binding on the
IRS or any court. If the Company were treated as a publicly traded
partnership or otherwise treated as a corporation for federal income tax
purposes, material adverse consequences for the members would result. See
"Certain Federal Income Tax Considerations - Tax Status of the Company."

Distributions In Kind. The Company may determine to make
distributions of securities or other property in kind. To the extent that
the Company does so, you will incur additional expenses when you determine
to dispose of such securities or other assets. In addition, the
determination of whether and when to dispose of such securities or other
assets will be your responsibility. Such securities or other property may
be worth more or less when you dispose of them than their value at the time
of distribution. Although the Company generally intends to distribute
securities prior to liquidation only if such securities are traded in an
active secondary market without registration, such securities may be
subject to a minimum holding period or other limitations on resale.

Regulation. The Company has elected to be treated as a business
development company under the Investment Company Act, and as such is
subject to numerous restrictions on the nature of its investments, the use
of leverage and the issuance of securities, options, warrants or rights,
which could prohibit the Company from investing in potentially attractive
situations that might otherwise be available. At the same time, our
election to be treated as a business development company exempts us from
certain provisions of the Investment Company Act. As a result, we operate
differently than a registered investment company and are subject to
different and greater risks as compared to a registered investment company.

GENERAL RISKS OF INVESTMENTS

Risk of Private Equity Investments. Though private equity
investments offer the opportunity for significant capital gains, such
investments also involve a high degree of business and financial risk that
can result in substantial losses.

Illiquidity of Private Equity Investments. The Company anticipates
that it may take up to four years before it is fully invested or committed
to invest in portfolio companies, and it is unlikely that any significant
distribution of the proceeds from the disposition of private equity
investments will be made until the later years of the Company's term.
Securities laws, contractual limitations and practical limitations may
inhibit the Company's ability to sell, distribute or liquidate its
investments in portfolio companies and could reduce the amount of proceeds
that might otherwise be realized.

Need for Follow-On Investments. There is no assurance that the
Company will have sufficient funds available or choose to make follow-on
investments. Failure to make follow-on investments may have a substantial
impact on portfolio companies in need of such an investment or may result
in a missed opportunity for the Company to increase its participation in a
successful operation.

Competition for Investments. The Company expects to encounter
competition from, and to be a co-investor with, other professional venture
capital, private equity or leveraged buyout groups including several in
which the Company may be an investor.

Borrowing. The use of leverage even on a short-term basis could
have the effect of magnifying increases or decreases in the Company's net
asset value and could result in lenders placing restrictions on the Company
including reserve requirements or operating restrictions that would limit
the ability of the Investment Adviser to control investments or
refinancings and the ability of the Company to make distributions.

Lack of Diversification. The Company intends to operate as a
non-diversified investment company within the meaning of the Investment
Company Act. A non-diversified company may invest to a greater degree in
fewer issuers than may a diversified company. As a result, the Company will
be more exposed to developments adversely affecting only one or a few
companies that it has invested in. The net asset value of a nondiversified
company may be more volatile than that of a diversified company.

ALLOCATIONS, DISTRIBUTIONS AND LIQUIDATION

The Company has been formed as a Delaware limited liability
company and as such is governed by Delaware law and an operating agreement
(the "Operating Agreement") that defines many of the rights and
responsibilities of the Board of Managers and members. A copy of the
Operating Agreement is attached hereto as Exhibit A. Investors will become
members of the Company, which will establish a capital account for each
member. Your capital contributions and your share of items of income and
gain will be credited to your capital account, and your distributions and
your share of items of loss, deduction and expense will be debited from
your capital account.

ALLOCATIONS. The income, gain, loss, deduction and expense of the
Company generally will be determined and allocated as of the end of each
fiscal year to reflect the economic interests of the members and the
Investment Adviser.

Company allocations generally will be made in the following
manner:

o items of income, gain, loss, deduction and expense in an
amount equal to the Members' Allocation Amount will be
allocated to the members pro rata in accordance with their
capital contributions, and

o gains will be allocated to the Investment Adviser until the
cumulative amount of all gain that has been allocated to the
Investment Adviser from the commencement of operations
equals the Incentive Carried Interest calculated through the
period for which the allocation is being made.

The Members' Allocation Amount is the items of income, gain, loss,
deduction and expense remaining after the required allocation has been made
to the Investment Adviser.

DISTRIBUTIONS. The Company will distribute all cash that the
Investment Adviser does not expect to use in the operation of the Company
and that is available after the payment of all expenses then due and the
creation of any reserves. The Company will consider making such
distributions at least annually but, as described below, does not expect to
make distributions of cash or property during the first several years of
operations. Each year, the Investment Adviser generally will be entitled to
a distribution equal to the excess of the Incentive Carried Interest as
most recently calculated over the cumulative amount of all prior
distributions of Incentive Carried Interest made to the Investment Adviser.
The members generally will be entitled to all amounts remaining for
distribution pro rata in accordance with their capital contributions.

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. The Company will not reinvest income from its
investments or the proceeds from the sale of its investments, in each case
other than Short-Term Investments, except to make follow-on investments.
The Company may make distributions in kind of its property, which generally
would be treated for purposes of the Company's distribution policies as
distributions of cash in an amount equal to the current market value or
fair value of such property determined in accordance with the Company's
valuation procedures.

LIQUIDATION. The duration of the Company will be ten years from
the final subscription closing; however, the Board of Managers has the
right, in its sole discretion, to extend the term for up to two additional
two-year periods, after which the approval of members who represent 66 2/3%
of the Company's outstanding Units may determine to extend the term of the
Company. Upon dissolution of the Company, the affairs of the Company will
be wound up and its assets distributed as provided in the Operating
Agreement. See "Summary of the Limited Liability Company Operating
Agreement."

TAX STATUS OF THE COMPANY

The Company intends to be treated as a partnership for federal
income tax purposes. See "Certain Federal Income Tax Considerations - Tax
Status of the Company." Thus, each member in computing its federal income
tax liability for a taxable year will be required to take into account his,
her or its allocable share of Company items of income, gain, loss,
deduction and expense for the taxable year of the Company ending within or
with each taxable year of the member, regardless of whether the member has
received any distributions from the Company. It is possible that a member's
federal income tax liability with respect to his, her or its allocable
share of Company earnings in a particular year could exceed the
distributions to the member for the year, thus giving rise to an
out-of-pocket payment by the member.

THE COMPANY

The Company is a newly organized, non-diversified, closed-end
management investment company which has elected to be treated as a business
development company under the Investment Company Act, and which has
registered its securities under the Securities Act of 1933. The Investment
Adviser and the Company will offer managerial assistance to certain portfolio
companies. The Board of Managers may change the Company's status as a BDC
under the Investment Company Act only with the vote of a majority of the
outstanding Units. The Company provides investors with the opportunity to
participate in investments which are generally not available to the public
and typically require substantially larger financial commitments than the
minimum investment in the Company.

The Company was organized as a Delaware limited liability company
on February 18, 2000. Pursuant to the Operating Agreement, the business and
affairs of the Company are overseen by a four member Board of Managers,
three of whom are not "interested persons" of the Company or its affiliates
as that term is defined in the Investment Company Act. The Board of
Managers is analogous to a Board of Directors of a corporation. Pursuant to
the Investment Advisory Agreement, the Investment Adviser, subject to the
supervision of the Board of Managers, is responsible for finding,
evaluating, structuring, monitoring and liquidating the Company's
investments as described in "Management" and is responsible for providing,
or arranging for third parties to provide, any and all management and
administrative services reasonably necessary for the operation of the
Company and the conduct of its business. Pursuant to the Investment
Advisory Agreement, the Investment Adviser is entitled to the Advisory Fee.
Pursuant to the Operating Agreement, the Investment Adviser is entitled to
the Incentive Carried Interest. The Company's and the Investment Adviser's
principal offices are located at 114 West 47th Street, New York, New York
10036, and the telephone number of the Company is (212) 852-3125. The
Investment Adviser's principal office is located at 225 High Ridge Road,
Stamford, Connecticut, 06905.

The duration of the Company will be ten years from the final
subscription closing (not later than [October 31], 2010); however, the
Board of Managers has the right, in its sole discretion, to extend the term
for up to two additional two-year periods, after which the approval of
members who represent 66 2/3% of the Company's outstanding Units may
determine to extend the term of the Company. Upon dissolution of the
Company, the affairs of the Company will be wound up and its assets
distributed as provided in the Operating Agreement.

INVESTMENT OBJECTIVE AND POLICIES

GENERAL

The investment objective of the Company is to seek long-term
capital appreciation. Current income is not a significant factor in the
selection of investments. We will pursue long-term capital appreciation
primarily by investing in private domestic venture capital companies and
other private companies (collectively, "Venture Capital Investments").
Venture Capital Investments are domestic companies in which the equity is
closely held by company founders, management and/or a limited number of
institutional investors. Subject to the limitations of the Investment
Company Act, we also intend to invest in domestic and international venture
capital, buyout and other private equity funds managed by third parties
("Private Funds"), negotiated private investments in public companies
("Private Placements in Public Companies") and foreign companies in which
the equity is closely held by company founders, management and/or a limited
number of institutional investors ("International Venture Capital
Investments"). We refer to Venture Capital Investments, Private Placements
in Public Companies and International Venture Capital Investments as Direct
Investments. Pending investment, for operating purposes and for temporary
or emergency purposes, the Company will invest in interest bearing bank
accounts, money market mutual funds, U.S. treasury securities and/or
certificates of deposit with maturities of less than one year, commercial
paper and other short term securities (collectively "Short-Term
Investments"). Although the Company's objective is to seek long-term
capital appreciation, there is no minimum holding period for the Company's
investments and the Company may sell any investment at any time that the
Investment Adviser believes it is advantageous to do so.

As a BDC, the Company must invest at least 70% of its assets
("qualifying assets") in certain specified investments, including
securities of companies that qualify as "eligible portfolio companies"
under the Investment Company Act. The Company may maintain up to 30% of its
assets in non-qualifying assets; however, the Company intends to retain
maximum flexibility in connection with its investments and, therefore, does
not have a policy as to the minimum percentage of its assets that will be
so invested. See "The Company" and "Regulation."

Venture Capital Investments

We will seek to achieve our investment objective by investing
primarily in Venture Capital Investments. We may also commit to invest
funds in a Venture Capital Investment beyond our initial investment or
guarantee the obligations of a Venture Capital Investment. We will attempt
to reduce the risks inherent in private equity investing by investing in a
portfolio of companies involved in different industries and different
stages of development, through the utilization of professional management
provided by the Investment Adviser in the selection of private equity
investments and through the active monitoring of such investments.

Other Private Equity Investments

Subject to the limitations of the Investment Company Act, we may
invest in Private Funds, International Venture Capital Investments and
Private Placements in Public Companies (collectively, "Other Private Equity
Investments"). We generally will not make an investment in Other Private
Equity Investments if, immediately after such investment is made, more than
30% of the value of our total investment assets would be invested in such
assets. Any Private Fund investments will generally be made in domestic or
foreign venture capital, buyout or other private equity funds managed by
third parties. We do not expect to invest more than 10% of our total assets
in any one Other Private Equity Investment. The Investment Adviser will not
have a role in the management of Private Funds. Private Funds typically
charge a management fee and an incentive fee based upon gains. These fees
are in addition to the management fees payable to the Investment Adviser,
although the Incentive Carried Interest will not be based on gains from
Private Funds.

INVESTMENT STRATEGIES

The Investment Adviser will evaluate the ability of prospective
investments to produce long-term capital appreciation based upon criteria
that may be modified from time to time. The criteria that will initially be
used by the Investment Adviser in determining whether to make an investment
include:

(i) the presence or availability of strong management;

(ii) the existence of a substantial market for the
products or services of a potential portfolio
company, characterized by favorable growth
potential, or a substantial market position in a
stable industry;

(iii) the opportunity for liquidity to eventually be
obtained for the proposed investment through an
initial public offering or through a sale of the
business; and

(iv) the willingness of a potential portfolio company
to permit us and our co-investors, if any, to
take a substantial position in the company and
have representation on its board of directors or
a right to attend board meetings as a nonvoting
participant, so as to enable us to influence the
strategic direction of the company.

Although the Company is a non-diversified company as defined in
the Investment Company Act, we do not expect to invest more than 10% of our
total assets in any one portfolio company or Private Fund. While we retain
the flexibility to invest in all types of industries, we currently intend
to make investments in companies engaged in businesses that are consistent
with the general investment philosophy used by U.S. Trust in its investment
management advisory business. U.S. Trust follows a long-term investment
philosophy based on identifying opportunities with sustainable fundamental
values and uses two specific portfolio strategies to guide investment
decision-making.

U.S. Trust's first strategy is one of growth. This strategy seeks
to identify industries and companies with the capabilities to provide
solutions to or benefit from markets which are growing in response to
underlying trends, such as companies' need to enhance productivity through
technological innovation or the changing demographics of the U.S.
population. U.S. Trust's second strategy is a "transaction value"
comparison of a company's real underlying asset value with similar assets
changing ownership in market transactions. Differences between a company's
real asset value and the price of its shares often are corrected over time
by restructuring of the assets or by market recognition of their value.

The two portfolio strategies discussed above are applied together
with several "longer-term investment themes" to help identify specific
investment opportunities. U.S. Trust believes that the longer-term themes
described below represent strong and inexorable trends and that the
beneficiaries of these trends will be rewarded in the long-term.

o Communication and Information -- companies benefiting from
the technological and international transformation of the
communications and information industries, particularly the
convergence of information, communication and entertainment.

o Productivity Enhancers -- companies benefiting from their
roles as innovators, developers and/or suppliers of goods
and services which enhance service and manufacturing
productivity or companies that are most effective at
obtaining and applying productivity enhancements.

o Infrastructure Development -- companies benefiting from the
development and expansion of global infrastructure
expenditure.

o Early Life Cycle -- companies in an earlier stage of
development looking to exploit new market opportunities.

o Demographics/Rising Living Standards -- companies concerned
with the quality characteristics, lifestyles and changing
demographic profiles of individuals, families and companies.

o Globalization Forces -- companies benefiting from their
position as effective and strong competitors on a global
basis.

o Business and Industrial Restructuring -- companies
benefiting from their restructuring or redeployment of
assets and operations in order to become more competitive or
profitable.

INVESTMENT PRACTICES

Borrowing. The Company may from time to time borrow funds for
operating purposes in an amount up to 25% of the value of its total assets
(after giving effect to the borrowing) in order to make additional
investments in existing portfolio companies, to maintain various regulatory
qualifications or to pay contingencies and expenses. If the Company borrows
funds (other than through a private loan), distributions to Unitholders or
the repurchase of Units generally is prohibited under the Investment
Company Act unless the ratio of our total assets (less liabilities and
indebtedness not subject to this test) to the amount of all such borrowings
is at least 200% at the time of and after giving effect to the distribution
or repurchase. In general, the Company does not intend to borrow for
investment purposes other than for the purpose of making additional
investments in existing portfolio companies and will not borrow to pay the
management fee payable to the Investment Adviser. See "Regulation."

The use of leverage even on a short-term basis will have the
effect of magnifying increases or decreases in the Company's net asset
value. We also expect that, as a condition to lending, lenders may place
restrictions on us, which may include reserve requirements or operating
restrictions, and may limit our ability to make distributions. There can be
no assurance that the Company will borrow when considered desirable. The
Company may not be able to arrange debt financing on terms acceptable to
the Investment Adviser and the Board of Managers, or the Investment Adviser
and the Board of Managers may believe borrowings are not in the Company's
best interest. If the Company were unable to obtain debt financing, the
Company might be required to sell a portfolio investment at an inopportune
time, or to forego the purchase of an attractive investment. In either
case, the value of the Company's investment portfolio, and of the Units,
could be adversely affected. See "Risk Factors -- Borrowing."

Other Investment Policies. The Company will not sell securities
short or on margin. Except for hedging purposes, the Company will not write
puts or calls or purchase or sell commodities or commodity contracts. The
Company will not underwrite the issuance of securities of other companies.
Realized and unrealized gains and losses on hedging instruments used to
hedge Direct Investments will be treated as realized or unrealized gains or
losses on such Direct Investments for purposes of the Company's allocation
and distribution policies.

The Company will not lend its assets to any person or individual,
except through the purchase of bonds or other debt obligations customarily
sold to institutional investors. However, the Company may, subject to
limitations of the Investment Company Act, lend portfolio securities if
collateral values are continuously maintained at no less than 100% by
"marking to market" daily. The collateral received will consist of cash,
U.S. short-term government securities, bank letters of credit or such other
collateral as may be permitted under the Company's investment objective and
policies and by regulatory agencies and approved by the Board of Managers
of the Company. While a loan of portfolio securities is outstanding, the
Company will continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities, as well as interest on the
investment of the collateral or a fee from the borrower. The risks in
lending portfolio securities, as with other extensions of secured credit,
consist of possible delay in receiving additional collateral or in recovery
of the securities or possible loss of rights in the collateral should the
borrower fail financially.

The Company will not invest in real estate or oil, gas or other
mineral leases, either directly or indirectly (including limited
partnership interests of entities which invest in real property or
interests in oil, gas or minerals), although the Company may invest in
other entities whose business involves the holding or acquisition of real
estate or the holding or making of such leases.

The Company's objective and its policies (other than its status as
a BDC) are not deemed to be fundamental policies and all may be changed at
any time and from time to time by the Board of Managers without member
approval.

RISK FACTORS

The Units offered hereby involve a high degree of risk, including,
but not limited to, the risk factors described below. Each prospective
investor should carefully consider the following risk factors inherent in
and affecting the business of the Company and this offering before making
an investment decision. Prospective investors should consider the
information set forth under "Management -- Potential Conflicts of
Interest."

RISKS RELATED TO THE COMPANY

Lack of Operating History

While the key personnel of the Investment Adviser and its
affiliates have considerable experience in venture capital and private
equity investing, including experience with Fund I and Fund II, the Company
has recently been formed and has no operating history of its own upon which
an investor may base an evaluation of the likely performance of the
Company.

Minimum Proceeds; Portfolio Diversification

The Company will begin operations upon the sale of a minimum of
250,000 Units or minimum capital commitments of $250,000,000. To the extent
that the Company makes fewer investments, it may be subject to greater
risks from developments adversely affecting one or a limited number of
issuers. If the Company sells only the minimum number of Units, it will
have less assets to invest and will likely acquire fewer investments than
it would if it sold more Units. This would increase the Company's
volatility and risk.

Reliance on the Investment Adviser

The investment decisions of the Company will be made exclusively
by the Investment Adviser. Investors will have no right or power to take
part in the management of the Company and will not receive the detailed
financial information made available by issuers to the Investment Adviser
in connection with the review of possible purchases for the Company's
portfolio. Accordingly, investors must be willing to entrust all management
aspects of the Company to the Investment Adviser.

Regulation

The Company has elected to be treated as a BDC under the
Investment Company Act. The applicable provisions of the Investment Company
Act impose numerous restrictions on the activities of the Company,
including restrictions on the nature of its investments, its use of
leverage and its issuance of securities, options, warrants or rights. Among
the restrictions is the requirement that a majority of the Board of
Managers be individuals who are not "interested persons" within the meaning
of the Investment Company Act and that the Company must generally invest at
least 70% of its assets in securities of companies that meet the
requirements for "eligible portfolio companies" under the Investment
Company Act. In addition, a BDC must make significant managerial assistance
available to a significant number of the companies whose securities it
purchases. The Investment Adviser believes that the constraints applicable
to BDCs are consistent with the objectives of the Company. However, such
constraints could prohibit the Company from investing in some potentially
attractive situations that might otherwise be available. At the same time,
our election to be treated as a business development company exempts us
from certain provisions of the Investment Company Act. As a result, we
operate differently than a registered investment company and are subject to
different and greater risks as compared to a registered investment company.

There are relatively few judicial decisions under and
administrative interpretations of the portions of the Investment Company
Act applicable to the Company, and there can be no assurance that such
provisions will be interpreted or administratively implemented in a manner
consistent with the Company's objectives and intended manner of operation.
In the event that the Board of Managers determines that it cannot operate
effectively as a BDC, the Board of Managers may at some future date decide
to withdraw the Company's election to be treated as a BDC and transform it
into a registered investment company or an operating company not subject to
regulation under the Investment Company Act , or cause the Company to be
liquidated. The Company could not operate as an operating company
unregulated under the Investment Company Act consistent with its current
investment policies. Should the Board of Managers seek to withdraw the
Company's election as a BDC, it must obtain the approval of members who
represent a majority of the Company's outstanding Units. See "Regulation."

Transactions with Affiliates; Potential Conflicts of Interest

The Investment Company Act restricts transactions between the
Company and any "affiliated person" (as defined in the Investment Company
Act) including, among others, the Company's officers, members of its Board
of Managers, principal Unitholders, employees, the Investment Adviser, and
any other affiliates of the Company. In many cases, the Investment Company
Act prohibits transactions between the Company and such persons unless the
Company first applies for and obtains an exemptive order from the
Commission. Delays and costs involved in obtaining necessary approvals may
decrease the profitability of such transactions or make it impracticable or
impossible to consummate such transactions. Further, provisions of the
Federal Reserve Act impose restrictions on certain types of transactions
("covered transactions") between a member bank and its affiliates, as
defined in those provisions.

Prior to commencement of operations, the Company's Board of
Managers will implement written procedures approved by a majority of the
disinterested members of the Board of Managers that are designed to
regulate investment activity by affiliates in conflict with or in
conjunction with the Company's activities, including adopting a code of
ethics containing provisions designed to prevent employees from engaging in
acts prohibited by Rule 17j-1 under the Investment Company Act. However,
circumstances could develop which would require Commission approval in
advance of proposed transactions by the Company or its affiliates with
portfolio companies or their affiliates. Depending upon the extent of the
Investment Adviser's influence and control with respect to such portfolio
companies, the selection of any affiliates of the Investment Adviser to
perform various services for portfolio companies may not be a disinterested
decision and the terms and conditions for the performance of such services
and the amount and terms of compensation to be received therefor may not be
determined in arms-length negotiations, although the terms and conditions
of any such selection are expected to be consistent with those which would
be offered in good faith to an unaffiliated third party retained to provide
such services. The Company will not enter into any affiliated transactions
unless it believes that they are fair to the Company and not the result of
over-reaching by any person. The selection of the Investment Adviser or any
of its affiliates to perform services for a portfolio company must be
approved by a majority of the disinterested members of the Board of
Managers of the Company and the independent and disinterested directors of
the portfolio company.

In addition, officers, employees and members of the Board of
Managers of the Company or officers, employees, directors, partners or
members of its affiliates, including the Investment Adviser and the
Manager, may serve as directors of or as consultants to certain portfolio
companies and, in connection therewith, may earn consulting fees, finder's
fees and other fees and commissions, which may be paid in the form of cash,
securities or other forms of consideration. While the Investment Adviser is
obligated to use its best efforts to provide the Company with a continuing
and suitable investment program consistent with its investment objective
and policies, the Investment Adviser is not required to present to the
Company any particular investment opportunity that falls within the
investment objective and policies of the Company except as set forth in the
procedures adopted by the Company's Board of Managers. Such procedures
provide that the Investment Adviser must endeavor to offer to the Company
on an equitable basis investment opportunities that would be suitable for
both the Company and other similar private equity funds for which the
Investment Adviser, United States Trust Company of New York or any of its
subsidiaries provide discretionary investment advisory services. The
Company's portfolio companies may also enter into certain financial
arrangements with the Company and/or its affiliates subject to appropriate
regulatory guidelines or approvals as required. The Company may seek an
exemptive order from the Commission relieving the Company, subject to
certain terms and conditions, from certain provisions of the Investment
Company Act to permit co-investments by the Company with certain affiliates
of the Company or the Investment Adviser, including certain companies or
funds that may be set up in the future. Such co-investments will be in
specified amounts and on terms and conditions that are the same in all
material respects, subject to the availability of capital for investment on
the part of the Company and each such affiliate and certain other
considerations. There can be no assurance that the Commission will grant
such an order or that such affiliates will have capital available to
co-invest with the Company. See "Regulation." The Investment Adviser and
its affiliates will not enter into any such arrangement with a portfolio
company unless such arrangement has been approved by a majority of the
disinterested members of the Board of Managers of the Company and by the
independent directors of the portfolio company who also have no interest in
the arrangement. Because of their potentially varying investment objectives
or other factors, conflicts could arise between the Company and its
affiliates relating to such co-investments, which can only be resolved
through the exercise by the Investment Adviser of such judgment as is
consistent with its fiduciary duties to the Company. Even with the proper
exercise of such judgment, however, there can be no assurance that
potential conflicts will be resolved in a manner favorable to the Company.
The Company will not have independent management or employees and will rely
upon the Investment Adviser, and its affiliates for management and
administration of the Company and its assets. Conflicts of interest may
arise in allocating investment opportunities, management time, services or
functions between the Company and other entities for which the Investment
Adviser and its affiliates may provide similar services. The Company's
Board of Managers will supervise the activities of the Investment Adviser.
See "Management -- Potential Conflicts of Interest."

Unspecified Use of Proceeds

Inasmuch as the Company has not identified the particular uses for
the net proceeds from this offering other than to make investments on the
basis of opportunities as they may arise, prospective investors must rely
on the ability of the Investment Adviser to identify and make portfolio
investments consistent with the Company's investment objective. Investors
will not have the opportunity to evaluate personally the relevant economic,
financial and other information which will be utilized by the Investment
Adviser in deciding whether or not to make a particular investment or to
dispose of any such investment. See "Use of Proceeds."

FEDERAL INCOME TAXATION

Tax Status of the Company. At the first subscription closing, the
Company will receive an opinion of its counsel to the effect that, under
current law and based on certain assumptions and representations, the
Company will be treated as a partnership and not as a "publicly traded
partnership" that is treated as a corporation for federal income tax
purposes. Such opinion will be based upon the maintenance of certain
factual and other conditions, the continuation of which cannot be assured.
No ruling has been or will be sought from the IRS regarding the status of
the Company as a partnership. An opinion of counsel is not binding on the
IRS or any court.

A limited liability company (such as the Company) that has elected
to be treated as a business development company under the Investment
Company Act would be treated as a corporation for federal income tax
purposes if it were to become a publicly traded partnership. If the Company
were treated as a publicly traded partnership or otherwise treated as a
corporation for federal income tax purposes, material adverse consequences
for the members would result. The Company would be subject to tax on its
income at corporate tax rates, without a deduction for any distribution to
the members, thereby materially reducing the amount of any cash available
for distribution to the members. In addition, the members would be treated
as shareholders for federal income tax purposes. Thus, capital gains and
losses and other income and deductions of the Company would not be passed
through to the members, and all distributions by the Company to the members
would be treated as dividends, return of capital and/or gains. See "Certain
Federal Income Tax Considerations - Tax Status of the Company."

Taxation of Members on Company Profits and Losses. The Company, if
treated as a partnership for tax purposes as discussed above, will not
itself be subject to federal income tax. Rather, each member in computing
his, her or its federal income tax liability will be required to take into
account his, her or its allocable share of Company items of income, gain,
loss, deduction and expense for the taxable year of the Company ending
within or with such taxable year of the member, regardless of whether the
member has received any distributions from the Company. Prospective
investors should also be aware that they will be subject to various
limitations on their ability to deduct their allocable share of Company
losses (or items of loss and deduction thereof). For these and various
other reasons, it is possible that a member's federal income tax liability
with respect to his, her or its allocable share of Company earnings in a
particular year could exceed the cash distributions to the member for the
year, thus giving rise to an out-of-pocket payment by the member.

General. In view of the complexity of the tax aspects of the
offering, particularly in light of recent changes in the law and the fact
that certain of the tax aspects of the offering will not be the same for
all investors, prospective investors must consult their own tax advisers
with specific reference to their own tax situations prior to investing in
the Company. No assurance can be given that the current federal income tax
treatment applicable to an investment in the Company will not be modified
by legislative, administrative or judicial action in the future. Any such
changes may retroactively affect existing transactions and investments.
Prospective investors must also consult their own tax advisers with respect
to the effects of applicable state, local and non-U.S. tax laws.

The foregoing is a summary of certain significant federal income
tax risks relating to an investment in the Company. This summary should not
be interpreted as a representation that the matters referred to herein are
the only tax risks involved in this investment or that the magnitude of
such risks is necessarily equal. For a more detailed discussion of these
and other federal income tax risks of an investment in the Company, see
"Certain Federal Income Tax Considerations."

Liability of Investors

Except as described below, you will not be liable for any
obligations of the Company in excess of your capital, plus your share of
undistributed profits. However, if you receive a distribution from the
Company and after such distribution the liabilities of the Company exceed
the fair value of the Company's assets (and you had knowledge of this fact
at the time of the distribution) you may be required to return such
distribution to the Company. The Company has no intention of making such
distributions. You will also be obligated to make your full subscription
payment. You will not have the right to a return of your capital
contribution except in accordance with the distribution provisions of the
Operating Agreement.

No Public or Other Market for Units

No person may become a substitute member without the written
consent of the Company, which may withhold its consent for any reason in
its sole and absolute discretion. A member may transfer Units only by
operation of law pursuant to the death, bankruptcy, insolvency or
dissolution of the member or otherwise, or with the written consent of the
Company (which it may withhold in its sole and absolute discretion and will
grant, if at all, only in extenuating circumstances) or in connection with
the transfer to a family trust or another entity that does not result in a
change in beneficial ownership. Notice to the Company of any proposed
transfer must include evidence satisfactory to the Company that the
proposed transferee meets any eligibility and suitability standards and
must be accompanied by properly completed transfer documents.

Any transferee that acquires Units by operation of law as a result
of death, bankruptcy, insolvency or dissolution of the member or otherwise
shall be entitled to the allocations and distributions, if any, with
respect to the Units so acquired and to transfer those Units subject to the
restrictions of the Operating Agreement, but shall not be entitled to the
other rights of a member unless and until that transferee becomes a
substituted member as provided in the Operating Agreement. If a member
transfers Units with the approval of the Company under the policies
established by the Company, the Company shall promptly take all necessary
actions so that each transferee or successor to whom those Units is
transferred is admitted to the Company as a member. Each member and
transferee must pay all expenses, including attorneys' and accountants'
fees, incurred by the Company in connection with such transfer.

By subscribing for Units, each member will agree to indemnify and
hold harmless the Company, the Investment Adviser, each other member and
any successor or assign of any of the foregoing, against all losses,
claims, damages, liabilities, costs and expenses (including losses, claims,
damages, liabilities, costs and expenses of any judgments, fines and
amounts paid in settlement), joint or several, to which those persons may
become subject by reason of or arising from any transfer made by that
member in violation of these provisions or any misrepresentation made by
that member in connection with any such transfer. A similar indemnification
is required to be made by a permitted transferee.

GENERAL RISKS OF INVESTMENTS

Risk of Private Equity Investments

While the Company will be a non-diversified company as defined by
the Investment Company Act, it does not expect to invest more than 10% of
its total assets in any one portfolio company. The Company's investments in
Private Funds serve to further diversify its holdings. Since the Company's
assets may be concentrated in relatively few investments, substantial
declines in the values of its investments could have a material adverse
effect on the net asset value of the Company. Although private equity
investments offer the opportunity for significant capital gains, such
investments involve a high degree of business and financial risk that can
result in substantial losses. Among these are the risks associated with
investment in companies in an early stage of development or with little or
no operating history, companies operating at a loss or with substantial
variation in operating results from period to period, companies with the
need for substantial additional capital to support expansion or to maintain
a competitive position, or companies with significant financial leverage.
Such companies may also face intense competition from others including
those with greater financial resources, more extensive development,
manufacturing, distribution or other attributes, over which the Company
will have no control. The Company anticipates that it may also make
investments in high-technology companies that may face risks of product
obsolescence.

Illiquidity of Private Equity Investments

Because of the competition for investments that meet the
requirements for "qualifying assets," the Company anticipates that it may
take up to four years before it is fully invested or committed to invest in
portfolio companies. Private equity investments may typically take from two
to seven years from the date of initial investment to reach a state of
maturity at which disposition can be considered. In light of the foregoing,
it is unlikely that any significant distribution of the proceeds from the
disposition of private equity investments will be made until the later
years of the Company's term.

The Company's private equity investments will consist primarily of
securities that are subject to restrictions on sale by the Company because
they were acquired from the issuer in "private placement" transactions or
because the Company is deemed to be an affiliate of the issuer. Generally,
the Company cannot sell these securities publicly without the expense and
time required to register the securities under the Securities Act or sell
the securities under Rule 144 or other rules under the Securities Act which
permit only limited sales under specified conditions. When restricted
securities are sold to the public, the Company may be deemed an
"underwriter" or possibly a controlling person under the Securities Act and
be subject to liability as such under the Securities Act.

In addition, contractual or practical limitations may inhibit the
Company's ability to sell, distribute or liquidate its investments in
portfolio companies because the issuers are privately held, because the
Company owns a relatively large percentage of the issuer's outstanding
securities, or because joint venture associates, other investors, financial
institutions or management are relying on the Company's continued
investment. Sales may also be limited by financial market conditions, which
may be unfavorable for sales of securities of particular issuers or issuers
in particular markets. The above limitations on liquidity of the Company's
portfolio investments could prevent a successful sale and result in the
delay of any sale or reduction in the amount of proceeds that might
otherwise be realized. Although the Company will reflect these restrictive
factors in the valuation of its investments, no assurance can be given that
the estimated values will represent the return that might ultimately be
realized by the Company from the investment. See "Valuation of Portfolio
Securities."

Need for Follow-On Investments

Following its initial investments in portfolio companies, the
Company anticipates that it may be called upon to provide additional funds
to portfolio companies or have the opportunity to increase investments in
successful operations. Although the Company may borrow to make follow-on
investments, there is no assurance that the Company will make follow-on
investments or that the Company will have sufficient funds to make such
investments. Any decision by the Company not to make follow-on investments
or its inability to make them may have a substantial impact on portfolio
companies in need of such an investment or may result in a missed
opportunity for the Company to increase its participation in a successful
operation.

Competition for Investments

The Company expects to encounter competition from other entities
having similar investment objectives. Historically, the primary competition
for venture capital, buyout and other private equity investments has been
from venture capital, buyout and private equity partnerships and
corporations, private equity affiliates of large industrial and financial
companies, small business investment companies and wealthy individuals. The
Company will frequently be a co-investor with other professional venture
capital, private equity or leveraged buyout groups including several in
which the Company may be an investor. These relationships with other groups
should expand the Company's access to investment opportunities.

In addition, it is possible that there may be circumstances under
which an additional investment would be considered an affiliated
transaction, requiring prior Commission approval. The receipt of an
exemptive order from the Commission could be time consuming and costly and
there can be no assurance that such approval would be obtained.

Borrowing

In general, the Company does not intend to borrow funds for
investment purposes. However, the Company may borrow funds to facilitate
the making of follow-on investments, to maintain various regulatory
qualifications or to pay contingencies and expenses. The Company will not
borrow to pay the advisory fee payable to the Investment Adviser. The
Company is permitted under the Investment Company Act to borrow funds if,
immediately after the borrowing, it will have an asset coverage (as defined
in the Investment Company Act) of at least 200%. The amount and nature of
any borrowings will depend upon a number of factors over which neither the
Board of Managers nor the Investment Adviser has control, including general
economic conditions, conditions in the financial markets and the impact of
the financing on the tax treatment of the members. Subject to the
foregoing, the Company may borrow funds in an amount up to 25% of the value
of its assets. See "Investment Objective and Policies -- Borrowing."

Although the Company does not intend to borrow funds to make
initial investments, the use of leverage even on a short-term basis could
have the effect of magnifying increases or decreases in the Company's net
asset value. The Company also expects that, as a condition to lending,
lenders may place restrictions on the Company, which may include reserve
requirements or operating restrictions, and may limit the ability of the
Company to make distributions to members. There can be no assurance that
debt financing will be available on terms that the Manager considers to be
acceptable and in the best interests of the Company. If borrowing is
unavailable, the Company may be required to make an untimely disposition of
an investment.

Lack of Diversification

The Company intends to operate as a non-diversified investment
company within the meaning of the Investment Company Act and, therefore,
the Company's investments may not be substantially diversified. In any
event, the Company will not be able to achieve the same level of
diversification as much larger entities engaged in similar activities. The
Company's assets may be subject to greater risk of loss than if they were
more widely diversified, inasmuch as the failure of one or more of a
limited number of investments could have a greater adverse effect on the
Company than the failure of one of a large number of investments. The net
asset value of a nondiversified company may be more volatile than in the
case of a diversified company. See "Investment Objective and Policies."

THE OFFERING

The Company is offering investors the opportunity to subscribe to
make capital contributions to the Company in exchange for membership
interests in the Company. The Company is offering up to 400,000 Units at a
price per Unit of $1,000 through __________, as principal distributor. The
minimum subscription is $25,000. We have the right to waive the minimum at
our discretion. There are no sales charges or other commissions payable to
the Company or the Distributor in connection with the purchase of the
Units. Units may be sold by the Distributor to investors through financial
intermediaries acting as broker or agent for their customers. The
Investment Adviser or affiliate, out of its own assets and not the assets
of the Fund may compensate Selling Agents who sell Units of the Fund. If
subscriptions for a minimum of 250,000 units have not been received by the
Termination Date, the offering will terminate and all proceeds from the
offering will be refunded to investors with any interest earned thereon and
without any deductions. See "Risk Factors -- Minimum Proceeds and Portfolio
Diversification."

Each investor will be required to complete, execute and deliver to
the Company an executed copy of the Subscription Agreement, which will form
a binding contract of the investor. The Subscription Agreement must be
accompanied by a money transfer or check payable to the order of United
States Trust Company of New York in the amount of $500 for each Unit
subscribed for, representing the initial capital contribution per Unit (not
later than [October 31,] 2001). The remaining $500 per Unit will be
required to be paid on the first anniversary of the final subscription
closing. We will give you or your designated representative at least 30
business days' notice of the second contribution date, which notice will
specify the date for payment and amount required to be paid.

If any member fails to make the second payment when due, the
Company will give the member immediate notice of default. If such member
fails to cure such default promptly after receiving the notice of default
from the Company, the Company may take such action as may be necessary,
including enforcing the Subscription Agreement in any court of competent
jurisdiction. The Company may in its sole discretion elect instead to avail
itself of any other remedies afforded under Delaware law, including
potentially complete forfeiture to the Company of the delinquent member's
Units. This would result in the complete loss of amounts previously
contributed by the delinquent member.

Funds paid by subscribers will be deposited in an interest-bearing
bank escrow account with United States Trust Company of New York pending
each closing. In the event the Company rejects a subscriber's Subscription
Agreement or a subscriber elects to withdraw his subscription prior to his
or her initial subscription closing date, United States Trust Company of
New York will promptly deliver to such subscriber all funds received; any
interest earned on such funds will be returned within five business days of
the next subscription closing after such rejection or withdrawal.

We expect that a first subscription closing will be held on or
about the fifth business day after receipt of subscriptions for at least
$250,000,000. The Company may continue to offer the remaining unsold Units
and accept subscriptions for such Units from time to time at subsequent
closings until the Termination Date. In the event that the Company receives
subscriptions for more than $400,000,000 by the Termination Date, the
Company may, if approved by the Board of Managers and the Investment
Adviser, increase the offering, provided that in no event will the Company
accept subscriptions totaling more than $600,000,000. Within five days
after each closing, United States Trust Company of New York will mail to
each subscriber checks in the respective amounts of interest earned by
funds held in escrow. If the minimum of 250,000 Units are sold, any charges
or expenses associated with the escrow account will be paid by the
Investment Adviser.

USE OF PROCEEDS

The net proceeds to the Company from this offering will be
$400,000,000 if all Units are sold and before deducting organizational and
initial offering expenses estimated to be approximately [$_________].

No portion of the net proceeds of the offering has been allocated
to any particular investment. However, the proceeds will be utilized in a
manner consistent with the Investment Company Act and the Company's
investment objective and policies. Pending investment, for operating
purposes and for temporary or emergency purposes, such proceeds will be
invested in Short-Term Investments.

It is anticipated that there will be a significant period of time
(up to four years) before the Company becomes fully invested. Although the
Company intends to invest or commit to invest at least 50% of the proceeds
from this offering in Venture Capital Investments within approximately two
years after the receipt of such proceeds, a delay is common for BDCs
because of the competition for investments in entities that meet the
requirements for "qualifying assets" under the Investment Company Act.
Further, investments in Venture Capital Investments and other Direct
Investments may typically take from two to seven years from the date of
initial investment to reach a state of maturity at which disposition can be
considered. In light of the foregoing, it is unlikely that any significant
distribution of the proceeds from the disposition of Venture Capital
Investments and other Direct Investments will be made until the later years
of the existence of the Company. See "Risk Factors."

MANAGEMENT

INVESTMENT ADVISER; COMPENSATION

Investment Adviser. [Excelsior Venture Management LLC], a newly
formed limited liability company that is an affiliate of United States
Trust Company of New York and U.S. Trust Company, will serve as the
Investment Adviser of the Company pursuant to an investment advisory
agreement with the Company (the "Investment Advisory Agreement").
Affiliates of the Investment Adviser have been the Investment Adviser to
Fund I and Fund II, each a registered BDC, since September 1994 and March
1997, respectively. The investment personnel of the Investment Adviser
consist of the same persons that perform the investment management
functions for Fund I and Fund II.

The Investment Adviser is a recently organized limited liability
company that was created to provide investment management and
administrative services to the Company and to other investment funds that
may be established in the future. U.S. Trust Company and its parent
company, U.S. Trust Corporation, are members of the Investment Adviser.
Certain employees and officers of U.S. Trust Company and its affiliates are
also members of the Investment Adviser and are allocated a portion of the
Investment Adviser's net profits relating to the Incentive Carried
Interest. U.S. Trust Company is an FDIC insured, Connecticut chartered
state bank and trust company and is a subsidiary of U.S. Trust Corporation.
On December 31, 1999, U.S. Trust's Asset Management Group, which includes
United States Trust Company of New York and other affiliates of U.S. Trust
Corporation, had approximately $86 billion in assets under management. The
principal business address of the Investment Adviser is 225 High Ridge
Road, Stamford, Connecticut 06905.

Under the supervision of the Company's Board of Managers, the
Investment Adviser is responsible for finding, evaluating, structuring and
monitoring the Company's investments and for providing or arranging for
management and administrative services for the Company. The investment
professionals in charge of the day-to-day management of the Company have
extensive experience in venture capital and private equity investing. See
"Managers, Officers and Investment Professionals" below.

PROPOSED MERGER

On January 12, 2000, The Charles Schwab Corporation ("Schwab") and
U.S. Trust Corporation entered into a definitive agreement to merge (the
"Merger"). Through its principal subsidiary, Charles Schwab & Co., Inc.,
Schwab is the nation's fourth largest financial services firm and the
nation's largest electronic brokerage firm, in each case, as measured by
customer assets. At December 31, 1999, Schwab served 6.6 million active
accounts with $725 billion in customer assets through 340 branch offices,
four regional customer telephone service centers and automated telephone
online channels. Approximately 30% of Schwab's customer assets and
approximately 13% of its customer accounts are managed by 5,800
independent, fee-based investment Advisers served by Schwab's institutional
investor segment. After the Merger, U.S. Trust Corporation will be a
wholly-owned subsidiary of Schwab. The Merger is anticipated to close by
July 2000; however, it is subject to a number of conditions including
certain regulatory and shareholder approvals. Charles R. Schwab is the
founder, Chairman and Co-Chief Executive Officer and a director and
significant shareholder of Schwab.

The Investment Adviser, a subsidiary of U.S. Trust Corporation,
intends to continue to serve as the Investment Adviser to the Company after
the Merger. The Merger, however, represents a change in control of U.S.
Trust Corporation and may be deemed to result in an assignment of the
Investment Advisory Agreement and under the terms of the Investment
Advisory Agreement, and result in the automatic termination of the
Investment Advisory Agreement. The Board of Mangers, including a majority
of the members who are not interested persons of the Investment Adviser or
Schwab, and _____________ , acting as the sole Unitholder of the Company,
have authorized the Company to enter into a new Investment Advisory
Agreement with the Investment Adviser immediately after the Merger that is
substantially identical to the existing Investment Advisory Agreement.
Investors will also authorize such new Investment Advisory Agreement and
continuation in the Subscription Agreement. The Company will not call a
meeting of members to approve the new Investment Advisory Agreement.

Management Fee. In return for its services and the expenses which
the Investment Adviser assumes under the Investment Advisory Agreement, the
Company will pay the Investment Adviser, on a quarterly basis, an advisory
fee equal to 2.00% of net assets through the fifth anniversary of the first
closing date and 1.00% of net assets thereafter. The management fee is
payable in arrears on the last day of each fiscal quarter. The Investment
Adviser has agreed to waive the Advisory Fee during the subscription
period, which will end on the final subscription date. See "The Company"
and "Regulation."

Investment Advisory Agreement. The Company will enter into an
investment advisory agreement with the Investment Adviser. The Investment
Advisory Agreement provides that the Investment Adviser shall, subject to
the supervision of the Board of Managers, identify, evaluate, structure,
monitor and dispose of the Company's investments, and is required to
provide, or arrange suitable third parties to provide, any and all
management and administrative services reasonably necessary for the
operation of the Company and the conduct of its business. Such management
and administrative services include, without limitation: providing the
Company with office space, equipment, facilities and supplies and clerical
services; keeping and maintaining the books and records of the Company,
administering capital accounts and handling communications and
correspondence with members, preparing accounting, management and other
reports; and providing such other managerial and administrative services as
may be reasonably requested by the Company.

Under the Investment Advisory Agreement, the Company is obligated
to bear all costs and expenses directly allocable and identifiable to the
Company or its business or investments, including, but not limited to, fees
of the Board of Managers; fees of the Investment Adviser; expenses of
registering the Units under federal and state securities laws; interest;
taxes; fees and expenses of the Company's legal counsel and independent
accountants; fees and expenses of the transfer agent; expenses of printing
and mailing Units certificates, reports to members, notices to members and
proxy statements; reports to regulatory bodies; brokerage and other
expenses in connection with the execution, recording and settlement of
portfolio security transactions; expenses in connection with the
acquisition and disposition of portfolio securities or the registration of
privately issued portfolio securities; costs of third party evaluations or
appraisals of the Company (or its assets) or its actual investments;
expenses of membership in investment company associations; expenses of
fidelity bonding and other insurance premiums; expenses of members'
meetings; commission and state blue sky registration fees; fees payable to
the National Association of Securities Dealers, Inc. (the "NASD"), if any,
in connection with this offering; and the Company's other business and
operating expenses.

The Investment Advisory Agreement provides for indemnification by
the Company of the Investment Adviser from any and all losses, claims,
damages, liabilities or expenses (including reasonable counsel fees and
expenses) not resulting from willful misfeasance, bad faith or gross
negligence in the performance by the Investment Adviser of its duties
thereunder or the reckless disregard of its obligations and duties under
the Investment Advisory Agreement.

The Investment Advisory Agreement provides that it shall continue
in effect for two years and that, after the initial period of
effectiveness, it will continue in effect for successive annual periods,
provided that such continuance is specifically approved at least annually
by the vote of a majority of the Board of Managers of the Company who are
not parties to the Investment Advisory Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of
voting on such continuance, and either: (i) the vote of a majority of the
outstanding Units of the Company; or (ii) the vote of a majority of the
full Board of Managers of the Company. The Investment Advisory Agreement
also provides that it may be terminated at any time, without the payment of
any penalty, either by: (i) the Company, by action of the Board of Managers
or by vote of a majority of the outstanding Units of the Company, on 60
days' written notice to the Investment Adviser; or (ii) the Investment
Adviser, on 90 days' written notice to the Company. The Investment Advisory
Agreement will terminate immediately in the event of its "assignment" (as
defined in the Investment Company Act).

INVESTMENT OPERATIONS

The Investment Adviser will initiate, screen and monitor the
Company's investments.

Venture Capital Investments will typically be structured in
negotiated, private transactions directly with the issuer. The Company's
investments will generally consist of non-publicly traded equity and
equity-like securities, including common stock, preferred stock, limited
partnership interests, limited liability company interests, warrants and
convertible debentures, subject to certain regulatory and other
restrictions. In connection with most Company investments, the [Investment
Adviser or the Company] will work with the portfolio company to develop and
implement the portfolio company's long-term financial strategy and to
enhance its value.

The Investment Committee of the Investment Adviser, which consists
of senior investment professionals of the Investment Adviser, will make the
final investment decisions regarding any investment proposal made by the
Investment Adviser.

Deal Origination. Investment proposals may come to the attention
of the Investment Adviser from many sources including unsolicited proposals
from the public, personal contacts of the Investment Adviser or its
affiliates, other private equity investors and referrals from investment
banks, commercial banks, lawyers, accountants and other members of the
financial community, including U.S. Trust personnel. The Investment Adviser
believes that investment opportunities may also come from several venture
capital and private equity funds of which it or any of its affiliates may
be an investor. Under certain circumstances, such opportunities may require
prior exemptive relief from the Commission. See "Risk Factors --
Transactions with Affiliates; Potential Conflicts of Interest" and
"Regulation."

Evaluation of Investment Opportunities. Prior to committing funds
to an investment opportunity, a disciplined investment process is
undertaken which includes a legal, financial, tax, industry and company due
diligence investigation by the Investment Adviser to assess the prospects
and risks of the potential investment. The experience and expertise of the
officers of the Investment Adviser will be essential in evaluating
products, markets, industry trends, financial requirements, competition and
the management team associated with a prospective investment. Each
investment opportunity will need to be approved by the Investment Committee
of the Investment Adviser.

Structuring of Investments. The terms and conditions of the
investments acquired will result from negotiations directly with the
portfolio company or an affiliate thereof. The Investment Adviser will be
responsible for conducting such negotiations on behalf of the Company and
will seek to structure the terms of the investment to provide for the
capital needs and success of the issuer and at the same time to maximize
the Company's opportunity for long-term capital appreciation. An important
factor in successful private equity investing is proper structuring of the
transaction in terms of such matters as price, type of security,
restrictions on use of funds, commitments or rights to provide additional
financing, control and involvement in the issuer's business and liquidity.

Management Assistance and Monitoring of Investments. Successful
business development investing requires active monitoring and participation
and influence on major financial decisions. Representatives of the Company
or the Investment Adviser and/or its affiliates will frequently serve as
members of the board of directors or advisory boards of portfolio companies
or will have visitation rights to those companies. Board representation, as
well as a close working relationship with the operating management, should
enable the Company to exercise influence and provide management assistance
with respect to such matters as capital structure, budgets, profit goals,
diversification strategy, financing requirements, management additions or
replacements and developing a public market for the securities of the
portfolio companies. The close tracking of internal financial statements
and progress reports, as well as an active working relationship with
management, form the basis of effective portfolio monitoring and risk
management.

Liquidation of Investments. In order to realize the benefits of
capital appreciation, private equity investments must be liquidated. The
method and timing of the liquidation of investments are critical elements
to maximizing portfolio return. The Company expects to liquidate its
investments through a variety of transactions, including mergers,
negotiated sales of portfolio companies, sales in registered public
offerings, sales in the public markets of registered securities and
recapitalizations. In structuring the investments, the Investment Adviser
will endeavor to reach such understanding with the portfolio company or its
affiliates as may be appropriate as to the method and timing of liquidation
of the Company's investments and will usually seek to obtain registration
rights at the expense of the issuer and reporting compliance for eligible
companies under Rule 144 under the Securities Act of 1933. Timing of
divestiture or liquidation depends on the performance of the portfolio
company, the ability of the portfolio company to refinance its outstanding
securities and other financial market opportunities. See "Risk Factors --
Liquidity of Private Equity Investments." The Company will bear the costs
of liquidating investments to the extent that such expenses are not paid by
the issuer. The Company may as an alternative to liquidating certain
investments distribute such investments in kind. Prior to liquidation of
the Company, the Company intends to distribute in kind only securities that
may be resold without registration under the Securities Act and for which
an active trading market exists. Such distributions may have benefits for
investors, including greater control over the timing of recognition of
capital gains for income tax purposes. Distributions in kind also involve
certain expenses and risks. See "Risk Factors--Distributions of Securities
In Kind."

BACKGROUND

THE FOLLOWING LIST INCLUDES ALL THE PRIVATE COMPANIES AND PRIVATE
FUNDS IN WHICH FUND I AND FUND II HAVE INVESTED AS OF JANUARY 31, 2000 AND
AS REPORTED IN THEIR RESPECTIVE ANNUAL REPORTS AS FILED WITH THE
COMMISSION. UNREALIZED GAIN/(LOSS) AND TOTAL VALUE REFLECT THE VALUES
ASSIGNED FOR PURPOSES OF DETERMINING THE NET ASSET VALUES OF FUND I AND
FUND II. THE VALUES OF SECURITIES FOR WHICH NO ACTIVE TRADING MARKET EXISTS
OR WHICH ARE SUBJECT TO MATERIAL RESTRICTIONS ON RESALE REFLECT FAIR VALUE
AS DETERMINED PURSUANT TO SUCH FUND'S VALUATION POLICIES. ALL OR
SUBSTANTIALLY ALL OF THE INVESTMENTS LISTED BELOW ARE VALUED AT FAIR VALUE.
THE LIST IS INTENDED TO ILLUSTRATE THE TYPES OF INVESTMENTS WITH WHICH THE
INVESTMENT ADVISER'S INVESTMENT PROFESSIONALS HAVE EXPERIENCE.

Excelsior Private Equity Fund II, Inc. Investments (as of 1/31/00)

Average
Holding
Period Cost Realized Unrealized Total
(Years) Basis Gain/(Loss) Gain/(Loss) Value

Direct Investments
<S> <C> <C> <C> <C> <C>
Advantage Schools, Inc. 1.3 $ 4,606,979 $ - $ 4,540,255 $ 9,147,234
Captura Software, Inc. 1.0 3,999,999 - - 3,999,999
Classroom Connect, Inc. 1.1 7,999,951 - 1,819,965 9,819,915
Constellar Corporation 1.8 6,999,995 - - 6,999,995
Conway Stuart Medical, Inc. 0.4 6,124,144 - - 6,124,144
ePod Corporation 0.1 1,000,000 - - 1,000,000
Killerbiz, Inc. 0.1 500,000 - - 500,000
Lifeminders.com, Inc.* 0.6 11,499,997 - 172,817,836 184,317,833
Managemark, Inc. 0.6 5,000,002 - - 5,000,002
MarketFirst Software, Inc. 0.4 4,999,543 - - 4,999,543
PowerSmart, Inc. 1.9 9,237,500 - 4,851,261 14,088,761
Protogene Laboratories, Inc. 0.1 6,000,000 - - 6,000,000
ReleaseNow.com, Inc. 1.4 6,810,039 - 2,646,106 9,456,145
Softcom Microsystems, Inc. 1.0 4,178,649 9,998,176 1,243,640 15,420,465
Survivalink Corporation 1.4 7,584,999 - - 7,584,999
WNP Communications, Inc. 0.8 5,877,855 13,338,275 - 19,216,130
Zeus Wireless, Inc. 0.1 5,000,001 - - 5,000,001

Direct Investment Totals 1.0 $ 97,419,653 $ 23,336,450 $ 187,919,063 $ 308,675,166

Capital Cost Realized Unrealized Total
Committed Basis** Gain/(Loss) Gain/(Loss) Value

Fund Investments

Advanced Technology Ventures V 3,000,000 1,575,000 - 979,751 2,554,751
Brand Equity Ventures 2,500,000 1,855,263 496,693 655,133 3,007,089
Brentwood Associates III 5,000,000 709,730 - 122,281 832,011
Broadview Capital Partners 5,000,000 1,000,000 - (76,370) 923,630
Commonwealth Capital Ventures II 4,000,000 2,300,000 - 536,383 2,836,383
Communications Ventures III 5,000,000 3,625,000 - 1,390,109 5,015,109
Friedman, Fleischer & Lowe 5,000,000 635,269 - (29,000) 606,269
Mayfield Fund X 5,000,000 2,250,000 - 35,934 2,285,934
Mid-Atlantic Venture Fund III 5,000,000 3,500,000 - 1,904,319 5,404,319
Morgenthaler Venture Partners V 8,000,000 4,400,000 - 880,423 5,280,423
Quad-C Partners V 5,000,000 2,118,156 - 40,513 2,158,669
Sevin Rosen Fund VI 2,500,000 1,600,000 - 1,265,417 2,865,417
Trinity Ventures VI 3,000,000 1,931,250 - 2,969,477 4,900,727

Fund Investment Totals $ 58,000,000 $ 27,499,668 $ 496,693 $ 10,674,370 $ 38,670,732

Porfolio Totals $ 124,919,321 $ 23,833,144 $ 198,593,433 $347,345,897

* No illiquidity discount has been assigned to the Fund's position.
** Fund Investment Cost Basis includes adjustments made for LP distributions.

</TABLE>

INVESTMENTS LIQUIDATED (AS OF JANUARY 31, 2000)

Softcom Microsystems, Inc., Fremont, CA ("Softcom")
Initial Investment Date: August 1998
Total Investment: $4.2 million
Total Proceeds:* $15.4 million

Softcom designs, develops and markets data acceleration products
used in high-speed communications networks. Softcom's single-chip
network accelerator solutions and integrated subsystems provide
processing capabilities which help alleviate the "data bottleneck"
at the point where baseband Local Area Network traffic moves on to
a high-speed broadband Internet backbone. Softcom was sold in
August 1999 to Intel.

*10% of proceeds remain unrealized due to escrow holdback as part
of the Intel acquisition

WNP Communications, Inc., Reston, VA ("WNP")
Initial Investment Date: January 1998
Total Investment: $5.9 million
Total Proceeds: $19.2 million

WNP acquired broadband spectrum covering 30 of the top 50 markets
in the United States in the Local Multipoint Distribution Services
("LMDS") auction conducted by the FCC in 1998. Subsequently, the
company was acquired in May 1999 by NextLink, a publicly traded
wireless communication services provider, for cash and stock.

PUBLIC COMPANIES (AS OF JANUARY 31, 2000)

LifeMinders.com, Inc., Herndon, VA ("LifeMinders.com")
Initial Investment Date: February 1999
Total Investment: $11.5 million
Total Investment Value:* $184.3 million

LifeMinders.com is an online direct marketing company that
provides personalized information, or content, and advertisements
via email to a community of members. Email messages contain
helpful reminders and tips that enable its members to better
organize and manage their lives. As of January 31, 2000, the
company has approximately 8 million members and numerous
advertising partners. LifeMinders.com has experienced significant
membership growth since our initial investment in February 1999,
when the company had less than 50,000 members. LifeMinders.com
recently held its initial public offering in November 1999
(NASDAQ:LFMN). Fund II has invested $11.5 million in
Lifeminders.com at an average cost of $2.70 per share and the
company's stock, as of January 31, 2000, was trading at $43.25 per
share.

*Does not assign an illiquidity discount to the Fund's position.

PRIVATE COMPANIES (AS OF JANUARY 31, 2000)

Advantage Schools, Inc., Boston, MA ("Advantage")
Initial Investment Date: June 1998
Total Investment: $4.6 million
Investment Carrying Value: $9.1 million

Advantage is an education management organization which manages
public charter schools on a for-profit basis. Advantage manages
charter schools in urban school districts in cooperation with
local partners. Its schools are publicly funded, receiving
per-student capitalization rates generally consistent with those
received by other schools in the district. Founded in 1996,
Advantage currently manages 16 schools across the country.

Captura Software, Inc., Bothell, WA ("Captura")
Initial Investment Date: February 1999
Total Investment: $4.0 million
Investment Carrying Value: $4.0 million

Captura is an e-finance application services provider developing
and marketing expense management software and solutions for large
companies. The company's products significantly increase the
efficiency and lower the cost of expense reports by providing a
web-based software application that automates much of the process.
Captura's customer base includes General Motors, Ford, Compaq and
Aetna.

Classroom Connect Inc., Foster City, CA ("Classroom Connect")
Initial Investment Date: September 1998
Total Investment: $8.0 million
Investment Carrying Value: $9.8 million

Classroom Connect, is a provider of educational Internet products
to students in the kindergarten to eighth grade market. The
company offers products and services, including proprietary
instruction guides, teaching plans, seminars, and unique Internet
content via electronic commerce and direct mail, to teachers and
school districts wishing to incorporate the Internet into the
classroom.

Constellar Corporation, Redwood Shores, CA ("Constellar")
Initial Investment Date: April 1998
Total Investment: $7.0 million
Investment Carrying Value: $7.0 million

Constellar is a provider of enterprise application integration
software and services to large organizations in North America,
Europe and Australia. Constellar provides products and services
that work to untangle complex information technology environments
by managing data, making it accessible, and moving it across
several different applications. Constellar's customer list
includes Sprint, British Telecom, Deutsche Bank, NatWest,
Princeton University, London Stock Exchange, and General Electric.

Conway-Stuart Medical, Inc., Sunnyvale, CA ("Conway-Stuart")
Initial Investment Date: December 1999
Total Investment: $6.1 million
Investment Carrying Value: $6.1 million

Conway-Stuart develops and markets medical devices for the
treatment of gastrointestinal diseases using radio frequency
delivered through a catheter. Conway-Stuart had developed a
product targeting gastroesophageal reflux disease that is
undergoing the Food and Drug Administration 510(k)-clearance
process.

ePod Corporation, New York, NY ("ePod")
Initial Investment Date: December 1999
Total Investment: $1.0 million
Investment Carrying Value: $1.0 million

ePod provides distributed e-commerce, content syndication and
media advertising services to manufacturers, retailers, Web
publishers and content providers in the entertainment, retail and
advertising industries. The ePod.com commerce network uses a
common merchandising infrastructure through which companies can
promote and sell products by packaging and distributing content
and merchandise through commerce-enabled showcases called ePods.

KillerBiz, Inc., Fremont, CA ("KillerBiz")
Initial Investment Date: December 1999
Total Investment: $0.5 million
Investment Carrying Value: $0.5 million

KillerBiz is an online business-to-business marketplace connecting
small businesses to service providers. The company is dedicated to
lowering the time and costs associated with services procurement,
while providing sellers with a cost effective means to access and
respond to qualified sales leads through a "request-for-quote" or
"request-for-proposal" engine. The KillerBiz web site offers a
business-to-business marketplace that leverages both Extensible
Mark-up Language and patent-pending Intelligent Trained Agent
technology.

MarketFirst Software, Inc., Mountain View, CA ("MarketFirst")
Initial Investment Date: August 1999
Total Investment: $5.0 million
Investment Carrying Value: $5.0 million

MarketFirst is a developer and marketer of hosted e-marketing
software and services targeting middle-market corporations. The
company's solution is focused on enabling and managing interactive
marketing campaigns through the Internet. The company's customers
are motivated by the prospect of increasing customer revenue,
improving customer relationships and reducing costs by automating
key marketing functions with the MarketFirst solution.

Managemark, Inc., Sunnyvale, CA ("Managemark")
Initial Investment Date: June 1999
Total Investment: $5.0 million
Investment Carrying Value: $5.0 million

Managemark is an Internet application software company focused on
developing finance and administration software and services to
small and middle-market firms. The company's current offerings are
focused on increasing the efficiency and lowering the cost of
processing corporate expenses.

PowerSmart, Inc., Shelton, CT ("PowerSmart")
Initial Investment Date: January 1998
Total Investment: $9.2 million
Investment carrying Value: $14.1 million

PowerSmart is a provider of "smart" battery management products
designed to maximize battery run-times and safety in laptop
computers, cellular telephones and camcorders as well as a variety
of hand-held industrial devices. PowerSmart recently introduced
two new lines of Application Specific Integrated Circuits and
electronic modules that offer performance and flexibility at
competitive prices. PowerSmart was formed as a spin-off of
technology and related assets from Duracell.

Protogene Laboratories, Inc., Menlo Park, CA ("Protogene")
Initial Investment Date: December 1999
Total Investment $6.0 million
Investment Carrying Value: $6.0 million

Protogene is a developer and manufacturer of DNA gene chip
technology used in molecular biology and genetic research. The
company's products allow for flexible, short-run testing of
genetic expression that has broad applications in genetic research
and pharmaceutical development.

ReleaseNow.com, Menlo Park, CA ("ReleaseNow")
Initial Investment Date: June 1998
Total Investment: $6.8 million
Investment Carrying Value: $9.5 million

ReleaseNow is an outsourced provider of e-commerce services for
vendors and resellers of software and other digital goods. The
company builds and manages e-commerce solutions that enable
customers to market, sell and deliver software online. ReleaseNow
provides software publishers, software resellers, and
content-driven web sites with technology and services to establish
an Internet-based sales and distribution channel. ReleaseNow filed
its S-1 for Initial Public Offering on January 28, 1999.

SurVivaLink Corporation, Minnetonka, MN ("SurVivaLink")
Initial Investment Date: August 1998
Total Investment: $7.6 million
Investment Carrying Value: $7.6 million

SurVivaLink designs, develops and markets automated external
defibrillators ("AEDs"), which are portable, emergency medical
devices that deliver electrical shocks to resuscitate victims of
cardiac arrest. SurVivaLink's AEDs are small, lightweight and easy
to use, making them suitable for law enforcement personnel,
firefighters and paramedics. To date, SurVivaLink estimates that
its AEDs have been responsible for saving over 250 lives.

Zeus Wireless, Inc., Columbia, MD ("Zeus")
Initial Investment Date: December 1999
Total Investment: $5.0 million
Investment Carrying Value: $5.0 million

Zeus builds and markets long-range frequency hopping radios for
commercial and industrial facilities. The company utilizes radio
frequency technology as a substitute for wire with comparable
range, reliability and security at an equivalent price.

SUBSEQUENT INVESTMENTS

firstsource.com, Inc., Santa Ana, CA ("firstsource")
Initial Investment Date: February 2000
Total Investment: $10.0 million
Investment Value: $10.0 million

firstsource is a provider of business products, services and
online business procurement solutions for small and medium sized
business. With approximately 250,000 Store Keeping Units and
numerous different service providers, the firstsource.com web site
allows customers to search, compare, price and buy products and
services directly from multiple distributors' inventories.

MySeasons.com, Inc., New York, NY ("MySeasons")
Initial Investment Date: February 2000
Total Investment: $2.0 million
Investment Value: $2.0 million

MySeasons is a business-to-consumer and business-to-business
Internet commerce site aimed at selling gardening and related
horticultural products, as well as providing associated content to
the gardening community. MySeasons is a newly capitalized entity
and represents the internet initiative of Foster & Gallagher, a
direct mail company and the largest non-store horticulture
retailer in the United States.

PRIVATE FUNDS

Advanced Technology Ventures V, LP ("ATV V")
Fund Size: $175 million
Investment commitment: $3 million

ATV V is an early-stage focused fund targeting information
technology and health care markets. Since 1979, ATV has invested
in and worked with over 100 emerging companies, including Actel,
Berkeley Networks, Cadence Design Systems, Epigram and VLSI
Technology.

Brand Equity Ventures I, LP ("BEV")
Fund Size: $95 million
Investment commitment: $2.5 million

BEV is focused on investing broadly across the consumer sector,
particularly in branded opportunities within e-commerce,
retailing, direct response and other consumer services. To date,
the fund has made distributions resulting from investments in
Alloy Online and Outpost.com.

Brentwood Associates III, LP ("Brentwood III")
Fund Size: $360 million
Investment commitment: $5 million

Brentwood III is focused on middle-market buyouts and
consolidations. Brentwood III's strategy is to identify industries
with consolidation characteristics, develop a strategy for
implementation, and recruit management to execute that strategy.
Brentwood was an investor in Rental Services and is an investor in
Classroom Connect, companies in which Fund I and Fund II,
respectively, have invested. Brentwood Associates II is a Fund I
holding.

Broadview Capital II LP ("Broadview")
Fund Size: $220 million
Investment commitment: $5 million

Broadview is focused on buyouts and other recapitalizations within
the technology sector. The fund is sponsored by Broadview
International LLC, a leading technology mergers and acquisitions
focused investment banking firm. To date, Broadview International
has advised on mergers and acquisitions for companies such as
Nokia, Fore Systems, Lycos and BMC Software and will be able to
provide Broadview Capital with substantial resources to make its
investments.

Commonwealth Capital Ventures II, LP ("Commonwealth II")
Fund Size: $80 million
Investment commitment: $4 million

Commonwealth II makes investments in early to later-stage
information technology companies in the New England region.
Commonwealth II maintains a particular focus on communications
technology, Internet software and services and e-commerce
companies. Commonwealth has been an investor in Altiga Networks,
Direct Hit Technologies and Smarterkids.com.

Communications Ventures III, LP ("Communications Ventures III")
Fund Size: $125 million
Investment commitment: $5 million

Communications Ventures III invests exclusively in the
communications sector, targeting early stage companies. As
investors, the principals of Communications Ventures III have
played roles in the formation of many companies in the
communications industry, including Advanced Fibre Communications,
Ascend, Broadcom, Ciena, Copper Mountain, Digital Microwave,
Digital Island, Intecom, MCI, Newbridge, Octel, PairGain,
Paradyne, Tellabs, Tut Systems and 3Com.

Friedman, Fleischer & Lowe, LP ("Freidman, Fleischer & Lowe")
Fund Size: $325 million
Investment commitment: $5 million

Freidman, Fleischer & Lowe is a first-time fund focused
exclusively on participation in middle-market buyouts. The
principals of Freidman, Fleischer & Lowe have been involved in a
number of buyout transactions including Young & Rubicam,
Levi-Strauss, Hoyts and Western Wireless.

Mayfield Fund X, LP ("Mayfield X")
Fund Size: $450 million
Investment commitment: $5 million

Mayfield X is focused on early stage information technology and
healthcare investments, primarily located in Silicon Valley, CA.
Founded in 1969, Mayfield has raised over $1 billion in nine
venture funds and invested in over 340 high-growth companies.
Among their investments are 3COM, Compaq, Immunex, Silicon
Graphics, Citrix Systems and Legato.

Mid-Atlantic Venture Fund III, LP ("MAVF III")
Fund Size: $60 million
Investment commitment: $5 million

MAVF III invests in early and expansion stage technology companies
in the Mid-Atlantic region. The principals of MAVF III have
significant investment experience and have established over the
years a presence within the investment community in the
Mid-Atlantic region. The principals of MAVF III have been
investors in Visual Networks and Net2000 Communications.

Morgenthaler Venture Partners V, LP ("MVP V")
Fund Size: $300 million
Investment commitment: $8 million

MVP V is an early stage venture fund, investing primarily in
information technology and healthcare companies as well as buyouts
of basic businesses. The fund's principals have been involved with
successful venture capital investments in Apple Computer,
Synopsys, Atria Software, Premysis Software and CardioThoracic.
Morgenthaler Venture Partners IV is a Fund I holding.

Quad-C Partners V, LP ("Quad-C")
Fund Size: $300 million
Investment commitment: $5 million

Quad-C is focused on taking control positions in leveraged
acquisitions and recapitalizations of middle-market companies.
Quad-C's principals have significant operating and financial
experience and have made investments across industries such as
restaurants, banking, automotive logistics and media.

Sevin Rosen Fund VI, LP ("Sevin Rosen VI")
Fund Size: $165 million
Investment commitment: $2.5 million

Sevin Rosen VI invests in early-stage technology companies,
focusing specifically on companies in communications and eBusiness
infrastructure and solutions as well as those companies with
Internet-enabled business models. The principals at Sevin Rosen
Funds have a track record that includes being early investors in
Compaq, Lotus, Cyrix, Citrix, and Ciena. Sevin Rosen Fund V is a
Fund I holding.

Trinity Ventures VI, LP ("Trinity VI")
Fund Size: $140 million
Investment commitment: $3 million

Trinity VI is focused on investing in early to late-stage
companies in the software, communications and electronic commerce
sectors. The principals of Trinity VI have been involved with
numerous successful investments, including SciQuest, NextCard,
Quokka Sports, Starbucks and Fatbrain.com.

UST PRIVATE EQUITY INVESTORS FUND, INC. INVESTMENTS (AS OF 1/31/00)

Average
Holding
Period Cost Realized Unrealized Total
(Years) Basis Gain/(Loss) Gain/(Loss) Value

DIRECT INVESTMENTS

<S> <C> <C> <C> <C> <C>
Rental Services Corporation 1.7 $ 985,000 $ 2,086,479 - $ 3,071,479
Corsair Communications, Inc. 3.1 3,000,003 751,259 329,370 4,080,631
CommSite International, Inc. 2.6 2,718,750 - - 2,718,750
Quicklogic Corporation* 3.2 3,000,000 - 3,465,525 6,465,525
Signius Corporation 3.0 3,418,146 - (3,418,146) -
Cardiopulmonary Corporation 3.1 2,150,000 - (2,150,000) -
Best Friends Pet Care, Inc. 2.8 3,525,000 - - 3,525,000
Abtox, Inc. 2.8 2,800,001 - (2,800,001) -
LogicVision, Inc. 2.2 1,549,499 - 106,208 1,655,707
The Party Experience, Inc. 1.4 2,055,206 (2,055,206) - -
P2 Holdings/Plynex Corporation 1.2 2,750,000 (2,750,000) - -
NeoVista Software, Inc.* 2.0 1,038,488 - 2,081,601 3,120,089

DIRECT INVESTMENTS TOTALS 2.5 $ 28,990,092 $ (1,967,468) $(2,385,444) $ 24,637,181

Committed Cost Realized Unrealized Total
Capital Basis** Gain/(Loss) Gain/(Loss) Value
FUND INVESTMENTS
Allegra Capital Partners III 2,000,000 1,560,000 - 1,916,018 3,476,018
Brentwood Associates II 2,000,000 1,625,284 158,388 157,224 1,940,896
Bruckmann, Rosser, Sherrill 2,000,000 1,845,813 152,242 401,063 2,399,118
Morgenthaler Ventures IV 2,000,000 1,546,595 667,644 472,895 2,687,134
Sevin Rosen Fund V 2,000,000 1,743,748 1,654,983 1,033,574 4,432,305
Vanguard V 2,000,000 1,916,101 1,011,993 9,192,272 12,120,366

FUND INVESTMENT TOTALS $ 12,000,000 $ 10,237,539 $ 3,645,250 $ 13,173,047 $ 27,055,837

PORTFOLIO TOTALS $ 39,227,632 $ 1,677,782 $ 10,787,604 $ 51,693,018

* No illiquidity discount has been assigned to the Fund's position.
** Fund Investment Cost Basis includes adjustments made for LP distributions.
</TABLE>

INVESTMENTS LIQUIDATED

CommSite International, Inc., Vienna, VA ("CommSite")
Initial Investment Date: April 1996
Total Investment: $2.7 million
Total Proceeds:* $2.7 million

CommSite is a provider of wireless towers and construction
services. On May 13, 1999, American Tower Corporation, a publicly
traded company, acquired CommSite.

*Total proceeds include estimate of additional milestone payments
to Commsite from American Tower.

Rental Service Corp., Scottsdale, AZ ("Rental Service")
Initial Investment Date: January 1996
Total Investment: $1.0 million
Total Proceeds: $3.1 million

Rental Service is a consolidator of heavy equipment rental
businesses and an outsourced provider of heavy equipment. The
Company had its initial public offering in September 1996 and was
subsequently acquired by Atlas, Copco North America in July, 1999.

PUBLIC COMPANIES

Corsair Communications, Inc., Palo Alto, CA. ("Corsair")
Initial Investment Date: October 1996
Total Investment: $3.0 million
Total Investment Value: $4.1 million

Corsair (NASDAQ: CAIR) is a wireless communication infrastructure
company providing pre-paid wireless handset and fraud detection
software and services.

NeoVista Software, Inc., Cupertino, CA ("Neovista")
Initial Investment Date: June 1997
Total Investment: $1.0 million
Total Investment Value:* $3.1 million

NeoVista develops data mining software and applications related to
customer relationship management. Data mining allows companies to
discover non-obvious relationships by applying various algorithms
to data stored in databases and data warehouses. Data mining has
been used for inventory management, customer profiling, behavior
prediction and fraud detection. In January 2000, Accrue Software
("Accrue"; NASDAQ: ACRU) acquired NeoVista in exchange for 2.4
million shares of Accrue stock.

QuickLogic Corporation, Sunnyvale, CA ("QuickLogic")
Initial Investment Date: November 1996
Total Investment: $3.0 million
Total Investment Value:* $6.5 million

QuickLogic (NASDAQ: QUIK) designs, manufactures and markets
high-capacity programmable logic semiconductors, known as field
programmable gate arrays, along with comprehensive design
software. The company's products shorten the design cycle time for
electronic systems and accelerate time-to-market. QuickLogic's new
class of devices, embedded standard products, facilitate extremely
fast development of complex systems.

*Does not assign an illiquidity discount to the Fund's position.

PRIVATE COMPANIES

Best Friends Pet Care, Inc., Norwalk, CT ("Best Friends")
Initial Investment Date: December 1996
Total Investment: $3.5 million
Total Investment Value: $3.5 million

Best Friends is the largest operator of pet kennels in the United
States. The company's facilities offer a wide range of pet
services including boarding, grooming and training.

LogicVision, Inc., San Jose, CA ("LogicVision")
Initial Investment Date: May 1997
Total Investment: $1.5 million
Total Investment Value: $1.7 million

LogicVision is a developer of built-in semiconductor testing
technologies used in semiconductor design, testing and
manufacture. As semiconductors become more complex (i.e. large
systems reduced to a customized chip), the need to adopt new
testing technology has become critical. LogicVision's customers
include Sun Microsystems, Cisco Systems, NCR Corp., Hitachi and
Hughes.

PRIVATE FUNDS

Allegra Capital Partners III, LP ("Allegra III")
Fund Size: $40 million
Investment commitment: $2.0 million

Allegra III is a later stage focused venture fund based in New
York City. Allegra III invests primarily in companies in the
telecommunications, software and service industries with
"Internet-driven" strategies. Allegra's principals have been
investors in Autotote, Axent Technologies, Business Evolution and
Viasoft.

Brentwood Associates Buyout Fund II, LP ("Brentwood II")
Fund Size: $240 million
Investment commitment: $2.0 million

Brentwood II is focused on middle-market buyouts and
consolidations. Brentwood II's strategy is to identify industries
with consolidation characteristics, develop a strategy for
implementation and recruit management to execute that strategy.
Brentwood was an investor in Rental Services and is an investor in
Classroom Connect, companies in which Fund I and Fund II,
respectively, have invested. Brentwood III is a Fund II holding.

Bruckmann, Rosser, Sherrill & Co., LP ("BRS")
Fund Size: $375 million
Investment commitment: $2.0 million

BRS is a leveraged buyout fund based in New York. The firm's
portfolio contains investments ranging from Restaurant Associates,
a restaurant operator and food service contractor, to Doane Pet
Care Enterprises, a manufacturer and distributor of pet food.

Morgenthaler Venture Partners IV, LP ("MVP IV")
Fund Size: $135 million
Investment commitment: $2.0 million

MVP IV is an early stage venture fund, investing primarily in
information technology and healthcare companies as well as buyouts
of basic businesses. The fund's principals have been involved with
successful venture capital investments in Apple Computer,
Synopsys, Atria Software, Premysis Software and CardioThoracic. To
date, Fund I has received from MVP IV shares of Nortel, Microsoft,
Guidant, as well as several cash distributions. Morgenthaler
Venture Partners V is a Fund II holding.

Sevin Rosen Fund V, LP ("Sevin Rosen V")
Fund Size: $160 million
Investment commitment: $2.0 million

Sevin Rosen V invests in early-stage technology companies,
focusing specifically on companies in communications and eBusiness
infrastructure and solutions, as well as those companies with
Internet-enabled business models. The principals at Sevin Rosen
Funds have a track record that includes being early investors in
Compaq, Lotus, Cyrix, Citrix and Ciena. To date, this fund has
made distributions of stock including Ciena, Pure Atria Software
and Cisco Systems. Sevin Rosen Fund VI is a Fund II holding.

Vanguard Venture Partners V, LP ("Vanguard V")
Fund Size: $55 million
Investment commitment: $2.0 million

Vanguard V is an early-stage fund investing in information
technology and healthcare. Among the principals' previous
successful investments are Ciena, Advanced Fibre Communications
and Network Appliances. The fund has distributed shares of Cisco
Systems and currently holds Cobalt Networks, Image X, and Digital
Island.

INVESTMENTS WRITTEN-OFF

AbTox, Inc., Mundelein, IL ("AbTox")
Initial Investment Date: March 1997
Total Investment: $2.8 million
Total Investment Value: $0

AbTox is a manufacturer of gas plasma sterilizers, which has filed
for bankruptcy due to operating problems arising from regulatory
issues related to one of its products.

Cardiopulmonary Corporation, Milford, CT ("Cardiopulmonary
Corporation")
Initial Investment Date: November 1996
Total Investment: $2.2 million
Total Investment Value: $0

Cardiopulmonary Corporation is a manufacturer of a smart
ventilator used in the acute and sub-acute hospital market that
adapts to patients' changing breathing patterns. The Fund's
position has been written down pursuant to a recent
recapitalization of the company.

P2 Holdings Corp. (formerly known as Plynetic Express), San Leandro,
CA ("P2 Holdings")
Initial Investment Date: June 1997
Total Investment: $2.8 million
Total Investment Value: $0

P2 Holdings was a provider of rapid prototyping and rapid tooling
services. The Fund wrote off its investment as the company filed
for bankruptcy in 1998.

Party Stores Holdings, Inc., Melville, NY ("Party Stores")
Initial Investment Date: May 1997
Total Investment: $2.1 million
Total Investment Value: $0

Party Stores operated the Party Experience, the Paperama and Paper
Cutter retail stores. The company filed for bankruptcy in 1998.
The Fund's $2.1 million investment was written off as the company
filed for bankruptcy.

Signius Corporation (formerly known as ProCommunications Corp.),
Somerset, NJ ("Signius")
Initial Investment Date: September 1996
Total Investment: $3.4 million
Total Investment Value: $0

Signius provides telemessaging services for small and medium-sized
businesses. The Fund's investment has been written down to zero to
reflect the operating status of the company.

THE FOREGOING INFORMATION WITH RESPECT TO FUND I AND FUND II IS
PRESENTED TO ILLUSTRATE THE TYPES OF INVESTMENTS THAT THE INVESTMENT
ADVISER'S INVESTMENT PROFESSIONALS HAVE EXPERIENCE WITH IN THE BDC CONTEXT
AND TO SHOW THE POTENTIAL ECONOMIC BENEFITS AND RISKS INHERENT IN MAKING
SUCH INVESTMENTS. THE INFORMATION SHOWN SHOULD NOT BE CONSIDERED TO BE
REPRESENTATIVE OF THE INVESTMENTS THAT THE COMPANY WILL MAKE OR THE GAINS
OR LOSSES IT WILL EXPERIENCE ON ITS INVESTMENTS. PAST PERFORMANCE IS NOT
NECESSARILY INDICATIVE OF FUTURE RESULTS. THE INFORMATION SET FORTH ABOVE
REPRESENTS ACTUAL COST AND REALIZED AND UNREALIZED GAIN AND LOSS FOR EACH
INDIVIDUAL INVESTMENT MADE BY FUND I AND FUND II, OTHER THAN SHORT-TERM
INVESTMENTS. FUND I AND FUND II EXPERIENCED COSTS AND EXPENSES IN MAKING
SUCH INVESTMENTS, MONITORING SUCH INVESTMENTS AND WHERE APPLICABLE,
DISPOSING OF SUCH INVESTMENTS. ADDITIONAL COSTS WILL BE EXPERIENCED ON THE
DISPOSITION OF INVESTMENTS NOT YET DISPOSED OF. UNREALIZED GAIN AND LOSS
AMOUNTS ARE BASED ON UNITED STATES TRUST COMPANY OF NEW YORK'S
DETERMINATION OF THE CURRENT VALUE OF THE INVESTMENTS, WHICH DETERMINATION
ORDINARILY INVOLVES A HIGH DEGREE OF JUDGMENT AND SUBJECTIVITY. UPON
DISPOSITION, FUND I AND FUND II MAY REALIZE MORE OR LESS THAN THE ASSIGNED
VALUATION. IN ADDITION, FUND I AND FUND II ARE SUBJECT TO INVESTMENT
MANAGEMENT FEES, INCENTIVE FEES AND ONGOING OPERATING EXPENSES, NONE OF
WHICH ARE REFLECTED IN THE FOREGOING INFORMATION. FUND I AND FUND II ALSO
MAINTAINED SUBSTANTIAL HOLDINGS OF SHORT-TERM INVESTMENTS PENDING
INVESTMENT IN THE ABOVE LISTED INVESTMENTS. ACCORDINGLY, THE FOREGOING
INFORMATION IS NOT INDICATIVE OF THE ACTUAL RETURNS EXPERIENCED BY
INVESTORS IN FUND I AND FUND II.

Set forth below are the performance figures for Fund I
and Fund II for the periods shown, calculated in conformity with
the standardized performance methodology required by the
Securities and Exchange Commission.

1-Year 3-Year 5-Year 10-Year
<S> <C> <C> <C> <C>
UST Private Equity Investors Fund, Inc. 26.9% 6.4% N/A N/A
Excelsior Private Equity Fund II, Inc. 81.6% N/A N/A N/A
</TABLE>

CODE OF ETHICS

The Company and the Investment Adviser have adopted a code of
ethics under Rule 17j-1 of the Investment Company Act which restricts the
personal securities transactions of certain of the officers, employees,
directors and Board of Managers, members of the Company and the Investment
Adviser. Its primary purpose is to ensure that personal trading by
Investment Adviser employees does not disadvantage the Company. U.S. Trust
portfolio managers and other investment personnel who comply with the code
of ethic's preclearance and disclosure procedures may be permitted to
purchase, sell or hold certain types of securities which also may be
purchased or sold by or are held in the fund(s) they advise. The code of
ethics can be reviewed and copied at the Commission's Public Reference Room
in Washington, D.C. Information on the Public Reference Room can be
obtained by calling the Commission at 1-202-942-8090. The code of ethics is
also available on the EDGAR Database on the Commission's Internet site at
http://www.sec.gov or may be obtained after paying a duplicate fee, by
electronic request to the following E-mail address: [email protected] or
by writing the Commission's Public Reference Section, Washington, D.C.
20549-0102

BOARD OF MANAGERS, OFFICERS AND INVESTMENT PROFESSIONALS

Pursuant to the Operating Agreement, the business and affairs of
the Company will be managed under the direction of its Board of Managers.
The following are descriptions of the persons who have consented to serve
asmembers of the Board of Managers, and the officers of the Company, as
well as of key employees of the Investment Adviser, including the members
of the Investment Adviser's Investment Committee. Unless otherwise noted,
each member of the Investment Adviser's Investment Committee has been an
employee of United States Trust Company of New York for at least the
previous five years and the business address of each individual listed
below is 114 West 47th Street, New York, New York 10036. Mr. Hoover may be
deemed an "interested person" of the Company, as defined in the Investment
Company Act, on the basis of his affiliation with U.S. Trust.

Board of Managers

Gene M. Bernstein, (52). Gene Bernstein has consented to
serve as Manager upon appointment to that position. Mr. Bernstein
is currently Vice Chairman of Northville Industries Corp., a
privately held corporation engaged in petroleum, marketing,
distribution and trading. Mr. Bernstein was the President of BIG
Venture Inc., a privately held golf equipment marketing firm from
March 1994 to December 1997. From 1990 until 1994, he was the
President of Northville Industries Corp. Mr. Bernstein was
Executive Vice President of Northville Industries Corp. from 1982
to 1989. Mr. Bernstein holds a B.A. degree in English Literature
from Alfred University, an 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 of Fund I and Fund II.

John C. Hover II, (56). John Hover has consented to serve
as Manager upon appointment to that position. Mr. Hover retired as
Executive Vice President of the United States Trust Company of New
York 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 United
States Trust Company of New York, he was a commercial banker with
the Chemical Bank. Mr. Hover received his B.A. degree in English
Literature from the University of Pennsylvania and an M.B.A.
degree in Marketing from The Wharton School. John 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 of Fund I and Fund II.

Stephen V. Murphy, (53). Stephen Murphy has consented to
serve as Manager upon appointment to that position. Since 1991,
Mr. Murphy has been President of S.V. Murphy & Co., Inc., an
investment banking firm that specializes in mergers and
acquisitions, divestitures and strategic and capital-related
advisory services for financial 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 an M.B.A. degree from
Columbia University. Mr. Murphy serves as a director of Fund I and
II.

Officers of the Company

David I. Fann, (36), Co-Chief Executive Officer and
President of the Company and Managing Director of United States
Trust Company of New York. Mr. Fann serves as President and Chief
Executive Officer of Excelsior Private Equity Fund II, Inc. and
UST Private Equity Investors Fund, Inc. He is focused on direct
investments in healthcare, consumer services, and e-commerce.
Prior to joining United States Trust Company of New York in April
of 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 the Special Fiduciary Committee. Mr. Fann is on the
Board of the Somerset Exchange Fund, Classroom Connect, Inc.,
Conway Stuart Medical, Inc., SurVivaLink Corp. and Protogene
Laboratories, Inc.

Douglas A. Lindgren, (38), Co-Chief Executive Officer and
Chief Investment Officer of the Company and Managing Director of
United States Trust Company of New York. Mr. Lindgren is Chief
Investment Officer of the Excelsior Private Equity Fund II, Inc.
and Executive Vice President of the UST Private Equity Investors
Fund, Inc. He is focused on direct investments in information
technology, Internet services, and communications. Prior to
joining United States Trust Company of New York in April 1995, Mr.
Lindgren served in various capacities for Inco Venture Capital
Management ("IVCM") from January 1988 through March of 1995,
including President and Managing Principal from January 1993
through March of 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 a M.B.A. and B.A. from Columbia University. He
serves on the United States Trust Company of New York Portfolio
Policy Committee. Mr. Lindgren is on the Board of Powersmart Inc.,
MarketFirst Software, Inc., Managemark, Inc., Constellar
Corporation, ReleaseNow.com, Inc., LifeMinders.com, Inc., Zeus
Wireless, Inc. and firstsource.

Lee A. Gardella, (32), Vice President of the Company and
Vice President of United States Trust Company of New York, joined
United States Trust Company of New York 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,
NJ. 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 an
MBA from the University of Notre Dame and BSBA in Finance from
Shippensburg University. Mr. Gardella is a Chartered Financial
Analyst.

James F. Rorer, (30), Vice President of the Company and
United States Trust Company of New York. Mr. Rorer is focused on
direct investments in healthcare, consumer services, and
e-commerce. Prior to joining United States Trust Company of New
York in May 1999, he worked at Bain & Company ("Bain"), a leading
global strategic consulting firm, from 1996 until April 1999. He
was a consultant in the Private Equity Practice, which provides
strategic due diligence services to large leveraged buyout 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
an M.B.A. from Harvard Business School.

James F. Dorment, (26), Chief Administrative Officer of
the Company and Assistant Vice President of United States Trust
Company of New York has been with the Private Equity Division of
United States Trust Company of New York since December 1997. Mr.
Dorment is involved in all areas of investment analysis and
decision-making. From August 1995 through November 1997, he worked
in the wealth management division of United States Trust Company
of New York. Mr. Dorment graduated from Bates College with a
Bachelor of Arts 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.

Ronald A. Schwartz, (51), Corporate Secretary. Mr.
Schwartz is Vice President and Assistant General Counsel of United
States Trust Company of New York. Prior to joining United States
Trust Company of New York in 1991, Mr. Schwartz was associated
with the firm of Walter, Conston, Alexander & Green from 1985
through 1990, with a focus on securities law as well as mergers
and acquisitions. Mr. Schwartz received a B.A. and an M.A. degree
from the University of California at Berkeley, and a J.D. from
Boalt Hall, University of California.

Brian F. Schmidt, (41), Chief Financial Officer of the
Company and Senior Vice President at U.S. Trust. Mr. Schmidt is the
Chief Financial Officer of Excelsior Private Equity Fund II, Inc.
and UST Private Equity Investors Fund, Inc. He is the Division
Manager of Mutual Funds with an affiliate of U.S. Trust Company.
He is responsible for the operation and administration of the
Excelsior Family of Funds and the U.S. Trust Company Common Trust
Funds. Mr. Schmidt joined U.S. Trust Company 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 16 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. Bruno, (40), Treasurer of the Company. Mr. Bruno
is a Vice President in the Mutual Funds Administration Department
of an affiliate of U.S. Trust Company. Prior to joining U.S. Trust
Company, he worked for the Dreyfus Corporation and Price
Waterhouse. Mr. Bruno received his B.S. degree from The
Pennsylvania State University.

Investment Committee of the Investment Adviser

Frederick B. Taylor, (58), Chairman of the Investment
Committee. Mr. Taylor is Vice Chairman and Chief Investment
Officer of United States Trust Company of New York and is a member
of the Board of Directors and Chairman of the Portfolio Policy
Committee. He has been with United States Trust Company of New
York for over 30 years, and has been responsible for developing
and implementing the current investment policy since 1981. Mr.
Taylor received his B.A. degree from Wesleyan University, with
distinction, and his M.B.A. degree from the University of
Pennsylvania, Wharton School. He is a member of the New York
Society of Security Analysts and the Association for Investment
Management and Research.

Paul K. Napoli, (54), Co-Chairman of the Investment
Committee. Mr. Napoli is an Executive Vice President and is
responsible for the Personal Wealth Management Group. He is a
member of the Management Committee, the Risk Policy Committee, the
Trust Committee, the Broker Relations Committee and Derivatives
Committee. Mr. Napoli received his undergraduate degree in
Economics and Mathematics from Boston College and his M.B.A. in
Finance and Economics from Columbia University. He holds the
designation of Chartered Financial Analyst and Certified Trust &
Financial Adviser. Mr. Napoli is a member of the New York Society
of Security Analysts, and the Association of Investment Management
and Research.

John J. Apruzzese, (42), Managing Director and Senior
Portfolio Manager of United States Trust Company of New York. Mr.
Apruzzese is a Division Manager in the Wealth Management Group.
Previously, Mr. Apruzzese was a staff member of the Labor and
Human Resources Committee of the U.S. Senate and worked on federal
budget matters. Mr. Apruzzese received his B.A. from Bucknell
University and his M.B.A. from New York University. Mr. Apruzzese
is a Chartered Financial Analyst, a member of the New York Society
of Security Analysts and a member of the Board of Advisers of
Outward Bound.

Richard L. Bayles, (56), Managing Director and Senior
Portfolio Manager of United States Trust Company of New York. Mr.
Bayles manages the Common Stock Fund for Trusts. Mr. Bayles earned
his B.A. from Dartmouth College. He is a warden of St.
Bartholomew's Church in the City of New York. Mr. Bayles served
with the Peace Corps in Kenya for three years and is President,
Mid Manhattan Performing Arts Foundation.

Edith Cassidy, (47), Managing Director and Division
Manager at United States Trust Company of New York. Ms. Cassidy is
responsible for managing individual client assets and a division
of portfolio managers, administrators and support staff. Ms.
Cassidy is a member of the United States Trust Company of New
York's Operating Committee and Portfolio Policy Committee. Upon
joining U.S. Trust in 1989, Ms. Cassidy was appointed Director of
the Equity Research Division. Prior to joining U.S. Trust in 1989,
Ms. Cassidy was an investment executive at Piper, Jaffray &
Hopwood in New York City. From 1976 through 1986, she was with
International Business Machines Corporation in New York, where her
last position was Marketing Manager. Ms. Cassidy is a member of
the New York Society of Security Analysts. She is a member of the
Board of Trustees of The Westmoreland Davis Foundation and
Learning Leaders. Ms. Cassidy received her B.A. in 1975 from
-Goucher College.

William V. Ferdinand, (58), Managing Director and Senior
Investment Officer of U.S. Trust Company. Mr. Ferdinand is
responsible for managing the investment organization of U.S. Trust
Company. With eleven portfolio managers, this group actively
manages over $2.6 billion of assets. In addition, Mr. Ferdinand is
a member of the Portfolio Policy Committee, headquartered at U.S.
Trust Company in New York. With over 30 years of investment
management experience, he comes to U.S. Trust Company from The
Penn Mutual Life Insurance Company, where he served as Executive
Vice President and Chief Investment Officer as well as President
and Chief Executive Officer of the investment management
subsidiaries. His background includes over 10 years of senior
trust investment experience in Connecticut and Pennsylvania. He is
a member of the Board of Directors of U.S. Trust Company. Mr.
Ferninand is a Chartered Financial Analyst and received a B.S.
degree from the University of Pennsylvania Wharton School of
Business. He earned his M.B.A. from New York University. He is a
member of the New York and International Society of Security
Analysts and the Association for Investment Management and
Research.

Joseph A. Gallagher, (58), Senior Vice President of U.S.
Trust Company of New Jersey. Prior to joining U.S. Trust, Mr.
Gallagher was Managing Director of Delafield, Harvey, Tabell,
which was acquired by U.S. Trust in 1992. Previously, he held the
positions of Senior Portfolio Manager in the Private Banking and
Investment Division at Citibank, N.A. and Vice President--
Investments at United Jersey Bank. Mr. Gallagher received his B.S.
degree from Georgetown University. 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.

Timothy C. Pettee, (41), Managing Director of United
States Trust Company of New York. Mr. Pettee is currently the
Director of Equity Research at U.S. Trust. He is responsible for
supporting over 100 portfolio managers with $40 billion plus in
equity assets under management with proprietary analysis from the
research department. Prior to joining United States Trust Company
of New York, Mr. Pettee worked for 8 years at Alliance Capital
Management, LP as an analyst in both the domestic and
international research departments. In addition, he managed the
Alliance Global Leisure Fund, the Alliance American Fund and
co-managed funds run by the research department. Prior to
Alliance, Mr. Pettee was with Merrill Lynch and Bear Stearns & Co.
Mr. Pettee holds a B.A. from Boston University.

Harvey A. Seline, (61), is a Managing Director and Senior
Portfolio Manager of United States Trust Company of New York. Mr.
Seline is a Division Manager in the Personal Wealth Management
Group. He has been with United States Trust Company of New York
since 1969. Prior to joining U.S. Trust, he was a Trust Investment
Officer at The National Bank of Tulsa and a Trust Analyst at First
City National Bank in Houston. Mr. Seline received his B.A. from
the University of Colorado and his M.B.A. from the Columbia
University Graduate School of Business Administration. Mr. Seline
is a Chartered Financial Analyst, a member of the New York Society
of Security Analysts and a member of The Association for
Investment Management and Research.

Jay B. Springer, (41), Managing Director and Senior
Portfolio Manager of United States Trust Company of New York. Mr.
Springer is a Division Manager in the Personal Wealth Management
Group. Previously, he worked as a Financial Analyst at Citibank.
Mr. Springer earned his B.B.A., magna cum laude, from Boston
University and his M.B.A. from New York University Graduate School
of Business. He is currently a member of The New York State
Bankers Association Trust Investment Committee and is a former
director of Bank Fiduciary Funds. Mr. Springer serves on the Board
of Directors of Christmas-in-April-USA.

David A. Tillson, (51), Managing Director and Senior
Portfolio Manager of United States Trust Company of New York. Mr.
Tillson is a Division Manager in the Personal Wealth Management
Group. Prior to joining United States Trust Company of New York,
he was the President of TDA Capital Management Company, which he
formed in 1990. From 1992 until he joined U.S. Trust, he was also
a Senior Vice President at Matrix Asset Advisers. Prior to
founding TDA Capital management, he was a Vice President,
portfolio manager and director of research at Management Asset
Corporation. He also held positions at W.P. Carey & Company and
General Reinsurance Corporation. Mr. Tillson received his B.A. in
1971 from Brown University and his M.B.A. in 1974 from New York
University. A Chartered Financial Analyst, Mr. Tillson is a member
of the New York Society of Security Analysts and the Association
for Investment Management Research.

Leigh Weiss, (45), Managing Director of United States
Trust Company of New York and Manager of Institutional Equity and
Balanced Portfolios. Mr. Weiss has been with the Trust Company
since September of 1993. Prior to joining United States Trust
Company of New York, he worked for Goldman, Sachs & Co., where he
had been since 1981. Mr. Weiss received his B.S. degree in
Economics from the Wharton School of the University of
Pennsylvania and he earned his M.B.A. from the University of
Chicago.

David J. Williams, (age), Managing Director and Senior
Portfolio Manager of United States Trust Company of New York, Mr.
Williams is a Portfolio Manager with over 20 years of investment
experience. He is a member of United States Trust Company of New
York's Investment Policy Committee and manages the Value and
Restructuring Fund. Formerly, Mr. Williams was a Senior Vice
President and the Senior Investment Officer of Horizon Trust
Company in Morristown, New Jersey. He was also a Portfolio Manager
with T. Rowe Price Associates, Inc. in Baltimore, Maryland. Mr.
Williams received his B.A. from Yale University and his M.B.A.
from Harvard University. He is a Chartered Financial Analyst.

George C. Whiteley III, (60), Managing Director and
Senior Portfolio Manager of United States Trust Company of New
York. Mr. Whiteley is a Division Manager in the Personal Wealth
Management Group. He joined the Trust Company in 1995. Prior to
joining United States Trust Company of New York, he worked for
Chase Manhattan Bank where he was Vice President and Chief
Investment Executive of U.S. Private Banking. Mr. Whiteley
received his B.A. degree from Harvard College and was awarded his
J.D. from New York University School of Law.

BOARD OF MANAGER COMPENSATION

Each member of the Board of Manager will receive $9,000 annually
and $1,500 per meeting attended. No member of the Board of Managers or
officer will receive aggregate compensation from the Company in excess of
$15,000 for fiscal 2000. Members of the Board of Managers are also entitled
to reimbursement of their actual out-of-pocket expenses incurred in
connection with their attendance at meetings of the Board of Managers. The
Company does not have a stock option plan, other long-term incentive plan,
retirement plan or other retirement benefits.

ESTIMATED COMPENSATION TABLE

AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION
NAME OF PERSON, COMPENSATION FROM BENEFITS ACCRUED AS BENEFITS UPON FROM COMPANY AND FUND
POSITION THE COMPANY PART OF FUND EXPENSES RETIREMENT COMPLEX*

<S> <C> <C> <C> <C>
$ 0 0 $[ ] (3 Funds)

$ 0 0 $[ ] (3 Funds)

</TABLE>

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

* The total compensation paid to such persons by the Company and
Fund Complex is estimated for the fiscal year ending December 31,
2000. The parenthetical number represents the number of investment
companies (including the Company) from which such person receives
compensation that are considered part of the same Fund Complex as
the Company.

CONTROL PERSONS

Upon completion of the Offering, no person is expected to have
voting control over the Company.

POTENTIAL CONFLICTS OF INTEREST

The Investment Adviser and its affiliates may be subject to various
conflicts of interest in connection with their relationships and
transactions with the Company. The contractual and other arrangements
between the Company and the Investment Adviser and its affiliates have not
been established by arms-length negotiations. Such conflicts of interest
may include:

Transactions with the Company and Portfolio Companies. The
Investment Adviser and its affiliates may perform various services for the
Company and its portfolio companies. Such services may include making loans
to portfolio companies, maintaining deposits of funds of portfolio
companies, serving as directors or officers of portfolio companies and
providing services in connection with mergers and acquisitions, leasing
real estate and insurance and economic forecasting. In consideration for
such services, such persons may receive various fees, commissions and
reimbursements to the extent permitted under applicable law. Depending upon
the Investment Adviser's or its affiliates' influence and control with
respect to portfolio companies, the selection of such persons to perform
such services for portfolio companies may not be a disinterested decision
and the terms and conditions for the performance of such services and the
amounts and terms of such compensation, may not be determined in
arms-length negotiations. The selection of the Investment Adviser or any of
its affiliates to perform services for a portfolio company must be approved
by a majority of the disinterested members of the Board of Managers of the
Company and the independent and disinterested directors of the portfolio
company. The interest rate and financing charges that such persons may
charge portfolio companies on funds made available to them will not exceed
those that would be charged by unrelated lending institutions on comparable
loans for the same purpose.

The Investment Company Act and the Federal Reserve Act contain
restrictions as to certain transactions among the Company and the
Investment Adviser or their affiliates. See "Regulation." Generally,
transactions involving the Company and the Investment Adviser or certain of
their affiliates must receive the prior approval of a majority of the
disinterested members of the Board of Managers having no financial interest
in the proposed transaction and/or the Commission and may be subject to
certain percentage limitations, safety-and-soundness and other
requirements. There can be no assurance that prior approval of the
Commission can be obtained.

The Investment Adviser expects to provide services to other
investors, including, Fund I and Fund II, and including other investment
funds and other business development companies organized by them or their
affiliates. The Company will have no contractual or other right to such
services prior to any of such other investors. The Investment Adviser may
file on behalf of itself and the Company an application for an exemptive
order from the Commission with respect to proposed joint investments by the
Company and U.S. Trust or certain of its affiliates in portfolio companies.
If an exemptive order is not granted, certain joint investments with U.S.
Trust or its affiliates will be prohibited. While the Commission has
granted exemptive relief in substantially similar circumstances in the
past, no assurance can be given that an exemptive order will be granted. If
the Company and U.S. Trust or its affiliates co-invest in a portfolio
company, certain conflicts may arise. See "Potential Conflicts of
Interest-- Joint Investments in Portfolio Companies and Other Securities"
and "Regulation."

Conflicts as to Investment Opportunities. The Investment Adviser
and its affiliates intend to make investments for their own account and may
be in competition with the Company for such investments. In addition, the
Investment Adviser and its affiliates may serve as investment adviser for
other private or public investment vehicles that will have investment
objectives identical with or similar to those of the Company. While the
Investment Adviser is obligated to endeavor to provide the Company with
continuing and suitable investment opportunities consistent with its
investment objective and policies, the Investment Adviser is not required
to present to the Company any particular opportunity that falls within the
investment objective and policies of the Company, except as set forth in
the procedures adopted by the Company's Board of Managers. Such procedures
provide that the Investment Adviser must endeavor to offer to the Company
on an equitable basis investment opportunities that would be suitable for
both the Company and other similar private equity funds for which the
Investment Adviser or United States Trust Company of New York provide
discretionary investment advisory services. The Investment Adviser and
its affiliates will endeavor to resolve conflicts with respect to
investment opportunities in a manner deemed equitable to all and consistent
with their fiduciary duties to the Company.

Joint Investments in Portfolio Companies and Other Securities. The
Investment Adviser and its affiliates and employees may participate with
the Company as co-investors in portfolio companies and other securities and
may make loans to, or other investments in, portfolio companies. Investment
in the same security at or about the same time will be required to be on a
basis which, in the judgment of the Board of Managers, is not more
advantageous to such other persons than the basis upon which the Company
participates in such joint investments, and will require the prior approval
of the Board of Managers, including a majority of the disinterested members
of the Board of Managers. Without prior approval by the Board of Managers
and/or the Commission, the Company will not make joint investments in the
securities of any entity if the Investment Adviser or any of its affiliates
have previously acquired a security issued by such entity, provided that
this prohibition does not apply to follow-on investments or investments in
public securities. In most such instances, prior approval of the Commission
of such joint investments would be required. There can be no assurance that
such approval will be obtained. See "Regulation."

Timing of Disposition of Investments. The Investment Adviser
receives certain allocations and distributions determined by the amount of
net realized capital gains (net of realized capital losses and net
unrealized capital depreciation) of the Company as set forth under
"Description of the Company - Allocations and Distributions." The interests
of the Investment Adviser may conflict with the interests of the members
with respect to the timing of the disposition of Company investments. The
acts of the Investment Adviser are subject to supervision by the Board of
Managers.

Allocation of Management Time and Services. The Company will not
have independent management or employees and will rely upon the Investment
Adviser and its affiliates for management and administration of the Company
and its assets. The Investment Adviser believes that it and its affiliates
have or can attract sufficient personnel to discharge all of their
responsibilities to the Company. Conflicts of interest may arise in
allocating management time, services or functions between the Company and
other entities for which the Investment Adviser and its affiliates may
provide similar services. The officers and employees of the Investment
Adviser will devote such time to the affairs of the Company as they, in
their sole discretion, determine to be necessary for the conduct of the
business of the Company. The Company's Board of Investment Advisers will
supervise the activities of the Investment Adviser.

Other Relationships with Portfolio Companies. The Investment
Adviser and its affiliates may have other relationships on an on-going
basis with portfolio companies in which the company has invested. Such
relationships could influence the Investment Adviser or its affiliates to
take actions, or forbear from taking actions, which an independent
investment adviser might not take or forbear from taking. The Investment
Adviser and its affiliates will not enter into any new relationship with a
portfolio company while the Company owns more than 5% of the outstanding
voting securities unless such relationship has been approved by a majority
of the disinterested members of the Board of Managers of the Company and by
the independent directors of the portfolio company who also have no
interest in the relationship.

CUSTODIAN AND TRANSFER AGENT

The Chase Manhattan Bank ("Chase") will serve as the Company's
custodian in accordance with the provisions of the Investment Company Act
and the rules and regulations thereunder. As such, Chase will be
responsible for holding the Company's cash and portfolio securities. Chase
will also serve as the transfer agent and distribution paying agent for the
Company's Units. For its custodian, transfer agency and paying agency
services, Chase will receive customary fees from the Company. Chase's
address is: Chase Manhattan Bank, 4 New York Plaza, New York, NY 10004.

BROKERAGE ALLOCATION AND OTHER PRACTICES

Subject to policies established by the Board of Managers, the
Investment Adviser will arrange for the execution of the Company's
portfolio transactions and the allocation of brokerage. In executing
portfolio transactions, the Investment Adviser will seek to obtain the most
favorable execution of portfolio transactions, that is the best combination
of net price and prompt reliable execution. In the Investment Adviser's
opinion, it is not possible to determine in advance that any particular
broker will actually be able to effect the most favorable execution
because, in the context of a constantly changing market, order execution
involves judgments as to the price, volume, trend and breadth of the
market, possibility of a block transaction and the broker's activity in the
security as well as its general record for prompt, competent and reliable
service in all aspects of order processing, execution and settlement as
well as anticipated commission rates.

A portion of the securities in which the Company will invest may
be traded in the over-the-counter markets, and the Company intends to deal
directly with the dealers who make markets in the securities involved,
except in those circumstances where better prices and execution are
otherwise available. Under the Investment Company Act, persons affiliated
with the Company generally are prohibited from dealing with the Company as
principal in the purchase and sale of securities. Transactions in the
over-the-counter markets usually involve transactions with dealers acting
as principal for their own account. The Company will not deal with
affiliated persons as principal in such transactions; however, affiliated
persons of the Company may serve as its broker in over-the-counter markets
and other transactions conducted on an agency basis in accordance with the
Investment Company Act. If an affiliated person of the Company is a market
maker in the securities of a company, the affiliated person will not serve
as the Company's broker in the purchase of such securities.

The Investment Adviser has no obligation to deal with any broker
or group of brokers in the execution of transactions. With respect to
certain securities, the Company's portfolio transactions may be effected
through affiliates of the Investment Adviser, provided it is consistent
with the policy of obtaining the most favorable execution. The Company's
Board of Managers has adopted procedures to ensure compliance with
applicable regulations relating to trading of portfolio securities.

In allocating brokerage among other brokers who are believed to be
capable of providing equally favorable execution, the Company may also take
into consideration the fact that a particular broker may, in addition to
execution capability, provide other services to the Company or the
Investment Adviser and its affiliates, such as research and statistical
information. Research services so received are in addition to and not in
lieu of services required to be performed by the Investment Adviser and do
not reduce the investment advisory fees payable by the Company. Such
services may be useful to the Investment Adviser in serving the Company and
other clients and, conversely, research services obtained by the placement
of brokerage business of other clients may be useful to the Investment
Adviser in carrying out its obligations to the Company. The Investment
Adviser might incur significant expense were it to purchase such research
services from the parties.

PORTFOLIO TURNOVER

Because the investments of the Company generally require
relatively long periods of time to reach maturity, it is expected that the
Company's portfolio turnover will be low. There is, however, no policy
limitation on the ability of the Company to sell an investment after a
short period of time. Any short-term securities in which the Company
invests will have a high rate of turnover.

Portfolio turnover will generally involve some expense to the
Company, including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and, where permitted,
reinvestment in other securities. The portfolio turnover rate will be
computed by dividing the lesser of the amount of the securities purchased
or securities sold during the year by the average monthly value of
securities owned during the year (excluding securities whose maturities at
acquisition were one year or less).

REGULATION

The Investment Advisers Act of 1940, as amended (the "Investment
Advisers Act"), generally prohibits an investment adviser from entering
into an investment advisory contract with an investment company that
provides for compensation to the investment adviser on the basis of a share
of capital gains upon or capital appreciation of the funds or any portion
of the funds of the investment company. In 1980, Congress enacted the Small
Business Investment Incentive Act of 1980 which added provisions to the
Investment Advisers Act which permit the payment of compensation to an
investment adviser to a BDC based on capital gains.

In addition, the Small Business Investment Incentive Act of 1980
modified the provisions of the Investment Company Act that are applicable
to BDCs. The BDC is considered to be a closed-end investment company as
those terms are defined in the Investment Company Act. The following is a
brief description of the Investment Company Act, as modified by the Small
Business Investment Incentive Act of 1980, and is qualified in its entirety
by reference to the full text of the Investment Company Act and the rules
thereunder.

Generally, to be eligible to elect BDC status, a company must
engage in the business of furnishing capital and offering significant
managerial assistance to companies that do not have ready access to capital
through conventional financial channels. A BDC must be operated for the
purpose of making investments in securities of the types required by the
Investment Company Act, which types include certain present and former
"eligible portfolio companies" and certain bankrupt or insolvent companies.
A BDC need not invest in all of the possible types of securities approved
for investment by BDCs. Business development companies must also make
available significant managerial assistance to portfolio companies. An
eligible portfolio company generally is a United States company that is not
an investment company (except for wholly-owned Small Business Investment
Companies licensed by the Small Business Administration) and that (i) does
not have a class of securities registered on a national securities exchange
or included in the Federal Reserve Board's over-the-counter margin list,
(ii) is actively controlled by the BDC either alone or as part of a group
acting together and an affiliate of the BDC is a member of the portfolio
company's board of directors, or (iii) meets such other criteria as may be
established by the Commission. Control, under the Investment Company Act,
is presumed to exist where the BDC owns 25% of the outstanding voting
securities of the portfolio company.

The Investment Company Act limits the type of assets that the
Company may acquire to "qualifying assets" and certain assets necessary for
its operations (such as office furniture, equipment, and facilities)
unless, at the time of the acquisition, at least 70% of the value of the
Company's assets consists of qualifying assets. Qualifying assets include:
(i) securities of companies that were eligible portfolio companies at the
time the Company acquired their securities; (ii) securities of bankrupt or
insolvent companies that are not otherwise eligible portfolio companies;
(iii) securities acquired as follow-on investments in companies that were
eligible at the time of the Company's initial acquisition of their
securities but are no longer eligible, provided that the Company has
maintained a substantial portion of its initial investment in those
companies; (iv) securities received in exchange for or distributed on or
with respect to any of the foregoing; and (v) cash items, government
securities, and high-quality, short-term debt. The Investment Company Act
also places restrictions on the nature of the transactions in which, and
the persons from whom, securities can be purchased in order for the
securities to be considered qualifying assets. In addition, certain
provisions of the federal banking laws, including the Bank Holding Company
Act of 1956, as amended, would prohibit or restrict investments by the
Company in securities of commercial banking organizations.

The Company is permitted by the Investment Company Act, under
specified conditions, to issue multiple classes of senior debt and a single
class of equity senior to the Units if its asset coverage, as defined in
the Investment Company Act, is at least 200% after the issuance of the debt
or equity. In addition, provision must be made to prohibit any distribution
to members or the repurchase of any Units unless the asset coverage ratio
is at least 200% at the time of the distribution or repurchase.

After this offering, the Company may sell its securities at a
price that is below the prevailing net asset value per Unit only upon the
approval by the holders of a majority of its voting securities. In
addition, the Company may repurchase its Units subject to the restrictions
of the Operating Agreement and the Investment Company Act.

Under the Investment Company Act as amended by the Small Business
Investment Incentive Act of 1980, certain of the transactions involving the
Company and its affiliates (as well as affiliates of those affiliates) that
would previously have been prohibited without the prior approval of the
Commission require the prior approval of a majority of the disinterested
members of the Board of Managers having no financial interest in the
transactions. Certain transactions involving certain closely affiliated
persons of the Company, including the Investment Adviser and its officers
and employees, still require the prior approval of the Commission. In
general, (i) any person who owns, controls, or holds with power to vote,
more than 5% of the outstanding Units, (ii) any director, executive
officer, or general partner of that person, and (iii) any person who
directly or indirectly controls, is controlled by, or is under common
control with, that person, must obtain the prior approval of a majority of
the disinterested members of the Board of Managers and, in some situations,
the prior approval of the Commission, before engaging in certain
transactions involving the Company or any company controlled by the
Company. The Investment Company Act and applicable rules thereunder
generally do not restrict transactions between the Company and its
portfolio companies. In accordance with the Investment Company Act, a
majority of the members of the Board of Managers are not interested persons
of the Company as defined in the Investment Company Act. See "Management."

The Investment Company Act prohibits an investment company, such
as the Company, from knowingly participating in a joint transaction with an
affiliate of the investment company. Accordingly, the Company may not,
without exemptive relief from the Commission, participate in a joint
transaction with the Investment Adviser, certain other members of the U.S.
Trust family of companies, Fund I, Fund II or other companies or funds
which may be affiliates of the Company (collectively, "Company
Affiliates"). The Company and the Investment Adviser may submit an
application to the Commission to permit such co-investment. The Investment
Adviser believes that co-investment by the Company and any Company
Affiliates would afford the Company the ability to achieve greater
diversification and, together with any Company Affiliates, the opportunity
to exercise greater influence on the portfolio companies in which the
Company and any Company Affiliates invest together. Accordingly, the
Company may file an application that would seek an exemptive order
permitting the Company and any Company Affiliates to co-invest together in
the same portfolio companies where such is consistent with investment
objectives, investment positions, investment policies, investment
strategies, investment restrictions, regulatory requirements and other
pertinent factors applicable to the Company. Although the Investment
Adviser intends to select investments for the Company and for Company
Affiliates separately, considering in each case only the investment
objectives, investment positions, available funds and other pertinent
factors of the particular investment company or fund, it is expected that
if the application for exemptive relief is granted, the Company and any
Company Affiliates may frequently co-invest in the same portfolio
companies. It is expected that prior to committing to a co-investment, a
"required majority" (as defined in the Investment Company Act) of the
members of the Board of Managers of the Company would make certain findings
concerning the fairness to the Company of the co-investment arrangement.

VALUATION OF PORTFOLIO SECURITIES

Under the supervision of and in accordance with procedures adopted
by the Board of Managers, the Investment Adviser will value the securities
in the Company's portfolio quarterly and at such other time as, in the
Board's view, circumstances warrant. In the event of a sale by the Company
of its Units, the Investment Adviser must determine the net asset value
(the "NAV") of a Unit as of a date within 48 hours before such sale
(excluding Sundays and holidays) to comply with the requirement of the
Investment Company Act that securities not be sold below NAV without member
approval.

In order to determine the NAV per Unit, (i) the value of the
assets of the Company, including its portfolio securities, will be
determined by the Investment Adviser under the supervision of the Board of
Managers; (ii) the Company's liabilities will be subtracted therefrom; and
(iii) the difference will be divided by the number of outstanding Units of
the Company. For purposes of this calculation, any amount of the Incentive
Carried Interest, calculated as if all gains on investments were realized
gains, that the Investment Adviser would be entitled to distribution of if
the Company had cash available for distribution will be treated as a
liability of the Company.

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.
Securities for which market quotations are not readily available and other
assets will be valued at fair value as determined in good faith by the
Investment Adviser under the supervision of the Board of Managers and
pursuant to procedures established and periodically reviewed by the Board
of Managers. Securities having remaining maturities of 60 days or less are
valued at amortized cost.

The value for restricted stock investments 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. In the early stages of development,
venture capital investments will typically be valued based upon their
original cost to the Company, until developments positively or negatively
affecting the portfolio company provide a sufficient basis for use of a
valuation other than cost (such as changes in the portfolio company's
prospects or reliable private sales of a portfolio company's securities at
prices different from the value initially used by management). Such
developments may occur shortly after the Company's original investment, or
after a longer period. Upon the occurrence of developments providing a
sufficient basis for a change in valuation, venture capital investments
will typically be valued by appraisal valuation (the "appraisal method") by
the Investment Adviser. The appraisal method will be based upon such
factors affecting the portfolio company as earnings, net worth, reliable
private sale prices of the portfolio company's securities, the market
prices for similar securities of comparable companies and an assessment of
the portfolio company's future prospects. In the case of unsuccessful
operations, the appraisal may be based upon liquidation value. Valuations
based on the appraisal method are necessarily subjective. The Company will
also use third party transactions (actual or proposed) in the portfolio
company's securities as a basis of valuation (the "private market method").
The private market method will only be used with respect to actual
transactions or actual firm offers by sophisticated, independent investors.
The values for the investments referred to in this paragraph will be
estimated regularly by the Investment Adviser 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.

Securities with legal, contractual or practical restrictions on
transfer may be valued at a discount (typically ranging from 10% to 40%)
from their value determined by the foregoing methods to reflect the effect
of such restrictions.

The Company anticipates that it may invest in securities for which
a public market exists but which are "restricted securities" for purposes
of the Securities Act. In evaluating such securities, the Investment
Adviser will take into consideration various factors, including the price
at which the securities in question were acquired relative to the market
price for unrestricted shares of the same securities at the time of such
acquisition, modified as appropriate to reflect the nature of the market in
which the securities are traded, if any, the amount of the public float,
the existence and terms of any securities registration rights, the
proportion of the portfolio company's securities held by the Company,
changes in the financial condition and prospects of such portfolio company
and other factors which may affect their fair value, all in accordance with
the Investment Company Act. Restricted securities for which an established
trading market exists will typically be valued at a discount of 10% to 40%
from the public market price with the amount of the discount decreasing as
the restriction period decreases. If an established trading market does not
exist, valuations will be made consistent with the "going concern" method
described above. The Company's investments in Private Funds generally will
be valued based upon the Company's pro rata share of the value of the
assets of a Private Fund as determined by such Private Fund in accordance
with its by-laws, constitutional or other documents governing such
valuation, on the valuation date. If such valuation with respect to
investments in Private Funds is not available by reason of timing or other
event on the valuation date or are deemed to be unreliable by the
Investment Adviser, the Investment Adviser will determine such value based
on the Investment Adviser's judgment of fair value on the appropriate date,
less applicable charges, if any.

CAPITAL ACCOUNTS, ALLOCATIONS AND DISTRIBUTIONS

Capital Accounts. The Company will establish a capital account for
each investor who becomes a member of the Company. Your capital
contributions and your share of items of income and gain will be credited
to your capital account, and your distributions and your share of items of
loss, deduction and expense will be debited from your capital account. The
Company will establish a capital account for the Investment Adviser to
which allocations in respect of the Incentive Carried Interest will be
made.

Allocations. The income, gain, loss, deduction and expense of the
Company will be determined and allocated as of the end of each fiscal year
to reflect the economic interests of the members and the Investment
Adviser.

Each year, Company allocations generally will be made in the
following manner:

o items of income, gain, loss, deduction and expense in an
amount equal to the Members' Allocation Amount will be
allocated to the members pro rata in accordance with their
capital contributions; and

o gains will be allocated to the Investment Adviser until the
cumulative amount of all gains that has been allocated to
the Investment Adviser from the commencement of operations
equals the Incentive Carried Interest calculated through the
end of the period for which the allocation is being made.

The Members' Allocation Amount is the items of income, gain, loss,
deduction and expense remaining after the required allocation has been made
to the Investment Adviser.

For any given period, the allocation of gain to the Investment
Adviser described above will be made out of long-term capital gain and
short-term capital gain in proportion to the amount of such gains available
for allocation.

For any given period, the Incentive Carried Interest will be an
amount equal to 20% of the excess, if any, of the cumulative amount of all
capital gains realized by the Company on Direct Investments from the
commencement of operations through the end of such period over the sum of:

o the cumulative amount of all capital losses realized by the
Company on all investments of any type from the commencement
of operations through the end of such period; and

o the amount of net unrealized capital depreciation on all
investments of any type all determined as of the close of
such period.

To the extent that the Company distributes property in kind, the
Company will be deemed to have realized gain or loss on such property based
on the value assigned to such property in accordance with the Company's
valuation procedures. In the event of the resignation or removal of the
Investment Adviser or other termination without reinstatement of the
Investment Advisory Agreement with the Investment Adviser or an affiliate,
the assets of the Company will be valued in accordance with the Operating
Agreement as of the date of resignation, removal or termination, and the
Company will be deemed to have realized gain or loss on such assets based
on the valuations so assigned.

Notwithstanding the foregoing, the Company may, in its sole and
absolute discretion, make special allocations of items of Company income,
gain, loss, deduction and expense in order to cause the capital account
balances of the members and the Investment Adviser to reflect the economic
arrangement set forth in the following paragraph.

Distributions. The Company will distribute all cash that the
Investment Adviser does not expect to use in the operation of the Company
and that is available after the payment of all expenses then due and the
creation of any reserves. The Company will consider such distributions at
least annually but, as described below, does not expect to make
distributions of cash or property during the first several years of
operations. Each year, the Investment Adviser generally will be entitled to
a distribution equal to the excess, if any, of the Incentive Carried
Interest as most recently calculated over the cumulative amount of all
prior distributions made to the Investment Adviser in respect of the
Incentive Carried Interest determined in prior years. The members generally
will be entitled to all amounts remaining for distribution pro rata in
accordance with their capital contributions. Upon liquidation of the
Company, any cash or other property available for distribution will be
distributed to the members and to the Manager pro rata in accordance with
their respective capital account balances. The Investment Adviser's capital
account balance generally will reflect the allocations that have been made
to the Investment Adviser in respect of the Incentive Carried Interest but
that have not been previously distributed to the Investment Adviser.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of certain U.S. federal income tax
consequences to the initial members who are U.S. persons. The discussion is
based upon the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury Regulations, judicial authorities, published positions of the IRS
and other applicable authorities, all as in effect on the date hereof and
all of which are subject to change or differing interpretations (possibly
with retroactive effect). The discussion does not address all of the tax
consequences that may be relevant to a particular member or to members
subject to special treatment under federal income tax laws (e.g., banks and
certain other financial institutions, insurance companies, tax-exempt
organizations and non-U.S. persons). This discussion is limited to members
who hold their Units as capital assets. No ruling has been or will be
sought from the IRS regarding any matter discussed herein. Except as
expressed in "Tax Status of the Company" below, counsel to the Company has
not rendered any legal opinion regarding any tax consequences relating to
the Company or an investment in the Company. No assurance can be given that
the IRS would not assert, or that a court would not sustain, a position
contrary to any of the tax aspects set forth below. PROSPECTIVE INVESTORS
MUST CONSULT THEIR OWN TAX ADVISERS AS TO THE FEDERAL INCOME TAX
CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF UNITS AS WELL AS THE
EFFECTS OF STATE, LOCAL AND NON-U.S. TAX LAWS.

Tax Status of the Company. At the first subscription closing, the
Company will receive an opinion of its counsel, Skadden, Arps, Slate,
Meagher & Flom LLP, to the effect that, under current law and based on
certain assumptions and representations, the Company will be treated as a
partnership and not as a "publicly traded partnership" that is treated as a
corporation for federal income tax purposes. An opinion of counsel is not
binding on the IRS or any court.

A limited liability company (such as the Company) that has elected
to be treated as a business development company under the Investment
Company Act would be treated as a corporation for federal income tax
purposes if it were to become a publicly traded partnership. A publicly
traded partnership is a partnership, or limited liability company intended
to be treated as a partnership, the interests of which are either traded on
an established securities market or readily tradable on a secondary market
(or the substantial equivalent thereof). Each of the Investment Adviser and
the Company has represented to counsel for the Company that, among other
things, neither it, nor any affiliate thereof, will participate in the
establishment of an established securities market or secondary market (or
the substantial equivalent thereof) for this purpose.

In addition, the Operating Agreement imposes significant
restrictions on transfer of Units in order to address this point. By
subscribing for Units, each member agrees to indemnify and hold harmless
the Company, the Investment Adviser, each other member and any successor or
assign any of the foregoing, from and against all losses, claims, damages,
liabilities, costs and expenses (including losses, claims, damages,
liabilities, costs and expenses of any judgments, fines and amounts paid in
settlement), joint or several, to which those persons may become subject by
reason of or arising from any transfer made by that member in violation of
the Operating Agreement or any misrepresentation made by that member in
connection with any purported transfer. A similar indemnification is
required to be made by a permitted transferee.

Ultimately, counsel's opinion as to the treatment of the Company
as a partnership for federal income tax purposes will be based on, among
other things, the maintenance of factual conditions (including those
underlying the representations of the Investment Adviser and the Company),
the continuation of which cannot be assured. Company's counsel will not
render a Company tax status opinion or review such factual environment
after the first subscription closing.

If the Company were treated as a publicly traded partnership or
otherwise treated as a corporation for federal income tax purposes,
material adverse consequences for the members would result. The Company
would be subject to tax on its income at corporate tax rates, without a
deduction for any distribution to the members, thereby materially reducing
the amount of any cash available for distribution to the members. In
addition, the members would be treated as shareholders for federal income
tax purposes. Thus, capital gains and losses and other income and
deductions of the Company would not be passed through to the members, and
all distributions by the Company to the members would be treated as
dividends, return of capital and/or gains.

The following discussion assumes that the Company will continue to
be treated as a partnership for federal income tax purposes.

TAXATION OF MEMBERS OF THE COMPANY. By reason of its treatment as
a partnership for federal income tax purposes, the Company will not itself
be subject to federal income tax. Rather, each member in computing its
federal income tax will include his, her or its allocable share of Company
items of income, gain, loss, deduction and expense for the taxable year of
the Company ending within or with the taxable year of the member.
Nonliquidating cash distributions made by the Company to a member generally
will not be taxable to the member, except to the extent that the amount of
such cash distributions exceeds the distributee's adjusted tax basis in
his, her or its Units. Nonliquidating distributions of property other than
cash are also generally not taxable. If both cash and other property are
distributed by the Company to a member, the member's adjusted tax basis in
his, her or its Units will be reduced first by the cash and then by the
Company's tax basis in the other property distributed. The member will have
a tax basis in non-liquidating, non-cash distributions of property equal to
the Company's tax basis in such property (but in no event in excess of the
member's adjusted tax basis in his, her or its Units reduced by the amount
of any cash distributed in the same transaction).

For federal income tax purposes, a member's allocable share of
Company tax items will be determined by the provisions of the Operating
Agreement if such allocations have or are deemed to have "substantial
economic effect" or are determined to be in accordance with the members'
interests in the Company. The allocations under the Operating Agreement are
intended to satisfy such requirements. If, however, the IRS successfully
challenged the Company's allocations of income, gain, loss, deduction and
expense, the redetermination of the allocations to a particular member for
federal income tax purposes may be less favorable than the allocations set
forth in the Operating Agreement.

The Company may derive taxable income from an investment that is
not matched by a corresponding receipt of cash. This could occur, for
example, if the Company makes an investment in certain non-U.S.
corporations. See "Phantom Income from Company Investments in Non-U.S.
Corporations" below. This could also occur if the Company invests in an
entity that is classified as a partnership and such entity allocates income
or gain to the Company without making a corresponding distribution of cash.
Moreover, the Company is not required to make current distributions of its
entire earnings. In addition, a reduction of Company nonrecourse borrowings
(as defined for federal income tax purposes) would be treated as a
constructive distribution of cash to a member to the extent of his, her or
its allocable share of such reduction, even though an actual cash
distribution is not made. Accordingly, it is possible that a member's
federal income tax liability with respect to his, her or its allocable
share of Company earnings in a particular taxable year could exceed the
cash distributions to the member for the year, thus giving rise to an
out-of-pocket payment by the member.

TAX BASIS RULES. Company distributions generally will not be
taxable to a member to the extent of such member's adjusted tax basis in
his, her or its Units. In addition, a member is allowed to deduct his, her
or its allocable share of Company losses (if any) only to the extent of
such member's adjusted tax basis in his, her, or its Units at the end of
the taxable year in which the losses occur. A member's adjusted tax basis
is equal to the member's aggregate capital contributions to the Company as
adjusted by certain items. Basis is generally increased by the member's
allocable share of Company profits (and items of income and gain) and
Company nonrecourse borrowings (as defined for federal income tax
purposes). Basis is generally decreased by the member's allocable share of
Company losses (and items of loss, deduction and expense), the amount of
cash distributed by the Company to the member, the Company's tax basis of
property (other than cash) distributed by the Company to the member and any
reduction in the member's allocable share of Company nonrecourse borrowings
(as defined for federal income tax purposes).

To the extent that a member's allocable share of Company losses
are not allowed because the member has insufficient adjusted tax basis in
his, her or its Units, such disallowed losses may be carried over by the
member to subsequent taxable years and will be allowed if and to the extent
of the member's adjusted tax basis in subsequent years.

AT RISK RULES. Individuals and certain closely held C corporations
are allowed to deduct their allocable share of Company losses (if any) only
to the extent of each such member's "at risk" amount in the Company at the
end of the taxable year in which the losses occur. A member's at risk
amount generally is equal to the member's aggregate capital contributions
to the Company. To the extent that a member's allocable share of Company
losses are not allowed because the member has an insufficient amount at
risk in the Company, such disallowed losses may be carried over by the
member to subsequent taxable years and will be allowed if and to the extent
of the member's at risk amount in subsequent years.

PASSIVE ACTIVITY LOSS RULES. Individuals, estates, trusts, closely
held C corporations and personal service corporations are not allowed to
deduct "passive activity losses" (as defined for federal income tax
purposes) against certain other income, such as salary or other
compensation for personal services, interest, dividends, annuities or
royalties not derived in the ordinary course of a trade or business and
gain attributable to the disposition of property that either produces such
nonbusiness income or is held for investment. The Company's investment
activities generally will not constitute a passive activity for purposes of
the passive activity loss rules. Therefore, a member will not be allowed to
offset his, her or its allocable share of Company items of income or gain
with the member's passive activity losses from other sources.

INVESTMENT INTEREST LIMITATION. Individuals and other noncorporate
taxpayers are allowed to deduct interest paid or accrued by the Company on
its indebtedness (so-called investment interest) only to the extent of each
such member's net investment income for the taxable year. A member's net
investment income generally is the excess, if any, of the member's
investment income from all sources (which is gross income from property
held for investment) over investment expenses from all sources (which are
deductions allowed that are directly connected with the production of
investment income). Investment income excludes net capital gain
attributable to the disposition of property held for investment (and thus
would not include any Company gains on the sale of its investments), unless
the member elects to pay tax on such gain at ordinary income rates.

To the extent that a member's allocable share of Company
investment interest is not allowed because the member has insufficient net
investment income, such disallowed investment interest may be carried over
by the member to subsequent taxable years and will be allowed if and to the
extent of the member's net investment income in subsequent years. If a
member borrows to finance the purchase of Units, any interest paid or
accrued on the borrowing will be investment interest that is subject to
these limitations. Since the amount of a member's allocable share of
Company investment interest that is subject to this limitation will depend
on the member's aggregate investment interest and net investment income
from all sources for any taxable year, the extent, if any, to which Company
investment interest will be disallowed under this rule will depend on each
member's particular circumstances each year.

OTHER LIMITATIONS ON DEDUCTIONS AND SPECIAL CODE PROVISIONS.
Prospective investors should be aware that they could be subject to various
other limitations on their ability to deduct their allocable share of
Company losses (or items of loss and deduction thereof). An individual,
estate or trust may deduct so-called miscellaneous itemized deductions,
which include the advisory fee and certain other expenses of the Company
and of the Private Funds, only to the extent that such deductions exceed 2%
of the adjusted gross income of the taxpayer. Since the amount of a
member's allocable share of such expenses that is subject to this
disallowance rule will depend on the member's aggregate miscellaneous
itemized deductions from all sources and adjusted gross income for any
taxable year, the extent, if any, to which such expenses will be subject to
disallowance will depend on each member's particular circumstances each
year. Other limitations are imposed on itemized deductions of high-income
individuals.

For federal income tax purposes, if a member of a limited
liability company performs services for the company and there is a related
direct or indirect allocation and distribution by the company to such
member, the allocation and distribution may be recharacterized as a fee. It
is intended that the Investment Adviser's Incentive Carried Interest
constitute an allocable share of Company earnings and not a fee. No
assurance can be given, however, that the IRS could not successfully assert
that the Incentive Carried Interest be recharacterized as a fee under these
rules, in which case members could be subject to the limitations on
deductibility relating to miscellaneous itemized deductions and certain
other itemized deductions of high-income individuals described above.

In addition, prospective investors should be aware that certain of
the Company's activities may be subject to various special provisions of
the Code that, among other things, defer or disallow the deductibility of
certain expenses. Organizational expenses of the Company are not currently
deductible, but may, at the election of the Company, be amortized ratably
over a period of not less than 60 months. Syndication expenses of the
Company (i.e., expenditures made in connection with the marketing and
issuance of Units, including placement fees) are neither deductible nor
amortizable.

NON-U.S. CURRENCY GAINS OR LOSSES. If the Company makes an
investment or obtains financing denominated in a currency other than the
U.S. dollar, then the Company may recognize gain or loss attributable to
fluctuations in such currency relative to the U.S. dollar. The Company may
also recognize gain or loss on such fluctuations occurring between the time
it obtains and disposes of non-U.S. currency, between the time it accrues
and collects income denominated in a non-U.S. currency, or between the time
it accrues and pays liabilities denominated in a non-U.S. currency. Such
gains or losses generally will be treated as ordinary income or loss.

PHANTOM INCOME FROM COMPANY INVESTMENTS IN NON-U.S. CORPORATIONS.
It is possible that the Company may invest in non-U.S. corporations that
could be classified as "passive foreign investment companies," "controlled
foreign corporations" and "foreign personal holding companies" (each as
defined for federal income tax purposes). For federal income tax purposes,
these investments may, among other things, cause a member to recognize
taxable income without a corresponding receipt of cash, to incur an
interest charge on taxable income that is deemed to have been deferred
and/or to recognize ordinary income that would have otherwise been treated
as capital gains.

NON-U.S. TAXES. It is possible that certain dividends and interest
received by the Company from sources outside of the U.S. will be subject to
withholding taxes imposed by other countries. In addition, the Company may
also be subject to capital gains taxes in certain other countries where it
purchases and sells stocks and securities. Tax treaties between the United
States and other countries may reduce or eliminate such taxes.

The Company will inform members as to their proportionate share of
non-U.S. taxes paid by the Company, and members will be required to include
such taxes in their income. Members generally will be entitled to claim
either a credit (subject, however, to various limitations on foreign tax
credits) or, if they itemize their deductions, a deduction (subject to the
limitations generally applicable to deductions) for their share of such
non-U.S. taxes in computing their federal income taxes.

SALE OF COMPANY INVESTMENTS AND TAX RATES. The Company will
generally recognize capital gain or loss on the sale of its investments.
For members who are individuals, the maximum federal income tax rate on
their allocable share of Company capital gains is 39.6% for capital assets
held by the Company for one year or less and 20% for capital assets held by
the Company for more than one year. The maximum federal income tax rate on
an individual's allocable share of Company ordinary income is 39.6%.
Corporations are subject to a maximum 35% federal income tax rate on their
allocable share of Company ordinary income and capital gains (whether
long-term or short-term).

LIMITATION ON DEDUCTIBILITY OF CAPITAL LOSSES. Capital losses are
deductible only to the extent of capital gains (subject to an exception for
individuals under which a limited amount of capital losses may be offset
against ordinary income).

SALE OF UNITS. Members will not be able or allowed to freely sell
or otherwise transfer their Units. In addition, neither the Company nor the
Investment Adviser (nor any affiliate thereof) will repurchase any Units,
except that the Company will repurchase Units upon its termination. By
subscribing for Units, each member agrees to indemnify and hold harmless
the Company, the Investment Adviser each other member, and any successor or
assign of any of the foregoing, from and against all losses, claims,
damages, liabilities, costs and expenses (including losses, claims,
damages, liabilities, costs and expenses of any judgments, fines and
amounts paid in settlement), joint or several, to which those persons may
become subject by reason of or arising from any transfer made by that
member in violation of the Operating Agreement or any misrepresentation
made by that member in connection with any purported transfer. A similar
indemnification is required to be made by a permitted transferee. See "Risk
Factors - Risks Related to the Company -No Public or Other Market for
Units."

A member that is allowed to sell his, her, or its Units will
recognize gain or loss measured by the difference between the amount
realized on the sale and the member's adjusted tax basis in the Units sold
(as described in "Tax Basis Rules" above). Such gain or loss generally will
be long-term capital gain or loss if the member held the sold Units for
more than one year. The amount realized will include the member's allocable
share of Company nonrecourse borrowings (as defined for federal income tax
purposes), if any, as well as any proceeds from the sale. Thus, a tax
liability upon the sale of Units may exceed the member's cash proceeds from
the sale.

ALTERNATIVE MINIMUM TAX. In certain circumstances, individuals,
corporations and other taxpayers may be subject to an alternative minimum
tax in addition to regular tax. A member's potential alternative minimum
tax liability may be affected by reason of an investment in the Company.
The extent, if any, to which the alternative minimum tax applies will
depend on each member's particular circumstances for each taxable year.

TAX ELECTIONS. Under Section 754 of the Code, the Company may make
a generally irrevocable election to adjust the tax basis of its assets in
the event of a distribution of Company property to a member or in the event
of a transfer of Units (in which latter case basis will be adjusted with
respect to the transferee member only). The Company does not currently
intend to make a Section 754 election. Certain recent legislative proposals
would, if enacted, require the Company to make a Section 754 election. The
Investment Adviser has sole and absolute discretion to make all tax
elections for the Company.

REPORTS TO MEMBERS. The Company has the calendar year as its
taxable year. The Company will furnish annually to each member a report
containing a Schedule K-1, which indicates each member's distributive share
for each calendar year of Company income, gain, loss, deduction and expense
for use in the preparation of the member's income tax return. The Company
will endeavor to deliver Schedules K-1 to members prior to April 15 of each
year, but may not be able to do so because, among other things, the Company
may not receive, prior to April 15, a Schedule K-1 from a Private Fund that
is classified as a partnership for federal income tax purposes in which the
Company has invested. Accordingly, members may be required to obtain
extensions for filing their federal, state and local income tax returns
each year. The Company will provide members with estimated annual federal
income tax information prior to April 15, assuming the Company is able to
obtain such information.

TAX AUDITS. Although not required to pay any federal income tax,
the Company must file a federal income tax information return each taxable
year. The IRS may audit Company returns in a unified entity proceeding at
the Company level. The Investment Adviser, who would represent the Company
at such an audit as the so-called tax matters partner, has considerable
authority to make decisions affecting the tax treatment and procedural
rights of the members. The Investment Adviser may also generally enter into
settlement agreements with the IRS that bind members and consent on behalf
of the Company to extend the statute of limitations for assessing a
deficiency with respect to a Company item. Successful adjustments by the
IRS of Company items of income, gain, loss, deduction or expense could
change a member's federal income tax liabilities.

BACKUP WITHHOLDING. The Company may be required to withhold
federal income tax at a rate of 31% on a member's allocable share of
interest and dividends if the member fails to provide the Company with his,
her or its taxpayer identification number or a certificate that he, she or
it is exempt from backup withholding, or the IRS notifies the Company that
the member is subject to backup withholding. The member may be entitled to
a federal income tax credit for the amount of any backup withholding if the
required information is furnished to the IRS.

CERTAIN CONSIDERATIONS FOR TAX-EXEMPT INVESTORS. The Company may
from time to time borrow funds for operating purposes in an amount up to
25% of the value of its total assets (after giving effect to the borrowing)
in order to make additional investments in existing portfolio companies to
maintain various regulatory qualifications or to pay contingencies and
expenses. To the extent that the Company does so, an investment in the
Company will generate unrelated business taxable income for federal income
tax purposes (and may have other adverse tax consequences) for pension
funds, Keogh plans, individual retirement accounts, tax-exempt institutions
and other tax-exempt investors. Accordingly, such prospective investors are
urged to consult their own tax advisers concerning possible federal, state,
local and non-U.S. tax consequences from an investment in the Company.

CERTAIN CONSIDERATIONS FOR NON-U.S. INVESTORS. The discussion
under this heading applies to certain members who are not "U.S. persons" as
determined for U.S. federal income tax purposes ("non-U.S. members"). The
term "U.S. person" means:

o a citizen or resident of the United States;
o a corporation created or organized under the laws of the
United States or any political subdivision thereof or
therein;
o an estate the income of which is subject to U.S. federal
income taxation regardless of source; or
o a trust if both (a) a U.S. court is able to exercise primary
supervision over the administration of the trust and (b) one
or more U.S. persons has the authority to control all
substantial decisions of the trust.

Given the nature of the Company's investment activities, the
Company believes that a non-U.S. member generally should not be subject to
regular U.S. federal income taxation on his, her or its allocable share of
Company income where such member's nexus with the U.S. is solely as a
result of an investment in Units. No prohibition and thus no assurances can
be given in this regard, however. The Company will be subject to U.S.
withholding tax of 30% on dividends and certain interest income allocable
to non-U.S. members (unless reduced or eliminated by an applicable treaty).

If, contrary to the Company's expectations, the Company were
treated as being engaged in a U.S. trade or business, then each non-U.S.
member generally would be subject to regular U.S. federal income taxation
on his, her or its allocable share of Company income. In such case, each
non-U.S. member would be required to file a U.S. federal income tax return
reporting his, her or its allocable share of Company income and to pay U.S.
federal income tax at regular U.S. rates on that income. In addition, the
Company would be required to withhold and pay over to the IRS certain
amounts with respect to such income. Any amount so withheld would be
creditable against the non-U.S. member's ultimate U.S. federal income tax
liability, and the non-U.S. member would be entitled to a refund to the
extent that the amount withheld exceeded such member's U.S. federal income
tax liability for the taxable year. Finally, a corporate non-U.S. member's
allocable share of Company income may be subject to a 30% U.S. branch
profits tax.

Different rules from those described above apply in the case of a
non-U.S. member:

o who has an office or fixed place of business in the U.S. or
is otherwise carrying on a U.S. trade or business;
o who is an individual present in the United States for 183 or
more days in the taxable year of the disposition or has a
"tax home" in the United States for United States federal
income tax purposes;
o who is a former citizen or resident of the United States; or
o that is a controlled foreign corporation, a foreign
insurance company that holds Units in connection with a U.S.
trade or business, a foreign personal holding company or a
corporation that accumulates earnings to avoid U.S. federal
income tax.

NON-U.S. MEMBERS ARE URGED TO CONSULT THEIR U.S. TAX ADVISERS
REGARDING THE TAX CONSEQUENCES OF INVESTING IN THE COMPANY.

STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES. In addition to the
federal income tax consequences described above, the members, as well as
the Company itself and the entities in which the Company invests, may be
subject to various state, local and non-U.S. taxes. A member's allocable
share of Company income, gain, loss, deduction and expense may be required
to be included in determining such member's reportable income for state,
local and non-U.S. tax purposes. In addition, state, local and non-U.S.
taxation of such Company tax items may differ from the treatment of such
items for federal income tax purposes.

The Investment Adviser has sole and absolute discretion to file or
not to file composite, group or similar state, local and non-U.S. tax
returns on behalf of the members (where and to the extent permissible under
applicable law). If the Investment Adviser decides to make any such
composite, group or similar filing, such a filing would eliminate a
member's filing requirement in such a jurisdiction arising by reason of an
investment in the Company. Each member will be required to execute any
relevant documents (including a power of attorney authorizing such a
filing), to furnish any relevant information and otherwise to do anything
necessary in order to facilitate any such composite, group or similar
filing. Any taxes paid by the Company in connection with any such
composite, group or similar filing will be treated as an advance to the
relevant members (with interest being charged thereon) and will be recouped
by the Company out of any distributions subsequently made to the relevant
members. Such advances may be funded by the Investment Adviser or an
affiliate thereof (with interest thereon). Both the deduction for interest
payable by the Company to the Investment Adviser (or an affiliate thereof)
with respect to such advances, and the corresponding income from interest
received by the Company from the relevant members, will be specially
allocated to such members, and such interest expense may be subject to
limitations on deductibility (see "Investment Interest Limitation" above).
Such taxes may be higher or lower than what a member's state, local or
non-U.S. tax liability would be in the absence of such a composite, group
or similar filing.

PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS WITH
RESPECT TO THE STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF ACQUIRING,
HOLDING AND DISPOSING OF UNITS.

DESCRIPTION OF UNITS

The Company has been formed as a Delaware limited liability
company and as such is governed by Delaware law and an operating agreement
(the "Operating Agreement") that defines many of the rights and
responsibilities of the Board of Managers and members. A copy of the
Operating Agreement is attached hereto as Exhibit A. Investors will become
members of the Company, which will establish a capital account for each
member. Your capital contributions and your share of items of income and
gain will be credited to your capital account and your distributions and
your share of items of loss, deduction and expense will be debited from
your capital account. See "Capital Accounts, Allocations and
Distributions."

SUMMARY OF LIMITED LIABILITY COMPANY OPERATING AGREEMENT

The Operating Agreement governs the relationships, rights, and
obligations of the investors in the Company. The following is intended only
as a summary of certain provisions of the Operating Agreement not discussed
elsewhere in this Prospectus. The statements made herein do not purport to
be complete and are qualified by reference to the Operating Agreement.
Prospective investors should study the entire Operating Agreement before
signing the Subscription Agreement.

Fund Capital. Except as specifically provided in the Operating
Agreement, no investor is entitled to interest on any capital contribution
to the Company or on such investor's capital account. Except as otherwise
provided in the Operating Agreement, no investor has the right to withdraw,
or to receive any return of, such investor's capital contribution. No
investor is required to make any additional capital contributions to the
Company beyond the amount of the investor's subscription, which will be
payable in two equal installments. See "Limited Liability of Investors."

Voting Rights of Investors. Investors cannot participate in the
management or control of the Company. However, the Operating Agreement
provides that, subject to certain conditions described below, the investors
may vote on or approve certain Company matters. Upon notification to the
Company, investors may, at their expense, obtain a list of the names and
addresses (if known) of all of the investors for a purpose reasonably
related to such investor's interest as an investor of the Company.

Subject to the provisions described below, the investors may: (i)
approve and elect and for cause disapprove and remove the members of the
Board of Managers; (ii) approve or disapprove proposed changes in the
nature of the Company's business so as to cause the Company to cease to be,
or to withdraw its election as, a BDC under the Investment Company Act;
(iii) to the extent required by the Investment Company Act, approve or
disapprove any proposed investment advisory contract or disapprove and
terminate any such existing contract; provided, however, that such
contracts are also approved by a majority of the members of the Board of
Managers; (iv) to the extent required by the Investment Company Act, ratify
or reject the appointment of the independent accountants of the Company;
(v) to the extent required by the Investment Company Act, approve or
disapprove the appointment of each successor Investment Adviser; and (vi)
approve any other material matters related to the business of the Company
that the Investment Company Act requires to be approved by the investors so
long as the Company is a BDC subject to the provisions of the Investment
Company Act; provided, however, that, prior to the exercise of any such
right of approval, the Board of Managers amend the Operating Agreement to
reflect such additional voting right.

Transferability of Units. A member may transfer Units only by
operation of law pursuant to the death, bankruptcy, insolvency or
dissolution of the member or otherwise, or with the written consent of the
Company (which it may withhold in its sole and absolute discretion and will
grant, if at all, only in extenuating circumstances) or in connection with
a transfer to a family trust or another entity that does not result in a
change of beneficial ownership. Any permitted transferees will not,
however, be allowed to become substituted members in the Company without
the consent of the Company, which consent may be withheld in its sole and
absolute discretion . No member will have the right to require the Company
to redeem his, her or its Units. In addition, neither the Company nor the
Investment Adviser (nor any of their respective affiliates) will make
offers to repurchase Units, and Units will not be traded on any securities
exchange or other market.

The issuance of Units is not subject to any preemptive rights and
Units are not convertible into any other security of the Company.

LIABILITY OF MEMBERS

You will not be liable for any obligations of the Company in
excess of your capital, plus your share of undistributed profits, except
that you will be obligated to make your full subscription payment. However,
if you receive a distribution from the Company and after such distribution
the liabilities of the Company exceed the fair value of the Company's
assets (and you had knowledge of this fact at the time of the distribution)
you may be required to return such distribution to the Company. You will
not have the right to a return of your capital contribution except in
accordance with the distribution provisions of the Operating Agreement.

DUTY OF CARE

The Operating Agreement provides that the members of the Board of
Managers (and the Investment Adviser or its affiliates, among others) shall
not be liable to the Company or the members for any loss or damage
occasioned by any act or omission in the performance of their respective
services as such in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of their obligations under the Operating
Agreement. The Operating Agreement also contains provision for the
indemnification, to the extent permitted by law, of the members of the
Board of Managers (and the Investment Adviser and its affiliates, among
others) by the Company, but not by the members individually, against any
liability and expense to which any of them may become liable which arises
out of or in connection with the performance of their activities on behalf
of the Company. None of these persons will be personally liable to a member
for the repayment of any balance in such member's capital account for
contributions by such member to the capital of the Company or by reason of
any change in the Federal or state income tax laws applicable to the
Company or members. The rights of indemnification and exculpation provided
under the Operating Agreement do not provide for indemnification against
any liability, including liability under Federal securities laws which,
under certain circumstances, impose liability even on persons that act in
good faith, to the extent, but only to the extent, that such
indemnification would result in violation of applicable law.

AMENDMENT OF THE OPERATING AGREEMENT

The Operating Agreement may be amended with the approval of (i)
the Board of Managers, including a majority of the independent members of
the Board of Managers, if required by the Investment Company Act and (ii)
to the extent, but only to the extent, required by the Investment Company
Act, a majority, as defined in the Investment Company Act, of the
outstanding voting securities of the Company. Certain amendments involving
capital accounts and allocations thereto and the modification of events
causing dissolution of the Company may not be made without the consent of
any members adversely affected thereby or unless each member has received
notice of such amendment and each member objecting to such amendment has
been allowed a reasonable opportunity to tender its entire interest for
repurchase by the Company. However, the Board of Managers may at any time,
without the consent of the other members, amend the Operating Agreement to
(i) restate the Operating Agreement, (ii) effect compliance with applicable
law or regulation, (iii) cure any ambiguity or to correct or supplement any
provision that may be inconsistent with another provision, provided such
change does not affect the rights of any member in any material respect, or
(iv) make such changes as may be necessary to assure the Company's
continuing eligibility to be classified for U.S. Federal income tax
purposes as a partnership which is not treated as a corporation under
Section 7704 (a) of the Code.

POWER OF ATTORNEY

By purchasing an interest in the Company, each member will appoint
the Investment Adviser and each member of the Board of Managers his or her
attorney-in-fact for purposes of filing required certificates and documents
relating to the formation and continuation of the Company as a limited
liability company under Delaware law or signing instruments effecting
authorized changes in the Company or the Operating Agreement or conveyances
and other instruments deemed necessary to effect the dissolution or
termination of the Company.

The power-of-attorney is a special power-of-attorney coupled with
an interest in favor of the Investment Adviser and each member of the Board
of Managers and as such is irrevocable and continues in effect until
expressly withdrawn or the investor ceases to be a member subject to and in
accordance with the Operating Agreement.

TERM, DISSOLUTION AND LIQUIDATION

The Company will be dissolved:

o On the tenth anniversary of the Termination Date, provided
that the Board of Managers may extend termination for up to
two additional periods of up to two years each; provided
further, that termination may be extended to such later date
with the approval of members holding at least two-thirds of
the total number of votes eligible to be cast;

o upon the affirmative vote to dissolve the Company by both
(1) the Board of Managers and (2) members holding at least
two-thirds of the total number of votes eligible to be cast
by all members;

o upon the resignation of the Investment Adviser;

o upon the failure of members to elect successor members of
the Board of Managers at any meeting called by the Company
when no members of the Board of Managers remain; or

o as required by operation of law.

Upon the occurrence of any event of dissolution, the Investment
Adviser, or a liquidator appointed by the Board of Managers, is charged
with winding up the affairs of the Company and liquidating its assets.
Items of income, gain, loss, deduction and expense during the fiscal period
including the period of liquidation will be allocated as described in the
section titled "Capital Accounts, Allocations and Distributions."

Upon the dissolution of the Company, its assets are to be
distributed (1) first to satisfy the debts, liabilities and obligations of
the Company, other than debts to members including actual or anticipated
liquidation expenses, (2) next to satisfy debts owing to members, and (3)
finally to members and the Investment Adviser proportionately in accordance
with the balances in their respective capital accounts. Assets may be
distributed in kind on a pro rata basis if the Investment Adviser or
liquidator determines that such a distribution would be in the interests of
the members in facilitating an orderly liquidation.

SELLING ARRANGEMENTS

___________ has entered into a Distribution Agreement with the
Company pursuant to which the Distributor has agreed to act as the
principal distributor for the Units. This agreement is an agency agreement
only and places the Distributor under no obligation to use its best efforts
to sell the Units or otherwise solicit or promote transactions in such
Units. The Distributor will not at any time purchase any Units for its own
account and its sole function is to promote the sale of the Company's
Units. __________________________________.

Pursuant to the Distributor Agreement, the Distributor may enter
into agreements with one or more financial intermediaries ("Selling Agent")
relating to the purchase of Units through such Selling Agents acting as
brokers or agents for their customers.

The Company has agreed to indemnify the Distributor and each
Selling Agent who enters into a Selling Agent Agreement against certain
civil liabilities, including liabilities under the federal securities laws.
However, such indemnification is subject to the provisions of Section 17(i)
of the Investment Company Act which provides, in part, that no agreement
shall contain a provision which protects or purports to protect any person
against any liability to such company or its security holders to which it
would otherwise be subject due to such person's misfeasance, bad faith, or
gross negligence in the performance of its duties or reckless disregard of
its obligations and duties under such agreement.

LEGAL MATTERS

The validity of the Units offered hereby will be passed upon for
the Company by Skadden, Arps, Slate, Meagher & Flom LLP, Boston,
Massachusetts.

EXPERTS

The Statement of Assets and Liabilities of the Company included in
this Prospectus has been audited by Ernst & Young, LLP, independent
certified public accountants, as stated in their report included herein,
and is included herein in reliance upon such report given on their
authority as experts in auditing and accounting. Ernst & Young, LLP is
located at 787 Seventh Avenue, New York, New York 10019.

AVAILABLE INFORMATION

The Company is required to file reports with the Securities and
Exchange Commission. Information about the Company can be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the public reference
room. This information is also available on the SEC's Internet site at
http://www.sec.gov and copies may be obtained upon payment of a duplicating
fee by writing the Public Reference Section of the SEC, Washington, D.C.
20549-6009.

Investors should rely only on the information contained in this
prospectus. The Company has not, and the Distributor has not, authorized
any other person to provide investors with different information. If anyone
provides you with different or inconsistent information, you should not
rely on it. The Company is not, and the Distributor is not, making an offer
to sell these securities in any jurisdiction where the offer or sale is not
permitted. Investors should assume that the information appearing in this
prospectus is accurate as of the date on the front cover of this prospectus
only. The Company's business, financial condition, results of operations
and prospects may have changed since that date.

REPORTS TO MEMBERS

The Company will furnish to its members annual reports containing
audited financial statements and such other periodic reports as it may
determine to furnish or as may be required by law. The Company does not
intend to hold annual meetings of its Unitholders.

FINANCIAL STATEMENTS
[Statement of Assets and Liabilities to come]

TABLE OF CONTENTS

Page

FEE TABLE................................................................2
PROSPECTUS SUMMARY.......................................................3
The Company...........................................................3
Investment Objective and Policies.....................................3
Management and Compensation...........................................4
The Offering..........................................................4
Minimum Investments...................................................5
Use of Proceeds.......................................................5
Risk Factors..........................................................5
Allocations, Distributions and Liquidation............................8
Tax Status of the Company.............................................8
THE COMPANY.............................................................10
INVESTMENT OBJECTIVE AND POLICIES.......................................10
General..............................................................10
Investment Strategies................................................11
Investment Practices.................................................12
RISK FACTORS............................................................13
THE OFFERING............................................................19
USE OF PROCEEDS.........................................................19
MANAGEMENT..............................................................20
Investment Adviser; Compensation.....................................20
Investment Operations................................................22
Background...........................................................23
Code of Ethics.......................................................35
Board of Managers, Officers and Investment Professionals.............35
Board of Manager Compensation........................................39
Control Persons......................................................40
Potential Conflicts of Interest......................................40
Custodian and Transfer Agent.........................................42
BROKERAGE ALLOCATION AND OTHER PRACTICES................................42
Portfolio Turnover...................................................42
REGULATION..............................................................43
VALUATION OF PORTFOLIO SECURITIES.......................................45
CAPITAL ACCOUNTS, ALLOCATIONS AND DISTRIBUTIONS.........................46
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS...............................48
DESCRIPTION OF UNITS....................................................53
Summary Of Limited Liability Company Operating Agreement.............54
Liability Of Members.................................................54
Duty Of Care.........................................................55
Amendment Of The Operating Agreement.................................55
Power Of Attorney....................................................55
Term, Dissolution And Liquidation....................................55
SELLING ARRANGEMENTS....................................................56
LEGAL MATTERS...........................................................56
EXPERTS.................................................................56
AVAILABLE INFORMATION...................................................56
REPORTS TO MEMBERS......................................................57
FINANCIAL STATEMENTS....................................................57
Page...............................................................58

Until May , 2000 (25 days after the date of this Prospectus),
all dealers effecting transactions in the Units, whether or not
participating in this distribution, may be required to deliver a
Prospectus. This is in addition to the obligations of dealers to deliver a
Prospectus when acting as Underwriters and with respect to their unsold
allotments or subscriptions.

PART C - OTHER INFORMATION

Item 24. FINANCIAL STATEMENTS AND EXHIBITS

1. Statement of Assets and Liabilities

2. Exhibits
(a) (1) Certificate of Formation of Limited Liability
Company filed February 18, 2000.
(2) Certificate of Amendment filed April 26, 2000.
(3) Operating Agreement.*
(b) Not applicable.
(c) Not applicable.
(d) Specimen Certificate.*
(e) Not applicable.
(f) Not applicable.
(g) Form of Investment Advisory Agreement between the Company
and Excelsior Venture Management LLC.*
(h) Form of Distribution Agreement between the Company and
[ ].
(i) Not applicable.
(j) (1) Form of Transfer Agency and Custodian Agreement
between the Company and Chase Manhattan Bank.*
(2) Form of Escrow Agreement among the Company,
[ ] and United States Trust Company of
New York.*
(k) Not applicable.
(l) Opinion and consent of Skadden, Arps, Slate, Meagher and
Flom LLP.*
(m) Not applicable.
(n) Consent of Ernst & Young, LLP independent auditors.*
(o) Not applicable.
(p) Form of Subscription Agreement for investment in units of
the Company.*
(q) Not applicable.
(r) Ethics Code.*
(s) (1) Power of Attorney.**
(2) Consent to Serve as a Member of the Board of Managers
of Excelsior Venture Partners III, LLC.

* To be filed by amendment.
** Incorporated by reference to the Company's Registration Statement
on Form N-2 (File No. 333-30986), filed on
February 23, 2000.

Item 25. MARKETING ARRANGEMENTS

See the Form of Distribution Agreement to be filed as Exhibit 2(h) as
well as the Company's Prospectus under the caption "Selling Arrangements."

Item 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated expenses, payable by the
Company in connection with the issuance and distribution of the securities
covered by this Registration Statement.

Securities and Exchange Commission fees... [$ * ]
Blue Sky fees and expenses................ [ * ]
Printing.................................. [ * ]
Legal fees and expenses................... [ * ]
Independent auditors' fees and expenses... [ * ]
Miscellaneous............................. [ * ]
----------
Total................... *
==========

* To be provided by amendment.

Item 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL

Upon conclusion of the public offering of the Company's units of
membership interest, it is anticipated that no person will be controlled by
or under common control with the Company.

Item 28. NUMBER OF HOLDERS OF SECURITIES AS OF FEBRUARY 15, 2000

Title of Class Number of Record Holders
-------------- ------------------------
Units of Membership Interest, without
par value 0

Item 29. INDEMNIFICATION

The Investment Advisory Agreement provides for indemnification by the
Company of Excelsior Venture Management LLC, the Investment Adviser, from
any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) not resulting from willful
misfeasance, bad faith or gross negligence in the performance by the
Investment Adviser of its duties thereunder or the reckless disregard of
its obligations and duties under the Investment Advisory Agreement.

By subscribing for Units, each member agrees to indemnify and hold
harmless the Company, the Investment Adviser, each other member and any
successor or assign any of the foregoing, from and against all losses,
claims, damages, liabilities, costs and expenses (including losses, claims,
damages, liabilities, costs and expenses of any judgments, fines and
amounts paid in settlement), joint or several, to which those persons may
become subject by reason of or arising from any transfer made by that
member in violation of the Operating Agreement or any misrepresentation
made by that member in connection with any purported transfer. A similar
indemnification is required to be made by a permitted transferee. The
Operating Agreement also contains provision for the indemnification, to the
extent permitted by law, of the members of the Board of Managers (and the
Investment Adviser and its affiliates, among others) by the Company, but
not by the members individually, against any liability and expense to which
any of them may become liable which arises out of or in connection with the
performance of their activities on behalf of the Company. None of these
persons will be personally liable to a member for the repayment of any
balance in such member's capital account for contributions by such member
to the capital of the Company or by reason of any change in the Federal or
state income tax laws applicable to the Company or members. The rights of
indemnification and exculpation provided under the Operating Agreement do
not provide for indemnification of a member of the Board of Managers or the
Investment Adviser against any liability, including liability under Federal
securities laws which, under certain circumstances, impose liability even
on persons that act in good faith, to the extent, but only to the extent,
that such indemnification would result in violation of applicable law.

Pursuant to the Distribution Agreement, the Company agrees to
indemnify selling agents against certain civil liabilities, including
liabilities under the federal securities laws.

Item 30. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER.

Excelsior Venture Management LLC is a newly organized limited
liablity company that was created to provide investment management and
administrative services to the Company and to other investment funds that
may be established in the future. Reference is made to the section entitled
"Managment" in the Prospectus for the names and principal businesses of the
directors and certain senior executive officers of Excelsior Venture
Management LLC, including those who are engaged in any other business,
profession, vocation or employment of a substantial nature.

Item 31. LOCATION OF ACCOUNTS AND RECORDS

The accounts and records of the Company will be maintained at the
office of Excelsior Venture Management LLC, 114 West 47th Street,
New York, New York 10036.

Item 32. MANAGEMENT SERVICES

Except as described in the Prospectus under the caption "Management,"
the Company is not a party to any management service related contract.

Item 33. UNDERTAKINGS

The Company undertakes to suspend the offering of its units of
membership interest until it amends its Prospectus if (1) subsequent to the
effective date of its Registration Statement, the net asset value declines
more than 10 percent from its net asset value as of the effective date of
the Registration Statement or (2) the net asset value increases to an
amount greater than its net proceeds as stated in the Prospectus.

The Company additionally undertakes, pursuant to Rule 415 under the
Securities Act, as follows:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

(a) To include any prospectus required by Section 10(a)(3) of
the Securities Act;

(b) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement; and

(c) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
Registration Statement;

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York, State
of New York, on the 26th day of April, 2000.

EXCELSIOR VENTURE PARTNERS III, LLC

By: /s/ David I. Fann
-------------------------------------
David I. Fann, Manager, President and
Co-Chief Executive Officer
(principal executive officer)

Each person whose signature appears below hereby appoints David I.
Fann his true and lawful attorney-in- fact, with full power of such
attorney-in-fact to sign on his behalf, individually and in each capacity
stated below, any and all amendments (including post-effective amendments)
to this Registration Statement and to file the same, with all exhibits
thereto, with the Securities and Exchange Commission.

Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities
and on the dates indicated:

Signature Title Date
--------- ----- ----
/s/ David I. Fann Manager, President and April 26, 2000
- --------------------------- Co-Chief Executive Officer
David I. Fann (principal executive officer)

/s/ Douglas A. Lindgren* Manager, Co-Chief Executive April 26, 2000
- --------------------------- Officer Investment Officer
Douglas A. Lindgren (principal executive officer,
principal financial and
accounting officer)

/s/ James F. Dorment Manager and Corporate April 26, 2000
- --------------------------- Secretary
James F. Dorment

*By: /s/ David I. Fann
---------------------
David I. Fann
Attorney-in-Fact

=============================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington. D.C. 20549

EXHIBITS
TO
FORM N-2A

REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 |_|

Pre-Effective Amendment No. 1 |X|
Post-Effective Amendment No. |_|

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 |_|

Amendment No. |_|

EXCELSIOR VENTURE PARTNERS III, LLC
(Exact Name of Registrant as Specified in Charter)

=============================================================================

EXHIBIT INDEX

Exhibit Page
No. Exhibit Number
------- ------- ------
(a) (1) Certificate of Formation of Limited Liability
Company filed February 18, 2000.
(2) Certificate of Amendment filed April 26, 2000.
(3) Operating Agreement.*
(b) Not applicable.
(c) Not applicable.
(d) Specimen Certificate.*
(e) Not applicable.
(f) Not applicable.
(g) Form of Management Agreement between the Company and
Excelsior Venture Management LLC.*
(h) Form of Distributor Agreement between the Company and
[ ].*
(i) Not applicable.
(j) (1) Form of Transfer Agency and Custodian Agreement
between the Company and Chase Manhattan Bank.*
(2) Form of Escrow Agreement among the Company,
[ ] and United States Trust Company
of New York.*
(k) Not applicable.
(l) Opinion and consent of Skadden, Arps, Slate, Meagher
and Flom LLP.*
(m) Not applicable.
(n) Consent of Ernst & Young, LLP independent auditors.*
(o) Not applicable.
(p) Form of Subscription Agreement for investment in units
of the Company.*
(q) Not applicable.
(r) Ethics Code.*
(s) (1) Power of Attorney.**
(2) Consent to Serve as a Member of the Board of Managers
of Excelsior Venture Partners III, LLC.

* To be filed by amendment.
** Incorporated by reference.

Exhibit (a)(1)

CERTIFICATE OF FORMATION

EXCELSIOR PRIVATE EQUITY FUND III, LLC

FIRST: The name of the limited liability company is Excelsior
Private Equity Fund III, LLC.

SECOND: The Officers and initial Members of the Board of
Managers of the limited liability company shall be as follows:

NAME: TITLE:
David I. Fann Manager, President and
Co-Chief Executive Officer
Douglas A. Lindgren Manager, Co-Chief Executive Officer, Chief
Investment Officer and Chief Financial
Officer
James F. Dorment Manager and Corporate Secretary

THIRD: The address of its registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, County of New
Castle, City of Wilmington, Delaware 19801. The name of its registered
agent at such address is The Corporation Trust Company.

IN WITNESS WHEREOF, the undersigned has executed this Certificate
of Formation of Excelsior Private Equity Fund III, LLC on this 18th day of
February, 2000.

EXCELSIOR PRIVATE EQUITY FUND III, LLC

By: /s/ Nathan Bouley
------------------------------------
Name: Nathan Bouley
Title: Authorized Person

Exhibit (a)(2)

CERTIFICATE OF AMENDMENT

Pursuant to Section 18-202 of the
Limited Liability Company Act

FIRST: The name of the limited liability company is Excelsior
Private Equity Fund III, LLC.

SECOND: The Certificate of Formation is hereby amended to change
the name of the limited liability company to Excelsior Venture Partners
III, LLC.

THIRD: Accordingly, Article 1 of the Certificate of Formation
shall, as amended, read as follows:

1. "The name of the limited liability company is Excelsior
Venture Partners III, LLC."

IN WITNESS WHEREOF, the undersigned authorized person has
executed this Certificate of Amendment this 26th day of April, 2000.

EXCELSIOR PRIVATE EQUITY FUND III, LLC

By: /s/ Nathan Bouley
-------------------------------------
Name: Nathan Bouley
Title: Authorized Person

CONSENT TO SERVE AS A MEMBER OF THE BOARD OF
MANAGERS OF EXCELSIOR VENTURE PARTNERS III, LLC

I hereby consent to serve as a Member of the Board of
Managers of Excelsior Venture Partners III, LLC upon my appointment as
such, and to the use of my name as having so consented in the Registration
Statement under the Securities Act of 1933 of the above-referenced company.

By: /s/ Gene M. Bernstein
---------------------------
Name: Gene M. Bernstein

By: /s/ John C. Hover, II
---------------------------
Name: John C. Hover, II

By: /s/ Steven V. Murphy
--------------------------
Name: Steven V. Murphy