Microsoft Word 11.0.6568;


                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
                                  ACT OF 1934

                  For the quarterly period ended June 30, 2005

                                       OR

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                  ACT OF 1934

             For the transition period from ________ to ___________

                         Commission file number: 0-21494


                    WNC HOUSING TAX CREDIT FUND III, L.P.

                  California                             33-0463432
         (State or other jurisdiction of               (I.R.S. Employer
         incorporation or organization)                Identification No.)



                     17782 Sky Park Circle, Irvine, CA 92614
                   ( Address of principle executive offices )

                                 (714) 622-5565
                              ( Telephone Number )

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

Yes       No   X
   -------  -------

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in rule 12b-2 of the Exchange Act).

Yes       No   X
   -------  -------

<PAGE>

                      WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                               INDEX TO FORM 10-Q

                  For the Quarterly Period Ended June 30, 2005



PART I. FINANCIAL INFORMATION

   Item 1.  Financial Statements

            Balance Sheets
                   June 30, 2005 and March 31, 2005............................3

            Statements of Operations
                   For the Three Months Ended June 30, 2005 and 2004...........4

            Statement of Partners' Deficit
                   For the Three Months Ended June 30, 2005 ...................5

            Statements of Cash Flows
                   For the Three Months Ended June 30, 2005 and 2004...........6

            Notes to Financial Statements......................................7


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

   Item 3.  Quantitative and Qualitative Disclosures about Market Risk........15

   Item 4.  Procedures and Controls...........................................15
PART II.    OTHER INFORMATIOn

   Item 1.  Legal Proceedings.................................................16

   Item 2.  Changes in Securities and Use of Proceeds.........................16

   Item 3.  Defaults Upon Senior Securities...................................16

   Item 4.  Submission of Matters to a Vote of Security Holders...............16

   Item 5.  Other Information.................................................16

   Item 6.  Exhibits..........................................................16

   Signatures.................................................................17

                                        2

<PAGE>

                      WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                       June 30, 2005               March 31, 2005
                                                                   -----------------------        ------------------
                                                                        (unaudited)                   (unaudited)
ASSETS
<S>                                                             <C>                            <C>
Cash and cash equivalents                                        $               184,374        $         212,588

Investments in limited partnerships, net (Note 2)                                 46,893                   57,307
                                                                   -----------------------        ------------------

                                                                 $               231,267        $         269,895
                                                                   =======================        ==================


LIABILITIES AND PARTNERS' DEFICIT

Liabilities:
Accrued fees and expenses due to
General Partner and affiliates (Note 3)                          $             2,998,250        $       2,948,938
                                                                   -----------------------        ------------------

Partners' deficit:
General Partner                                                                  (68,191)                 (67,312)
Limited Partners (15,000 units authorized; 15,000 units
 issued and outstanding)                                                      (2,698,792)              (2,611,731)
                                                                   -----------------------        ------------------

   Total partners' deficit                                                    (2,766,983)              (2,679,043)
                                                                   -----------------------        ------------------

                                                                 $               231,267        $         269,895
                                                                   =======================        ==================
</TABLE>

                 See accompanying notes to financial statements
                                       3
<PAGE>



                      WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                            STATEMENTS OF OPERATIONS

                For the Three Months Ended June 30, 2005 and 2004
                                   (unaudited)
<TABLE>
<CAPTION>
                                                          2005                             2004
                                                      Three Months                     Three Months
                                                 ------------------------        --------------------------
<S>                                           <C>                             <C>
Interest income                                $                     239       $                       205
Distribution income                                                5,428                             6,845
                                                 ------------------------        --------------------------

  Total income                                                     5,667                             7,050
                                                 ------------------------        --------------------------

Operating expenses:
 Amortization (Note 2)                                                85                             5,158
 Asset management fees (Note 3)                                   74,866                            74,866
 Legal and accounting                                              5,475                             1,525
 Other                                                             2,852                             3,896
                                                 ------------------------        --------------------------

  Total operating expenses                                        83,278                            85,445
                                                 ------------------------        --------------------------

Loss from operations                                             (77,611)                          (78,395)

Equity in losses of
 limited partnerships (Note 2)                                   (10,329)                          (40,354)
                                                 ------------------------        --------------------------

Net loss                                       $                 (87,940)      $                  (118,749)
                                                 ========================        ==========================

Net loss allocated to:
 General Partner                               $                    (879)      $                    (1,187)
                                                 ========================        ==========================

 Limited Partners                              $                 (87,061)      $                  (117,562)
                                                 ========================        ==========================

Net loss per limited
 partner unit                                  $                      (6)      $                        (8)
                                                 ========================        ==========================

Outstanding weighted limited
 partner units                                                    15,000                            15,000
                                                 ========================        ==========================
</TABLE>

                 See accompanying notes to financial statements
                                       4
<PAGE>


                      WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                         STATEMENT OF PARTNERS' DEFICIT

                    For the Three Months Ended June 30, 2005
                                   (unaudited)
<TABLE>
<CAPTION>
                                                          General              Limited
                                                          Partner              Partners                 Total
                                                       ---------------      ----------------      ------------------
<S>                                                 <C>                  <C>                     <C>
Partners' deficit at March 31, 2005                  $       (67,312)     $     (2,611,731)       $      (2,679,043)

Net loss                                                        (879)              (87,061)                 (87,940)
                                                       ---------------      ----------------      ------------------
Partners' deficit at June 30, 2005                   $       (68,191)     $     (2,698,792)       $      (2,766,983)
                                                       ===============      ================      ==================
</TABLE>

                 See accompanying notes to financial statements
                                       5
<PAGE>

                      WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                            STATEMENTS OF CASH FLOWS

                For the Three Months Ended June 30, 2005 and 2004
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                            2005                 2004
                                                                        --------------      ---------------
<S>                                                                  <C>                 <C>
Cash flows from operating activities:
  Net loss                                                            $      (87,940)     $      (118,749)
    Adjustments to reconcile net loss to net
      cash used in operating activities:
        Amortization                                                              85                5,158

        Equity in losses of limited partnerships                              10,329               40,354
        Change in accrued  fees and expenses due to
           General Partner and affiliates                                     49,312               66,531
                                                                        --------------      ---------------

Net cash used in operating activities                                        (28,214)              (6,706)
                                                                        --------------      ---------------

Net decrease in cash                                                         (28,214)              (6,706)

Cash, beginning of period                                                    212,588              226,870
                                                                        --------------      ---------------

Cash, end of period                                                   $      184,374      $       220,164
                                                                        ==============      ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:

  Taxes paid                                                          $            -      $             -
                                                                        ==============      ===============
</TABLE>
                 See accompanying notes to financial statements
                                       6
<PAGE>


                      WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                  For the Quarterly Period Ended June 30, 2005
                                   (unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
General
-------
The accompanying  condensed unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form 10-Q
for quarterly  reports under Section 13 or 15(d) of the Securities  Exchange Act
of 1934.  Accordingly,  they do not include all of the information and footnotes
required by  accounting  principles  generally  accepted in the United States of
America for complete  financial  statements.  In the opinion of management,  all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair  presentation  have been included.  Operating  results for the three months
ended June 30, 2005 are not  necessarily  indicative  of the results that may be
expected  for the fiscal year ending March 31,  2006.  For further  information,
refer  to  the  financial  statements  and  footnotes  thereto  included  in the
Partnership's  annual  report on Form 10-K for the fiscal  year ended  March 31,
2005.

Organization
------------
WNC Housing Tax Credit Fund III,  L.P., a California  Limited  Partnership  (the
"Partnership"),  was  formed  on May 10,  1991  under  the laws of the  State of
California.  The  Partnership  was formed to invest  primarily in other  limited
partnerships   (the "Local  Limited   Partnerships" )   which  own  and  operate
multi-family  housing complexes (the "Housing  Complexes") that are eligible for
Low Income Housing Tax Credits.  The local general  partners (the "Local General
Partners")  of  each  Local  Limited   Partnership  retain   responsibility  for
maintaining, operating and managing the Housing Complex.

The general  partner of the  Partnership is WNC Tax Credit  Partners,  L.P. (the
"General Partner"). WNC & Associates,  Inc. ("Associates") and Wilfred N. Cooper
Sr. are the general partners of the General Partner.  The chairman and president
own substantially  all of the outstanding  stock of Associates.  The business of
the Partnership is conducted primarily through Associates as the General Partner
and the Partnership have no employees of their own.

The Partnership  shall continue in full force and effect until December 31, 2050
unless  terminated  prior to that date pursuant to the partnership  agreement or
law.

The  partnership  agreement  authorized the sale of up to 15,000 units at $1,000
per Unit  ("Units").  The offering of Units  concluded on September 30, 1993, at
which time 15,000 Units representing  subscriptions in the amount of $15,000,000
had been accepted.  The General Partner has 1% interest in operating profits and
losses,  taxable  income and losses,  cash available for  distribution  from the
Partnership  and  tax  credits.  The  limited  partners  will be  allocated  the
remaining 99% of these items in proportion to their respective investments.

After the Limited  Partners  have received  proceeds from a sale or  refinancing
equal to their capital contributions and their return on investments (as defined
in the  Partnership  Agreement)  and the General  Partner has received  proceeds
equal to its capital  contribution  and a subordinated  disposition fee from the
remainder,  any additional sales or refinancing proceeds will be distributed 90%
to the Limited Partners (in proportion to their respective  investments) and 10%
to the General Partner.
                                       7

<PAGE>

                    WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                       For the Quarter Ended June 30, 2005
                                   (unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
--------------------------------------------------------------
Certain Risks and Uncertainties
-------------------------------
An investment in the  Partnership  and the  Partnership's  investments  in Local
Limited  Partnerships  and their Housing  Complexes are subject to risks.  These
risks may impact the tax benefits of an investment in the  Partnership,  and the
amount of proceeds  available for distribution to the Limited Partners,  if any,
on liquidation of the Partnership's investments. Some of those risks include the
following:

The  Low  Income   Housing  Tax  Credits   rules  are   extremely   complicated.
Noncompliance  with these rules results in the loss of future Low Income Housing
Tax  Credits  and the  fractional  recapture  of Low Income  Housing Tax Credits
already taken. In most cases the annual amount of Low Income Housing Tax Credits
that an  individual  can use is limited to the tax liability due on the person's
last $25,000 of taxable income. The Local Limited  Partnerships may be unable to
sell the Housing  Complexes  at a price which  would  result in the  Partnership
realizing cash distributions or proceeds from the transaction.  Accordingly, the
Partnership  may be unable to distribute any cash to its limited  partners.  Low
Income  Housing Tax Credits may be the only  benefit from an  investment  in the
Partnership.

The Partnership has invested in a limited number of Local Limited  Partnerships.
Such  limited  diversity  means that the  results of  operation  of each  single
Housing  Complex  will have a greater  impact on the  Partnership.  With limited
diversity,   poor   performance   of  one  Housing   Complex  could  impair  the
Partnership's ability to satisfy its investment objectives. Each Housing Complex
is subject to mortgage  indebtedness.  If a Local Limited  Partnership failed to
pay its  mortgage,  it  could  lose  its  Housing  Complex  in  foreclosure.  If
foreclosure  were to occur during the first 15 years,  the loss of any remaining
future Low Income  Housing Tax  Credits,  a  fractional  recapture  of prior Low
Income Housing Tax Credits,  and a loss of the  Partnership's  investment in the
Housing  Complex  would  occur.  The  Partnership  is  a  limited  partner  or a
non-managing  member  of  each  Local  Limited  Partnership.   Accordingly,  the
Partnership  will have very  limited  rights with respect to  management  of the
Local  Limited  Partnerships.  The  Partnership  will rely  totally on the Local
General  Partners.  Neither  the  Partnership's  investments  in  Local  Limited
Partnerships,  nor  the  Local  Limited  Partnerships'  investments  in  Housing
Complexes,  are readily marketable.  To the extent the Housing Complexes receive
government financing or operating subsidies,  they may be subject to one or more
of the  following  risks:  difficulties  in  obtaining  tenants  for the Housing
Complexes;  difficulties  in  obtaining  rent  increases;  limitations  on  cash
distributions;  limitations  on  sales  or  refinancing  of  Housing  Complexes;
limitations on transfers of interests in Local Limited Partnerships; limitations
on removal of Local  General  Partners;  limitations  on subsidy  programs;  and
possible changes in applicable regulations. Uninsured casualties could result in
loss of property and Low Income  Housing Tax Credits and recapture of Low Income
Housing Tax  Credits  previously  taken.  The value of real estate is subject to
risks  from  fluctuating  economic   conditions,   including  employment  rates,
inflation,  tax, environmental,  land use and zoning policies, supply and demand
of similar properties, and neighborhood conditions, among others.

The  ability of Limited  Partners to claim tax losses  from the  Partnership  is
limited.  The IRS may audit the  Partnership or a Local Limited  Partnership and
challenge the tax treatment of tax items.  The amount of Low Income  Housing Tax
Credits and tax losses allocable to the limited partners could be reduced if the
IRS were  successful  in such a  challenge.  The  alternative  minimum tax could
reduce tax benefits from an investment in the  Partnership.  Changes in tax laws
could also impact the tax benefits from an investment in the Partnership  and/or
the value of the Housing Complexes.

Substantially  all of the Low  Income  Housing  Tax  Credits  anticipated  to be
realized from the Local Limited Partnerships have been realized. The Partnership
does not anticipate  being allocated a significant  amount of Low Income Housing
Tax Credits from the Local Limited  Partnerships in the future.  Until the Local
Limited  Partnerships  have  completed the 15 year Low Income Housing Tax Credit
compliance  period,  risks  exist for  potential  recapture  of prior Low Income
Housing Tax Credits.

No trading  market  for the Units  exists or is  expected  to  develop.  Limited
Partners  may be unable to sell  their  Units  except at a  discount  and should
consider their Units to be a long-term  investment.  Individual Limited Partners
will have no recourse if they disagree with actions  authorized by a vote of the
majority of Limited Partners.

                                       8

<PAGE>

                      WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                  For the Quarterly Period Ended June 30, 2005
                                   (unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
--------------------------------------------------------------
Method of Accounting for Investments in Limited Partnerships
------------------------------------------------------------
The Partnership  accounts for its investments in limited  partnerships using the
equity method of  accounting,  whereby the  Partnership  adjusts its  investment
balance for its share of the Local Limited  Partnerships'  results of operations
and for any  contributions  made and  distributions  received.  The  Partnership
reviews the  carrying  amount of an  individual  investment  in a Local  Limited
Partnership for possible  impairment whenever events or changes in circumstances
indicate that the carrying  amount of such  investment  may not be  recoverable.
Recoverability  of such investment is measured by the estimated value derived by
management,  generally  consisting of the sum of the remaining future Low Income
Housing  Tax  Credits  estimated  to be  allocated  to the  Partnership  and the
estimated  residual value to the Partnership.  If an investment is considered to
be impaired,  the impairment to be recognized is measured by the amount by which
the  carrying  amount of the  investment  exceeds  fair  value.  The  accounting
policies of the Local Limited  Partnerships are generally  consistent with those
of  the  Partnership.  Costs  incurred  by  the  Partnership  in  acquiring  the
investments  are  capitalized  as part of the  investment  account and are being
amortized over 30 years (see Note 2).

Equity in losses of Limited Partnerships for the periods ended June 30, 2005 and
2004 have been  recorded by the  Partnership  based on three  months of reported
results  estimated by management of the Partnership.  Management's  estimate for
the three-month  period is based on either actual unaudited  results reported by
the Local Limited  Partnerships  or historical  trends in the  operations of the
Local Limited  Partnerships.  In subsequent  annual financial  statements,  upon
receiving the actual annual results reported by the Local Limited  Partnerships,
management  reverses its prior estimate and records the actual results  reported
by  the  Local  Limited   Partnerships.   Equity  in  losses  from  the  Limited
Partnerships  allocated to the Partnership are not recognized to the extent that
the  investment  balance would be adjusted below zero. As soon as the investment
balance  reaches  zero,  amortization  of the  related  costs of  acquiring  the
investment are  accelerated  to the extent of losses  available (see Note 2). If
the  Local  Limited   Partnerships  report  net  income  in  future  years,  the
Partnership  will resume applying the equity method only after its share of such
net income  equals the share of net losses not  recognized  during the period(s)
the equity method was suspended.

Distributions  received by limited  partners are accounted for as a reduction of
the investment balance.  Distributions received after the investment has reached
zero are recognized as income.

Offering Expenses
-----------------
Offering  expenses consist of underwriting  commissions,  legal fees,  printing,
filing and  recordation  fees,  and other costs  incurred  with selling  limited
partnership  interests in the  Partnership.  The General Partner is obligated to
pay all  offering  and  organization  costs in  excess of 15%  (including  sales
commissions) of the total offering proceeds.  Offering expenses are reflected as
a reduction of limited  partners'  capital and amounted to $2,250,000 at the end
of all periods presented.

Reclassifications
-----------------
Certain  reclassifications have been made to the 2004 financial statements to be
consistent with the 2005 presentation.

Exit Strategy
-------------
The IRS  compliance  period for Low Income  Housing  Tax  Credit  properties  is
generally  15 years from  occupancy  following  construction  or  rehabilitation
completion.  WNC was one of the first in the industry to offer investments using
the tax credit.  Now these very first programs are completing  their  compliance
period.

                                       9
<PAGE>

                     WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                  For the Quarterly Period Ended June 30, 2005
                                   (unaudited)


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
--------------------------------------------------------------
With that in mind, we are continuing our review of the  Partnership's  holdings,
with special  emphasis on the more mature  properties  including those that have
satisfied the IRS compliance requirements. Our review will consider many factors
including  extended  use  requirements  on the  property  (such as those  due to
mortgage  restrictions  or state  compliance  agreements),  the condition of the
property,  and the tax consequences to the limited partners from the sale of the
property.

Upon identifying  those  properties with the highest  potential for a successful
sale, refinancing or syndication, we expect to proceed with efforts to liquidate
those  properties.  Our  objective is to maximize the Limited  Partners'  return
wherever  possible  and,  ultimately,  to wind down  those  funds that no longer
provide tax benefits to Limited  Partners.  However,  Local Limited  Partnership
interests may be disposed at any time by Associates in its  discretion.  To date
no properties in the Partnership have been selected.

Income Taxes
------------
No provision  for income taxes has been recorded in the  accompanying  financial
statements  as any  liability  and/or  benefits for income taxes as income taxes
flows to the partners of the Partnership and is their obligation and/or benefit.
For income tax purposes the Partnership reports on a calendar year basis.

Use of Estimates
----------------
The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements,  and the  reported  amounts of revenues and expenses
during the reporting  period.  Actual results could materially differ from those
estimates.

Concentration of Credit Risk
----------------------------
At June  30,  2005,  the  Partnership  maintained  cash  balances  at a  certain
financial institution in excess of the federally insured maximum.

Net Loss Per Limited Partner Unit
---------------------------------
Net loss per limited  partnership  unit is  calculated  pursuant to Statement of
Financial  Accounting  Standards No. 128,  Earnings Per Share. Net loss per unit
includes no dilution  and is computed  by  dividing  loss  available  to limited
partners by the weighted average number of units outstanding  during the period.
Calculation of diluted net loss per unit is not required.

Reporting Comprehensive Income
------------------------------
The  Statement of Financial  Accounting  Standards  ("SFAS") No. 130,  Reporting
Comprehensive  Income  established  standards  for the  reporting and display of
comprehensive  income (loss) and its components in a full set of general-purpose
financial statements. The Partnership had no items of other comprehensive income
for all periods presented, as defined by SFAS No. 130.

                                       10

<PAGE>



                     WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                  For the Quarterly Period Ended June 30, 2005
                                   (unaudited)


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
--------------------------------------------------------------
New Accounting Pronouncements
-----------------------------
As of March 31,  2004,  the  Partnership  adopted FASB  Interpretation  No. 46 -
Revised,  Consolidation  of  Variable  Interest  Entities  ("FIN46R").  FIN  46R
provides  guidance as to when a company should include the assets,  liabilities,
and  activities  of  a  variable   interest  entity  ("VIE")  in  its  financial
statements,   and  when  a  company  should  disclose   information   about  its
relationship  with a VIE. A VIE is a legal structure used to conduct  activities
or hold assets, and a VIE must be consolidated by a company if it is the primary
beneficiary  because a primary  beneficiary absorbs the majority of the entity's
expected losses, the majority of the expected residual returns, or both.

Under FIN 46R, the Local Limited  Partnerships in which the Partnership  invests
are VIEs. However,  management does not consolidate the Partnership's  interests
in these VIE's under FIN46R,  as the  Partnership  is not considered the primary
beneficiary.  Rather,  the  Partnership  currently  records  the  amount  of the
investment in the Local Limited  Partnerships  as an asset in the balance sheet,
and  recognizes  its share of Local  Limited  Partnership  income or loss in the
statement of operations.

The Partnership's balance in its investment in Local Limited Partnerships,  plus
the risk of recapture of tax credits previously recognized on these investments,
represents its maximum exposure to loss. The  Partnership's  exposure to loss is
mitigated  by  the  condition  and  financial   performance  of  the  underlying
properties,  as well as the  strength of the Local  General  Partners  and their
guarantee against credit recapture.

In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154
(SFAS 154),  "Accounting Changes and  Error Corrections" which provides guidance
on the  accounting  for and  reporting of accounting  changes and  correction of
errors.  This  statement  changes the  requirements  for the  accounting for and
reporting  of a change in  accounting  principle  and  applies to all  voluntary
changes in  accounting  principle.  It also  applies to changes  required  by an
accounting pronouncement in the unusual instance that the pronouncement does not
include  specific  transition  provisions.   This  statement  is  effective  for
accounting  changes and  corrections  of errors made in fiscal  years  beginning
after December 15, 2005. The  Partnership  does not anticipate a material effect
upon the adoption of this statement.

NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
--------------------------------------------

As of the periods  presented,  the Partnership has acquired limited  partnership
interests  in 48 Local  Limited  Partnerships,  each of which  owns one  Housing
Complex, except one Local Limited Partnership that owns three Housing complexes,
consisting of an aggregate of 1,685  apartment  units.  The  respective  General
Partners of the Local Limited  Partnerships manage the day-to-day  operations of
the entities.  Significant Local Limited Partnership  business decisions require
approval  from the  Partnership.  The  Partnership,  as a  limited  partner,  is
generally  entitled  to 99%,  as  specified  in the  Local  Limited  Partnership
agreements,  of the operating profits and losses,  taxable income and losses and
tax credits of the Local Limited Partnerships.

                                       11

<PAGE>


                     WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                  For the Quarterly Period Ended June 30, 2005
                                   (unaudited)


NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
-------------------------------------------------------
The following is a summary of the equity method  activity of the  investments in
Local Limited Partnerships for the periods presented below:
<TABLE>
<CAPTION>
                                                                  For the Three              For the Year
                                                                   Months Ended                  Ended
                                                                  June 30, 2005             March 31, 2005
                                                               -----------------------       ------------------
<S>                                                          <C>                        <C>
     Investments per balance sheet, beginning of period       $              57,307      $           514,148
     Impairment loss                                                              -                 (330,705)
     Equity in losses of limited partnerships                               (10,329)                (116,289)
     Distributions received from limited partnerships                             -                   (2,291)
     Amortization of capitalized acquisition fees and
     costs                                                                      (85)                  (7,556)
                                                                ---------------------      ------------------
     Investments per balance sheet, end of period             $              46,893      $            57,307
                                                                =====================      ==================
</TABLE>
Selected financial information for the three months ended June 30, 2005 and 2004
from the  unaudited  combined  condensed  financial  statements  of the  limited
partnerships in which the Partnership has invested as follows:


                                COMBINED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                       2005                        2004
                                                               ----------------------      ------------------
<S>                                                         <C>                         <C>
        Revenues                                             $             1,761,000     $         1,837,000
                                                               ----------------------      ------------------
        Expenses:
         Operating expenses                                                1,212,000               1,242,000
         Interest expense                                                    356,000                 433,000
         Depreciation and amortization                                       436,000                 472,000
                                                               ----------------------      ------------------
        Total expenses                                                     2,004,000               2,147,000
                                                               ----------------------      ------------------
        Net loss                                             $              (243,000)     $         (310,000)
                                                               ======================      ==================
                                                             $                            $
        Net loss allocable to the Partnership                               (240,000)               (306,000)
                                                               ======================      ==================
        Net loss recorded by the Partnership                 $               (10,000)     $          (40,000)
                                                               ======================      ==================
</TABLE>
Certain Local Limited  Partnerships have incurred  significant  operating losses
and/or have  working  capital  deficiencies.  In the event  these Local  Limited
Partnerships continue to incur significant operating losses,  additional capital
contributions by the Partnership  and/or  the  Local  General  Partners  may  be
required to sustain  the  operations  of  such  Local Limited  Partnerships.  If
additional  capital  contributions are not made  when  they  are  required,  the
Partnership's  investment in certain of such Local Limited Partnerships could be
impaired,  and the loss and recapture of the related tax credits could occur.
                                       12

<PAGE>


                     WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                  For the Quarterly Period Ended June 30, 2005
                                   (unaudited)

NOTE 3 - RELATED PARTY TRANSACTIONS
-----------------------------------
Under the terms of the  Partnership  Agreement  the  Partnership  has paid or is
obligated to the General Partner or its affiliates for the following fees:

(a)  Annual asset  management fee. An annual asset  management fee equal to 0.5%
     of the invested assets of the Local Limited  Partnerships.  Invested Assets
     means the sum of the Partnership's  Investment in Local Limited Partnership
     Interests  and the  Partnership's  allocable  share  of the  amount  of the
     mortgage loans on and other debts related to, the Apartment Complexes owned
     by such Local Limited  Partnerships.  Fees of $74,866 were incurred  during
     each of three months ended June 30, 2005 and 2004. The Partnership paid the
     General  Partner or its affiliates  $13,750 and $7,500 of those fees during
     the three months ended June 30, 2005 and 2004, respectively.

(b)  Subordinated  disposition fee. A subordinated  disposition fee is an amount
     equal to 1% of the sales price of real estate sold.  Payment of this fee is
     subordinated to the Limited  Partners  receiving a preferred  return of 16%
     through  December 31, 2002 and 6% thereafter (as defined in the Partnership
     Agreement)  and is payable  only if the General  Partner or its  affiliates
     render services in the sales effort.

(c)  The  Partnership  reimburses  the  General  Partner or its  affiliates  for
     operating expenses incurred in behalf of the Partnership. Operating expense
     reimbursements  were  approximately  $20,130  and  $6,250  during the three
     months ended June 30, 2005 and 2004, respectively.

The accrued fees and expenses due to General Partner and affiliates consisted of
the following at:
<TABLE>
<CAPTION>
                                                            June 30, 2005              March 31, 2005
<S>                                             <C>                            <C>
   Asset management fee payable                  $              2,989,923       $           2,928,807
   Reimbursement  for  expenses  paid by the
   General Partner and/or its affiliates                            8,327                      20,131
                                                    ----------------------         -------------------
                                                 $              2,998,250       $           2,948,938
                                                    ======================         ===================

</TABLE>
The General  Partner and/or its affiliates do not anticipate  that these accrued
fees will be paid in full until such time as capital  reserves  are in excess of
the future foreseeable working capital requirements of the Partnership.

                                       13

<PAGE>



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

Forward-Looking Statements

With  the  exception  of  the  discussion  regarding   historical   information,
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  and  other   discussions   elsewhere  in  this  Form  10-Q  contain
forward-looking  statements.  Such statements are based on current  expectations
subject to uncertainties and other factors,  which may involve known and unknown
risks that could cause actual  results of operations to differ  materially  from
those  projected or implied.  Further,  certain  forward-looking  statements are
based upon assumptions  about future events, which may not prove to be accurate.

Risks and uncertainties inherent in forward-looking  statements include, but are
not  limited  to,  our  future  cash  flows and  ability  to  obtain  sufficient
financing, level of operating expenses, conditions in the Low Income housing tax
credit property market and the economy in general, as well as legal proceedings.
Historical  results are not necessarily  indicative of the operating results for
any future period.

Subsequent  written and oral  forward-looking  statements  attributable to us or
persons  acting on our behalf  are  expressly  qualified  in their  entirety  by
cautionary  statements  in this Form 10-Q and in other reports we filed with the
Securities and Exchange  Commission.  The following discussion should be read in
conjunction  with the  Consolidated  Financial  Statements and the Notes thereto
included elsewhere in this filing.

The following discussion and analysis compares the results of operations for the
three  months  ended June 30, 2005 and 2004,  and should be read in  conjunction
with the condensed  consolidated  financial  statements and  accompanying  notes
included within this report.

Financial Condition

The  Partnership's  assets at June 30, 2005  consisted  primarily of $184,000 in
cash and aggregate  investments in the forty-eight Local Limited Partnerships of
$47,000.  Liabilities  at June 30, 2005  primarily  consisted of  $2,998,000  of
accrued annual asset management fees and  reimbursement for expenses paid by the
General Partner and/or its affiliates.

Results of Operations

Three Months  Ended June 30, 2005  Compared to Three Months Ended June 30, 2004.
The  Partnership's  net loss  for the  three  months  ended  June  30,  2005 was
$(88,000),  reflecting  a decrease  of  $31,000  from the net loss for the three
months ended June 30, 2004 of  $(119,000).  This  decrease was  primarily due to
equity in  losses  of  limited  partnerships,  which  decreased  by  $30,000  to
$(10,000),  for the three months ended June 30, 2005  compared to $(40,000)  for
the  three  months  ended  June 30,  2004.  This  decrease  was a result  of the
Partnership  not recognizing  certain losses of the Local Limited  Partnerships.
The  investments in such Local Limited  Partnerships  had reached $0 at June 30,
2005.  Since the  Partnership's  liability  with respect to its  investments  is
limited,  losses in excess of  investments  are not  recognized.  Along with the
decrease in equity in losses of limited  partnerships,  the loss from operations
decreased by $1,000,  from $(78,000) for the three months ended June 30, 2004 to
$(77,000) for the three months ended June 30, 2005, due to a $2,000  decrease in
operating  expenses  which was offset by a  $(1,000)  decrease  in  distribution
income.  The decrease  in operating expenses  was  primarily  due  to  a  $5,000
decrease in amortization  expense,  $1,000  decrease in other  operating expense
which were offset by $(4,000) increase in legal and accounting expenses.

Cash Flows

Three Months  Ended June 30, 2005  Compared to Three Months Ended June 30, 2004.
Net cash used  during  the  three  months  ended  June 30,  2005 was  $(28,000),
compared to net cash used in the three  months  ended June 30, 2004 of $(6,000),
reflecting a  change of $(22,000). The change was primarily due to a decrease of
$(17,000) in accrued fees  and expenses due to General Partner and affiliates, a
$(1,000) decrease in distribution  income along with a $(4,000) increase in paid
legal and accounting expenses.

                                       14

<PAGE>


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

During the three months  ended June 30,  2005,  accrued  asset  management  fees
payable  and  advances  due to the General  Partner  increased  by $49,000.  The
General  Partner does not anticipate  that the accrued fees and advances will be
paid until such time as capital  reserves are in excess of  foreseeable  working
capital requirements of the partnership.

Anticipated  future and  existing  cash  resources  of the  Partnership  are not
sufficient   to  pay  existing   liabilities   of  the   Partnership.   However,
substantially all of the existing  liabilities of the Partnership are payable to
the General  Partner and /or its  affiliates.  Though the amounts payable to the
General Partner and/or its affiliates are contractually  currently payable,  the
Partnership  anticipates that the General Partner and/or its affiliates will not
require the payment of these contractual  obligations until capital reserves are
in excess of the  aggregate  of the  existing  contractual  obligations  and the
anticipated future foreseeable  obligations of the Partnership.  The Partnership
would be adversely  affected  should the General  Partner  and/or its affiliates
demand current payment of the existing  contractual  obligations  and/or suspend
services for this or any other reason.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

        NOT APPLICABLE

Item 4. Procedures and Controls

        As of the end of the period  covered by this report,  the  Partnership's
        General Partner, under the supervision and with the participation of the
        Chief Executive  Officer  and  Chief  Financial  Officer  of  Associates
        carried out an evaluation of the effectiveness of the Fund's "disclosure
        controls and procedures" as defined in Securities Exchange Act  of  1934
        Rule 13a-15 and 15d-15. Based on that evaluation,  the  Chief  Executive
        Officer  and  Chief  Financial Officer have concluded that as of the end
        of the period  covered  by this  report,  the  Partnership's  disclosure
        controls and procedures were adequate and effective in  timely  alerting
        them to material information relating to the Partnership required to  be
        included in the Partnership's periodic SEC filings.

        Changes in internal controls. There were no changes in the Partnership's
        internal control over  financial  reporting  that  occurred  during  the
        quarter ended June 30, 2005 that materially  affected, or are reasonably
        likely to materially affect, the  Partnership's  internal  control  over
        financial reporting.

                                       15

<PAGE>


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

         NONE

Item 2.  Changes in Securities and Use of Proceeds

         NONE

Item 3.  Defaults Upon Senior Securities

         NONE

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

         NONE

Item 5.  Other Information

         NONE

Item 6.  Exhibits

31.1  Certification of the Principal Executive  Officer  pursuant  to  Rule 13a-
      15(e) and 15d-15(e), as adopted  pursuant to section  302 of the Sarbanes-
      Oxley Act of2002.(filed herewith)

31.2  Certification of the Principal  Financial  Officer  pursuant to Rule  13a-
      15(e) and 15d-15(e), as adopted pursuant to  section 302  of the Sarbanes-
      Oxley Actof 2002.(filed herewith)

32.1  Section 1350 Certification of the Chief Executive Officer.(filed herewith)

32.2  Section 1350 Certification of the Chief Financial Officer.(filed herewith)

                                       16

<PAGE>

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

WNC HOUSING TAX CREDITS III, L.P.

By:  WNC Tax Credit Partners, L.P.          General Partner


By:  WNC & ASSOCIATES, INC.                 General Partner





By: /s/ Wilfred N. Cooper, Jr.
------------------------------
Wilfred N. Cooper, Jr.
Chairman and Chief Executive Officer of WNC & Associates, Inc.

Date: November 21, 2005





By:  /s/ Thomas J. Riha
-----------------------
Thomas J. Riha
Senior Vice-President - Chief Financial Officer of WNC & Associates, Inc.

Date: November 21, 2005

                                       17
<