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 December 31, 2006

                                       OR

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

             For the transition period from             to
                                           -------------   -------------

                         Commission file number: 0-21494


                      WNC HOUSING TAX CREDIT FUND III, L.P.

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



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

                                 (714) 622-5565
                              ( Telephone Number )

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

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


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

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

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

                               INDEX TO FORM 10-Q

                     For the Quarter Ended December 31, 2006

PART I. FINANCIAL INFORMATION

  Item 1. Financial Statements

          Balance Sheets
               December 31, 2006 and March 31, 2006............................3

          Statements of Operations
               For the Nine Months and Three Months Ended December 31, 2006  and
               2005............................................................4

           Statement of Partners' Deficit
               For the Nine Months Ended December 31, 2006 ....................5

           Statements of Cash Flows
               For the Nine Months Ended December 31, 2006 and 2005............6

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


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

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

  Item 4.  Controls and Procedures............................................15

PART II. OTHER INFORMATION

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

  Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds........16

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

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

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

  Item 6.  Exhibits and Reports on Form 8-K...................................16

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

  Certifications.........................................................18 & 19

                                       2
<PAGE>
                      WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                     December 31, 2006             March 31, 2006
                                                                   -----------------------        ------------------
                                                                        (unaudited)
ASSETS
<S>                                                             <C>                            <C>
Cash and cash equivalents                                        $               130,798        $          156,158
Investments in Local Limited Partnerships, net (Note 2)                           22,525                    23,717
                                                                   -----------------------        ------------------
       Total  Assets                                             $               153,323        $          179,875
                                                                   =======================        ==================
LIABILITIES AND PARTNERS' DEFICIT

Liabilities:
   Accrued fees and expenses due to
     General Partner and affiliates (Note 3)                     $             3,396,574        $        3,198,608

Partners' deficit:
  General Partner                                                                (72,954)                  (70,709)
  Limited Partners (15,000 Partnership Units authorized;
    15,000 Partnership Units issued and outstanding)                          (3,170,297)               (2,948,024)
                                                                   -----------------------        ------------------
      Total partners' deficit                                                 (3,243,251)               (3,018,733)
                                                                   -----------------------        ------------------
      Total Liabilities and Partners' Deficit                    $               153,323        $          179,875
                                                                   =======================        ==================
</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 Nine Months Ended December 31, 2006 and 2005
                                   (unaudited)
<TABLE>
<CAPTION>
                                                          2006                                        2005
                                       -------------------------------------------    -------------------------------------
                                         Three Months             Nine Months          Three Months         Nine Months
                                       ------------------      -------------------    ----------------    -----------------
<S>                                 <C>                     <C>                    <C>                <C>
Interest income                      $               176     $               543    $            211   $              679
Distribution income                                    -                  21,179                   -               17,782
                                       ------------------      -------------------    ----------------    -----------------
                                                     176                  21,722                 211               18,461
                                       ------------------      -------------------    ----------------    -----------------
Operating expenses:
  Amortization (Note 2)                               85                     255                  85                  255
  Asset management fees (Note 3)                  74,866                 224,598              74,866              224,598
  Legal and accounting                               109                  17,030              13,092               28,943
  Other                                              924                   3,620               1,089                5,691
                                       ------------------      -------------------    ----------------    -----------------
    Total operating expenses                      75,984                 245,503              89,132              259,487
                                       ------------------      -------------------    ----------------    -----------------
Loss from operations                             (75,808)               (223,781)            (88,921)            (241,026)

Equity in losses of
 Local Limited Partnerships
 (Note 2)                                          (246)                    (737)             (2,495)             (23,153)
                                       ------------------      -------------------    ----------------    -----------------
Net loss                             $          (76,054)     $          (224,518)   $        (91,416)   $        (264,179)
                                       ==================      ===================    ================    =================
Net loss allocated to:
  General Partner                    $             (761)     $            (2,245)   $           (914)   $          (2,642)
                                       ==================      ===================    ================    =================
  Limited Partners                   $          (75,293)     $          (222,273)   $        (90,502)   $        (261,537)
                                       ==================      ===================    ================    =================
Net loss per Partnership Unit        $               (5)     $               (15)   $             (6)   $             (17)
                                       ==================      ===================    ================    =================
Outstanding weighted Partnership
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 Nine Months Ended December 31, 2006
<TABLE>
<CAPTION>
                                                          General               Limited
                                                          Partner              Partners                 Total
                                                       ---------------      ----------------      ------------------
<S>                                                 <C>                  <C>                   <C>
Partners' deficit at March 31, 2006                  $       (70,709)     $     (2,948,024)     $       (3,018,733)

Net loss (unaudited)                                          (2,245)             (222,273)               (224,518)
                                                       ---------------      ----------------      ------------------
Partners' deficit at December 31, 2006 (unaudited)   $       (72,954)     $     (3,170,297)     $       (3,243,251)
                                                       ===============      ================      ==================
</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 Nine Months Ended December 31, 2006 and 2005
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                             2006                 2005
                                                                        --------------      ---------------
<S>                                                                 <C>                  <C>
Cash flows from operating activities:
  Net loss                                                            $     (224,518)     $      (264,179)
    Adjustments to reconcile net loss to net
      cash used in operating activities:
        Amortization                                                             255                  255
        Equity in losses of Local Limited Partnerships                           737               23,153
        Change in accrued  fees and expenses due to
           General Partner and affiliates                                    197,966              177,317
                                                                        --------------      ---------------
Net cash used in operating activities                                        (25,560)             (63,454)
                                                                        --------------      ---------------
Cash flows from investing activities:
    Distributions received from Local Limited Partnerships                       200                    -
                                                                        --------------      ---------------
Net decrease in cash and cash equivalents                                    (25,360)             (63,454)

Cash and cash equivalents, beginning of period                               156,158              212,588
                                                                        --------------      ---------------
Cash and cash equivalents, end of period                              $      130,798      $       149,134
                                                                        ==============      ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION:

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

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

                          NOTES TO FINANCIAL STATEMENTS
                     For the Quarter Ended December 31, 2006
                                   (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 nine months
ended December 31, 2006 are not  necessarily  indicative of the results that may
be expected for the fiscal year ending March 31, 2007. 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,
2006.

Organization
------------

WNC Housing Tax Credit Fund III, L.P. ("the Partnership"),  a California Limited
Partnership,  was  formed  on May  10,  1991  under  the  laws of the  State  of
California.  The Partnership was formed to acquire limited partnership interests
or membership interests in other Local Limited Partnerships or limited liability
companies  ("Local  Limited   Partnerships")   which  own  multi-family  housing
complexes ("Housing Complexes") that are eligible for Federal low-income housing
tax credits ("Low Income Housing Tax Credits").

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

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

The  Partnership  Agreement  authorized  the  sale of up to  15,000  of  Limited
Partnership interest  ("Partnership  Units") at $1,000 per Partnership Unit. The
offering of  Partnership  Units  concluded on September  30, 1993, at which time
15,000 Partnership 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,  in cash available for distribution from the
Partnership and Low Income Housing Tax Credits of the Partnership. The investors
(the "Limited  Partners")  will be allocated the remaining 99% of these items in
proportion to their respective investments.

The  proceeds  from the  disposition  of any of the  Local  Limited  Partnership
properties  will be used  first  to pay  debts  and  other  obligations  per the
respective Local Limited Partnership Agreement. Any remaining proceeds will then
be paid to the  Partnership.  The sale of a Housing  Complex  may be  subject to
other restrictions and obligations.  Accordingly, there can be no assurance that
a Local Limited Partnership will be able to sell its Housing Complex. Even if it
does so, there can be no assurance that any significant  amounts of cash will be
distributed to the  Partnership.  Should such  distributions  occur, the Limited
Partners  will be  entitled  to  receive  distributions  equal to their  capital
contributions  and their  return on  investment  (as defined in the  Partnership
Agreement) and the General  Partners would then be entitled to receive  proceeds
equal to their capital contributions from the remainder.  Any additional sale or
refinancing  proceeds  will  be  distributed  99% to the  Limited  Partners  (in
proportion to their respective investments) and 1% to the General Partners.

                                       7
<PAGE>
                      WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                     For the Quarter Ended December 31, 2006
                                   (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  Tax  Credits   rules  are   extremely   complicated.
Noncompliance  with these rules results in the loss of future Low Income Housing
Tax  Credits  and the  fractional  recapture  of Low Income  Housing Tax Credits
already taken. In most cases the annual amount of Low Income Housing Tax Credits
that an  individual  can use is limited to the tax liability due on the person's
last $25,000 of taxable income. The Local Limited  Partnerships may be unable to
sell the Housing  Complexes  at a price which  would  result in the  Partnership
realizing cash distributions or proceeds from the transaction.  Accordingly, the
Partnership  may be unable to distribute any cash to its Limited  Partners.  Low
Income  Housing Tax Credits may be the only  benefit from an  investment  in the
Partnership.

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

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

Substantially  all of the Low  Income  Housing  Tax  Credits  anticipated  to be
realized from the Local Limited Partnerships have been realized. The Partnership
does not anticipate  being allocated a significant  amount of Low Income Housing
Tax Credits from the Local Limited  Partnerships in the future.  Until the Local
Limited  Partnerships  have  completed the 15 year Low Income Housing Tax Credit
compliance  period,  risks  exist for  potential  recapture  of prior Low Income
Housing Tax Credits.
                                       8
<PAGE>
                      WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                     For the Quarter Ended December 31, 2006
                                   (unaudited)

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

Risks and Uncertainties, continued
----------------------------------

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

Associates has agreed to continue providing  advances  sufficient enough to fund
the operations  and working  capital  requirements  of the  Partnership  through
December 31,  2007,  if the  Partnership  were to  experience a working  capital
deficiency.

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  following   construction  or  rehabilitation   completion.
Associates was one of the first in the industry to offer syndicated  investments
in Low Income Housing Tax Credits.  The initial  programs are  completing  their
compliance periods.

With that in mind,  the General  Partner is continuing its review of the Housing
Complexes,  with special emphasis on the more mature properties such as any that
have  satisfied  the IRS  compliance  requirements.  The review  considers  many
factors,  including  extended  use  requirements  (such as those due to mortgage
restrictions  or state  compliance  agreements),  the  condition  of the Housing
Complex,  and the tax  consequences to the Limited Partners from the sale of the
Housing Complex.

Upon  identifying  those  Housing  Complexes  with the highest  potential  for a
successful sale, refinancing or syndication,  the Partnership expects to proceed
with  efforts to  liquidate  them.  The  objective  is to  maximize  the Limited
Partners'  return  wherever   possible  and,   ultimately,   to  wind  down  the
Partnership.  Local Limited Partnership interests may be disposed of any time by
the General  Partner in its  discretion.  As of December  31,  2006,  no Housing
Complexes  have  completed  15  year  compliance  period  or been  selected  for
disposition.  The dissolution of the Partnership was not imminent as of December
31, 2006 and therefore the Partnership  continues to be accounted for as a going
concern.

The  proceeds  from the  disposition  of any of the  Local  Limited  Partnership
properties  will be used  first  to pay  debts  and  other  obligations  per the
respective Local Limited Partnership Agreement. Any remaining proceeds will then
be paid to the  Partnership.  The sale of a Housing  Complex  may be  subject to
other restrictions and obligations.  Accordingly, there can be no assurance that
a Local Limited Partnership will be able to sell its Housing Complex. Even if it
does so, there can be no assurance that any significant  amounts of cash will be
distributed to the  Partnership.  Should such  distributions  occur, the Limited
Partners  will be  entitled  to  receive  distributions  equal to their  capital
contributions  and their  return on  investment  (as defined in the  Partnership
Agreement) and the General  Partners would then be entitled to receive  proceeds
equal to their capital contributions from the remainder.  Any additional sale or
refinancing  proceeds  will  be  distributed  99% to the  Limited  Partners  (in
proportion to their respective investments) and 1% to the General Partners.

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

                          NOTES TO FINANCIAL STATEMENTS
                     For the Quarter Ended December 31, 2006
                                   (unaudited)

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

Method of Accounting for Investments in Local Limited Partnerships
------------------------------------------------------------------

The Partnership  accounts for its investments in limited  partnerships using the
equity method of  accounting,  whereby the  Partnership  adjusts its  investment
balance for its share of the Local Limited  Partnerships'  results of operations
and for any  contributions  made and  distributions  received.

The  Partnership  reviews the carrying  amount of an individual  investment in a
Local Limited  Partnership for possible impairment whenever events or changes in
circumstances  indicate that the carrying  amount of such  investment may not be
recoverable.  Recoverability  of such  investment  is measured by the  estimated
value derived by  management,  generally  consisting of the sum of the remaining
future Low Income Housing Tax Credits estimated

to be 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   and  includes  such   reduction  in  equity  in  loss  of  limited
partnerships.  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 Notes 2).

"Equity  in losses of the Local  Limited  Partnerships"  for each  period  ended
December 31, 2006 and 2005 have been recorded by the  Partnership  based on nine
months of results  estimated  by  management  of the  Partnership.  Management's
estimate for the nine-month  period is based on either actual unaudited  results
reported  by  the  Local  Limited  Partnerships  or  historical  trends  in  the
operations of the Local Limited Partnerships.  In subsequent quarterly financial
statements,  upon  receiving  the actual  annual  results  reported by the Local
Limited  Partnerships,  management  reverses its prior  estimate and records the
actual results reported by the Local Limited  Partnerships.  Equity in losses of
the Local 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.  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. (See Note 2)

Distributions received from the Local Limited Partnerships will be accounted for
as a reduction  of the  investment  balance.  Distributions  received  after the
investment has reached zero will be recognized as distribution income.

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

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

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

At December  31,  2006,  the  Partnership  maintained  cash  balances at certain
financial   institutions  in  excess  of  the  federally  insured  maximum.  The
Partnership  believes it is not  exposed to any  significant  financial  risk on
cash.
                                       10
<PAGE>
                     WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                     For the Quarter Ended December 31, 2006
                                   (unaudited)

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

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

The  Partnership  considers  all  highly  liquid  investments  with an  original
maturity of three months or less when  purchased to be cash  equivalents.  As of
December 31, 2006 and March 31, 2006, the Partnership had no cash equivalents.

Net Loss Per Partnership Unit
-----------------------------

Net loss per Partnership  Unit is calculated  pursuant to Statement of Financial
Accounting  Standards No. 128, Earnings Per Share. Net loss per Partnership Unit
includes no dilution  and is computed  by  dividing  loss  allocated  to Limited
Partners by the weighted average number of Partnership Units outstanding  during
the  period.  Calculation  of  diluted  net  loss  per  Partnership  Unit is not
required.

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

No provision for income taxes has been  recorded in the financial  statements as
any  liabilities  and/or  benefits  for income taxes flow to the partners of the
Partnership and are their obligations  and/or benefits.  For income tax purposes
the Partnership reports on a calendar year basis.

Revenue Recognition
-------------------

The  Partnership  is entitled to receive  reporting  fees from the Local Limited
Partnerships.  The  intent  of  the  reporting  fees  is  to  offset  (in  part)
administrative costs incurred by the Partnership in corresponding with the Local
Limited  Partnerships.  Due to the  uncertainty of the collection of these fees,
the Partnership recognizes reporting fees as collections are made.

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

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

The following is a summary of the equity method  activity of the  investments in
Local Limited Partnerships for the periods presented below:
<TABLE>
<CAPTION>
                                                                   For the Nine              For the Year
                                                                   Months Ended                  Ended
                                                                December 31, 2006           March 31, 2006
                                                              -----------------------      ------------------
<S>                                                          <C>                        <C>
     Investments per balance sheet, beginning of period       $              23,717      $           57,307
     Equity in losses of Local Limited Partnerships                            (737)                (32,221)
     Distributions received from Local Limited Partnerships                    (200)                 (1,029)
     Amortization of capitalized acquisition fees and costs                    (255)                   (340)
                                                                ---------------------      ------------------
     Investments per balance sheet, end of period             $              22,525      $           23,717
                                                                =====================      ==================
</TABLE>
                                       11
<PAGE>
                                       WNC HOUSING TAX CREDIT FUND III, L.P.
                                        (A California Limited Partnership)

                                     NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                      For the Quarter Ended December 31, 2006
                                                    (unaudited)

NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
-------------------------------------------------------
Selected  financial  information for the nine months ended December 31, 2006 and
2005 from the unaudited  combined  condensed  financial  statements of the Local
Limited Partnerships in which the Partnership has invested as follows:

                   COMBINED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                       2006                      2005
                                                               ----------------------      ------------------
<S>                                                         <C>                         <C>
        Revenues                                             $             5,867,000      $        5,283,000
        Expenses:

          Interest expense                                                 1,233,000               1,068,000
          Depreciation and amortization                                    1,390,000               1,308,000
          Operating expenses                                               4,002,000               3,636,000
                                                               ----------------------      ------------------
        Total expenses                                                     6,625,000               6,012,000
                                                               ----------------------      ------------------
        Net loss                                             $              (758,000)     $         (729,000)
                                                               ======================      ==================
                                                             $              (750,000)     $         (720,000)
        Net loss allocable to the Partnership
                                                               ======================      ==================
        Net loss recorded by the Partnership                 $                (1,000)     $          (23,000)
                                                               ======================      ==================
</TABLE>
Certain Local Limited  Partnerships  have incurred  operating losses and/or have
working  capital  deficiencies.  In the event these Local  Limited  Partnerships
continue to incur significant operating losses, additional capital contributions
by the Partnership  and/or the Local General Partners may be required to sustain
the  operations  of such  Local  Limited  Partnerships.  If  additional  capital
contributions are not made when they are required, the Partnership's  investment
in certain of such Local Limited  Partnerships  could be impaired,  and the loss
and recapture of the related tax credits could occur.

                                       12
<PAGE>
                     WNC HOUSING TAX CREDIT FUND III, L.P.
                       (A California Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                     For the Quarter Ended December 31, 2006
                                   (unaudited)

NOTE 3 - RELATED PARTY TRANSACTIONS

Under the terms of the  Partnership  Agreement  the  Partnership  has paid or is
obligated to the General Partner or its affiliates for the following fees:

(a)  Annual asset  management fee. An annual asset  management fee equal to 0.5%
     of the invested assets of the Local Limited  Partnerships.  Invested Assets
     means the sum of the Partnership's  Investment in Local Limited Partnership
     Interests  and the  Partnership's  allocable  share  of the  amount  of the
     mortgage loans on and other debts related to the Housing Complexes owned by
     such Local Limited  Partnerships.  Asset  Management  fees of $224,598 were
     incurred  during each of the nine months ended  December 31, 2006 and 2005.
     The  Partnership  paid the General  Partner or its  affiliates  $22,500 and
     $27,500 of those fees during the nine months  ended  December  31, 2006 and
     2005, respectively.

(b)  Subordinated  disposition fee. A subordinated  disposition fee is earned 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.  No such fees were
     earned for the periods presented.

(c)  The  Partnership  reimburses  the  General  Partner or its  affiliates  for
     operating expenses incurred in behalf of the Partnership. Operating expense
     reimbursements  were  $24,781  and  $54,415  during the nine  months  ended
     December 31, 2006 and 2005, respectively.

The accrued fees and expenses due to General Partner and affiliates consisted of
the following at:
<TABLE>
<CAPTION>
                                                        December 31, 2006              March 31, 2006
                                                    ---------------------          -------------------
<S>                                             <C>                            <C>
   Asset management fee payable                  $              3,395,994                   3,193,896
   Reimbursement  for  expenses  paid by the
   General Partner and/or its affiliates                              580                       4,712
                                                    ----------------------         -------------------
                                                 $              3,396,574       $           3,198,608
                                                    ======================         ===================
</TABLE>
The General  Partner and/or its affiliates do not anticipate  that these accrued
fees will be paid in full until such time as capital  reserves  are in excess of
the future foreseeable working capital requirements of the Partnership.

                                       13
<PAGE>
Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

Forward-Looking Statements

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

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

Subsequent  written and oral forward  looking  statements  attributable to us or
persons  acting on our behalf  are  expressly  qualified  in their  entirety  by
cautionary  statements  in this Form 10-Q and in other reports we filed with the
Securities and Exchange Commission.

The following discussion and analysis compares the results of operations for the
three and nine months ended  December  31, 2006 and 2005,  and should be read in
conjunction   with  the  condensed   consolidated   financial   statements   and
accompanying notes included within this report.

Financial Condition

The Partnership's assets at December 31, 2006 consisted primarily of $131,000 in
cash and aggregate  investments in the forty-eight Local Limited Partnerships of
$22,000.  Liabilities at December 31, 2006 primarily  consisted of $3,397,000 of
accrued annual asset management fees and  reimbursement for expenses paid by the
General Partner and/or its affiliates.

Results of Operations

Three Months Ended December 31, 2006 Compared to Three Months Ended December 31,
2005.  The  Partnership's  net loss for the three months ended December 31, 2006
was $(76,000),  reflecting a decrease of $15,000 from the net loss for the three
months ended December 31, 2005 of $(91,000).  This decrease was primarily due to
a decrease of $13,000 in loss from operations along with a decrease of $2,000 in
equity in losses  of Local  Limited  Partnerships  for the  three  months  ended
December 31, 2006. This decrease was a result of the Partnership not recognizing
certain  losses of the Local Limited  Partnerships,  as the  investments in such
Local  Limited  Partnerships  had reached $0 at  December  31,  2006.  Since the
Partnership's  liability with respect to its  investments is limited,  losses in
excess of investments are not  recognized.  The decrease in loss from operations
was primarily caused by $13,000 decrease in legal and accounting expenses.

Nine Months Ended  December 31, 2006 Compared to Nine Months Ended  December 31,
2005. The Partnership's net loss for the nine months ended December 31, 2006 was
$(225,000),  reflecting  a decrease  of  $39,000  from the net loss for the nine
months ended December 31, 2005 of $(264,000). This decrease was primarily due to
a decrease of $22,000 in equity in losses of Local Limited  Partnerships for the
nine  months  ended  December  31,  2006.  This  decrease  was a  result  of the
Partnership not recognizing certain losses of the Local Limited Partnerships, as
the  investments in such Local Limited  Partnerships  had reached $0 at December
31, 2006. 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 Local  Limited  Partnerships,  the loss from
operations  decreased  by $17,000,  from  $(241,000)  for the nine months  ended
December 31, 2005 to $(224,000) for the nine months ended December 31, 2006, due
to a $12,000 decrease in legal and accounting  expenses and a $2,000 decrease in
other operating expenses along with a $3,000 increase in distribution income.

                                       14
<PAGE>
Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations, continued

Liquidity and Capital

Nine Months Ended  December 31, 2006 Compared to Nine Months Ended  December 31,
2005.  Net cash  used  during  the  nine  months  ended  December  31,  2006 was
$(25,000),  compared to net cash used in the nine months ended December 31, 2005
of  $(63,000),  reflecting  a decrease  of $38,000 in cash used.  The change was
primarily due to the decrease of $38,000 of cash used in operating activities.

During the nine months ended December 31, 2006,  accrued asset  management  fees
payable and advances  due to the General  Partner  increased  by  $198,000.  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.

The Partnership  expects its future cash flows,  together with its net available
assets at December 31, 2006, to be sufficient to meet all currently  foreseeable
future cash  requirements.  This  excludes  amounts  owed to  Associates  by the
Partnership.

Item 3.   Quantitative and Qualitative Disclosures about Market Risk

          NOT APPLICABLE

Item 4.   Controls and Procedures

          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 December 31, 2006 that  materially  affected,
          or are  reasonably  likely to  materially  affect,  the  Partnership's
          internal control over financial reporting.

                                       15
<PAGE>
PART II. Other Information

Item 1.  Legal Proceedings

         NONE

Item 2.  Unregistered Sales of Equity 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 and Reports on Form 8-K

(a)      Reports on Form 8-K
         -------------------

         NONE

(b)      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)
                                       16
<PAGE>
Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

WNC HOUSING TAX CREDITS III, L.P.

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


By:  WNC & ASSOCIATES, INC.         General Partner





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

Date: March 6, 2007




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

Date: March 6, 2007

                                       17