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, 2001

                                       OR

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

             For the transition period from ________ to ___________

                         Commission file number: 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.)



              3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626

                                 (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



<PAGE>


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

                               INDEX TO FORM 10-Q

              For the Three and Six Months Ended September 30, 2001




PART I. FINANCIAL INFORMATION

     Item 1. Financial Statements

             Balance Sheets,
              September 30, 2001 and March 31, 2001............................3

             Statements of Operations
              For the three and six months ended September 30, 2001 and 2000...4

             Statement of Partners' Equity (Deficit)
              For the six months ended September 30, 2001 .....................5

             Statements of Cash Flows
              For the six months ended September 30, 2001 and 2000.............6

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


     Item 2. Management's Discussion and Analysis of Financial
             Condition and Results of Operations..............................12

     Item 3. Quantitative and Qualitative Disclosures About Markets Risks.....14

PART II. OTHER INFORMATION

     Item 1. Legal Proceedings................................................14

     Item 6. Exhibits and Reports on Form 8-K.................................14

     Signatures...............................................................15


                                       2
<PAGE>


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

                                 BALANCE SHEETS


<TABLE>
<CAPTION>

                                                                     September 30, 2001            March 31, 2001
                                                                   -----------------------        ------------------
                                                                        (unaudited)
ASSETS

<S>                                                              <C>                            <C>
Cash and cash equivalents                                        $               288,777        $         310,526
Investments in limited partnerships, net (Note 2)                              2,038,790                2,387,646
                                                                   -----------------------        ------------------

                                                                 $             2,327,567        $       2,698,172
                                                                   =======================        ==================


LIABILITIES AND PARTNERS' EQUITY (DEFICIT)

Liabilities:
   Payables to limited partnerships (Note 4)                     $                50,818        $          50,818
   Accrued fees and expenses due to
     General Partner and affiliates (Note 3)                                   1,971,678                1,850,328
                                                                   -----------------------        ------------------

      Total liabilities                                                        2,022,496                1,901,146
                                                                   -----------------------        ------------------


Partners' equity (deficit):
  General Partner                                                                (37,471)                 (32,551)
  Limited Partners (15,000 units authorized and 15,000
    units issued and outstanding)                                                342,542                  829,577
                                                                   -----------------------        ------------------

      Total partners' equity                                                     305,071                  797,026
                                                                   -----------------------        ------------------

                                                                 $             2,327,567        $       2,698,172
                                                                   =======================        ==================

</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, 2001 and 2000
                                   (unaudited)
<TABLE>
<CAPTION>


                                                        2001                                      2000
                                       ----------------------------------------   -------------------------------------
                                         Three months           Six months         Three months          Six months
                                       ------------------   -------------------   ----------------    -----------------

<S>                                  <C>                  <C>                   <C>                 <C>
Interest income                      $             2,491  $              5,484  $           4,771   $            9,507
Distribution income                               17,151                17,151              4,150               11,570
                                       ------------------   -------------------   ----------------    -----------------
    Total income                                  19,642                22,635              8,921               21,077
                                       ------------------   -------------------   ----------------    -----------------

Operating expenses:
  Amortization (Note 2)                            7,235                14,470             11,812               23,624
  Asset management fees (Note 3)                  74,747               149,514             74,757              149,514
  Legal and accounting                            16,553                21,057             15,474               18,204
  Other                                              931                 4,391              3,233                6,080
                                       ------------------   -------------------   ----------------    -----------------

    Total operating expenses                      99,466               189,432            105,276              197,422
                                       ------------------   -------------------   ----------------    -----------------

Loss from operations                             (79,824)             (166,797)           (96,355)            (176,345)

Equity in losses of
 limited partnerships (Note 2)                  (203,073)             (325,158)          (139,556)            (302,656)
                                       ------------------   -------------------   ----------------    -----------------

Net loss                             $          (282,897)  $          (491,955) $        (235,911)  $         (479,001)
                                       ==================   ===================   ================    =================

Net loss allocated to:
  General Partner                    $            (2,829)  $            (4,920) $          (2,359)  $           (4,790)
                                       ==================   ===================   ================    =================

  Limited Partners                   $          (280,068)  $          (487,035) $        (233,552)  $         (474,211)
                                       ==================   ===================   ================    =================

Net loss per limited
  partner unit                       $               (19)  $               (33) $             (16)  $              (32)
                                       ==================   ===================   ================    =================

 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' EQUITY (DEFICIT)

                   For the Six Months Ended September 30, 2001
                                   (unaudited)

<TABLE>
<CAPTION>


                                                          General               Limited
                                                          Partner              Partners                 Total
                                                       ---------------      ----------------      ------------------

<S>                                                  <C>                  <C>                   <C>
Partners' equity (deficit) at March 31, 2001         $       (32,551)     $       829,577       $          797,026

Net loss                                                      (4,920)            (487,035)                (491,955)
                                                       ---------------      ----------------      ------------------

Partners' equity (deficit) at September 30, 2001     $       (37,471)     $       342,542       $          305,071
                                                       ===============      ================      ==================


</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, 2001 and 2000
                                   (unaudited)
<TABLE>
<CAPTION>


                                                                            2001                 2000
                                                                        --------------      ---------------
Cash flows from operating activities:
<S>                                                                   <C>                 <C>
  Net loss                                                            $     (491,955)     $     (479,001)
    Adjustments to reconcile net loss to net
      cash used in operating activities:
        Amortization                                                          14,470              23,624
        Equity in losses of limited partnerships                             325,158             302,656
        Change in accrued fees and expenses due to
        General Partner and affiliates                                       121,350             132,847
                                                                        --------------      ---------------

Net cash used in operating activities                                        (30,977)            (19,874)
                                                                        --------------      ---------------

Cash flows from investing activities:
    Investments in limited partnerships                                       (5,000)                   -
    Distributions from limited partnerships                                   14,228                4,621
                                                                        --------------      ---------------

Net cash provided by investing activities                                      9,228                4,621
                                                                        --------------      ---------------

Net decrease in cash and cash equivalents                                    (21,749)             (15,253)

Cash and cash equivalents, beginning of period                               310,526              330,386
                                                                        --------------      ---------------

Cash and cash equivalents, end of period                              $      288,777      $       315,133
                                                                        ==============       ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION:
   Taxes paid                                                         $          800      $           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
                       For the Three and Six Months Ended
                               September 30, 2001
                                   (unaudited)


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

General
-------

The accompanying  condensed unaudited financial statements have been prepared in
accordance with generally accepted  accounting  principles 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 generally accepted
accounting  principles  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, 2001 are not necessarily  indicative of
the results that may be expected for the fiscal year ending March 31, 2002.  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, 2001.

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 is WNC Tax Credit Partners,  L.P. (the "General Partner"), a
California limited  partnership,  WNC & Associates,  Inc. ("WNC") and Wilfred N.
Cooper, Sr. are the general partners of the General Partner.  Wilfred N. Cooper,
Sr., through the Cooper  Revocable Trust owns 66.8% of the outstanding  stock of
WNC. John B. Lester is the original  limited partner of the Partnership and owns
28.6% of the outstanding stock of WNC. Wilfred N. Cooper, Jr., President of WNC,
owns 2.1% of the outstanding stock of WNC.

The Partnership  shall continue in full force and effect until December 31, 2050
unless  terminated prior to that date pursuant to the partnership  agreement and
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 investment (as defined
in the  Partnership  Agreement)  and the General  Partner has received  proceeds
equal  to its  capital  contribution  and a  subordinated  disposition  fee  (as
described in Note 3) from the  remainder,  any  additional  sale 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 Three and Six Months Ended
                               September 30, 2001
                                   (unaudited)

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

Risks and Uncertainties
-----------------------

The Partnership's  investments in Local Limited  Partnerships are subject to the
risks incident to the management and ownership of low-income  housing and to the
management and ownership of multi-unit  residential  real estate.  Some of these
risks  are that the low  income  housing  credit  could be  recaptured  and that
neither the  Partnership's  investments  nor the Housing  Complexes owned by the
Local  Limited  Partnerships  would be  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  Local  Limited  Partnership
Interests;  limitations  on removal of Local General  Partners;  limitations  on
subsidy programs;  and possible changes in applicable  regulations.  The Housing
Complexes  are or will be subject to mortgage  indebtedness.  If a Local Limited
Partnership  does not make its mortgage  payments,  the lender  could  foreclose
resulting in a loss of the Housing Complex and low-income housing credits.  As a
limited partner of the Local Limited  Partnerships,  the  Partnership  will have
very  limited   rights  with  respect  to   management   of  the  Local  Limited
Partnerships,  and will rely totally on the Local General  Partners of the Local
Limited Partnerships for management of the Local Limited Partnerships. The value
of the  Partnership's  investments  will be subject to changes in  national  and
local  economic  conditions,  including  unemployment  conditions,  which  could
adversely impact vacancy levels, rental payment defaults and operating expenses.
This, in turn, could substantially increase the risk of operating losses for the
Housing  Complexes  and  the  Partnership.   In  addition,  each  Limited  Local
Partnership  is subject to risks relating to  environmental  hazards and natural
disasters, which might be uninsurable. Because the Partnership's operations will
depend on these and other factors beyond the control of the General  Partner and
the Local General  Partners,  there can be no assurance that the anticipated low
income housing credits will be available to Limited Partners.

In addition,  Limited  Partners are subject to risks in that the rules governing
the low income  housing  credit are  complicated,  and the use of credits can be
limited.  The only  material  benefit from an investment in Units may be the low
income housing credits. There are limits on the transferability of Units, and it
is unlikely that a market for Units will  develop.  All  management's  decisions
will be made by the General Partner.

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  Partnership's  results of operations
and for any distributions received. The accounting policies of the Local Limited
Partnership's  are 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 (Note 2).

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 partners'  capital and amounted to  $2,250,000  at the end of all
periods presented.

                                       8

<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                       For the Three and Six Months Ended
                               September 30, 2001
                                   (unaudited)


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

Use of Estimates
----------------

The preparation of financial  statements in conformity  with generally  accepted
accounting principles 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.

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

The Partnership  considers all highly liquid investments with remaining maturity
of three months or less when purchased to be cash  equivalents.  As of September
30, 2001 and March 31, 2001,  the  Partnership  had cash  equivalents  of $0 and
$12,288, respectively.

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

At September 30, 2001,  the  Partnership  maintained a cash balance at a certain
financial institution in excess of the maximum federally insured amounts.

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 income per unit is not required.

Reporting Comprehensive Income
------------------------------

In June 1997,  the FASB  issued  Statement  of  Financial  Accounting  Standards
("SFAS") No. 130, Reporting  Comprehensive  Income.  This statement  establishes
standards for reporting the components of comprehensive income and requires that
all items that are  required to be  recognized  under  accounting  standards  as
components of comprehensive  income be included in a financial statement that is
displayed with the same prominence as other financial statements.  Comprehensive
income  includes net income as well as certain items that are reported  directly
within a separate  component  of  partners'  equity and bypass net  income.  The
Partnership  adopted the  provisions of this  statement in 1998. For the periods
presented,  the Partnership has no elements of other  comprehensive  income,  as
defined by SFAS No. 130.

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.

                                       9
<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                       For the Three and Six Months Ended
                               September 30, 2001
                                   (unaudited)


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

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 has reached
zero are recognized as income.

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 Six              For the Year
                                                                    Months Ended                 Ended
                                                                 September 30, 2001         March 31, 2001
                                                                ---------------------      ------------------
<S>                                                           <C>                        <C>
     Investments per balance sheet, beginning of period       $           2,387,646      $        3,533,290
     Capital contribution                                                     5,000                       -
     Equity in losses of limited partnerships                              (325,158)             (1,081,247)
     Distributions received from limited partnerships                       (14,228)                (17,149)
     Amortization of capitalized acquisition fees and costs                 (14,470)                (47,248)
                                                                ---------------------      ------------------
     Investments per balance sheet, end of period             $           2,038,790      $        2,387,646
                                                                =====================      ==================
</TABLE>

Selected  financial  information for the six months ended September 30, 2001 and
2000 from the unaudited combined condensed  financial  statements of the limited
partnerships in which the Partnership has invested as follows:
<TABLE>
<CAPTION>

                                COMBINED CONDENSED STATEMENTS OF OPERATIONS
                                                                       2001                      2000
                                                               ----------------------      ------------------
<S>                                                          <C>                         <C>
        Revenues                                             $             3,308,000     $        3,303,000
                                                               ----------------------      ------------------
        Expenses:
          Operating expenses                                               2,176,000              2,185,000
          Interest expense                                                   892,000                866,000
          Depreciation and amortization                                      951,000                964,000
                                                               ----------------------      ------------------
        Total expenses                                                     4,019,000              4,015,000
                                                               ----------------------      ------------------

        Net loss                                             $              (711,000)    $         (712,000)
                                                               ======================      ==================
                                                             $              (704,000)    $         (705,000)
        Net loss allocable to the Partnership
                                                               ======================      ==================
                                                             $              (325,000)    $         (303,000)
        Net loss recorded by the Partnership
                                                               ======================      ==================
</TABLE>

Certain Local Limited  Partnerships have incurred  significant  operating losses
and  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


                                       10
<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                       For the Three and Six Months Ended
                               September 30, 2001
                                   (unaudited)


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

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  o the  amount  of the
     mortgage  loans on and on,  and  other  debts  related  to,  the  Apartment
     Complexes owned by such Local Limited  Partnerships.  Fees of $149,514 were
     incurred  during each of the six months ended  September 30, 2001 and 2000.
     The Partnership  paid the General Partner $28,501 and $16,667 of those fees
     during the six months ended September 30, 2001 and 2000, respectively.

(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.

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

                                                       September 30, 2001              March 31, 2001
                                                       ------------------              --------------

<S>                                              <C>                            <C>
   Asset management fee payable                  $              1,971,341       $           1,850,328
   Accrued expenses                                                   337                           -
                                                    ----------------------         -------------------
                                                 $              1,971,678       $           1,850,328
                                                    ======================         ===================
</TABLE>



The General  Partners do not anticipate that the accrued fees will be paid until
such time as capital  reserves are in excess of the future  foreseeable  working
capital requirements.

NOTE 4 - PAYABLES TO LIMITED PARTNERSHIPS
-----------------------------------------

Payables to Limited  Partnerships  represent  amounts,  which are due at various
times  based on  conditions  specified  in the  respective  limited  partnership
agreements.  These contributions are payable in installments,  are generally due
upon the limited  partnership  achieving  certain  operating  benchmarks and are
generally  expected  to be paid  within two years of the  Partnership's  initial
investment.

NOTE 5 - INCOME TAXES
---------------------

No provision for income taxes has been recorded in the financial statements,  as
any  liability  for  income  taxes  is the  obligation  of the  partners  of the
Partnership.

                                       11
<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                       For the Three and Six Months Ended
                               September 30, 2001
                                   (unaudited)

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 and six months ended  September  30, 2001 and 2000,  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, 2001 consisted  primarily of $289,000
in cash and aggregate  investments in the forty-eight Local Limited Partnerships
of  $2,039,000.  Liabilities  at  September  30,  2001  primarily  consisted  of
$1,972,000  of accrued  asset  management  fees due to the  General  Partner and
affiliates.

Results of Operations
---------------------

Three Months Ended  September 30, 2001 Compared to Three Months Ended  September
30, 2000. The  Partnership's  net loss for the three months ended  September 30,
2001 was  $(283,000),  reflecting an increase of $(47,000) from the net loss for
the three months ended September 30, 2000 of $(236,000). This increase primarily
was due to  equity  in  losses  of  limited  partnerships,  which  increased  by
$(63,000) to $(203,000),  for the three months ended September 30, 2001 compared
to the $(140,000) for the three months ended September 30, 2000. The increase in
equity  in  losses  of  limited  partnerships  is due to  the  reduction  of the
respective  net  acquisition  fee  component  of  investments  in Local  Limited
Partnerships to zero for those Local Limited  Partnerships which would otherwise
be below a zero balance offset by the Partnership not recognizing certain losses
of the  Local  Limited  Partnerships.  The  investments  in such  Local  Limited
Partnerships  had reached $0 at  September  30,  2001.  Since the  Partnership's
liability  with  respect  to its  investments  is  limited,  losses in excess of
investment  are not  recognized.  This  increase  was  offset by a  decrease  of
$(16,000) in loss from  operations,  from  $(96,000)  for the three months ended
September 30, 2000 to $(80,000)  for the three months ended  September 30, 2001,
caused  primarily by an increase in total income of $10,000 for the three months
ended  September 30, 2001 compared to the three month ended  September 30, 2000,
and a decrease  in  operating  expenses of $6,000  from  $105,000  for the three
months ended September 30, 2000,  compared to $99,000 for the three months ended
September 30,2001.

                                       12
<PAGE>

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

Results of Operations, continued
--------------------------------

Six Months Ended  September 30, 2001 Compared to Six Months Ended  September 30,
2000. The Partnership's net loss for the six months ended September 30, 2001 was
$(492,000),  reflecting an increase of $(13,000)  from the net loss  experienced
for the six  months  ended  September  30,  2000 of  $(479,000).  This  increase
primarily was due to equity in losses of limited partnerships which increased by
$(22,000) to $(325,000) for the six months ended September 30, 2001, compared to
the  $(303,000)  for the six months ended  September  30, 2000.  The increase in
equity  in  losses  of  limited  partnerships  is due to  the  reduction  of the
respective  net  acquisition  fee  component  of  investments  in Local  Limited
Partnerships to zero for those Local Limited  Partnerships which would otherwise
be below a zero balance offset by the Partnership not recognizing certain losses
of the  Local  Limited  Partnerships.  The  investments  in such  Local  Limited
Partnerships  had reached $0 at  September  30,  2001.  Since the  Partnership's
liability  with  respect  to its  investments  is  limited,  losses in excess of
investment are not recognized. The increase was offset by a decrease of $(9,000)
in loss from  operations  from the $(176,000) for the six months ended September
30,  2000 to  $(167,000)  for the six months  ended  September  30,  2001 caused
primarily  by an increase in total  income of  approximately  $1,000 for the six
months ended  September 30, 2001 compared to the six months ended  September 30,
2000 and a decrease in  operating  expense of $8,000 from  $197,000  for the six
month ended  September  30, 2000,  compared to $189,000 for the six months ended
September 30, 2001.

Cash Flows
----------

Six Months Ended  September 30, 2001 Compared to Six Months Ended  September 30,
2000.  Net cash and cash  equivalents  decreased by $(22,000) for the six months
ended  September  30, 2001,  compared to  $(15,000)  decrease for the six months
ended  September  30, 2000  reflecting  an increase of $(7,000).  The change was
primarily due to an $(11,000) increase in net cash used in operating  activities
to  $(31,000)  for the six months  ended  September  30,  2001,  compared to the
$(20,000)  net  cash  used in  operating  activities  for the six  months  ended
September 30, 2000. The increase was primarily  offset by  approximately  $4,000
increase in cash provided by investing  activities for $5,000 for the six months
ended  September 30, 2000 compared to $9,000 for the six months ended  September
30, 2001.

During the six months ended  September 30, 2001,  accrued asset  management fees
payable and advances  due to the General  Partner  increased  by  $121,000.  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.



                                       13

<PAGE>


Item 3: Quantitative and Qualitative Disclosures About Market Risks

         NOT APPLICABLE

Part II.  Other Information

Item 1.  Legal Proceedings

         NONE

Item 6.  Exhibits and Reports on Form 8-K

         NONE



                                       14
<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 CREDIT FUND III, L.P.

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

By: WNC & Associates,  Inc., General Partner of WNC Housing Tax Credit Fund III,
    L.P.






By: /s/  Wilfred N. Cooper, Jr.
    ---------------------------

Wilfred N. Cooper, Jr.
President - Chief Operating Officer of WNC & Associates, Inc.

Date:   November 2, 2001






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

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

Date: November 2, 2001



                                       15