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, 2005

                                       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 Quarterly Period Ended September 30, 2005


PART I. FINANCIAL INFORMATION

     Item 1. Financial Statements

     Balance Sheets
             September 30, 2005 and March 31, 2005.............................3

     Statements of Operations
             For the Three and Six Months Ended September 30, 2005 and 2004....4

     Statement of Partners' Equity (Deficit)
             For the Six Months Ended September 30, 2005.......................5

     Statements of Cash Flows
             For the Six Months Ended September 30, 2005 and 2004..............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 Proceed....................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 and Reports on Form 8-K.............................17

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

                                       2

<PAGE>

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

                                                  BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                  September 30, 2005                  March 31, 2005
                                                                -----------------------             -------------------
                                                                     (unaudited)                         (unaudited)
ASSETS
<S>                                                          <C>                                 <C>
Cash and cash equivalents                                     $               296,850             $           293,367
Investments in limited partnerships, net (Note 2)                           2,048,395                       2,173,564
                                                                -----------------------             -------------------

                                                              $             2,345,245             $         2,466,931
                                                                =======================             ===================
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)

Liabilities:
 Accrued fees and expenses due to
  General Partner and affiliates (Note 3)                     $             1,479,154             $         1,413,074


Partners' equity (deficit):
  General partner                                                            (161,470)                       (159,592)
  Limited partners (30,000 units authorized;
     18,000 units issued and outstanding)                                   1,027,561                       1,213,449
                                                                -----------------------             -------------------

        Total partners' equity                                                866,091                       1,053,857
                                                                -----------------------             -------------------

                                                              $             2,345,245             $         2,466,931
                                                                =======================             ===================
</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, 2005 and 2004
                                   (unaudited)

<TABLE>
<CAPTION>
                                                         2005                                      2004
                                       -----------------------------------------    ------------------------------------
                                          Three Months           Six months           Three Months        Six months
                                       -------------------    ------------------    -----------------   ----------------
<S>                                 <C>                    <C>                   <C>                 <C>
Interest income                      $               367    $              736    $             199   $            400
Distribution income                                  875                   875                    -              5,044
Reporting fee income                              10,527                15,893                    -                  -
                                       -------------------    ------------------    -----------------   ----------------
                                                  11,769                17,504                  199              5,444
                                       -------------------    ------------------    -----------------   ----------------

Operating expenses:
  Amortization (Note 2)                            3,435                 6,870               11,208             22,416
  Asset management fees (Note 3)                  45,346                90,692               45,346             90,692
  Legal and accounting                            12,769                13,769                6,525              8,050
  Other                                              592                 2,871                   51              2,454
                                       -------------------    ------------------    -----------------   ----------------

    Total operating expenses                      62,142               114,202               63,130            123,612
                                       -------------------    ------------------    -----------------   ----------------

Loss from operations                             (50,373)              (96,698)             (62,931)          (118,168)
                                       -------------------    ------------------    -----------------   ----------------

Equity in losses of
 limited partnerships (Note 2)                   (39,695)              (91,068)             (76,009)          (152,022)
                                       -------------------    ------------------    -----------------   ----------------

Net loss                             $           (90,068)   $         (187,766)   $        (138,940)  $       (270,190)
                                       ===================    ==================    =================   ================

Net loss allocated to:
  General partner                    $              (901)   $           (1,878)   $          (1,389)  $         (2,702)
                                       ===================    ==================    =================   ================

  Limited partners                   $           (89,167)   $         (185,888)   $        (137,551)  $       (267,488)
                                       ===================    ==================    =================   ================

Net loss per limited
 partner unit                        $                (5)   $              (10)   $              (8)  $            (15)
                                       ===================    ==================    =================   ================

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, 2005
                                   (unaudited)
<TABLE>
<CAPTION>
                                                            General               Limited
                                                            Partner              Partners                Total
                                                        -----------------     ----------------   ----------------------
<S>                                                  <C>                   <C>                <C>
Partners' equity (deficit) at March 31, 2005          $        (159,592)    $     1,213,449    $            1,053,857

Net loss                                                         (1,878)           (185,888)                 (187,766)
                                                        -----------------     ----------------   ----------------------

Partners' equity (deficit) at September 30, 2005      $        (161,470)    $     1,027,561    $              866,091
                                                        =================     ================   ======================
</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, 2005 and 2004
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                              2005                      2004
                                                                        ------------------        ------------------
<S>                                                                  <C>                       <C>
Cash flows from operating activities:
  Net loss                                                            $         (187,766)       $         (270,190)
     Adjustments to reconcile net loss to
       cash used in operating activities:
       Amortization                                                                6,870                    22,416
       Equity in losses of limited partnerships                                   91,068                   152,022
        Change in accrued fees and expenses due to
               General Partner and affiliates                                     66,080                    73,881
                                                                        ------------------        ------------------

Net cash used in operating activities                                            (23,748)                  (21,871)
                                                                        ------------------        ------------------

Cash flows from investing activities:
    Distributions received from limited partnerships                              27,231                    27,343
                                                                        ------------------        ------------------

Net increase in cash                                                               3,483                     5,472

Cash and cash equivalents, beginning of period                                   293,367                   310,717
                                                                        ------------------        ------------------
Cash and cash equivalents, end of period                              $          296,850        $          316,189
                                                                        ==================        ==================

SUPPLEMENTAL DISCLOSURE
  OF CASH FLOW INFORMATION:

  Taxes paid                                                          $              800        $                -
                                                                        ==================        ==================
</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 Quarterly Period Ended September 30, 2005
                                   (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, 2005 are not  necessarily  indicative  of the results that may be
expected  for the fiscal year ending March 31,  2006.  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,
2005.

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 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.

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 Partnership.  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 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  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  so the
total outstanding is 18,000. 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 Quarterly Period Ended September 30, 2005
                                   (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 Tax Credit rules are extremely complicated. Noncompliance
with these  rules  results in the loss of future Low Income  Housing Tax Credits
and the fractional recapture of Low Income Housing Tax Credits already taken. In
most  cases  the  annual  amount  of Low  Income  Housing  Tax  Credits  that an
individual  can use is limited to the tax  liability  due on the  person's  last
$25,000 of taxable income. The Local Limited  Partnerships may be unable to sell
the Housing Complexes at a price which would result in the Partnership realizing
cash   distributions  or  proceeds  from  the  transaction.   Accordingly,   the
Partnership  may be unable to distribute any cash to its Limited  Partners.  Low
Income  Housing Tax Credits may be the only  benefit from an  investment  in the
Partnership.

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

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

Substantially  all of the Low  Income  Housing  Tax  Credits  anticipated  to be
realized from the Local Limited Partnerships have been realized. The Partnership
does not anticipate  being allocated a significant  amount of Low Income Housing
Tax Credits from the Local Limited  Partnerships in the future.  Until the Local
Limited  Partnerships  have  completed  the 15 year Low  Income  Housing  Credit
compliance  period  risks  exist for  potential  recapture  of prior Low  Income
Housing Tax Credits.

                                       8
<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, 2005
                                   (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.   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.

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 the estimated value derived by
management,  generally  consisting of the sum of the remaining future Low Income
Housing  Tax  Credits  estimated  to be  allocated  to the  Partnership  and the
estimated  residual value to the Partnership.  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,
2005 and 2004 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.  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 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.

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.

                                        9
<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, 2005
                                   (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,  the  Partnership  expects to proceed  with
efforts to liquidate those properties.  The objective is to maximize the Limited
Partners' return wherever possible and, ultimately, to wind down the Partnership
when it no longer  provides tax  benefits to Limited  Partners.  However,  Local
Limited  Partnership  interests may be disposed at any time by Associates in its
discretion.  To date no  properties  in the  Partnership  have been selected for
disposition.

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.

Concentration of Credit Risk
----------------------------
At September 30, 2005,  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 loss per unit is not required.

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, 2005 and March 31, 2005, the Partnership had no cash equivalents.

                                       10

<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, 2005
                                   (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
-----------------------------
As of March 31,  2004,  the  Partnership  adopted FASB  Interpretation  No. 46 -
Revised,  Consolidation  of  Variable  Interest  Entities  ("FIN46R").  FIN  46R
provides  guidance as to when a company should include the assets,  liabilities,
and  activities  of  a  variable   interest  entity  ("VIE")  in  its  financial
statements,   and  when  a  company  should  disclose   information   about  its
relationship  with a VIE. A VIE is a legal structure used to conduct  activities
or hold assets, and a VIE must be consolidated by a company if it is the primary
beneficiary  because a primary  beneficiary absorbs the majority of the entity's
expected losses, the majority of the expected residual returns, or both.

Under FIN 46R, the Local Limited  Partnerships in which the Partnership  invests
are VIEs. However,  management does not consolidate the Partnership's  interests
in these VIE's under FIN46R,  as the  Partnership  is not considered the primary
beneficiary.  Rather,  the  Partnership  currently  records  the  amount  of the
investment in the Local Limited  Partnerships  as an asset in the balance sheet,
and  recognizes  its share of Local  Limited  Partnership  income or loss in the
statement of operations.

The Partnership's balance in its investment in Local Limited Partnerships,  plus
the risk of recapture of tax credits previously recognized on these investments,
represents its maximum exposure to loss. The  Partnership's  exposure to loss is
mitigated  by  the  condition  and  financial   performance  of  the  underlying
properties,  as well as the  strength of the Local  General  Partners  and their
guarantee against credit recapture.

In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154
(SFAS 154),  "Accounting Changes and  Error Corrections" which provides guidance
on the  accounting  for and  reporting of accounting  changes and  correction of
errors.  This  statement  changes the  requirements  for the  accounting for and
reporting  of a change in  accounting  principle  and  applies to all  voluntary
changes in  accounting  principle.  It also  applies to changes  required  by an
accounting pronouncement in the unusual instance that the pronouncement does not
include  specific  transition  provisions.   This  statement  is  effective  for
accounting  changes and  corrections  of errors made in fiscal  years  beginning
after December 15, 2005. The  Partnership  does not anticipate a material effect
upon the adoption of this statement.

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.

                                       11

<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, 2005
                                   (unaudited)

NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
-------------------------------------------------------
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, 2005            March 31, 2005
                                                                      -------------------         -------------------
<S>                                                                <C>                         <C>
  Investments per balance sheet, beginning of period                $         2,173,564         $         3,525,413
  Equity in losses of limited partnerships                                      (91,068)                   (408,022)
  Distributions received from limited partnership                               (27,231)                    (27,376)
  Impairment of local limited partnerships                                            -                    (873,891)
  Amortization of capitalized acquisition fees and
    costs                                                                        (6,870)                    (42,560)
                                                                      -------------------         -------------------

  Investments per balance sheet, end of period                      $         2,048,395         $         2,173,564
                                                                      ===================         ===================
</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, 2005
                                   (unaudited)

NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
-------------------------------------------------------
Selected  financial  information for the six months ended September 30, 2005 and
2004 from the unaudited combined condensed  financial  statements of the limited
partnerships in which the Partnership has invested as follows:


                   COMBINED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                              2005                      2004
                                                      ----------------------     --------------------
<S>                                                <C>                        <C>
  Revenue                                           $           1,844,000     $          1,785,000
                                                      ----------------------     --------------------
  Expenses:
     Operating expenses                                        (1,239,000)              (1,299,000)
     Interest expense                                            (434,000)                (436,000)
     Depreciation and amortization                               (560,000)                (555,000)
                                                      ----------------------     --------------------

  Total expenses                                               (2,233,000)              (2,290,000)
                                                      ----------------------     --------------------

  Net loss                                          $            (389,000)    $           (505,000)
                                                      ======================     ====================

  Net loss allocable to the Partnership             $            (365,000)    $           (501,000)
                                                      ======================     ====================

  Net loss recorded by the Partnership              $             (81,000)    $           (152,000)
                                                      ======================     ====================
</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 Quarterly Period Ended September 30, 2005
                                   (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 were
     incurred  during each of the six months ended  September 30, 2005 and 2004.
     The  Partnership  paid the General  Partner or its  affiliates  $31,875 and
     $22,250 of those fees during the six months  ended  September  30, 2005 and
     2004, respectively.

(b)  Subordinated  Disposition Fee. A subordinated  disposition fee in an amount
     equal to 1% of the sales price of real estate sold.  Payment of this fee is
     subordinated to the limited  partners  receiving a preferred  return of 16%
     through  December 31, 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.

(c)  The  Partnership  reimburses  the  General  Partner or its  affiliates  for
     operating expenses incurred in behalf of the Partnership. Operating expense
     reimbursements were $9,378 and $4,816 during the six months ended September
     30, 2005 and 2004, respectively.


The accrued  fees and  expenses  due to General  Partner  and/or its  affiliates
consist of the following:
<TABLE>
<CAPTION>
                                                                  September 30, 2005            March 31, 2005
                                                                 ----------------------      ----------------------
<S>                                                          <C>                         <C>
Reimbursement for expenses paid by the General
   Partner and/or its affiliate                               $                 13,133    $                  5,870
Asset management fee payable                                                 1,466,021                   1,407,204
                                                                 ----------------------      ----------------------
                                                              $              1,479,154    $              1,413,074
                                                                 ======================      ======================
</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, 2005 and 2004, 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, 2005 consisted  primarily of $297,000
in cash and aggregate  investments in the eighteen Local Limited Partnerships of
$2,048,000.  Liabilities at September 30, 2005 primarily consisted of $1,479,000
of accrued annual  management  fees and  reimbursement  for expenses paid by the
General Partner and/or its affiliates.

Results of Operations

Three Months Ended  September 30, 2005 Compared to Three Months Ended  September
30, 2004. The  Partnership's  net loss for the three months ended  September 30,
2005 was  $(90,000),  reflecting a decrease of $49,000 from the  $(139,000)  net
loss for the three months ended  September 30, 2004. The decrease in net loss is
primarily  due to a  decrease  in equity in losses of  limited  partnerships  of
$36,000  to  $(40,000)  for the  three  months  ended  September  30,  2005 from
$(76,000)  for the three  months  ended  September  30,  2004.  Additionally,  a
decrease in loss from operations of $13,000 for the three months ended September
30, 2005 to $(50,000)  from  $(63,000) for the three months ended  September 30,
2004 was incurred due to an increase of $12,000 in reporting  fee income,  along
with a decrease of $1,000 in  operating  expenses.  The  decrease  in  operating
expenses is due to a $8,000 decrease in amortization  expense offset by a $7,000
decrease in accounting and legal fees and other expenses during the three months
ended September 30, 2005.

                                       15

<PAGE>

Six Months Ended  September 30, 2005 Compared to Six Months Ended  September 30,
2004. The Partnership's net loss for the six months ended September 30, 2005 was
$(188,000),  reflecting a decrease of $82,000 from the  $(270,000)  net loss for
the six months ended  September 30, 2004.  The decrease in net loss is primarily
due to equity in losses of Local Limited Partnerships which decreased by $61,000
to $(91,000) for the six months ended September 30, 2005 from $(152,000) for the
six months ended  September 30, 2004.  The decrease in equity in losses of Local
Limited Partnerships is due to the Partnership not recognizing certain losses of
the  Local  Limited  Partnerships, as the  investments  in  such  Local  Limited
Partnerships  had reached $0 at  September  30,  2005.  Since the  Partnership's
liability  with  respect  to its  investments  is  limited,  losses in excess of
investment  are not  recognized.  Along with the decrease in equity in losses of
Local Limited Partnerships,  the loss from operations decreased by approximately
$21,000 to $(97,000) for the six months ended September 30, 2005 from $(118,000)
for the six  months  ended  September  30,  2004,  which was  contributed  by an
increase of $12,000 in  reporting  fees income,  along with $15,000  decrease in
amortization, offset by a $(6,000) increase in accounting and legal fees for the
six months ended September 30, 2005.

Cash Flows

Six Months Ended  September 30, 2005 Compared to Six Months Ended  September 30,
2004.  Net cash  provided  during the six months  ended  September  30, 2005 was
$3,000  compared to net cash provided in the six months ended September 30, 2004
of $5,000.  The $(2,000) net cash  decrease was  primarily due to an increase in
cash paid for operating costs of $(2,000).

During the six months ended September 30, 2005 amortization expense decreased by
$16,000  mainly  due  to the  current  and  prior  acceleration  of  unamortized
acquisition  costs and fees  realted  to  investments  that have  reached a zero
balance.  Along with the decrease in accrued fees  which   consist  primarily of
asset management fees to the General Partner or affiliates,  decreased by $8,000
during the six months ended September 30, 2005.

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  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 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,  2005  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 and Reports on Form 8-K

(a)      Reports on Form 8-K
         -------------------
         NONE

(b)      Exhibits.
         ---------

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

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

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

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

                                       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:  December 29,2005





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

Date:  December 29,2005


                                       18