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 September 30, 2004

                                       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 92614-6404
                    (Address of principal executive offices)

                                 (714) 622-5565

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 Quarter Ended September 30, 2004


PART I. FINANCIAL INFORMATION

     Item 1. Financial Statements

             Balance Sheets
              September 30, 2004 and March 31, 2004............................3

             Statements of Operations
              For the Three and Six Months Ended September 30, 2004 and 2003...4

             Statement of Partners' Deficit
              For the Six Months Ended September 30, 2004 .....................5

             Statements of Cash Flows
              For the Six Months Ended September 30, 2004 and 2003.............6

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

     Item 2. Management's Discussion and Analysis of Financial
             Condition and Results of Operations..............................16

     Item 3. Quantitative and Qualitative Disclosures about Market Risk.......16

     Item 4. Procedures and Controls..........................................16

PART II. OTHER INFORMATION

     Item 1. Legal Proceedings................................................17

     Item 2. Changes in Securities and Use of Proceeds........................17

     Item 3. Defaults Upon Senior Securities..................................17

     Item 4. Submission of Matters to a Vote of Security Holders..............17

     Item 5. Other Information................................................17

     Item 6. Exhibits.........................................................17

     Signatures...............................................................18





                                       2
<PAGE>


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

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                      September 30, 2004           March 31, 2004
                                                                   -----------------------        ------------------
                                                                        (unaudited)
<S>                                                              <C>                            <C>
ASSETS

Cash and cash equivalents                                        $               214,535        $         226,870
Investments in limited partnerships, net (Note 2)                                430,855                  514,148
                                                                   -----------------------        ------------------

                                                                 $               645,390        $         741,018
                                                                   =======================        ==================


LIABILITIES AND PARTNERS' DEFICIT

Liabilities:
   Accrued fees and expenses due to
     General Partner and affiliates (Note 3)                     $             2,794,279        $       2,660,187

Commitments and contingencies

Partners' deficit:
  General Partner                                                                (62,010)                 (59,713)
  Limited Partners (15,000 units authorized; 15,000 units
    issued and outstanding)                                                   (2,086,879)              (1,859,456)
                                                                   -----------------------        ------------------

      Total partners' deficit                                                 (2,148,889)              (1,919,169)
                                                                   -----------------------        ------------------

                                                                 $               645,390        $         741,018
                                                                   =======================        ==================
</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 and Six Months Ended September 30, 2004 and 2003
<TABLE>
<CAPTION>
                                   (unaudited)
                                                          2004                                        2003
                                       -------------------------------------------    -------------------------------------
                                         Three Months              Six Months          Three Months          Six Months
                                       ------------------      -------------------    ----------------    -----------------
<S>                                  <C>                     <C>                    <C>                 <C>
Interest income                      $               135     $                340   $             536   $            1,181
Distribution income                                7,049                   13,894              13,815               20,409
                                       ------------------      -------------------    ----------------    -----------------

                                                   7,184                   14,234              14,351               21,590
                                       ------------------      -------------------    ----------------    -----------------

Operating expenses:
  Amortization (Note 2)                            4,891                   10,049               7,235               14,470
  Asset management fees (Note 3)                  74,865                  149,731              74,866              149,732
  Legal and accounting                             7,475                    9,000              15,474               19,044
  Other                                              325                    4,221               1,717                8,635
                                       ------------------      -------------------    ----------------    -----------------

    Total operating expenses                      87,556                  173,001              99,292              191,881
                                       ------------------      -------------------    ----------------    -----------------

Loss from operations                             (80,372)                (158,767)            (84,941)            (170,291)

Equity in losses of
 limited partnerships (Note 2)                   (30,599)                 (70,953)           (108,485)            (154,970)
                                       ------------------      -------------------    ----------------    -----------------


Net loss                             $          (110,971)    $           (229,720)  $        (193,426)  $         (325,261)
                                       ==================      ===================    ================    =================

Net loss allocated to:

  General Partner                    $            (1,110)    $             (2,297)  $          (1,934)  $           (3,253)
                                       ==================      ===================    ================    =================

  Limited Partners                   $          (109,861)    $           (227,423)  $        (191,492)  $         (322,008)
                                       ==================      ===================    ================    =================

Net loss per limited
  partner unit                       $                (7)    $                (15)  $             (13)  $              (21)
                                       ==================      ===================    ================    =================

Outstanding weighted limited
  partner units                                   15,000                   15,000              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 Six Months Ended September 30, 2004
                                   (unaudited)
<TABLE>
<CAPTION>
                                                          General              Limited
                                                          Partner              Partners                 Total
                                                       ---------------      ----------------      ------------------

<S>                                                  <C>                  <C>                   <C>
Partners' deficit at March 31, 2004                  $       (59,713)     $     (1,859,456)     $       (1,919,169)

Net loss                                                      (2,297)             (227,423)               (229,720)
                                                       ---------------      ----------------      ------------------

Partners' deficit at September 30, 2004              $       (62,010)     $     (2,086,879)     $       (2,148,889)
                                                       ===============      ================      ==================
</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 Six Months Ended September 30, 2004 and 2003
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                            2004                 2003
                                                                        --------------      ---------------
<S>                                                                   <C>                 <C>
Cash flows from operating activities:
  Net loss                                                            $     (229,720)     $      (325,261)
    Adjustments to reconcile net loss to net
      cash used in operating activities:
        Amortization                                                          10,049               14,470
        Equity in losses of limited partnerships                              70,953              154,970
        Change in accrued  fees and expenses due to
           General Partner and affiliates                                    134,091              131,422
                                                                        --------------      ---------------

Net cash used in operating activities                                        (14,626)             (24,399)
                                                                        --------------      ---------------

Cash flows from investing activities:
    Distributions received from limited partnerships                           2,291                6,522
                                                                        --------------      ---------------

Net decrease in cash and cash equivalents                                    (12,335)             (17,877)

Cash and cash equivalents, beginning of period                               226,870              251,056
                                                                        --------------      ---------------

Cash and cash equivalents, end of period                              $      214,535      $       233,179
                                                                        ==============      ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION:

   Taxes paid                                                         $            -      $           800
                                                                        ==============      ===============
</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 - CONTINUED
                    For the Quarter Ended September 30, 2004
                                   (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 and six
months ended  September 30, 2004 are not  necessarily  indicative of the results
that may be  expected  for the fiscal year ending  March 31,  2005.  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,
2004.

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  Complex") that are eligible for
low-income  housing  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 its 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 September 30, 2004
                                   (unaudited)


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
--------------------------------------------------------------

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  Credit rules are extremely  complicated.  Noncompliance
with these rules  results in the loss of future Low Income  Housing  Credits and
the fractional  recapture of Low Income Housing  Credits  already taken. In most
cases the annual amount of Low Income Housing 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 investors.  Low Income Housing  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  Credits,  a fractional  recapture of prior Low Income
Housing  Credits,  and a loss of the  Partnership's  investment  in the  Housing
Complex would occur. The Partnership is a limited partner or 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
Credits and recapture of Low Income Housing 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
Credits and tax losses  allocable to the  investors  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 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 Credits
from the Local  Limited  Partnerships  in the  future.  Until the Local  Limited
Partnerships  have completed the 15 year Low Income  Housing  Credit  compliance
period risks exist for potential recapture of prior low Income Housing Credits.


                                       8
<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                    For the Quarter Ended September 30, 2004
                                   (unaudited)


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
--------------------------------------------------------------

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

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.

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.

With that in mind,  the  Partnership  is continuing to review the  Partnership's
holdings,  with special emphasis on the more mature  properties  including those
that have satisfied the IRS compliance  requirements.  The Partnership's  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 investors from the
sale of the property.

Upon identifying  those  properties with the highest  potential for a successful
sale,  refinancing  or  syndication,  the  Partnership  expects to proceed  with
efforts  to  liquidate  those  properties.  The  Partnership's  objective  is to
maximize the investors' return wherever possible and,  ultimately,  to wind down
those  funds  that no longer  provide  tax  benefits  to  investors.  To date no
properties in the Partnership have been selected.

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  Credits  estimated to be allocable to the Partnership and the estimated
residual  value  to  the  Partnership.  If an  investment  is  considered  to be
impaired,  the  Partnership  reduces the carrying value of its investment in any
such Local Limited  Partnership.  The  accounting  policies of the Local Limited
Partnerships,  generally,  are  expected  to be  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  September 30,
2004 and 2003 have  been  recorded  by the  Partnership  based on six  months of
reported  results  estimated  by  management  of the  Partnership.  Management's
estimate for the six-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. Equity in losses from the Local


                                       9
<PAGE>
                      WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                    For the Quarter Ended September 30, 2004
                                   (unaudited)


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
--------------------------------------------------------------

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.

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.

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.

Income Taxes
------------

No provision for income taxes has been  recorded in the financial  statements as
any  liability  and or benefits  for 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.

Cash and Cash Equivalents
-------------------------

The Partnership considers all highly liquid investments with original maturities
of three months or less when purchased to be cash  equivalents.  The Partnership
had no cash equivalents for all periods presented.

Concentration of Credit Risk
----------------------------

At September 30, 2004,  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  partner  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
during for all periods



                                       10
<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                    For the Quarter Ended September 30, 2004
                                   (unaudited)


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
--------------------------------------------------------------

presented, as defined by SFAS No. 130.

New Accounting Pronouncements
-----------------------------

As of March 31,  2004,  the  Partnership  adopted FASB  Interpretation  No. 46 -
Revised,  Consolidation  of  Variable  Interest  Entities  ("FIN46Ra").  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.





                                       11
<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                    For the Quarter Ended September 30, 2004
                                   (unaudited)

<TABLE>
<CAPTION>

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  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.

Equity  in  losses  of the  Local  Limited  Partnerships  is  recognized  in the
financial  statements until the related  investment account is reduced to a zero
balance. Losses incurred after the investment account is reduced to zero are not
recognized. 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  that has
reached zero is recognized as income.

Following is a summary of the equity method activity of the investments in Local
Limited Partnerships for the periods presented below:

                                                                       For the Six             For the Year
                                                                      Months Ended                 Ended
                                                                 September 30, 2004          March 31, 2004
                                                                ---------------------      ------------------
<S>                                                           <C>                        <C>
     Investments per balance sheet, beginning of period       $             514,148      $        1,358,412
     Equity in losses of limited partnerships                               (70,953)               (268,216)
     Distributions received from limited partnerships                        (2,291)                 (1,525)
     Impairment loss                                                              -                (549,216)
     Amortization of capitalized acquisition fees and
     costs                                                                  (10,049)                (25,307)
                                                                ---------------------      ------------------
     Investments per balance sheet, end of period             $             430,855      $          514,148
                                                                =====================      ==================
</TABLE>








                                       12
<PAGE>




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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                    For the Quarter Ended September 30, 2004
                                   (unaudited)

<TABLE>
<CAPTION>

NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
-------------------------------------------------------

Selected  financial  information for the six months ended September 30, 2004 and
2003 from the unaudited combined condensed  financial  statements of the limited
partnerships in which the Partnership has invested as follows:

                                COMBINED CONDENSED STATEMENTS OF OPERATIONS
                                                                       2004                      2003
                                                               ----------------------      ------------------
<S>                                                          <C>                         <C>
        Revenues                                             $             3,675,000     $         3,544,000
                                                               ----------------------      ------------------
        Expenses:
          Operating expenses                                               2,484,000               2,406,000
          Interest expense                                                   867,000                 880,000
          Depreciation and amortization                                      944,000                 934,000
                                                               ----------------------      ------------------
        Total expenses                                                     4,295,000               4,220,000
                                                               ----------------------      ------------------

        Net loss                                             $              (620,000)    $          (676,000)
                                                               ======================      ==================
        Net loss allocable to the Partnership                $              (613,000)    $          (669,000)
                                                               ======================      ==================
        Net loss recorded by the Partnership                 $               (71,000)    $          (155,000)
                                                               ======================      ==================
</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  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.

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 $149,731 and  $149,732  were
     incurred  during  the  six  months  ended  September  30,  2004  and  2003,
     respectively.  The  Partnership  paid the General Partner or its affiliates
     $22,500 of those fees during  each of the six months  ended  September  30,
     2004 and 2003.

(b)  Subordinated  disposition fee. A subordinated  disposition fee in 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  $6,360 and $21,389 during the six months
     ended September 30, 2004 and 2003, respectively.



                                       13
<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                    For the Quarter Ended September 30, 2004
                                   (unaudited)

<TABLE>
<CAPTION>

NOTE 3 - RELATED PARTY TRANSACTIONS, contintued
-----------------------------------------------

The accrued fees and expenses due to General Partner and affiliates consisted of
the following at:

                                                       September 30, 2004              March 31, 2004
                                                       ------------------              --------------

<S>                                              <C>                            <C>
   Asset management fee payable                  $              2,786,576       $           2,659,345
   Advances from Associates                                         7,703                         842
                                                    ----------------------         -------------------
                                                 $              2,794,279       $           2,660,187
                                                    ======================         ===================

</TABLE>


The General  Partners 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.





                                       14
<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 condensed  unaudited  financial  statements  and the notes
thereto included elsewhere in this filing.

The following discussion and analysis compares the results of operations for the
three and six months ended  September  30, 2004 and 2003,  and should be read in
conjunction  with the condensed  financial  statements  and  accompanying  notes
included within this report.

Financial Condition

The Partnership's  assets at September 30, 2004 consisted  primarily of $215,000
in cash and aggregate  investments in the forty-eight Local Limited Partnerships
of $431,000. Liabilities at September 30, 2004 primarily consisted of $2,794,000
of accrued  asset  management  fees and expenses due to the General  Partner and
affiliates.

Results of Operations

Three Months Ended  September 30, 2004 Compared to Three Months Ended  September
30, 2003. The  Partnership's  net loss for the three months ended  September 30,
2004 was $(111,000),  reflecting a decrease of $82,000 from the net loss for the
three months ended September 30, 2003 of $(193,000). This decrease was primarily
due to equity in losses of limited  partnerships,  which decreased by $78,000 to
$(31,000),  for the three months ended September 30, 2004 compared to $(109,000)
for the three months ended September 30, 2003. 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 September
30, 2004. 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 $4,000 from $(85,000) for the three months ended September 30, 2003
to  $(81,000)  for the three months ended  September  30, 2004,  due to a $8,000
decrease in legal and accounting,  $2,000 decrease in amortization  and a $1,000
decrease  in  other  operating  expenses,  offset  by  a  $(7,000)  decrease  in
distribution income.

Six Months Ended  September 30, 2004 Compared to Six Months Ended  September 30,
2003. The Partnership's net loss for the six months ended September 30, 2004 was
$(230,000),  reflecting  a  decrease  of  $95,000  from the net loss for the six
months ended  September 30, 2003 of $(325,000).  This decrease was primarily due
to equity in losses of  limited  partnerships,  which  decreased  by  $84,000 to
$(71,000),  for  the  six  months  ended  September  30,  2004  compared  to the
$(155,000)  for the six months ended  September  30, 2003.  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 September 30, 2004.  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 $11,000 from  $(170,000) for the six months ended
September  30, 2003 to $(159,000)  for the six months ended  September 30, 2004,
due  to  a  $10,000  decrease  in  legal  and  accounting,  $4,000  decrease  in
amortization  and a $4,000  decrease in other  operating  expenses,  offset by a
$(6,000)  decrease in  distribution  income and a $(1,000)  decrease in interest
income.

                                       15
<PAGE>


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

Cash Flows

Six Months Ended  September 30, 2004 Compared to Six Months Ended  September 30,
2003.  Net  cash  used  during  the six  months  ended  September  30,  2004 was
$(12,000),  compared to net cash used during the six months ended  September 30,
2004 of $(18,000),  reflecting a change of $6,000.  The change was primarily due
to a decrease of $10,000 in net cash used by operating  activities,  offset by a
decrease of $(4,000) in distributions received from Local Limited Partnerships.

During the six months ended  September 30, 2004,  accrued asset  management fees
payable and advances  due to the General  Partner  increased  by  $134,000.  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 Principal 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 September 30, 2004 that materially  affected,
          or are  reasonably  likely to  materially  affect,  the  Partnership's
          internal control over financial reporting.





                                       16
<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 of 2002. (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 Act of 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)



                                       17
<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: September 16, 2005





By:  /s/ Thomas J. Riha
     ------------------

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

Date: September 16, 2005