FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

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

                For the quarterly period ended September 30, 2004

                                       OR

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

             For the transition period from ________ to ___________

                         Commission file number: 0-23908


                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.


                    California                                    33-0531301
                  (State or other jurisdiction of              (I.R.S. Employer
                incorporation or organization)               Identification No.)

                   17782 Sky Park Circle Irvine, CA 92614-6404
                    (Address of principal executive offices)

                                 (714) 662-5565
                               (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 CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                               INDEX TO FORM 10-Q

                    For the Quarter Ended September 30, 2004



PART I. FINANCIAL INFORMATION

         Item 1. Financial Statements

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

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

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

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

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

         Item 2. Management's Discussion and Analysis of Financial
                       Condition and Results of Operations....................15

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

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

PART II. OTHER INFORMATION

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

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

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

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

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

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

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




                                       2
<PAGE>


                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                                 BALANCE SHEETS

<TABLE>
<CAPTION>


                                                                  September 30, 2004                  March 31, 2004
                                                                -----------------------             -------------------
                                                                     (unaudited)

<S>                                                           <C>                                 <C>
ASSETS

Cash and cash equivalents                                     $                316,189            $            310,717
Investments in limited partnerships, net (Note 2)                            3,323,632                       3,525,413
                                                                -----------------------             -------------------

                                                              $              3,639,821            $          3,836,130
                                                                =======================             ===================


LIABILITIES AND PARTNERS' EQUITY (DEFICIT)

Liabilities:
 Accrued fees and expenses due to
  General Partner and affiliates (Note 3)                     $              1,330,537            $          1,256,656

Partners' equity (deficit):
  General partner                                                             (147,038)                       (144,336)
  Limited partners (30,000 units authorized;
     18,000 units issued and outstanding)                                    2,456,322                       2,723,810
                                                                -----------------------             -------------------

        Total partners' equity                                               2,309,284                       2,579,474
                                                                -----------------------             -------------------

                                                              $              3,639,821            $          3,836,130
                                                                =======================             ===================
</TABLE>



                 See accompanying notes to financial statements
                                       3
<PAGE>


                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                            STATEMENTS OF OPERATIONS

         For the Three and Six Months Ended September 30, 2004 and 2003
                                   (unaudited)
<TABLE>
<CAPTION>

                                                         2004                                      2003
                                       -----------------------------------------    ------------------------------------
                                          Three Months           Six months           Three Months        Six months
                                       -------------------    ------------------    -----------------   ----------------
<S>                                  <C>                    <C>                   <C>                 <C>

Interest income                      $               199    $              400    $             437   $            886
Distribution income                                    -                 5,044                1,952              3,747
                                       -------------------    ------------------    -----------------   ----------------

                                                     199                 5,444                2,389              4,633
                                       -------------------    ------------------    -----------------   ----------------

Operating expenses:
  Amortization (Note 2)                           11,208                22,416               14,981             29,962
  Asset management fees (Note 3)                  45,346                90,692               45,347             90,693
  Legal and accounting                             6,525                 8,050               13,375             16,945
  Other                                               51                 2,454                  757              2,357
                                       -------------------    ------------------    -----------------   ----------------

    Total operating expenses                      63,130               123,612               74,460            139,957
                                       -------------------    ------------------    -----------------   ----------------

Loss from operations                             (62,931)             (118,168)             (72,071)          (135,324)
                                       -------------------    ------------------    -----------------   ----------------

Equity in losses of
 limited partnerships (Note 2)                   (76,009)             (152,022)            (214,690)          (354,312)
                                       -------------------    ------------------    -----------------   ----------------

Net loss                             $          (139,040)   $         (270,190)   $        (286,761)  $       (489,636)
                                       ===================    ==================    =================   ================

Net loss allocated to:
  General partner                    $            (1,389)   $           (2,702)   $          (2,868)  $         (4,896)
                                       ===================    ==================    =================   ================

  Limited partners                   $          (137,551)   $         (267,488)   $        (283,893)  $       (484,740)
                                       ===================    ==================    =================   ================

Net loss per limited
 partner unit                        $                (8)   $              (15)   $             (16)  $            (27)
                                       ===================    ==================    =================   ================

Outstanding weighted limited
 partner units
                                                  18,000                18,000               18,000             18,000
                                       ===================    ==================    =================   ================



</TABLE>
                 See accompanying notes to financial statements
                                       4
<PAGE>


                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                     STATEMENT OF PARTNERS' EQUITY (DEFICIT)

                   For the Six Months Ended September 30, 2004
                                   (unaudited)

<TABLE>
<CAPTION>


                                                            General                Limited
                                                            Partner                Partners               Total
                                                        -----------------      ----------------     ----------------
<S>                                                   <C>                    <C>                  <C>
Partners' equity (deficit) at March 31, 2004          $        (144,336)     $     2,723,810      $       2,579,474

Net loss                                                         (2,702)            (267,488)              (270,190)
                                                        -----------------      ----------------     ----------------

Partners' equity (deficit) at September 30, 2004      $        (147,038)     $     2,456,322      $       2,309,284
                                                        =================      ================     ================

</TABLE>







                 See accompanying notes to financial statements
                                       5
<PAGE>


                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                            STATEMENTS OF CASH FLOWS

              For the Six Months Ended September 30, 2004 and 2003
                                   (unaudited)

<TABLE>
<CAPTION>

                                                                              2004                      2003

                                                                        ------------------        ------------------
<S>                                                                   <C>                       <C>
Cash flows from operating activities:
  Net loss                                                            $         (270,190)       $         (489,636)
     Adjustments to reconcile net loss to
       cash used in operating activities:
       Amortization                                                               22,416                    29,962
       Equity in losses of limited partnerships                                  152,022                   354,312
        Change in accrued fees and expenses due to
               General Partner and affiliates                                     73,881                    64,791
                                                                        ------------------        ------------------

Net cash used in operating activities                                            (21,871)                  (40,571)
                                                                        ------------------        ------------------

Cash flows from investing activities:
    Distributions received from limited partnerships                              27,343                     7,150
                                                                        ------------------        ------------------

Net increase (decrease) in cash and cash equivalents                               5,472                   (33,421)

Cash and cash equivalents, beginning of period                                   310,717                   371,426
                                                                        ------------------        ------------------
Cash and cash equivalents, end of period                              $          316,189       $           338,005
                                                                        ==================        ==================

SUPPLEMENTAL DISCLOSURE
  OF CASH FLOW INFORMATION:

  Taxes paid                                                          $                -       $                 -
                                                                        ==================        ==================


</TABLE>
                 See accompanying notes to financial statements
                                       6
<PAGE>


                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS

                    For the Quarter Ended September 30, 2004
                                   (unaudited)




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

General
-------

The accompanying  condensed unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form 10-Q
for quarterly  reports under Section 13 or 15(d) of the Securities  Exchange Act
of 1934.  Accordingly,  they do not include all of the information and footnotes
required by  accounting  principles  generally  accepted in the United States of
America for complete  financial  statements.  In the opinion of management,  all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the six months ended
September  30, 2004 are not  necessarily  indicative  of the results that may be
expected  for the fiscal year ending March 31,  2005.  For further  information,
refer  to  the  financial  statements  and  footnotes  thereto  included  in the
Partnership's  annual  report on Form 10-K for the fiscal  year ended  March 31,
2004.

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

WNC California  Housing Tax Credits III, L.P. a California  Limited  Partnership
(the  "Partnership"),  was formed on October 5, 1992 under the laws of the state
of California and began  operations on July 19, 1993. The Partnership was formed
to  invest  primarily  in  other  limited   partnerships   (the  "Local  Limited
Partnerships")  which  own  and  operate  multi-family  housing  complexes  (the
"Housing Complex") that are eligible for low-income  housing credits.  The local
general   partners  (the  "Local  General   Partners")  of  each  Local  Limited
Partnership retain  responsibility  for maintaining,  operating and managing the
Housing Complex.

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

The Partnership shall continue to be 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 30,000 units at $1,000
per Unit  ("Units").  The offering of Units concluded in July 1994 at which time
17,990 Units,  representing  subscriptions in the amount of $17,990,000 had been
accepted.  During 1995,  an additional  $10,000 was  collected on  subscriptions
accepted  for 10  additional  units and  previously  deemed  uncollectible.  The
General  Partner  has a 1%  interest in  operating  profits and losses,  taxable
income and losses,  cash available for distribution from the Partnership and tax
credits of the Partnership. 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 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 CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                    For the Quarter Ended September 30, 2004
                                   (unaudited)

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

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

An investment in the  Partnership  and the  Partnership's  investments  in Local
Limited  Partnerships  and their Housing  Complexes are subject to risks.  These
risks may impact the tax benefits of an investment in the  Partnership,  and the
amount of proceeds  available for distribution to the Limited Partners,  if any,
on liquidation of the Partnership's investments. Some of those risks include the
following:

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

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

The  ability of Limited  Partners to claim tax losses  from the  Partnership  is
limited.  The IRS may audit the  Partnership or a Local Limited  Partnership and
challenge  the tax  treatment  of tax items.  The amount of  Low-Income  Housing
Credits and tax losses allocable to the 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 Credits  anticipated to be realized
from the Local Limited Partnerships have been realized. The Partnership does not
anticipate  being  allocated a significant  amount of Low Income Housing Credits
from the Local  Limited  Partnerships  in the  future.  Until the Local  Limited
Partnerships  have completed the 15 year Low Income  Housing  Credit  compliance
period risks exist for potential recapture of prior low Income Housing Credits.

                                       8
<PAGE>

                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                    For the Quarter Ended September 30, 2004
                                   (unaudited)

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

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

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

Method of Accounting For Investments in Limited Partnerships
------------------------------------------------------------

The Partnership  accounts for its investments in limited  partnerships using the
equity method of  accounting,  whereby the  Partnership  adjusts its  investment
balance for its share of the Local Limited  Partnerships'  results of operations
and for any  contributions  made and  distributions  received.  The  Partnership
reviews the  carrying  amount of an  individual  investment  in a Local  Limited
Partnership for possible  impairment whenever events or changes in circumstances
indicate that the carrying  amount of such  investment  may not be  recoverable.
Recoverability  of such  investment  is measured by a comparison of the carrying
amount to future  undiscounted  net cash flows  expected to be generated.  If an
investment  is  considered  to be impaired,  the  impairment to be recognized is
measured by the amount by which the carrying  amount of the  investment  exceeds
fair value.  The  accounting  policies  of the Local  Limited  Partnerships  are
generally  consistent  with  those of the  Partnership.  Costs  incurred  by the
Partnership  in  acquiring  the  investments  are  capitalized  as  part  of the
investment account and are being amortized over 30 years (see Note 2).

Equity in losses of limited  partnerships  for the periods  ended  September 30,
2004 and 2003 have  been  recorded  by the  Partnership  based on six  months of
reported  results  estimated  by  management  of the  Partnership.  Management's
estimate for the six-month  period is based on either actual  unaudited  results
reported  by  the  Local  Limited  Partnerships  or  historical  trends  in  the
operations of the Local Limited Partnerships.  Equity in losses from the Limited
Partnerships  allocated to the Partnership are not recognized to the extent that
the  investment  balance would be adjusted below zero. As soon as the investment
balance  reaches  zero,  amortization  of the  related  costs of  acquiring  the
investment are  accelerated  to the extent of losses  available (see Note 2). If
the  Local  Limited   Partnerships  report  net  income  in  future  years,  the
Partnership  will resume applying the equity method only after its share of such
net income  equals the share of net losses not  recognized  during the period(s)
the equity method was suspended.

Offering Expenses
-----------------

Offering  expenses consist of underwriting  commissions,  legal fees,  printing,
filing and  recordation  fees,  and other costs  incurred  with selling  limited
partnership  interests in the  Partnership.  The General Partner is obligated to
pay all  offering  and  organization  costs in  excess of 15%  (including  sales
commissions) of the total offering proceeds.  Offering expenses are reflected as
a reduction of partners'  capital and amounted to  $2,366,564  at the end of all
periods presented.


                                       9
<PAGE>

                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                    For the Quarter Ended September 30, 2004
                                   (unaudited)



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

Exit Strategy
-------------

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

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

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

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

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

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

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

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

The Partnership considers all highly liquid investments with original maturities
of three months or less when purchased to be cash  equivalents.  The Partnership
had no cash equivalents as of September 30, 2004 and March 31, 2004.

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

At September 30, 2004,  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  partnership  unit is  calculated  pursuant to Statement of
Financial  Accounting  Standards No. 128,  Earnings Per Share. Net loss per unit
includes no dilution  and is computed  by  dividing  loss  available  to limited
partners by the weighted average number of units outstanding  during the period.
Calculation of diluted net income per unit is not required.

                                       10
<PAGE>
                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                    For the Quarter Ended September 30, 2004
                                   (unaudited)

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

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

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

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

In January 2003, the FASB issued Interpretation No. 46 ("FIN46"), "Consolidation
of  Variable  Interest  Entities."  FIN 46  provides  guidance on when a company
should include the assets,  liabilities,  and activities of a variable  interest
entity  ("VIE")  in  its  financial  statements  and  when  it  should  disclose
information  about its relationship  with a VIE. A VIE is a legal structure used
to conduct activities or hold assets, which must be consolidated by a company if
it is the primary  beneficiary  because it absorbs the  majority of the entity's
expected losses, the majority of the expected returns, or both.

In  December  2003,  the FASB issued a revision of FIN 46 ("FIN 46R") to clarify
some of its provisions.  The revision results in multiple  effective dates based
on the  nature  as well as the  creation  date of the VIE.  VIEs  created  after
January 31,  2003,  but prior to January 1, 2004,  may be  accounted  for either
based on the original interpretations or the revised  interpretations.  However,
all VIEs must be accounted for under the revised interpretations as of March 31,
2004, when FIN 46R is effective for the Partnership.

This  Interpretation  would require  consolidation by the Partnership of certain
Local Limited  Partnerships' assets and liabilities and results of operations if
the Partnership determined that the Local Limited Partnership was a VIE and that
the  Partnership  was  the  "Primary  Beneficiary."  Minority  interests  may be
recorded for the Local Limited  Partnerships'  ownership  share  attributable to
other Limited Partners. Where consolidation of Local Limited Partnerships is not
required,   additional  financial  information   disclosures  of  Local  Limited
Partnerships  may be  required.  The  Partnership  has  assessed  the  potential
consolidation  effects of the  Interpretation and concluded that the adoption of
the Interpretation  will not have a material impact on the financial  statements
of the Partnerships.



                                       11
<PAGE>







                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                    For the Quarter Ended September 30, 2004
                                   (unaudited)


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

As of the periods  presented,  the Partnership had acquired limited  partnership
interests in eighteen Local Limited Partnerships, each of which owns one Housing
Complex  consisting  of an  aggregate of 635  apartment  units.  The  respective
general  partners  of the  Local  Limited  Partnerships  manage  the  day-to-day
operations of the entities.  Significant  Local Limited  Partnership's  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 Limited Partnerships.

Equity  in  losses  of the  Local  Limited  Partnerships  is  recognized  in the
financial  statements until the related  investment account is reduced to a zero
balance. Losses incurred after the investment account is reduced to zero are not
recognized. If the Local Limited Partnerships report net income in future years,
the  Partnership  will resume applying the equity method only after its share of
such net  income  equals  the share of net  losses  not  recognized  during  the
period(s) the equity method was suspended.

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

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 Six                 For the Year
                                                                         Months Ended                   Ended
                                                                      September 30, 2004            March 31, 2004
                                                                      -------------------         -------------------
<S>                                                                 <C>                         <C>
  Investments per balance sheet, beginning of period                $         3,525,413         $         5,572,016
  Equity in losses of limited partnerships                                     (152,022)                   (383,422)
  Distributions received                                                        (27,343)                     (8,650)
  Impairment of local limited partnerships                                            -                  (1,607,047)
  Amortization of paid acquisition fees and costs                               (22,416)                    (47,484)
                                                                      -------------------         -------------------

  Investments per balance sheet, end of period                      $         3,323,632         $         3,525,413
                                                                      ===================         ===================
</TABLE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                    For the Quarter Ended September 30, 2004
                                   (unaudited)

<TABLE>
<CAPTION>

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

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


                             COMBINED CONDENSED STATEMENTS OF OPERATIONS
                                                              2004                      2003
                                                      ----------------------     --------------------

<S>                                                 <C>                        <C>
  Revenue                                           $             1,785,000    $           1,669,000
                                                      ----------------------     --------------------
  Expenses:
     Operating expenses                                           1,299,000                1,125,000
     Interest expense                                               436,000                  470,000
     Depreciation and amortization                                  555,000                  555,000
                                                      ----------------------     --------------------

  Total expenses                                                  2,290,000                2,150,000
                                                      ----------------------     --------------------

  Net loss                                          $              (505,000)   $            (481,000)
                                                      ======================     ====================

  Net loss allocable to the Partnership             $              (501,000)   $            (476,000)
                                                      ======================     ====================

  Net loss recorded by the Partnership              $              (152,000)   $            (354,000)
                                                      ======================     ====================
</TABLE>


Certain Local Limited  Partnerships have incurred  significant  operating losses
and/or have  working  capital  deficiencies.  In the event  these Local  Limited
Partnerships continue to incur significant operating losses,  additional capital
contributions  by the  Partnership  and/or  the  Local  General  Partner  may be
required to sustain 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.


                                       13
<PAGE>

                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                    For the Quarter Ended September 30, 2004
                                   (unaudited)


NOTE 3 - RELATED PARTY TRANSACTIONS

The Partnership has no officers,  employees,  or directors.  However,  under the
terms of the  Partnership  Agreement the Partnership is obligated to the General
Partner or its  affiliates  during the current or future years for the following
fees:

(a)  Annual Asset  Management  Fee. An annual asset  management fee in an amount
     equal  to 0.5% of the  Invested  Assets  of the  Partnership,  as  defined.
     "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.  Fees of $90,692 and
     $90,693 were  incurred  during each of the six months ended  September  30,
     2004 and 2003,  respectively.  The Partnership  paid the General Partner or
     its  affiliates  $22,500  and  $30,000 of those fees  during the six months
     ended September 30, 2004 and 2003, 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 September 30, 2004 and 6% thereafter (as defined in the Partnership
     Agreement)  and is payable  only if the General  Partner or its  affiliates
     render services in the sales effort.

(c)  The  Partnership  reimburses  the  General  Partner or its  affiliates  for
     operating expenses incurred in behalf of the Partnership. Operating expense
     reimbursements  are approximately  $4,816 and $15,204 during the six months
     ended September 30, 2004 and 2003, respectively.

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

                                                                  September 30, 2004            March 31, 2004
                                                                 ----------------------      ----------------------
<S>                                                           <C>                         <C>
Reimbursement for expenses paid by the General
   Partners and affiliates                                    $                  6,525    $                    837
Asset management fee payable                                                 1,324,012                   1,255,819
                                                                 ----------------------      ----------------------
                                                              $              1,330,537    $              1,256,656
                                                                 ======================      ======================
</TABLE>


The General  Partner does not anticipate that these accrued fees will be paid in
full  until such time as capital  reserves  are in excess of future  foreseeable
working capital requirements of the Partnership.




                                       14
<PAGE>


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

Forward-Looking Statements

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

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

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

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

Financial Condition

The Partnership's  assets at September 30, 2004 consisted  primarily of $316,189
in cash and aggregate  investments in the eighteen Local Limited Partnerships of
$3,323,632.  Liabilities at September 30, 2004 primarily consisted of $1,330,537
of accrued asset management fees and expenses due to the General Partner.

Results of Operations

Three Months Ended  September 30, 2004 Compared to Three Months Ended  September
30, 2003. The  Partnership's  net loss for the three months ended  September 30,
2004 was  $(139,000),  reflecting a decrease of $148,000 from the $(287,000) net
loss for the three months ended  September 30, 2003. The decrease in net loss is
primarily  due to a  decrease  in equity in losses of  limited  partnerships  of
$139,000  to  $(76,000)  for the three  months  ended  September  30,  2004 from
$(215,000) for the three months ended  September 30, 2003. The large decrease in
equity in losses is largely  due to the fact that five lower tier  partnership's
investment balances had reached zero, therefore,  the acquisition fees and costs
associated  with those  properties  were  written off in the three  months ended
September 30, 2004. Additionally,  a decrease in loss from operations of $11,000
for the three months ended  September 30, 2004 to $(63,000)  from  $(74,000) for
the three  months  ended  September  30, 2003 was  incurred due to a decrease in
accounting and legal fees and other expenses.

                                       15
<PAGE>


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

Six Months Ended  September 30, 2004 Compared to Six Months Ended  September 30,
2003. The Partnership's net loss for the six months ended September 30, 2004 was
$(268,000),  reflecting a decrease of $219,000 from the  $(489,000) net loss for
the six months ended  September 30, 2003.  The decrease in net loss is primarily
due to a decrease  in equity in losses of limited  partnerships  of  $202,000 to
$(152,000) for the six months ended  September 30, 2004 from  $(354,000) for the
six months ended  September 30, 2003.  The large decrease in equity in losses is
largely due to the fact that five lower tier  partnerships  investment  balances
had reached zero,  therefore,  the  acquisition  fees and costs  associated with
those properties were written off in 2004.

Cash Flows

Six Months Ended  September 30, 2004 Compared to Six Months Ended  September 30,
2003.  Net cash  provided  during the six months  ended  September  30, 2004 was
$5,000  compared to net cash used in the six months ended  September 30, 2003 of
$(34,000).  The  increase  of  $39,000  was  primarily  due  to an  increase  in
distributions received from limited partnerships of $20,000 and decrease in cash
paid for operating costs of $19,000.

During the six months ended September 30, 2004 accrued  payables,  which consist
primarily  of  asset  management  fees to the  General  Partner  or  affiliates,
increased by $74,000. The General Partner does not anticipate that these accrued
fees will be paid in full until such time as capital  reserves  are in excess of
future foreseeable working capital requirements of the partnership.

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

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

Item 3. Quantitative and Qualitative Disclosures About Market Risks

        NONE

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
September  30,  2004  that  materially  affected,  or are  reasonably  likely to
materially affect, the Partnership's internal control over financial reporting.



                                       16
<PAGE>




Part II.  OTHER INFORMATION

Item 1.   Legal Proceedings

          NONE

Item 2.   Changes in Securities and Use of Proceeds

          NONE

Item 3.   Defaults Upon Senior Securities

          NONE

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

          NONE

Item 5.   Other Information

          NONE

Item 6.   Exhibits

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

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

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

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



                                       17
<PAGE>



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

WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.

By: WNC California Tax Credit Partners III General Partner

By: WNC & Associates, Inc. General Partner




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

Wilfred N. Cooper, Jr.
President and Chief Executive Officer of WNC & Associates, Inc.

Date:  January 25, 2005





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

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

Date: January 25, 2005





                                       18