UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q
(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, 2008

                                       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 a large  accelerated  filer, an
accelerated filer, a non-accelerated  filer, or a smaller reporting company. See
the definitions of "large accelerated  filer,"  "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer___ Accelerated filer___

Non-accelerated filer___X__ Smaller reporting company___

Indicate by check mark whether the  registrant is a shell company (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 Quarterly Period Ended September 30, 2008
                                        2


PART I. FINANCIAL INFORMATION

     Item 1. Financial Statements

       Balance Sheets
            As of September 30, 2008 and March 31, 2008........................3

       Statements of Operations
            For the Three and Six Months Ended September 30, 2008 and 2007.....4

       Statement of Partners' Deficit
            For the Six Months Ended September 30, 2008........................5

       Statements of Cash Flows
            For the Six Months Ended September 30, 2008 and 2007...............6

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

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

     Item 3. Quantitative and Qualitative Disclosures about Market Risks......17

     Item 4T. Controls and Procedures.........................................17

PART II. OTHER INFORMATION

     Item 1. Legal Proceedings................................................18

     Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.....18

     Item 3.  Defaults Upon Senior Securities.................................18

     Item 4.  Submission of Matters to a Vote of Security Holders.............18

     Item 5.  Other Information...............................................18

     Item 6.  Exhibits .......................................................18

     Signatures ..............................................................19

                                       2
<PAGE>

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

                                 BALANCE SHEETS
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                  September 30, 2008                  March 31, 2008
                                                                -----------------------             -------------------
                                                                 <S>                                <C>

ASSETS

Cash                                                              $           224,809                 $        228,980
Investments in Local Limited Partnerships, net (Note 2)                       166,626                        1,740,459
                                                                -----------------------             ------------------

     Total Assets                                                 $           391,435                 $      1,969,439
                                                                =======================             ==================


LIABILITIES AND PARTNERS' EQUITY (DEFICIT)

Liabilities:
 Accrued fees and expenses due to
 General Partner and affiliates (Note 3)                          $         1,879,369                 $      1,841,301
                                                                -----------------------             ------------------
Partners' Equity (Deficit):
  General Partner                                                            (185,011)                       (168,850)
  Limited Partners (30,000 Partnership Units
     authorized; 18,000 Partnership Units issued and
     outstanding)                                                          (1,302,923)                         296,988
                                                                -----------------------             ------------------

     Total Partners' Equity (Deficit)                                      (1,487,934)                         128,138
                                                                -----------------------             ------------------

     Total Liabilities and Partners' Equity (Deficit)             $           391,435                 $      1,969,439
                                                                =======================             ==================
</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, 2008 and 2007
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                            2008                                    2007
                                            -------------------------------------   -------------------------------------
                                              Three Months         Six Months        Three Months          Six Months
                                            -----------------   -----------------   ----------------    -----------------
                                             <S>                 <C>                 <C>                <C>

Distribution income                           $        4,825      $       10,681      $        2,875       $       20,356
Reporting fees                                             -                   -               1,500                4,250
                                            -----------------   -----------------   ----------------    -----------------

  Total operating income                                4,825             10,681               4,375               24,606
                                            -----------------   -----------------   ----------------    -----------------

Operating expenses:
  Amortization (Note 2)                                 1,996              3,992               2,129                4,258
  Asset management fees (Note 3)                       44,422             89,768              45,346               90,692
  Legal and accounting fees                                 -                816              14,050               14,050
  Impairment loss                                       6,134          1,501,366                   -                    -
  Other                                                   119              1,966                   -                1,140
                                            -----------------   -----------------   ----------------    -----------------

  Total operating expenses                             52,671          1,597,908              61,525              110,140
                                            -----------------   -----------------   ----------------    -----------------

Loss from operations                                  (47,846)        (1,587,227)           (57,150)             (85,534)

Equity in losses of Local
  Limited Partnerships (Note 2)                       (15,297)           (28,903)            (7,560)             (15,120)

Gain on sale of investment in Local
Limited Partnership                                         -                  1                  -                     -

Interest income                                            28                 57                 142                  371
                                            -----------------   -----------------   ----------------    -----------------

Net loss                                      $       (63,115)    $   (1,616,072)     $      (64,568)     $     (100,283)
                                            =================   =================   ================    =================

Net loss allocated to:
  General Partner                             $          (631)    $      (16,161)     $         (646)     $       (1,003)
                                            =================   =================   ================    =================

  Limited Partners                            $       (62,484)    $   (1,599,911)     $      (63,922)     $      (99,280)
                                            =================   =================   ================    =================

Net loss per Partnership Unit                 $            (3)    $          (89)     $           (4)     $           (6)
                                            =================   =================   ================    =================

Outstanding weighted Partnership
  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, 2008
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                            General               Limited
                                                            Partner              Partners                Total
                                                        -----------------     ----------------   ----------------------
                                                         <S>                    <C>                <C>

Partners' equity (deficit) at March 31, 2008              $      (168,850)       $      296,988     $           128,138

Net loss                                                          (16,161)           (1,599,911)            (1,616,072)
                                                          -----------------     ----------------   --------------------

Partners' equity (deficit) at September 30, 2008          $      (185,011)       $   (1,302,923)    $       (1,487,934)
                                                          =================     ================   ====================
                 See accompanying notes to financial statements

                                       5
</TABLE>

<PAGE>

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

                            STATEMENTS OF CASH FLOWS

              For the Six Months Ended September 30, 2008 and 2007
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                                              2008                      2007
                                                                        ------------------        ------------------
                                                                         <S>                       <C>

Cash flows from operating activities:
  Net loss                                                                $    (1,616,072)         $       (100,283)
     Adjustments to reconcile net loss to
      net cash used in operating activities:
      Amortization                                                                  3,992                      4,258
      Equity in losses of Local Limited Partnerships                               28,903                     15,120
      Impairment loss                                                           1,501,366                          -
      Change in accrued fees and expenses due to
         General Partner and affiliates                                            38,068                     76,562
      Gain on sale of investment in Local Limited Partnership                          (1)                         -
                                                                        ------------------        ------------------

  Net cash used in operating activities                                            (43,744)                  (4,343)
                                                                        ------------------        ------------------

  Cash flows from investing activities:
      Distributions received from Local Limited Partnerships                        39,572                    32,040
      Proceeds from sale of investment in Local Limited
       Partnership                                                                       1                         -
                                                                        ------------------        ------------------
  Net cash provided by investing activities                                         39,573                    32,040
                                                                        ------------------        ------------------

  Net increase (decrease) in cash                                                   (4,171)                   27,697

  Cash, beginning of period                                                        228,980                   239,164
                                                                        ------------------        ------------------
  Cash, end of period                                                   $          224,809        $          266,861
                                                                        ==================        ==================

  SUPPLEMENTAL DISCLOSURE
   OF CASH FLOW INFORMATION:

  Taxes paid                                                            $                -         $               -
                                                                        ==================        ==================
</TABLE>

                                       6
<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

                For the Quarterly Period Ended September 30, 2008
                                   (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, 2008 are not  necessarily  indicative  of the results that may be
expected  for the fiscal year ending March 31,  2009.  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,
2008.

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 ("Local Limited Partnerships")
which own  multi-family  housing  complexes (the "Housing  Complexes")  that are
eligible for Federal Low Income  Housing Tax Credits  ("Low  Income  Housing Tax
Credits").  The local general  partners (the "Local  General  Partners") of each
Local Limited  Partnership retain  responsibility for maintaining  operating and
managing the Housing Complex.  Each Local Limited Partnership is governed by its
agreement of limited partnership (the "Local Limited Partnership
Agreement").

The general partner of the Partnership is WNC Tax Credit Partners III, L.P. (the
"General Partner"). WNC & Associates, Inc. ("Associates") is the general partner
of WNC Tax Credit  Partners  III,  L.P. The chairman and president of Associates
owns all of the outstanding stock of Associates. The business of the Partnership
is conducted primarily through  Associates,  as the Partnership has 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 financial  statements  include only activity relating to the business of the
Partnership,  and do not give  effect to any assets that the  partners  may have
outside of their interests in the Partnership, or to any obligations,  including
income taxes, of the partners.

Pursuant to a  registration  statement  filed with the  Securities  and Exchange
Commission, on February 17, 1993, the Partnership commenced a public offering of
30,000 units of limited partnership interest ("Partnership Units") at a price of
$1,000 per Partnership  Unit. As of the close of the public offering on July 22,
1994, a total of 17,990  Partnership  Units  representing  $17,990,000  had been
sold.  During 1995, an additional 10 Partnership  Units amounting to $10,000 was
collected on subscriptions  accepted and previously  deemed  uncollectible.  The
General  Partner  has a 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  in the
Partnership  ("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
Housing  Complexes 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

                                       7
<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                For the Quarterly Period Ended September 30, 2008
                                   (Unaudited)

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

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 90% to the Limited Partners (in proportion to their
respective investments) and 10% to the General Partners.

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

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

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

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

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  any 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

                                       8
<PAGE>

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

Housing Tax Credit  compliance  period,  risks exist for potential  recapture of
prior Low Income Housing Tax Credits received.

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.

The  Partnership   currently  has  insufficient  working  capital  to  fund  its
operations.  Associates  has agreed to continue  providing  advances  sufficient
enough  to  fund  the  operations  and  working  capital   requirements  of  the
Partnership through October 31, 2010.

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 then  existing  contractual  obligations  and then
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  Compliance  Period for a Housing  Complex 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 Housing  Complexes 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
Complexes, and the tax consequences to the Limited Partners from the sale of the
Housing Complexes.

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.  While  liquidation  of  the  Housing
Complexes continues to be evaluated,  the dissolution of the Partnership was not
imminent as of September 30, 2008.

During the  quarter  ended  June 30,  2008,  the  Partnership  sold its  Limited
Partnership  interest in Rosewood Apartments L.P.  ("Rosewood") for $1. Rosewood
had an  appraised  value of $70,000  and the  outstanding  mortgage  balance was
approximately  $398,000 therefore it was to the best interest of the Partnership
to sell its Limited Partnership interest to the Local General Partner.

Subsequent to September 30, 2008, the Partnership  sold its Limited  Partnership
interest in Venus Retirement Village, Ltd ("Venus") and Winters Investment Group
("Winters").  The  Partnership  received  $15,000  and  $25,000  for its Limited
Partnership  interests in the respective Local Limited  Partnerships.  Venus and
Winters were in similar situations as

                                       9

<PAGE>

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

Rosewood with Venus appraised at $170,000 with an outstanding  mortgage  balance
of $700,000 and Winters  appraised at $1,460,000  with an  outstanding  mortgage
balance of $1,765,000.  The Partnership  collected $40,000 in total for the sale
of the two Limited  Partnership  interests and those funds are being kept in the
Partnerships  reserves to pay for future  operating  expenses and accrued  asset
management fees.

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

The Partnership accounts for its investments in Local 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.  The  accounting  policies of the Local Limited
Partnerships,  generally,  are  expected  to be  consistent  with  those  of the
Partnership.  Costs incurred by the Partnership in acquiring the investments are
capitalized  as part of the investment  account and are being  amortized over 30
years (see Note 2).

"Equity in losses of Local Limited Partnerships" for the periods ended September
30, 2008 and 2007 have been recorded by the Partnership.  Management's  estimate
for the three-month  period is based on either actual unaudited results reported
by the Local Limited  Partnerships or historical trends in the operations of the
Local Limited  Partnerships.  In subsequent  annual financial  statements,  upon
receiving the actual annual results reported by the Local Limited  Partnerships,
management  reverses its prior estimate and records the actual results  reported
by  the  Local  Limited   Partnerships.   Equity  in  losses  of  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 is impaired (see Note 2). If the Local Limited Partnerships  reported
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).

The  Partnership  does not  consolidate the accounts and activities of the Local
Limited  Partnerships,  which are considered  Variable  Interest  Entities under
Financial  Accounting  Standards Board ("FASB")  Interpretation  No. 46-Revised,
"Consolidation  of Variable Interest  Entities",  because the Partnership is not
considered the primary beneficiary.  The Partnership's balance in investments in
Local Limited Partnerships, plus the risk of recapture of Low Income Housing Tax
Credits  previously  recognized  on such  investments,  represents  the  maximum
exposure to loss in connection with such investments. The Partnership's exposure
to loss on the Local  Limited  Partnerships  is mitigated by the  condition  and
financial  performance  of the  underlying  Housing  Complexes  as  well  as the
strength of the Local General Partners and their  guarantees  against Low Income
Housing Tax Credits recapture.

Distributions  received by the  Partnership  are accounted for as a reduction of
the investment balance.  Distributions received after the investment has reached
zero are  recognized  as income.  As of September  30, 2008,  all but one of the
investment balances had reached zero.

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

                                       10
<PAGE>

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

of revenues and expenses  during the  reporting  period.  Actual  results  could
materially differ from those estimates.

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

The Partnership considers all highly liquid investments with original maturities
of three months or less when purchased to be cash  equivalents.  As of September
30, 2008 and March 31, 2008, the Partnership had no cash equivalents.

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.

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

No provision  for income taxes has been recorded in the  accompanying  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.

In June 2006, the FASB issued  Interpretation No. 48 "Accounting for Uncertainty
in Income Taxes" (FIN 48), an  interpretation  of FASB Statement No. 109. FIN 48
provides  guidance  for  how  uncertain  tax  positions  should  be  recognized,
measured,  presented and disclosed in the financial statements.  FIN 48 requires
the  evaluation of tax positions  taken or expected to be taken in the course of
preparing the  Partnership's  tax returns to determine whether the tax positions
are  more-likely-than-not  of being sustained upon examination by the applicable
tax  authority,  based on the  technical  merits of the tax  position,  and then
recognizing  the tax benefit that is  more-likely-than-not  to be realized.  Tax
positions  not  deemed  to meet  the  more-likely-than-not  threshold  would  be
recorded as a tax expense in the current  reporting  period.  As  required,  the
Partnership adopted FIN 48 effective April 1, 2007 and concluded that the effect
is not material to its financial statements.  Accordingly,  no cumulative effect
adjustment related to the adoption of FIN 48 was recorded.

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.

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

At September 30, 2008,  the  Partnership  maintained a cash balance at a certain
financial  institution in excess of the maximum federally  insured amounts.  The
Partnership  believes it is not  exposed to any  significant  financial  risk on
cash.

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

                                       11
<PAGE>

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

Partnerships.  Due to the  uncertainty  of the  collection  of these  fees,  the
Partnership recognizes reporting fees as collections are made.

Amortization
------------

Acquisition  fees  and  costs  are  being  amortized  over 30  years  using  the
straight-line method.  Amortization expense was $3,992 and $4,258 during the six
months ended September 30, 2008 and 2007, respectively.

Impairment
----------

A loss in value of an  investment in a Local  Limited  Partnership  other than a
temporary  decline is recorded as an impairment loss.  Impairment is measured by
comparing the investment's carrying amount to the sum of the total amount of the
remaining future Low Income Housing Tax Credits estimated to be allocated to the
Partnership  and the estimated  residual value to the  Partnership.  For the six
months  ended  September  30,  2008  and  2007  impairment  expense  related  to
investments in Local Limited Partnerships was $1,501,366 and $0, respectively.

When the value of the  Partnership's  investment in a Local Limited  Partnership
has  been  reduced  to zero,  the  respective  net  acquisition  fees and  costs
component of investments in Local Limited Partnerships are impaired. For each of
the six months ended September 30, 2008 and 2007,  impairment expense related to
acquisition fees and costs was $0.

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

As of September 30, 2008 and March 31, 2008, the Partnership  owns Local Limited
Partnership  interests in seventeen  and eighteen  Local  Limited  Partnerships,
respectively.  All of these Local Limited  Partnerships  own one Housing Complex
consisting of an aggregate of 614 and 634  apartment  units,  respectively.  The
Local 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 governing agreements,  of the operating profits and losses,  taxable
income and  losses,  and Low Income  Housing  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 Six                 For the Year
                                                                         Months Ended                   Ended
                                                                      September 30, 2008            March 31, 2008
                                                                      -------------------         -------------------
                                                                      <S>                         <C>

  Investments per balance sheet, beginning of period                   $       1,740,459           $         1,815,552
  Equity in losses of Local Limited Partnerships                                 (28,903)                     (34,537)
  Distributions received from Local Limited Partnerships                         (39,572)                     (32,040)
  Impairment loss                                                             (1,501,366)                            -
  Amortization of capitalized acquisition fees and costs                          (3,992)                      (8,516)
                                                                      -------------------         --------------------
  Investments per balance sheet, end of period                         $         166,626           $         1,740,459
                                                                      ===================         ====================
</TABLE>

                                       12
<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                For the Quarterly Period Ended September 30, 2008
                                   (Unaudited)

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued
-------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                       For the Six Months
                                                                               Ended              For the Year Ended
                                                                       September 30, 2008            March 31, 2008
                                                                       -------------------      ----------------------
                                                                      <S>                        <C>
  Investments in Local Limited Partnerships, net                       $          42,856          $          1,612,697
  Acquisition fees and costs, net of accumulated
  amortization of $1,690,249, and $1,686,257                                     123,770                       127,762
                                                                    ----------------------      ----------------------
  Investments per balance sheet, end of period                          $        166,626          $          1,740,459
                                                                    ======================      ======================
</TABLE>

Selected  financial  information for the six months ended September 30, 2008 and
2007 from the unaudited  combined  condensed  financial  statements of the Local
Limited Partnerships in which the partnership has invested is as follows:
<TABLE>
<CAPTION>

                             COMBINED CONDENSED STATEMENTS OF OPERATIONS
                                                              2008                      2007
                                                      ----------------------     --------------------
                                                      <S>                        <C>

  Revenue                                              $           2,000,000      $         1,919,000
                                                      ----------------------     --------------------
  Expenses:
     Operating expenses                                            1,455,000                1,365,000
     Interest expense                                                387,000                  392,000
     Depreciation and amortization                                   558,000                  559,000
                                                      ----------------------     --------------------

  Total expenses                                                   2,400,000                2,316,000
                                                      ----------------------     --------------------

  Net loss                                                          (400,000)               (397,000)
                                                      ======================     ====================

  Net loss allocable to the Partnership                $            (395,000)     $         (333,000)
                                                      ======================     ====================

  Net loss recorded by the Partnership                 $             (29,000)     $          (15,000)
                                                      ======================     ====================
</TABLE>


Certain Local Limited  Partnerships have incurred  significant  operating losses
and/or have  working  capital  deficiencies.  In the event  these Local  Limited
Partnerships continue to incur significant operating losses,  additional capital
contributions  by the Partnership may be required to sustain  operations of such
Local Limited  Partnerships.  If additional  capital  contributions are not made
when they are required,  the Partnership's  investments in certain of such Local
Limited  Partnerships  could be  impaired,  and the loss  and  recapture  of the
related Low Income Housing Tax Credits could occur.

                                       13

<PAGE>

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 items:

     (a)  Acquisition  fees of up to 9% of the gross  proceeds  from the sale of
          Partnership  Units as compensation for services rendered in connection
          with the acquisition of Local Limited Partnerships.  At the end of all
          periods  presented,  the  Partnership  incurred  acquisition  fees  of
          $1,620,000.  Accumulated  amortization of these  capitalized costs was
          $1,496,230 and $1,492,238 as of September 30, 2008 and March 31, 2008,
          respectively.

     (b)  Reimbursement of costs incurred by the General Partner or an affiliate
          in connection  with the  acquisition  of Local  Limited  Partnerships.
          These reimbursements have not exceeded 1.5% of the gross proceeds.  As
          of  the  end  of  all  periods  presented,  the  Partnership  incurred
          acquisition costs of $194,019, which have been included in investments
          in Local Limited Partnerships.  Accumulated  amortization was $194,019
          as of ended September 30, 2008 and March 31, 2008.

     (c)  An annual asset management fee 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 mortgage loans on and other debts
          related  to  the  Housing   Complexes  owned  by  such  Local  Limited
          Partnerships. Fees of $89,768 and $90,692 were incurred during the six
          months  ended   September  30,  2008  and  2007,   respectively.   The
          Partnership paid the General Partners and or their affiliates  $25,000
          of those fees during each of the six months ended  September  30, 2008
          and 2007.

     (d)  Subordinated  Disposition  Fee. A subordinated  disposition  fee is an
          amount equal to 1% of the sales price of real estate sold.  Payment of
          this fee is subordinated to the Limited Partners receiving a preferred
          return of 16% through  December 31, 2003 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 during the periods presented.

     (e)  The  Partnership  reimburses the General Partner or its affiliates for
          operating  expenses  incurred by the  Partnership  and paid for by the
          General  Partner  or its  affiliates  on  behalf  of the  Partnership.
          Operating  expense  reimbursements  were $31,237 and $4,320 during the
          six months ended September 30, 2008 and 2007, respectively.

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

                                                                    September  30,  2008       March  31,  2008
                                                                  ----------------------     ----------------------
                                                                    <S>                       <C>
Expenses paid by the General Partner or an affiliate
   on behalf of the Partnership                                      $          119            $         26,819
Asset management fee payable                                              1,879,250                   1,814,482
                                                                 ----------------------      ----------------------
   Total                                                             $    1,879,369            $      1,841,301
                                                                 ======================      ======================
</TABLE>

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

                                       14
<PAGE>

NOTE 4 - SUBSEQUENT EVENTS
--------------------------

Subsequent to September 30, 2008, the Partnership  sold its Limited  Partnership
interest in Venus Retirement Village, Ltd ("Venus") and Winters Investment Group
("Winters").  The  Partnership  received  $15,000  and  $25,000  for its Limited
Partnership  interests in the respective Local Limited  Partnerships.  Venus and
Winters were in similar  situations as Rosewood with Venus appraised at $170,000
with an  outstanding  mortgage  balance of  $700,000  and Winters  appraised  at
$1,460,000 with an outstanding  mortgage balance of $1,765,000.  The Partnership
collected $40,000 in total for the sale of the two Limited Partnership interests
and those  funds are being kept in the  Partnerships  reserves to pay for future
operating expenses and accrued asset management fees.

                                       15
<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,  this
"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,  the  Partnership  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 the
Partnership  or persons  acting on its behalf are  expressly  qualified in their
entirety by  cautionary  statements in this Form 10-Q and in other reports filed
with the Securities and Exchange Commission.  The following discussion should be
read in conjunction with the condensed  unaudited  financial  statements and the
notes thereto included elsewhere in this filing.

The following discussion and analysis compares the results of operations for the
six months ended  September 30, 2008 and 2007, and should be read in conjunction
with  the  condensed  unaudited  financial  statements  and  accompanying  notes
included within this report.

Financial Condition

The Partnership's assets at September 30, 2008 consisted of $225,000 in cash and
aggregate  investments in the seventeen Local Limited  Partnerships of $167,000.
Liabilities  at September 30, 2008  consisted of  $1,879,000  of accrued  annual
management  fees and amounts due for expenses paid by the General Partner and/or
its affiliates.

Results of Operations

Three Months Ended  September 30, 2008 Compared to Three Months Ended  September
30, 2007. The  Partnership's  net loss for the three months ended  September 30,
2008 was $(63,000),  reflecting a decrease of $1,000 from the $(64,000) net loss
for the three  months  ended  September  30,  2007.  The decrease in net loss is
partially due to a $9,000 decrease in operating  losses which was comprised of a
$14,000  decrease  in legal  and  accounting  fees due to a timing  issue of the
accounting  work  being  performed,  along  with  a  $1,000  decrease  in  asset
management  fees,  offset by a $(6,000)  increase in impairment  expense for the
three  months  ended  September  30,  2008  compared to the three  months  ended
September  30,  2007.  The  decrease  in loss from  operations  was offset by an
$(8,000)  increase  from  equity in losses of Local  Limited  Partnerships.  The
equity in losses of Local Limited  Partnerships  can vary year to year depending
on the operations of the underlying properties.

Six Months Ended  September 30, 2008 Compared to Six Months Ended  September 30,
2007. The Partnership's net loss for the six months ended September 30, 2008 was
$(1,616,000),  reflecting an increase of  $(1,516,000)  from the  $(100,000) net
loss for the six months ended  September  30, 2007.  The increase in net loss is
primarily  due to a  $(1,502,000)  increase  in loss from  operations  which was
comprised  of a  $(1,501,000)  increase in  impairment  expense The  significant
increase  in  impairment  is due to a change in the  impairment  analysis in the
current  quarter.  For the six months ended  September  30, 2007 the  impairment
analysis  calculated  any residual  value to the  Partnership in addition to the
remaining  Low Income  Housing  Tax Credits  available  to the  Partnership  and
compared  that  to  the  current  carrying  value  of  each  investment  to  the
Partnership.  For the six months  ended  September  30,  2008 all Local  Limited
Partnerships  were  considered  to not  have  any  material  residual  value  in
consideration  of the  current  economic  circumstances.  The large  increase in
impairment expense was offset by a $13,000 decrease in legal and accounting fees
due to a timing  issue  of the  accounting  work  being  performed  and a $1,000
decrease  in  asset  management  fees.  The  distribution  income  decreased  by
$(10,000) and the reporting fees

                                       16
<PAGE>

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

decreased  by $(4,000)  the  decreases in the  reporting  fees and  distribution
income are due to the fact that Local Limited Partnerships pay distributions and
reporting fees to the Partnership when the Local Limited Partnership's cash flow
will allow for the payment.  The equity in losses of Local Limited  Partnerships
increased by $(14,000).  The equity in losses of Local Limited  Partnerships can
vary year to year depending on the operations of the underlying properties.

Liquidity and Capital Resources

Six Months Ended  September 30, 2008 Compared to Six Months Ended  September 30,
2007. Net cash used during the six months ended  September 30, 2008 was $(4,000)
compared to net cash provided  during the six months ended September 30, 2007 of
$28,000.  The  $(32,000)  decrease in net change in cash was  primarily due to a
$(39,000) decrease in change in accrued fees and expenses due to General Partner
and  affiliates,  along with a $7,000  increase in  distributions  received from
Local Limited Partnerships.

During the six months ended September 30, 2008 accrued  payables,  which consist
primarily  of  asset  management  fees to the  General  Partner  or  affiliates,
increased by $38,000. 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 Partnership  expects its future cash flows,  together with its net available
assets  at  September  30,  2008,  to be  insufficient  to  meet  all  currently
foreseeable  future  cash  requirements.   Associates  has  agreed  to  continue
providing advances  sufficient enough to fund the operations and working capital
requirements of the Partnership through October 31, 2010.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

        NOT APPLICABLE

Item 4T. Controls and Procedures

     (a)  Disclosure 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  Partnership's
          "disclosure controls and procedures" as defined in Securities Exchange
          Act of 1934 Rule  13a-15 and  15d-15.  Based on that  evaluation,  the
          Chief  Executive  Officer and Chief  Financial  Officer have concluded
          that,  as of  the  end of the  period  covered  by  this  report,  the
          Partnership's disclosure controls and procedures were not effective to
          ensure  that  material  information  required to be  disclosed  in the
          Partnership's periodic report filings with SEC is recorded, processed,
          summarized and reported within the time period  specified by the SEC's
          rules  and  forms,  consistent  with  the  definition  of  "disclosure
          controls and  procedures"  under the Securities  Exchange Act of 1934.

          The Partnership must rely on the Local Limited Partnerships to provide
          the  Partnership  with  certain  information  necessary  to the timely
          filing  of  the  Partnership's   periodic  reports.   Factors  in  the
          accounting at the Local Limited Partnerships have caused delays in the
          provision  of such  information  during past  reporting  periods,  and
          resulted in the  Partnership's  inability to file its periodic reports
          in a timely manner.

          Once the Partnership has received the necessary  information  from the
          Local Limited Partnerships,  the Chief Executive Officer and the Chief
          Financial Officer of Associates believe that the material  information
          required to be disclosed in the Partnership's  periodic report filings
          with SEC is effectively recorded, processed,  summarized and reported,
          albeit not in a timely manner. Going forward, the Partnership will use
          the means reasonably within its power to impose procedures designed to
          obtain from the Local Limited  Partnerships the information  necessary
          to the timely filing of the Partnership's periodic reports.

                                       17
<PAGE>

     (b)  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,  2008  that  materially  affected,  or are  reasonably  likely  to
          materially affect,  the Partnership's  internal control over financial
          reporting.

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

31.1 Certification  of the Principal  Executive  Officer pursuant to Rule 13a-14
     and 15d-14, 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-14
     and 15d-14, 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)

                                       18
<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:  October 9, 2009




By:  /s/ Melanie R. Wenk
     -------------------

Melanie R. Wenk
Vice President - Chief Financial Officer of WNC & Associates, Inc.

Date: October 9, 2009

                                       19

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