UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)

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

                    For the fiscal year ended March 31, 2006

                                       OR

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

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

                         Commission file number: 0-23908


                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
             (Exact name of registrant as specified in its charter)

              California                                33-0563307
             (State or other jurisdiction of           (I.R.S. Employer
             incorporation or organization)            Identification No.)

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

                                 (714) 662-5565
                               (Telephone number)

           Securities registered pursuant to Section 12(b) of the Act:

                                      NONE

           Securities registered pursuant to section 12(g) of the Act:

                      UNITS OF LIMITED PARTNERSHIP INTEREST
                                (Title of Class)

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act
Yes       No    X
   -------  --------

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act.
Yes       No    X
   -------  --------

<PAGE>
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 if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the Exchange  Act.  (Check

one): Large accelerated  filer     Accelerated  filer      Non-accelerated filer
                              -----                  -----
  X
------

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes      No   X
   ------  ------

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common  equity,  as of
the last business day of the registrant's most recently  completed second fiscal
quarter.

                                  INAPPLICABLE


                       DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K  (e.g.,  Part I, Part II,  etc.)  into  which the  document  is
incorporated:  (1) Any  annual  report  to  security  holders;  (2) Any proxy or
information  statement;  and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the  Securities Act of 1933.  The listed  documents  should be clearly
described for identification  purposes (e.g.,  annual report to security holders
for fiscal year ended December 24, 1980).

                                      NONE
<PAGE>
PART I.

Item 1.  Business

Organization

WNC California Housing Tax Credits III, L.P. (the "Partnership") is a California
limited  partnership formed under the laws of the State of California on October
5, 1992. The Partnership was formed to acquire limited partnership  interests or
membership   interests  in  other  limited  partnerships  or  limited  liability
companies  ("Local  Limited   Partnerships")   which  own  multi-family  housing
complexes ("Housing Complexes") that are eligible for Federal low income housing
("Low Income Housing Tax Credits").

The  general  partner  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  own
substantially  all of the outstanding  stock of Associates.  The business of the
Partnership is conducted  primarily through  Associates,  as the Partnership and
General Partner have no employees of their own.

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 offering on July 22, 1994, a
total of  18,000  Partnership  Units  representing  $18,000,000  had been  sold.
Holders of Partnership Units are referred to herein as "Limited Partners."

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
(as defined below) or law.

Description of Business

The  Partnership's  principal  business  objective  is to  provide  its  Limited
Partners  with Low Income  Housing  Tax  Credits.  The  Partnership's  principal
business  consists of investing as a limited partner or  non-managing  member in
Local  Limited  Partnerships  each of which owns and operates a Housing  Complex
which  qualifies  for the Low Income  Housing Tax  Credits.  In  general,  under
Section 42 of the Internal  Revenue  Code,  an owner of  low-income  housing can
receive  the Low Income  Housing Tax Credit to be used to reduce  Federal  taxes
otherwise due in each year of a ten-year period. Each Housing Complex is subject
to a 15 year compliance  period (the "Compliance  Period"),  and under state law
may have to be maintained as low income housing for 30 or more years.

In general,  in order to avoid recapture of Low Income Housing Tax Credits,  the
Partnership  does not  expect  that it will  dispose of its  interests  in Local
Limited Partnerships ("Local Limited Partnership Interests") or approve the sale
by any Local Limited  Partnership of its Housing Complex prior to the end of the
applicable  Compliance  Period.  Because  of  (i)  the  nature  of  the  Housing
Complexes,  (ii) the  difficulty of predicting  the resale market for low-income
housing,  and (iii) the ability of government lenders to disapprove of transfer,
it is not  possible  at this time to  predict  whether  the  liquidation  of the
Partnership's assets and the disposition of the proceeds,  if any, in accordance
with the Partnership's Agreement of Limited Partnership, dated October 1992 (the
"Partnership  Agreement"),  will  be  accomplished  promptly  at the  end of the
Compliance Period. If a Local Limited  Partnership is unable to sell its Housing
Complex,  it is  anticipated  that the local  general  partner  ("Local  General
Partner")  will either  continue to operate  such  Housing  Complex or take such
other actions as the Local General  Partner  believes to be in the best interest
of the Local Limited Partnership.  Notwithstanding the preceding,  circumstances
beyond the  control of the General  Partner or the Local  General  Partners  may
occur during the  Compliance  Period,  which would  require the  Partnership  to
approve the disposition of a Housing Complex prior to the end thereof,  possibly
resulting in recapture of Low Income Housing Tax Credits.

The Partnership invested in eighteen Local Limited  Partnerships,  none of which
had been sold or otherwise  disposed as of March 31,  2006.  Each of these Local
Limited  Partnerships  owns a Housing  Complex that was eligible for the Federal
Low Income Housing Credit and eight of them were eligible for the California Low
Income Housing Credit.  Certain Local Limited Partnerships may also benefit from
additional government programs promoting low- or moderate-income housing.

                                       3
<PAGE>
Exit Strategy

The IRS  Compliance  Period for  low-income  housing  tax credit  properties  is
generally  15  years  following   construction  or  rehabilitation   completion.
Associates was one of the first in the industry to offer syndicated  investments
in Low Income Housing Tax Credits.  The initial  programs are  completing  their
compliance periods.

With that in mind,  the General  Partner is continuing its review of the Housing
Complexes,  with special  emphasis on the more mature 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.  As of March  31,  2006,  no  Housing
Complexes have been selected for disposition.  While  liquidation of the Housing
Complexes continues to be evaluated,  the dissolution of the Partnership was not
imminent  as of  March  31,  2006.  As of March  31,  2006  none of the  Housing
Complexes had completed the 15 year compliance period.

On February 13, 2006 the Partnership filed a form 8-K explaining the liquidation
process  that is  beginning  as the  low-income  housing  tax credit  properties
complete the 15 years compliance period.

Item 1A.  Risk Factors

Set forth below are the principal risks the Partnership believes are material to
the Limited Partners. The Partnership and the Local Limited Partnerships operate
in a continually changing business environment and, therefore,  new risks emerge
from time to time. This section contains some forward-looking statements. For an
explanation of the qualifications and limitations on forward-looking statements,
see Item 7.

(a)  Risks  arising from the Internal  Revenue Code rules  governing  Low Income
     Housing Tax Credits

     Low Income Housing Tax Credits might not be available. If a Housing Complex
does not satisfy the  requirements of Internal Revenue Code Section 42, then the
Housing Complex will not be eligible for Low Income Housing Tax Credits.

     Low income  housing tax credits might be less than  anticipated.  The Local
General  Partners  will  calculate  the  amount of the Low  Income  Housing  Tax
Credits.  No opinion of counsel will cover the  calculation of the amount of Low
Income Housing Tax Credits. The IRS could challenge the amount of the Low Income
Housing Tax Credits  claimed  for any Housing  Complex  under any of a number of
provisions set forth in Internal Revenue Code Section 42. A successful challenge
by the IRS would  decrease the amount of the Low Income Housing Tax Credits from
the amount paid for by the Partnership.

     Unless a bond is posted or a Treasury  Direct Account is  established,  Low
Income Housing Tax Credits may be recaptured if Housing  Complexes are not owned
and operated for 15 years.  Housing  Complexes must comply with Internal Revenue
Code  Section 42 for the  15-year  Compliance  Period.  Low Income  Housing  Tax
Credits will be recaptured with interest to the extent that a Housing Complex is
not rented as low  income  housing  or in some  other way does not  satisfy  the
requirements of Internal  Revenue Code Section 42 during the Compliance  Period.
For  example,  unless  a  bond  is  posted  or  a  Treasury  Direct  Account  is
established, recapture with interest would occur if:

     o    a Local  Limited  Partnership  disposed  of its  interest in a Housing
          Complex during the Compliance Period, or
     o    the   Partnership   disposed  of  its  interest  in  a  Local  Limited
          Partnership during the Compliance Period.

For these purposes, disposition includes transfer by way of foreclosure.

It will be up to the Partnership to determine  whether to post a bond.  There is
no obligation under the agreements with the Local Limited  Partnerships that the
Local Limited Partnerships must do so.

                                       4
<PAGE>
There can be no assurance that recapture will not occur.  If it does,  recapture
will be a portion of all Low Income Housing Tax Credits taken in prior years for
that Housing Complex, plus interest. During the first 11 years of the Compliance
Period,  non-compliance  results  in  one-third  of the Low Income  Housing  Tax
Credits up to that point for the particular  Housing  Complex being  recaptured,
plus interest. Between years 12 and 15, the recapture is phased out ratably.

     Sales of Housing  Complexes after 15 years are subject to limitations which
may impact a Local Limited  Partnership's  ability to sell its Housing  Complex.
Each  Local  Limited  Partnership   executes  an  extended  low  income  housing
commitment with the state in which the Housing Complex is located.  The extended
low income housing  commitment states the number of years that the Local Limited
Partnership  and any  subsequent  owners  must rent the  Housing  Complex as low
income housing. Under Federal law, the commitment must be for at least 30 years.
The commitment,  actually agreed to, may be significantly  longer than 30 years.
In prioritizing  applicants for Low Income Housing Tax Credits, most states give
additional  points for commitment  periods in excess of 30 years. On any sale of
the Housing  Complex during the commitment  period,  the purchaser would have to
agree to  continue  to rent the  Housing  Complex as low income  housing for the
duration of the  commitment  period.  This  requirement  reduces  the  potential
market, and possibly the sales price, for the Housing  Complexes.  The sale of a
Housing  Complex  may be subject to other  restrictions.  For  example,  Federal
lenders or subsidizers may have the right to approve or disapprove a purchase of
a Housing Complex.  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  amount of cash will be distributed to
the Limited Partners.  As a result, a material portion of the Low Income Housing
Tax  Credits  may  represent  a return of the money  originally  invested in the
Partnership.

     Limited  Partners  can only use Low Income  Housing  Tax Credits in limited
amounts. The ability of an individual or other non-corporate  Limited Partner to
claim Low Income  Housing Tax Credits on his  individual  tax return is limited.
For  example,  an  individual  Limited  Partner  can use Low Income  Housing Tax
Credits to reduce his tax liability on:

     o    an unlimited  amount of passive income,  which is income from entities
          such as the Partnership, and
     o    $25,000 in income from other sources.

However,  the use of Low Income  Housing  Tax Credits by an  individual  against
these types of income is subject to ordering rules,  which may further limit the
use of Low Income  Housing Tax  Credits.  Some  corporate  Limited  Partners are
subject  to similar  and other  limitations.  They  include  corporations  which
provide personal  services,  and  corporations  which are owned by five or fewer
shareholders.

Any  portion of a Low Income  Housing  Tax Credit  which is allowed to a Limited
Partner under such rules is then  aggregated  with all of the Limited  Partner's
other business credits.  The aggregate is then subject to the general limitation
on all business credits. That limitation provides that a Limited Partner can use
business  credits to offset the Limited  Partner's annual tax liability equal to
$25,000 plus 75% of the Limited  Partner's  tax  liability in excess of $25,000.
However, business credits may not be used to offset any alternative minimum tax.
All of these concepts are extremely complicated.

(b)  Risks  related to  investment  in Local  Limited  Partnerships  and Housing
     Complexes

     Because the  Partnership has few  investments,  each investment will have a
great impact on the  Partnership's  results of  operations.  Any single  Housing
Complex  experiencing  poor  operating  performance,   impairment  of  value  or
recapture of Low Income Housing Tax Credits will have a significant  impact upon
the Partnership as a whole.

     The failure to pay mortgage debt could result in a forced sale of a Housing
Complex. Each Local Limited Partnership  leverages the Partnership's  investment
therein by incurring mortgage debt. A Local Limited Partnership's revenues could
be less than its debt payments and taxes and other  operating  costs. If so, the
Local  Limited  Partnership  would have to use working  capital  reserves,  seek
additional  funds, or suffer a forced sale of its Housing  Complex,  which could
include a  foreclosure.  The same results  could occur if  government  subsidies
ceased. Foreclosure would result in a loss of the Partnership's capital invested
in the Housing  Complex.  Foreclosure  could also  result in a recapture  of Low
Income Housing Tax Credits, and a loss of Low Income Housing Tax Credits for the
year  in  which   the   foreclosure   occurs.   If  the   Housing   Complex   is
highly-leveraged,  a relatively  slight  decrease in the rental  revenues  could
adversely affect the Local Limited Partnership's ability to pay its debt service
requirements.  Mortgage  debt may be  repayable in a  self-amortizing  series of
equal  installments  or with a large balloon  final  payment.

                                       5
<PAGE>
Balloon payments maturing prior to the end of the anticipated holding period for
the  Housing  Complex  create  the risk of a forced  sale if the debt  cannot be
refinanced. There can be no assurance that additional funds will be available to
any Local  Limited  Partnership  if needed on  acceptable  terms or at all.

The Partnership does not control the Local Limited Partnerships and must rely on
the Local General Partners.  The Local General Partners will make all management
decisions  for the Local Limited  Partnerships  and the Housing  Complexes.  The
Partnership  has very  limited  rights with respect to  management  of the Local
Limited  Partnerships.  The Partnership will not be able to exercise any control
with respect to Local Limited  Partnership  business  decisions and  operations.
Consequently, the success of the Partnership will depend on the abilities of the
Local General Partners.

     Housing Complexess  subsidized by other government  programs are subject to
additional  rules  which  may make it  difficult  to  operate  and sell  Housing
Complexes.  Some  or  all of  the  Housing  Complexes  receive  or  may  receive
government  financing or operating  subsidies in addition to Low Income  Housing
Tax Credits. The following are risks associated with such subsidy programs:

     o    Obtaining tenants for the Housing  Complexes.  Government  regulations
          limit the  types of  people  who can rent  subsidized  housing.  These
          regulations may make it more difficult to rent the  residential  units
          in the Housing Complexes.
     o    Obtaining  rent  increases.  In many cases rents can only be increased
          with the prior approval of the subsidizing agency.
     o    Limitations  on cash  distributions.  The  amount  of cash that may be
          distributed to owners of subsidized Housing Complexes is less than the
          amount  that could be earned by the owners of  non-subsidized  Housing
          Complexes.
     o    Limitations on sale or refinancing of the Housing  Complexes.  A Local
          Limited  Partnership  may be unable to sell its Housing  Complex or to
          refinance  its  mortgage  loan  without  the  prior  approval  of  the
          subsidizer.   The   subsidizer  may  withhold  such  approval  in  the
          discretion of the  subsidizer.  Approval may be subject to conditions,
          including  the condition  that the purchaser  continues to operate the
          property as affordable  housing for terms which could be as long as 30
          years or more. In addition, any prepayment of a mortgage may result in
          the assessment of a prepayment penalty.
     o    Limitations  on transfers of interests in Local Limited  Partnerships.
          The  Partnership may be unable to sell its interest in a Local Limited
          Partnership  without  the  prior  approval  of  the  subsidizer.   The
          subsidizer  may  withhold  such  approval  in  the  discretion  of the
          subsidizer. Approval may be subject to conditions.
     o    Limitations  on removal and admission of Local General  Partners.  The
          Partnership  may be unable to remove a Local  General  Partner  from a
          Local Limited  Partnership  except for cause, such as the violation of
          the rules of the subsidizer. Regulations may prohibit the removal of a
          Local General  Partner or permit  removal only with the prior approval
          of the  subsidizer.  Regulations  may  also  require  approval  of the
          admission of a successor  Local General Partner even upon the death or
          other disability of a Local General Partner.
     o    Limitations  on subsidy  payments.  Subsidy  payments  may be fixed in
          amount and subject to annual  legislative  appropriations.  The rental
          revenues  of  a  Housing  Complex,  when  combined  with  the  maximum
          committed subsidy,  may be insufficient to meet obligations.  Congress
          or the state legislature,  as the case may be, may fail to appropriate
          or increase  the  necessary  subsidy.  In those  events,  the mortgage
          lender  could  foreclose  on the  Housing  Complex  unless  a  workout
          arrangement could be negotiated.
     o    Possible changes in applicable regulations. Legislation may be enacted
          which adversely revises provisions of outstanding mortgage loans. Such
          legislation has been enacted in the past.
     o    Limited Partners may not receive  distributions  if Housing  Complexes
          are sold. There is no assurance that Limited Partners will receive any
          cash  distributions from the sale or refinancing of a Housing Complex.
          The price at which a Housing Complex is sold may not be high enough to
          pay the mortgage and other  expenses  which must be paid at such time.
          If that happens,  a Limited  Partner's return may be derived only from
          the Low Income Housing Tax Credits and tax losses.

                                       6
<PAGE>
     Uninsured  casualties  could  result in  losses  and  recapture.  There are
casualties  which are either  uninsurable or not economically  insurable.  These
include earthquakes,  floods, wars and losses relating to hazardous materials or
environmental  matters.  If a Housing Complex experienced an uninsured casualty,
the Partnership could lose both its invested capital and anticipated  profits in
such  property.  Even if the casualty  were an insured  loss,  the Local Limited
Partnership  might be unable to rebuild  the  destroyed  property.  A portion of
prior Low Income  Housing Tax Credits could be recaptured  and future Low Income
Housing  Tax  Credits  could be lost if the Housing  Complex  were not  restored
within a reasonable  period of time. And liability  judgments  against the Local
Limited  Partnership  could  exceed  available  insurance  proceeds or otherwise
materially  and  adversely  affect the Local  Limited  Partnership.  The cost of
liability  and  casualty  insurance  has  increased  in recent  years.  Casualty
insurance has become more  difficult to obtain and may require large  deductible
amounts.

     Housing Complexes without financing or operating subsidies may be unable to
pay  operating  expenses.  If a Local  Limited  Partnership  were  unable to pay
operating expenses, one result could be a forced sale of its Housing Complex. If
a forced sale occurs during the first 15 years of a Housing  Complex,  a partial
recapture of Low Income Housing Tax Credits could occur. In this regard, some of
the Local Limited Partnerships may own Housing Complexes which have no subsidies
other than Low Income Housing Tax Credits.  Those Housing  Complexes do not have
the benefit of below-market-interest-rate financing or operating subsidies which
often are  important to the  feasibility  of low income  housing.  Those Housing
Complexes  rely  solely  on rents to pay  expenses.  However,  in order  for any
Housing  Complex to be  eligible  for Low Income  Housing Tax  Credits,  it must
restrict the rent which may be charged to tenants.  Over time, the expenses of a
Housing Complex will increase.  If a Local Limited  Partnership  cannot increase
its rents, it may be unable to pay increased operating expenses.

     The Partnership's  investment  protection policies will be worthless if the
net worth of the Local  General  Partners  is not  sufficient  to satisfy  their
obligations.  There is a risk that the Local General  Partners will be unable to
perform their financial obligations to the Partnership.  The General Partner has
not established a minimum net worth  requirement for the Local General Partners.
Rather,  each Local General  Partner  demonstrates a net worth which the General
Partner believes is appropriate under the circumstances. The assets of the Local
General  Partners are likely to consist  primarily  of real estate  holdings and
similar  assets.  The fair market value of these types of assets is difficult to
estimate.  These  types of assets  cannot be readily  liquidated  to satisfy the
financial  guarantees and commitments  which the Local General  Partners make to
the Partnership.  Moreover,  other creditors may have claims on these assets. No
escrow  accounts or other  security  arrangements  will be established to ensure
performance  of a Local  General  Partner's  obligations.  The cost to enforce a
Local General Partner's obligations may be high. If a Local General Partner does
not satisfy its obligations  the  Partnership may have no remedy,  or the remedy
may be limited to removing the Local General  Partner as general  partner of the
Local Limited Partnership.

     Fluctuating  economic  conditions can reduce the value of real estate.  Any
investment  in real  estate  is  subject  to  risks  from  fluctuating  economic
conditions.  These  conditions  can  adversely  affect the  ability to realize a
profit or even to recover invested capital. Among these conditions are:

     o    the general and local job market,
     o    the availability and cost of mortgage financing,
     o    monetary inflation,
     o    tax, environmental, land use and zoning policies,
     o    the supply of and demand for similar properties,
     o    neighborhood conditions,
     o    the availability and cost of utilities and water.

 (c)     Tax risks other than those relating to tax credits

In addition to the risks pertaining specifically to tax credits, there are other
Federal income tax risks.  Additional  Federal income tax risks  associated with
the ownership of Partnership Units and the operations of the Partnership and the
Local Limited Partnerships include, but are not limited to, the following:

                                       7
<PAGE>

          No opinion of counsel  as  to  certain  matters.  No legal  opinion is
          obtained regarding matters:

     o    the determination of which depends on future factual circumstances,
     o    which are peculiar to individual Limited Partners, or
     o    which are not customarily the subject of an opinion.

The more significant of these matters include:

     o    allocating purchase price among components of a property, particularly
          as between  buildings and fixtures,  the cost of which is depreciable,
          and the underlying land, the cost of which is not depreciable,
     o    characterizing  expenses and payments made to or by the Partnership or
          a Local Limited Partnership,
     o    identifying  the  portion of the costs of any  Housing  Complex  which
          qualify for historic and other tax credits,
     o    applying to any specific  Limited Partner the limitation on the use of
          tax  credits and tax  losses.  Limited  Partners  must  determine  for
          themselves  the  extent  to  which  they can use tax  credits  and tax
          losses, and
     o    the application of the alternative minimum tax to any specific Limited
          Partner,  or the  calculation  of the  alternative  minimum tax by any
          Limited  Partner.  The  alternative  minimum tax could  reduce the tax
          benefits from an investment in the Partnership.

There can be no assurance,  therefore,  that the IRS will not challenge  some of
the tax positions  adopted by the  Partnership.  The courts could sustain an IRS
challenge. An IRS challenge,  if successful,  could have a detrimental effect on
the Partnership's ability to realize its investment objectives.

     Passive activity rules will limit deduction of the Partnership's losses and
impose tax on interest  income.  The Internal Revenue Code imposes limits on the
ability of most investors to claim losses from  investments  in real estate.  An
individual may claim these so-called  passive losses only as an offset to income
from  investments  in real estate or rental  activities.  An individual  may not
claim  passive  losses as an  offset  against  other  types of  income,  such as
salaries,  wages,  dividends and interest.  These  passive  activity  rules will
restrict the ability of most Limited Partners to use losses from the Partnership
as an offset of non-passive income.

     The  Partnership  may earn interest  income on its reserves and loans.  The
passive activity rules generally will categorize  interest as portfolio  income,
and not passive income.  Passive losses cannot be used as an offset to portfolio
income.  Consequently,  a Limited  Partner  could pay tax liability on portfolio
income from the Partnership.

     At risk rules might  limit  deduction  of the  Partnership's  losses.  If a
significant portion of the financing used to purchase Housing Complexes does not
consist of  qualified  nonrecourse  financing,  the "at risk" rules will limit a
Limited Partner's ability to claim Partnership  losses to the amount the Limited
Partner invests in the Partnership.  The "at risk" rules of the Internal Revenue
Code generally limit a Limited Partner's ability to deduct Partnership losses to
the sum of:

     o    the amount of cash the Limited Partner invests in the Partnership, and
     o    the  Limited  Partner's  share of  Partnership  qualified  nonrecourse
          financing.

Qualified  nonrecourse  financing is non-convertible,  nonrecourse debt which is
borrowed  from a  government,  or  with  exceptions,  any  person  actively  and
regularly engaged in the business of lending money.

     Tax  liability  on sale of  Housing  Complex or Local  Limited  Partnership
Interest  may  exceed the cash  available  from the sale.  When a Local  Limited
Partnership  sells a Housing  Complex it will recognize gain. Such gain is equal
to the difference between:

     o    the sales  proceeds  plus the  amount of  indebtedness  secured by the
          Housing Complex, and
     o    the adjusted basis for the Housing  Complex.  The adjusted basis for a
          Housing Complex is its original cost, plus capital expenditures, minus
          depreciation.
                                       8
<PAGE>
Similarly, when the Partnership sells an interest in a Local Limited Partnership
the  Partnership  will  recognize  gain.  Such  gain is equal to the  difference
between:

     o    the  sales  proceeds  plus the  Partnership's  share of the  amount of
          indebtedness secured by the Housing Complex, and
     o    the  adjusted  basis  for the  interest.  The  adjusted  basis  for an
          interest  in a Local  Limited  Partnership  is the amount paid for the
          interest,  plus income allocations and cash  distributions,  less loss
          allocations.

Accordingly,  gain will be increased by the depreciation deductions taken during
the holding period for the Housing  Complex.  In some cases,  a Limited  Partner
could have a tax liability from a sale greater than the cash  distributed to the
Limited Partner from the sale.

     Alternative  minimum tax  liability  could reduce a Limited  Partner's  tax
benefits. If a Limited Partner pays alternative minimum tax, the Limited Partner
could suffer a reduction in benefits from an investment in the Partnership.  The
application of the alternative  minimum tax is personal to each Limited Partner.
Tax credits may not be utilized to reduce alternative minimum tax liability.

     IRS  could  audit  the  returns  of  the  Partnership,  the  Local  Limited
Partnerships  or the Limited  Partners.  The IRS can audit the  Partnership or a
Local Limited  Partnership  at the entity level with regard to issues  affecting
the  entity.  The IRS does not have to audit  each  Limited  Partner in order to
challenge a position taken by the  Partnership  or a Local Limited  Partnership.
Similarly,  only  one  judicial  proceeding  can  be  filed  to  contest  an IRS
determination.  A contest  by the  Partnership  of any IRS  determination  might
result in high legal fees.

     An audit of the  Partnership  or a Local  Limited  Partnership  also  could
result in an audit of a Limited  Partner.  An audit of a Limited  Partner's  tax
returns  could  result in  adjustments  both to items  that are  related  to the
Partnership and to unrelated  items.  The Limited Partner could then be required
to file amended tax returns and pay additional tax plus interest and penalties.

     A successful IRS challenge to tax allocations of the Partnership or a Local
Limited  Partnership  would  reduce the tax  benefits  of an  investment  in the
Partnership.  Under the Internal  Revenue  Code, a  partnership's  allocation of
income, gains, deductions, losses and tax credits must have substantial economic
effect.   Substantial  economic  effect  is  a  highly-technical   concept.  The
fundamental  principle is two-fold.  If a partner will benefit economically from
an item of  partnership  income or gain,  that item must be  allocated to him so
that he bears the correlative tax burden.  Conversely,  if a partner will suffer
economically  from an item of partnership  deduction or loss,  that item must be
allocated  to  him  so  that  he  bears  the  correlative  tax  benefit.   If  a
partnership's  allocations do not have  substantial  economic  effect,  then the
partnership's tax items are allocated in accordance with each partner's interest
in the  partnership.  The  IRS  might  challenge  the  allocations  made  by the
Partnership:

     o    between the Limited Partners and the General Partner,
     o    among the Limited Partners, or
     o    between the Partnership and a Local General Partner.

If any allocations were successfully  challenged,  a greater share of the income
or gain or a lesser share of the losses or tax credits might be allocated to the
Limited  Partners.  This  would  increase  the tax  liability  or reduce the tax
benefits to the Limited Partners.

     Tax  liabilities  could  arise in later years of the  Partnership.  After a
period  of  years  following  commencement  of  operations  by a  Local  Limited
Partnership,  the Local Limited  Partnership  may generate  profits  rather than
losses.  A Limited Partner would have tax liability on his share of such profits
unless he could offset the income with:

     o    unused passive losses from the Partnership or other investments, or
     o    current passive losses from other investments.

                                       9
<PAGE>
In such circumstances, the Limited Partner would not receive a cash distribution
from the Partnership with which to pay any tax
liability.

     IRS challenge to tax treatment of expenditures could reduce losses. The IRS
may  contend  that  fees and  payments  of the  Partnership  or a Local  Limited
Partnership:

     o    should be deductible over a longer period of time or in a later year,
     o    are excessive and may not be capitalized or deducted in full,
     o    should be capitalized and not deducted, or
     o    may not be included as part of the basis for computing tax credits.

Any such contention by the IRS could adversely impact, among other things:

     o    the  eligible  basis of a Housing  Complex  used to compute Low Income
          Housing Tax Credits,
     o    the adjusted basis of a Housing Complex used to compute depreciation,
     o    the correct deduction of fees,
     o    the  amortization of organization  and offering  expenses and start-up
          expenditures.

If the IRS were successful in any such  contention,  the anticipated tax credits
and losses of the Partnership would be reduced, perhaps substantially.

     Changes  in tax law  might  reduce  the  value of Low  Income  Housing  Tax
Credits.  Although all Low Income Housing Tax Credits are allocated to a Housing
Complex at commencement of the 10-year credit period,  there can be no assurance
that  future   legislation  may  not  adversely  affect  an  investment  in  the
Partnership. For example, legislation could reduce or eliminate the value of Low
Income  Housing Tax Credits.  In this regard,  before 1986,  the  principal  tax
benefit of an investment in low income housing was tax losses.  These tax losses
generally  were  used to reduce  an  investor's  income  from all  sources  on a
dollar-for-dollar basis. Investments in low income housing were made in reliance
on the availability of such tax benefits.  However,  tax legislation  enacted in
1986 severely curtailed deduction of such losses.

     New administrative or judicial  interpretations of the law might reduce the
value of tax  credits.  Many of the  provisions  of the  Internal  Revenue  Code
related  to low  income  housing  and  real  estate  investments  have  not been
interpreted by the IRS in regulations,  rulings or public  announcements,  or by
the courts.  In the future,  these provisions may be interpreted or clarified by
the IRS or the  courts  in a manner  adverse  to the  Partnership  or the  Local
Limited Partnerships.  The IRS constantly reviews the Federal tax rules, and can
revise its  interpretations  of established  concepts.  Any such revisions could
reduce  or  eliminate  tax  benefits   associated  with  an  investment  in  the
Partnership.

     State income tax laws may adversely affect the Limited Partners.  A Limited
Partner  may be  required  to file  income tax returns and be subject to tax and
withholding  in each  state or local  taxing  jurisdiction  in which:  a Housing
Complex is located,  the Partnership or a Local Limited  Partnership  engages in
business  activities,  or the Limited Partner is a resident.  Corporate  Limited
Partners may be required to pay state franchise taxes.

     The tax treatment of particular  items under state or local income tax laws
may vary  materially  from the  Federal  income  tax  treatment  of such  items.
Nonetheless,  many of the Federal income tax risks associated with an investment
in the  Partnership  may also apply  under  state or local  income tax law.  The
Partnership may be required to withhold state taxes from distributions or income
allocations to Limited Partners in some instances.

(d)  Risks related to the Partnership and the Partnership Agreement

     The  Partnership may be unable to timely provide  financial  reports to the
Limited   Partners  which  would  adversely  affect  their  ability  to  monitor
Partnership  operations.  Each  Local  General  Partner  is  required  to retain
independent  public  accountants  and to  report  financial  information  to the
Partnership  in a timely  manner.  There cannot be any assurance  that the Local
General Partners will satisfy these  obligations.  If not, the Partnership would
be unable to provide to the Limited  Partners in a timely  manner its  financial

                                       10
<PAGE>
statements and other reports. That would impact the Limited Partners' ability to
monitor  Partnership  operations.  The Partnership's  failure to meet its filing
requirements  under  the  Securities  Exchange  Act of  1934  could  reduce  the
liquidity  for  the  Partnership  Units  due to  the  unavailability  of  public
information concerning the Partnership. The failure to file could also result in
sanctions imposed by the SEC. Any defense mounted by the Partnership in the face
of such sanctions  could entail legal and other fees,  which would diminish cash
reserves.

     Lack of liquidity of  investment.  It is unlikely that a public market will
develop for the purchase and sale of  Partnership  Units.  Accordingly,  Limited
Partners  may not be  able to sell  their  Partnership  Units  promptly  or at a
reasonable  price.  Partnership  Units  should  be  considered  as  a  long-term
investment  because  the  Partnership  is  unlikely  to sell any  Local  Limited
Partnership  Interests  for at least  15  years.  Partnership  Units  cannot  be
transferred to tax-exempt or foreign  entities,  or through a secondary  market.
The General Partner can deny  effectiveness  of a transfer if necessary to avoid
adverse  tax  consequences  from the  transfer.  The  General  Partner  does not
anticipate that any Partnership Units will be redeemed by the Partnership.

     The Limited Partners will not control the Partnership and must rely totally
on the General Partner.  The General Partner will make all management  decisions
for the Partnership.  Management  decisions include exercising powers granted to
the Partnership by a Local Limited  Partnership.  Limited Partners have no right
or power to take part in Partnership management.

     Individual  Limited  Partners  will have no recourse if they  disagree with
actions authorized by a vote of the majority.  The Partnership  Agreement grants
to Limited Partners owning more than 50% of the Partnership Units the right to:

     o    remove the General Partner and elect a replacement general partner,
     o    amend the Partnership Agreement,
     o    terminate the Partnership.

Accordingly, a majority-in-interest of the Limited Partners could cause any such
events to occur,  even if Limited  Partners owning 49% of the Partnership  Units
opposed such action.

     Limitations  on liability of the General  Partner to the  Partnership.  The
ability of Limited  Partners to sue the General  Partner  and it  affiliates  is
subject to limitations.  The Partnership  Agreement  limits the liability of the
General Partner and it affiliates to the Limited  Partners.  The General Partner
and it  affiliates  will not be  liable  to the  Limited  Partners  for acts and
omissions:  performed  or omitted in good faith,  and  performed or omitted in a
manner which the General Partner  reasonably  believed to be within the scope of
its authority and in the best  interest of the Limited  Partners,  provided such
conduct did not constitute negligence or misconduct.

Therefore,  Limited  Partners may be less able to sue the General Partner and it
affiliates  than would be the case if such  provisions  were not included in the
Partnership Agreement.

     Payment of fees to the General  Partner  and its  affiliates  reduces  cash
available for investment in Local Limited Partnerships.  The General Partner and
it affiliates perform many services for the Partnership.  They are paid fees for
these services,  which reduce the amount of the cash available for investment in
Local Limited Partnerships. Accordingly, an investor investing directly in a low
income  housing  Housing  Complex  would  have a greater  amount  available  for
investment  than  an  investor  investing  in low  income  housing  through  the
Partnership.

     Associates and its  affiliates are serving as the general  partners of many
other  partnerships.  Depending on their corporate area of  responsibility,  the
officers of Associates initially devote approximately 5% to 50% of their time to
the Partnership.  These individuals spend significantly less time devoted to the
Partnership after the investment of the  Partnership's  capital in Local Limited
Partnerships.

     The  interests of Limited  Partners may conflict  with the interests of the
General  Partner and it  affiliates.  The General  Partner and it affiliates are
committed to the  management  of more than 100 other limited  partnerships  that
have investments similar to those of the Partnership. The General Partner and it
affiliates receive substantial compensation from the Partnership.

                                       11
<PAGE>
     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.

Item 1B.  Unresolved Staff Comments

Not applicable.

Item 2.  Properties

Through its investments in Local Limited  Partnerships,  the  Partnership  holds
indirect  ownership  interests in the Housing  Complexes.  The  following  table
reflects the status of the eighteen Housing Complexes as of the dates or for the
periods indicated:
                                       12
<PAGE>
<TABLE>
<CAPTION>
                                                              As of March 31, 2006                       As of December 31, 2005
                                                  --------------------------------------------    ----------------------------------
                                                                                                        Estimated
                                                    Partnership's        Amount                         Aggregate         Mortgage
                                    General       Total Investment         of                           Low Income      Balances of
Local Limited                       Partner           in Local         Investment  Number of              Housing      Local Limited
Partnership Name     Location        Name        Limited Partnerships  Paid to Date  Units   Occupancy Tax Credits (1)  Partnerships
------------------------------------------------------------------------------------------------------------------------------------
<S>             <C>           <C>                  <C>             <C>            <C>     <C>        <C>             <C>
Almond Garden       Delhi,        Anthony Donovan       $ 391,000      $ 391,000       34       100%     $ 807,000      $  1,359,000
Apartment           California
Associates

Almond View         Stockton,     Daniel C. Logue       1,639,000      1,639,000       72       100%     3,523,000         1,718,000
Apartments,         California    and Cyrus Youssefi
Ltd.

Buccaneer           Fernandia     Clifford E. Olsen       365,000        365,000       48       100%       768,000         1,443,000
Associates,         Beach,
Limited             Florida

Candleridge         Perry,        Eric A. Sheldahl        126,000        126,000       24       100%       245,000           677,000
Apartments          Iowa
of Perry
L.P. II

Colonial            Roseville,    S.P. Thomas Company   2,811,000      2,811,000       56       100%     5,872,000         1,898,000
Village             Calfornia     of  Northern
Roseville                         California Inc.
                                  and Project Go,
                                  Inc.

Dallas County       Orrville,     Thomas H. Cooksey and   130,000        130,000       19        84%       287,000           601,000
Housing, Ltd.       Alabama       Apartment Developers,
                                  Inc.

La Paloma del       Deming,       Dean Greenwalt          254,000        254,000       38        95%       625,000         1,400,000
Sol Limited         New Mexico
Partnership

Memory Lane         Yankton,      Skogen - Peterson,      151,000        151,000       18        94%       295,000           666,000
Limited             South Dakota  Inc.
Partnership
</TABLE>
                                       13
<PAGE>
<TABLE>
<CAPTION>
                                                                As of March 31, 2006                    As of December 31, 2005
                                                  --------------------------------------------    ----------------------------------
                                                                                                        Estimated
                                                    Partnership's        Amount                         Aggregate         Mortgage
                                    General       Total Investment         of                           Low Income      Balances of
Local Limited                       Partner           in Local         Investment  Number of              Housing      Local Limited
Partnership Name     Location        Name        Limited Partnerships  Paid to Date  Units   Occupancy Tax Credits (1)  Partnerships
------------------------------------------------------------------------------------------------------------------------------------
<S>            <C>            <C>               <C>               <C>             <C>    <C>          <C>             <C>
Nueva Sierra        Richgrove,    Self-Help          1,688,000         1,688,000      35       100%      3,516,000      $ 1,623,000
Vista               California    Enterprises, Inc.
Associates                        and Nueva Sierra
                                  VistaCorporation

Old Fort            Hidalgo,      Alan Deke            249,000           249,000      40        93%        547,000        1,248,000
Limited             Texas         Noftsker and ABO
Partnership                       Corporation

Orosi               Orosi,        Douglas W. Young     461,000           461,000      42        93%        902,000        1,865,000
Apartments,         California
Ltd.

Parlier Garden      Parlier,      David J. Micheal     453,000           453,000      41       100%        917,000        1,673,000
Apts.               California    and Professional
                                  Apartment
                                  Management, Inc.

Rosewood            Superior,     Duffy Development    185,000           185,000      20        85%        375,000          428,000
Apartments          Wisconsin     Company,  Inc.
Limited
Partnership

Sun Manor,          Itta Bena,    Glenn D. Miller      230,000           230,000      36       100%        464,000        1,036,000
L.P.                Mississippi

Tahoe Pines         South Lake    David J. Michael,  1,633,000         1,633,000      28        96%      3,171,000        1,607,000
Apartments          Tahoe,        Bucky Fong, Dean
                    California    Pearson, Coy
                                  Elvis and Dr.
                                  Patricia Hatton

Venus Retirement    Venus, Texas  W. Joseph Chamy      161,000           161,000      24       100%        318,000          710,000
Village, Ltd.

Walnut - Pixley,    Orange,       Walnut - Pixley,   1,078,000         1,078,000      22        95%      2,309,000          927,000
L.P.                California    Inc.

Winters             Winters,      John P. Casper       531,000           531,000      38       100%      1,072,000        1,794,000
Investment          California                      ----------       -----------    ----       ----   ------------     -------------
Group
                                                   $12,536,000       $12,536,000     635        96%    $26,013,000     $ 22,673,000
                                                   ===========       ===========    ====       ====   ============     =============
</TABLE>
(1) Represents  aggregate total anticipated Low Income Housing Tax Credits to be
received  over the 10 year credit  period if the Housing  Complexes are retained
and rented in compliance  with credit rules for the 15-year  Compliance  Period.
Substantially  all of the  anticipated  Low Income Housing Tax Credits have been
received from the Local Limited Partnerships.  Accordingly, the Partnership does
not  anticipate a  significant  amount of Low Income  Housing Tax Credits  being
allocated to the Limited Partners in the future.

                                       14
<PAGE>
<TABLE>
<CAPTION>
                                                                  46
                                                                --------------------------------------------------------------------
                                                                                 For the year ended December 31, 2005
                                                                --------------------------------------------------------------------
                                                                                                                     Low Income
                                                                                                                 Housing Tax Credits
                                                                                                                     Allocated to
                       Partnership Name                           Rental Income           Net Income (Loss)          Partnership
 -----------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                                  <C>                         <C>
 Almond Garden Apartment Associates                                    $ 190,000     $             (47,000)                      99%

 Almond View Apartments, Ltd.                                            245,000                  (238,000)                      99%

 Buccaneer Associates, Limited                                           245,000                   (33,000)                      99%

 Candleridge Apartments of Perry L.P. II                                 151,000                   (10,000)                      99%

 Colonial Village Roseville                                              541,000                   (12,000)                      99%

 Dallas County Housing, Ltd.                                              67,000                   (29,000)                      99%

 La Paloma del Sol Limited Partnership                                   182,000                    (3,000)                      99%

 Memory Lane Limited Partnership                                          79,000                   (13,000)                      99%

 Nueva Sierra Vista Associates                                           168,000                  (128,000)                      99%

 Old Fort Limited Partnership                                            203,000                   (31,000)                      99%

 Orosi Apartments, Ltd.                                                  232,000                   (10,000)                      99%

 Parlier Garden Apts.                                                    293,000                    16,000                       95%

 Rosewood Apartments Limited Partnership                                  89,000                    (5,000)                      99%

 Sun Manor, L.P.                                                         147,000                   (60,000)                      99%

 Tahoe Pines Apartments                                                  226,000                  (140,000)                      99%

 Venus Retirement Village, Ltd.                                           99,000                   (27,000)                      99%

 Walnut - Pixley, L.P.                                                   168,000                   (20,000)                      99%

 Winters Investment Group                                                278,000                    24,000                       99%
                                                              ------------------      --------------------
                                                                   $   3,603,000     $            (766,000)
                                                              ==================      ====================
</TABLE>
                                       15
<PAGE>
Item 3.  Legal Proceedings

NONE

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

NONE

PART II

Item 5. Market for Registrant's  Common Equity,  Related Stockholder Matters and
        Issuer Purchases of Equity Securities

Item 5a.

(a)  The  Partnership  Units are not traded on a public  exchange  but were sold
     through a public  offering.  It is not  anticipated  that any public market
     will  develop for the purchase  and sale of any  Partnership  Unit and none
     exists.  Partnership Units can be assigned or otherwise transferred only if
     certain requirements in the Partnership Agreement are satisfied.

(b)  At March 31,  2006,  there were 882 Limited  Partners  and 19  assignees of
     Partnership Units who were not admitted as Limited Partners.

(c)  The Partnership was not designed to provide cash  distributions  to Limited
     Partners in  circumstances  other than  refinancing  or  disposition of its
     investments in Local Limited Partnerships.  Any such distributions would be
     made in accordance with the terms of the Partnership Agreement.

(d)  No securities are authorized for issuance by the  Partnership  under equity
     compensation plans.

(e)  No unregistered  securities  were sold by the  Partnership  during the year
     ended March 31, 2006.

Item 5b. Use of Proceeds

NOT APPLICABLE

Item 5c. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

NONE
                                       16
<PAGE>
Item 6.  Selected Financial Data

Selected balance sheet information for the Partnership is as follows:
<TABLE>
<CAPTION>
                                                                                      March 31
                                                 -----------------------------------------------------------------------------------
                                                     2006              2005             2004              2003             2002
                                                 --------------    --------------   --------------    --------------   -------------
<S>                                           <C>               <C>              <C>              <C>               <C>
ASSETS
Cash                                           $       253,910   $       293,367  $       310,717   $       371,426  $       413,336
Investments in Local Limited
  Partnerships, net                                  1,891,029         2,173,564        3,525,413         5,572,016        6,455,167
                                                 --------------    --------------   --------------    --------------   -------------
     Total Assets                              $     2,144,939   $     2,466,931  $     3,836,130   $     5,943,442  $     6,868,503
                                                 ==============    ==============   ==============    ==============   =============
LIABILITIES
Accrued fees and expenses
  due to general partner and affiliates        $     1,539,639   $     1,413,074  $     1,256,656   $     1,126,324  $       994,710

PARTNERS' EQUITY                                       605,300         1,053,857        2,579,474         4,817,118        5,873,793
                                                 --------------    --------------   --------------    --------------   -------------
  Total Liabilities and Partners' Equity       $     2,144,939   $     2,466,931  $     3,836,130   $     5,943,442  $     6,868,503
                                                 ==============    ==============   ==============    ==============   =============
</TABLE>
Selected  results  of  operations,  cash  flows  and other  information  for the
Partnership are as follows:
<TABLE>
<CAPTION>
                                                                                          For the Years Ended
                                                                                               March 31
                                                  ----------------------------------------------------------------------------------
                                                       2006               2005               2004              2003           2002
                                                  ---------------     --------------      ------------     --------------   --------
<S>                                            <C>                 <C>                <C>              <C>             <C>
Loss from operations (Note 1)                   $     (317,823)     $ (1,217,245)      $   (1,950,126)  $    (257,349)  $  (245,989)
Equity in losses of Local Limited Partnerships        (132,114)         (309,324)            (289,176)       (799,326)     (798,807)
Interest income                                          1,380               952                1,658               -             -
                                                  ---------------     --------------      ------------   -------------  ------------
Net loss                                        $     (448,557)     $ (1,525,617)      $   (2,237,644)  $  (1,056,675)  $(1,044,796)
                                                  ===============     ==============      ============   =============  ============
Net loss allocated to:
  General  Partner                              $       (4,486)     $    (15,256)      $      (22,376)  $     (10,567)  $   (10,448)
                                                  ===============     ==============      ============   =============   ===========
  Limited Partners                              $     (444,071)     $ (1,510,361)      $   (2,215,268)  $  (1,046,108)  $(1,034,348)
                                                  ===============     ==============      ============   =============   ===========
Net loss per Partnership Unit                   $       (24.67)     $     (83.90)      $      (123.07)  $      (58.12)  $    (57.46)
                                                  ===============     ==============      ============   ==============  ===========
Outstanding weighted Partnership Units          $       18,000      $     18,000       $       18,000          18,000        18,000
                                                  ===============     ==============      ============   ==============  ===========
</TABLE>
Note 1 - Loss from  operations for the years ended March 31, 2006,  2005,  2004,
2003  and  2002  includes  a charge  for  impairment  losses  and  write-off  of
acquisition  cost  and fees on  investments  in Local  Limited  Partnerships  of
$101,658, $972,589, $1,701,293, $0, and $0, respectively.

                                       17
<PAGE>
<TABLE>
<CAPTION>
                                                                      For the Years Ended
                                                                           March 31
                                   ------------------------------------------------------------------------------------------
                                        2006               2005               2004              2003               2002
                                   ---------------     --------------     -------------     --------------     --------------
<S>                             <C>                  <C>               <C>               <C>                <C>
Net cash provided by
  (used in):
  Operating activities           $        (77,214)    $      (44,726)   $      (69,359)   $      (66,356)    $      (41,575)
  Investing activities                     37,757             27,376             8,650            24,446             17,048
                                   ---------------     --------------     -------------     --------------     --------------
Net decrease in cash                      (39,457)           (17,350)          (60,709)          (41,910)           (24,527)

Cash, beginning of  period                293,367            310,717           371,426           413,336            437,863
                                   ---------------     --------------     -------------     --------------     --------------
Cash, end of period              $        253,910     $      293,367    $      310,717    $      371,426     $      413,336
                                   ===============     ==============     =============     ==============     ==============
</TABLE>
Low Income  Housing  Tax Credits  per  Partnership  Unit were as follows for the
years ended December 31:
<TABLE>
<CAPTION>
                                      2005            2004            2003              2002            2001
                                 -------------    ------------     ------------     -------------    -----------
<S>                             <C>             <C>             <C>              <C>                <C>
Federal                           $       21     $       83      $      111       $        113       $       113
State                                      -              -               -                  -                 -
                                 -------------    ------------     ------------     -------------    ------------
Total                             $       21     $       83      $      111       $        113   $           113
                                 =============    ============     ============     =============    =============
</TABLE>
                                       18
<PAGE>
Item 7. 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-K 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 the
Partnership  or persons  acting on its behalf are  expressly  qualified in their
entirety by  cautionary  statements in this Form 10-K and in other reports filed
with the Securities and Exchange Commission.  The following discussion should be
read in conjunction with the Financial Statements and the Notes thereto included
elsewhere in this filing.

Critical Accounting Policies and Certain Risks and Uncertainties

The   Partnership   believes  that  the  following   discussion   addresses  the
Partnership's most significant accounting policies,  which are the most critical
to  aid  in  fully  understanding  and  evaluating  the  Partnership's  reported
financial results, and certain of the Partnership's risks and uncertainties.

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.

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.

"Equity in losses of Local  Limited  Partnerships"  for each year ended March 31
have been recorded by the Partnership  based on nine months of reported  results
provided by the Local Limited  Partnerships  for each year ended December 31 and
on  three  months  of  results  estimated  by  management  of  the  Partnership.
Management's  estimate  for the  three-month  period is based on  either  actual
un-audited  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  Local  Limited  Partnerships  allocated  to the  Partnership  are not

                                       19
<PAGE>
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 impaired.

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

The  Partnership  does not  consolidate the accounts and activities of the Local
Limited  Partnerships  which are  Variable  Interest  Entities  under  Financial
Accounting  Standards Board  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  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.

Income Taxes

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

Certain Risks and Uncertainties

See item 1A for a discussion of risks regarding the Partnership.

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

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

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.

Financial Condition

The  Partnership's  assets at March 31, 2006  consisted  of $254,000 in cash and
aggregate  investments in the eighteen Local Limited Partnerships of $1,891,000.
Liabilities  at March 31, 2006  primarily  consisted  of  $1,540,000  of accrued
annual  management  fees and advances due to the General  Partner.  (See "Future
Contractual Cash Obligations" below)
                                       20
<PAGE>
Results of Operations

Year  Ended  March  31,  2006   Compared  to  Year  Ended  March  31,  2005  The
Partnership's  net  loss for the  year  ended  March  31,  2006 was  $(449,000),
reflecting  a  decrease  of  $1,077,000   from  the  net  loss  of  $(1,526,000)
experienced  for the year ended  March 31,  2005.  The  decrease  in net loss is
primarily due to a decrease in impairment  loss of $871,000 from  investments in
Local  Limited  Partnerships  for the year ended March 31, 2006  compared to the
year ended March 31, 2005, an increase of $6,000 in reporting income, a decrease
of  $(4,000) in  distribution  income,  a decrease  of $32,000 in  amortization,
offset by an increase of $(5,000) in  accounting  fees,  Additionally  equity in
losses of Local Limited Partnerships  decreased by approximately  $177,000.  The
decrease in equity in losses of Local Limited  Partnerships  is primarily due to
not  recognizing  certain  losses  of  the  Local  Limited   Partnerships.   The
investments  in such Local  Limited  Partnerships  had reached zero at March 31,
2005.  Since the  Partnership's  liability  with respect to its  investments  is
limited, losses in excess of investments are not recognized.  The investments in
such Local Limited  Partnerships  had reached zero at March 31, 2005.  Since the
Partnership's  liability with respect to its  investments is limited,  losses in
excess of investments are not recognized.

Year  Ended  March  31,  2005   Compared  to  Year  Ended  March  31,  2004  The
Partnership's  net loss for the year  ended  March  31,  2005 was  $(1,525,000),
reflecting a decrease of $712,000 from the net loss of $(2,238,000)  experienced
for the year ended March 31, 2004.  The decrease in net loss is primarily due to
a decrease in impairment  expense of $729,000 from  investments in Local Limited
Partnerships  for the year ended March 31, 2005 compared to the year ended March
31, 2004, an increase of $5,000 in distribution  income,  a decrease of $(1,000)
in reporting fees, a decrease of $(1,000) in interest  income, a $5,000 decrease
in  amortization,  offset by an  increase of  $(4,000)  in  accounting  expense.
Additionally  equity  in  losses  of Local  Limited  Partnerships  increased  by
approximately $(20,000).

Liquidity and Capital Resources

Year Ended March 31, 2006  Compared to Year Ended March 31, 2005.  Net cash used
during the year ended March 31, 2006 was  $(39,000),  reflecting a net change of
$(22,000)  compared  to net cash  used  for the year  ended  March  31,  2005 of
$(17,000).  The  change  was  due  primarily  to  a  decrease  of  $(32,000)  in
amortization,  a $(30,000)  decrease in accrued fees and expenses due to General
Partner  and  affiliates,  offset  by a $10,000  increase  in cash  provided  by
distributions from Local Limited Partnerships.

Year Ended March 31, 2005  Compared to Year Ended March 31, 2004.  Net cash used
during the year ended March 31, 2005 was  $(17,000),  reflecting a net change of
$44,000  compared  to net  cash  used  for the  year  ended  March  31,  2004 of
$(61,000).  The  change  was due  primarily  to an  increase  of $19,000 in cash
provided by distributions from Local Limited  Partnerships,  in addition to cash
used in operations  decreasing by $25,000. The decrease is largely due to change
in accrued fees and expenses due to General Partner and affiliates increasing by
approximately $26,000.

During the years ended March 31, 2006, 2005 and 2004,  accrued  payables,  which
consist  primarily of related party  management fees due to the General Partner,
increased by $127,000, $156,000 and $130,000,  respectively. 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 March 31, 2006, to be  sufficient  to meet all  currently  foreseeable
future cash  requirements.  This  excludes  amounts  owed to  Associates  by the
Partnership disclosed below.
                                       21
<PAGE>
Future Contractual Cash Obligations

The following table  summarizes our future  contractual  cash  obligations as of
March 31, 2006:
<TABLE>
<CAPTION>
                                             2007          2008          2009          2010        2011       Thereafter     Total
                                         -----------   -----------   -----------   -----------   ---------   -----------    --------
<S>                                    <C>          <C>           <C>          <C>             <C>        <C>              <C>
Asset Management Fees (1)               $ 1,716,849  $    181,385  $   181,385  $      181,385  $ 181,385  $  7,074,015   $9,516,404
Capital Contributions Payable to Local
   Limited Partnerships                           -             -            -               -          -             -            -
                                         -----------   -----------   -----------   -----------   ---------   ------------ ----------
Total contractual cash obligations      $ 1,716,849  $    181,385  $   181,385  $      181,385  $ 181,385  $  7,074,015   $9,516,404
                                         ===========   ===========   ===========   ===========   =========   ============ ==========
</TABLE>
(1)  Asset  Management  Fees  are  payable  annually  until  termination  of the
     Partnership, which is to occur no later than 2050. The estimate of the fees
     payable included herein assumes the retention of the Partnership's interest
     in all Housing Complexes until 2050. Amounts due to the General Partners as
     of March 31,  2006 have  been  included  in the 2007  column.  The  General
     Partner does not anticipate that these fees will be paid until such time as
     capital reserves are in excess of the aggregate of the existing contractual
     obligations  and the  anticipated  future  foreseeable  obligations  of the
     Partnership.

For additional  information  regarding our asset  management fees, see Note 3 to
the financial statements included elsewhere herein.

Off-Balance Sheet Arrangements

The Partnership has no off-balance sheet arrangements.


Exit Strategy

See item 1B for information in this regard.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

NOT APPLICABLE

Item 8.  Financial Statements and Supplementary Data

                                       22
<PAGE>
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Partners
WNC California Housing Tax Credits III, L.P.

     We have audited the accompanying  balance sheets of WNC California  Housing
Tax Credits III, L.P. (the  Partnership)  as of March 31, 2006 and 2005, and the
related statements of operations,  partners' equity (deficit) and cash flows for
the periods ended March 31, 2006, 2005 and 2004. These financial  statements are
the  responsibility of the Partnership's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

     We  conducted  our audits in  accordance  with the  standards of the Public
Company  Accounting  Oversight Board (United  States).  Those standards  require
that we plan and perform the audit to obtain reasonable  assurance about whether
the financial statements are free of material  misstatement.  The Partnership is
not required to have,  nor were we engaged to perform,  an audit of its internal
control over financial reporting.  Our audit included  consideration of internal
control over financial  reporting as a basis for designing audit procedures that
are appropriate in the  circumstances,  but not for the purpose of expressing an
opinion  on  the  effectiveness  of  the  Partnership's  internal  control  over
financial  reporting.   Accordingly,  we  express  no such  opinion.   An  audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the financial position of WNC California Housing Tax
Credits  III,  L.P.  as of March  31,  2006 and  2005,  and the  results  of its
operations  and its cash flows for the periods  ended March 31,  2006,  2005 and
2004 in conformity with accounting  principles  generally accepted in the United
States of America.

     Our  audits  were made for the  purpose  of forming an opinion on the basic
financial statements taken as a whole.  The schedules listed under Item 15(a)(2)
in the index are presented for the purpose of complying  with the Securities and
Exchange  Commission's rules and are not part of the basic financial statements.
These  schedules have been subjected to the auditing  procedures  applied to the
audits of the basic  financial  statements  and,  in our  opinion,  based on our
audits,  fairly state in all  material  respects the  financial  statement  data
required to be set forth therein in relation to the basic  financial  statements
taken as a whole.




/s/ Reznick Group P.C.
----------------------

Bethesda, Maryland
October 16, 2007

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

                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                                            March 31
                                                                                           -----------------------------------------
                                                                                                  2006                   2005
                                                                                           ------------------     ------------------
 ASSETS
<S>                                                                                       <C>                   <C>
 Cash and cash equivalents                                                                   $         253,910    $          293,367
 Investments in Local Limited Partnerships, net
   (Notes 2 and 3)                                                                                  1,891,029             2,173,564
                                                                                           ------------------     ------------------
          Total Assets                                                                      $       2,144,939    $        2,466,931
                                                                                           ==================     ==================
 LIABILITIES AND PARTNERS' EQUITY (DEFICIT)

 Liabilities:
    Accrued fees and expenses due to General Partner
       and affiliates (Note 3)                                                              $      1,539,639     $        1,413,074
                                                                                           -----------------     ------------------

 Partners' equity (deficit):
    General Partner                                                                                 (164,078)              (159,592)
    Limited Partners (30,000 Partnership Units authorized; 18,000 Partnership Units
       issued and outstanding at March 31, 2006 and 2005)                                            769,378              1,213,449
                                                                                           ------------------     ------------------

        Total partners' equity (deficit)                                                             605,300              1,053,857
                                                                                           ------------------     ------------------

              Total Liabilities and Partners' Equity (Deficit)                              $      2,144,939     $        2,466,931
                                                                                           ==================     ==================
</TABLE>
                 See accompanying notes to financial statements

                                       24
                                     <PAGE>
                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                            STATEMENTS OF OPERATIONS

                For the Years Ended March 31, 2006, 2005 and 2004
<TABLE>
<CAPTION>
                                                                                             For the Years Ended
                                                                                                  March 31
                                                                   -----------------------------------------------------------------
                                                                         2006                  2005                    2004
                                                                   ----------------     ----------------       ---------------------
<S>                                                               <C>                 <C>                   <C>
Reporting fees                                                     $          9,241    $           3,600     $               4,947
Distribution income                                                             718                5,044                         -
Other income                                                                      -                    -                        20
                                                                   ----------------      ----------------       -------------------
   Total income                                                               9,959                8,644                     4,967
                                                                   ----------------      ----------------       -------------------
Operating expenses:
   Amortization (Notes 2 and 3)                                              11,006               42,560                    47,484
   Asset management fees (Note 3)                                           181,385              181,385                   181,385
   Impairment loss (Note 2)                                                 101,658              972,589                 1,701,293
   Accounting fees                                                           26,472               21,025                    17,126
   Other                                                                      7,261                8,330                     7,805
                                                                    ---------------      ---------------       -------------------
    Total operating expenses                                                327,782            1,225,889                 1,955,093
                                                                    ---------------      ---------------       -------------------
Loss from operations                                                       (317,823)          (1,217,245)               (1,950,126)

Equity in losses of Local Limited
  Partnerships (Note 2)                                                    (132,114)            (309,324)                 (289,176)

Interest income                                                               1,380                  952                      1,658
                                                                    ----------------      ---------------       -------------------
Net loss                                                           $       (448,557)   $      (1,525,617)    $          (2,237,644)
                                                                    ================      ===============       ===================
Net loss allocated to:
   General Partner                                                 $         (4,486)   $         (15,256)    $             (22,376)
                                                                    ================      ===============       ===================
   Limited Partners                                                $       (444,071)   $      (1,510,361)    $          (2,215,268)
                                                                    ================      ===============       ===================
Net loss per Partnership Unit                                      $         (24.67)   $          (83.90)    $             (123.07)
                                                                    ================      ===============       ===================
Outstanding weighted Partnership Units                                       18,000               18,000                    18,000
                                                                    ================      ===============       ===================
</TABLE>
                 See accompanying notes to financial statements

                                       25
<PAGE>
                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    STATEMENTS OF PARTNERS' EQUITY (DEFICIT)

                For The Years Ended March 31, 2006, 2005 and 2004
<TABLE>
<CAPTION>
                                                                      General Partner       Limited Partners              Total
                                                                     -----------------      -----------------      -----------------
<S>                                                               <C>                    <C>                      <C>
Partners' equity (deficit) at March 31, 2003                       $         (121,960)    $        4,939,078       $      4,817,118

Net loss                                                                      (22,376)            (2,215,268)            (2,237,644)
                                                                     -----------------      ------------------      ----------------
Partners' equity (deficit) at March 31, 2004                                 (144,336)             2,723,810              2,579,474

Net loss                                                                      (15,256)            (1,510,361)            (1,525,617)
                                                                     -----------------      ------------------      ----------------
Partners' equity (deficit) at March 31, 2005                                 (159,592)             1,213,449              1,053,857

Net loss                                                                       (4,486)              (444,071)              (448,557)
                                                                     -----------------      ------------------      ----------------
Partners' equity (deficit) at March 31, 2006                       $         (164,078)    $          769,378       $        605,300
                                                                     =================      ====================    ================
</TABLE>
                 See accompanying notes to financial statements

                                       26
<PAGE>
                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                            STATEMENTS OF CASH FLOWS

                For the Years Ended March 31, 2006, 2005 and 2004
<TABLE>
<CAPTION>
                                                                                                For the Years Ended
                                                                                                     March 31
                                                                         -----------------------------------------------------------
                                                                                2006                   2005                 2004
                                                                         -------------------     ------------------      -----------
<S>                                                                   <C>                    <C>                    <C>
Cash flows from operating activities:
   Net loss                                                             $        (448,557)    $       (1,525,617)    $   (2,237,644)
   Adjustments to reconcile net loss to
     net cash used in operating activities:
     Amortization                                                                  11,006                 42,560             47,484
     Equity in losses of Local Limited
       Partnerships                                                               132,114                309,324            289,176
     Impairment loss                                                              101,658                972,589          1,701,293
     Change in accrued fees and
       expenses due to General
       Partner and affiliates                                                     126,565                156,418            130,332
                                                                         -------------------  ------------------      --------------
Net cash used in                                                                  (77,214)               (44,726)           (69,359)
  operating activities                                                   -------------------  ------------------      --------------

Cash flows from investing activities:
   Distributions from Local Limited
     Partnerships                                                                  37,757                 27,376              8,650
                                                                         -------------------     ---------------      --------------
Net decrease in cash and cash equivalents                                         (39,457)              (17,350)            (60,709)

Cash and cash equivalent, beginning of year                                       293,367               310,717             371,426
                                                                         -------------------     ---------------      --------------

Cash and cash equivalent, end of year                                   $         253,910     $         293,367       $     310,717
                                                                         ===================     ===============      ==============
SUPPLEMENTAL DISCLOSURE
  OF CASH FLOW INFORMATION:

  Taxes paid                                                            $             800     $            800        $          800
                                                                         ===================     ===============      ==============
</TABLE>
                 See accompanying notes to financial statements

                                       27
<PAGE>
                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS

                For The Years Ended March 31, 2006, 2005 and 2004

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

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  Complexes") 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  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  own
substantially  all of the outstanding  stock of Associates.  The business of the
Partnership is conducted  primarily through  Associates,  as the Partnership and
General Partner have no employees of their own.

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

The 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.

The Partnership  Agreement  authorized the sale of up to 30,000 units of Limited
Partnership interest  ("Partnership  Units") at $1,000 per Partnership Unit. The
offering  of  Partnership  Units  concluded  in July 1994 at which  time  17,990
Partnership Units, representing subscriptions in the amount of $17,990,000,  had
been  accepted.  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,  cash available for  distribution  from the
Partnership and 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
properties  will be used  first  to pay  debts  and  other  obligations  per the
respective Local Limited Partnership Agreement. Any remaining proceeds will then
be paid to the  Partnership.  The sale of a Housing  Complex  may be  subject to
other restrictions and obligations.  Accordingly, there can be no assurance that
a Local Limited Partnership will be able to sell its Housing Complex. Even if it
does so, there can be no assurance that any significant  amounts of cash will be
distributed to the  Partnership.  Should such  distributions  occur, the Limited
Partners  will be  entitled  to  receive  distributions  equal to their  capital
contributions  and their  return on  investment  (as defined in the  Partnership
Agreement) and the General  Partners would then be entitled to receive  proceeds
equal to their capital contributions from the remainder.  Any additional sale or
refinancing  proceeds  will  be  distributed  90% to the  Limited  Partners  (in
proportion to their respective investments) and 10% to the General Partners.

                                       28
<PAGE>
                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS -CONTINUED

                For The Years Ended March 31, 2006, 2005 and 2004

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

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

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

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

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

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

Substantially  all of the Low  Income  Housing  Tax  Credits  anticipated  to be
realized from the Local Limited Partnerships have been realized. The Partnership
does not anticipate  being allocated a significant  amount of Low Income Housing
Tax Credits from the Local Limited  Partnerships in the future.  Until the Local
Limited  Partnerships  have completed the 15 year Low Income Housing Tax Credits
compliance  period  risks  exist for  potential  recapture  of prior Low  Income
Housing Tax Credits.
                                       29
<PAGE>
                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS -CONTINUED

                For The Years Ended March 31, 2006, 2005 and 2004

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

Associates has agreed to continue providing  advances  sufficient enough to fund
the operations  and working  capital  requirements  of the  Partnership  through
September 30, 2008,  if the  Partnership  were to  experience a working  capital
deficiency.

Anticipated  future and  existing  cash  resources  of the  Partnership  are not
sufficient   to  pay  existing   liabilities   of  the   Partnership.   However,
substantially all of the existing  liabilities of the Partnership are payable to
the General  Partner and/or its  affiliates.  Though the amounts  payable to the
General Partner and/or its affiliates are contractually  currently payable,  the
Partnership  anticipates that the General Partner and/or its affiliates will not
require the payment of these contractual  obligations until capital reserves are
in excess of the aggregate of 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  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.

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

The IRS  Compliance  Period for Low Income  Housing  Tax  Credit  properties  is
generally  15  years  following   construction  or  rehabilitation   completion.
Associates was one of the first in the industry to offer syndicated  investments
in Low Income Housing Tax Credits.  The initial  programs are  completing  their
compliance periods.

With that in mind,  the General  Partner is continuing its review of the Housing
Complexes,  with special  emphasis on the more mature 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.  As of March  31,  2006,  no  Housing
Complexes have been selected for disposition.  While  liquidation of the Housing
Complexes continues to be evaluated,  the dissolution of the Partnership was not
imminent  as of  March  31,  2006.  As of March  31,  2006  none of the  Housing
Complexes had completed the 15 year compliance period.

On February 13, 2006 the Partnership filed a form 8-K explaining the liquidation
process  that is  beginning  as the  low-income  housing  tax credit  properties
complete the 15 years compliance period.

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

                                       30
<PAGE>
                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS -CONTINUED

                For The Years Ended March 31, 2006, 2005 and 2004

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

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 Notes 2 and 3)

"Equity in losses of Local  Limited  Partnerships"  for each year ended March 31
have been recorded by the Partnership  based on nine months of reported  results
provided by the Local Limited  Partnerships  for each year ended December 31 and
on  three  months  of  results  estimated  by  management  of  the  Partnership.
Management's  estimate  for the  three-month  period is based on  either  actual
un-audited  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  Local  Limited  Partnerships  allocated  to  the  Partnership  is 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 impaired  (see Note 3). 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.

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   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  credit
recapture.

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

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.

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 March 31,
2006 and 2005, the Partnership had no cash equivalents.

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

As of March 31, 2006 and 2005,  the  Partnership  maintained  cash balances at a
certain financial  institution in excess of the federally  insured maximum.  The
Partnership  believes it is not  exposed to any  significant  financial  risk on
cash.
                                       31
<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS -CONTINUED

                For The Years Ended March 31, 2006, 2005 and 2004

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

Net Loss per Partnership Unit
-----------------------------

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

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

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

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

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

Reclassifications
-----------------

Certain  reclassifications  have  been  made  to the  2005  and  2004  financial
statements to be consistent with the 2006 presentation.

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

Acquisition  fees  and  costs  are  being  amortized  over 30  years  using  the
straight-line  method.  Amortization  expense for the year ended March 31, 2006,
2005  and  2004  was  $11,006,  $42,560  and  $47,484,  respectively.  Estimated
amoritization  expense for each of the ensuing  years  through March 31, 2011 is
$8,200.

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 years
ended March 31, 2006, 2005 and 2004,  impairment  expense related to investments
in Local Limited Partnerships was $0, $417,945 and $1,439,776, 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 the
years  ended  March 31,  2006,  2005 and 2004,  impairment  expense  related  to
acquisition fees and costs was $101,658, $554,644 and $261,517, respectively.

                                       32
<PAGE>
                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS -CONTINUED

                For The Years Ended March 31, 2006, 2005 and 2004

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

As of the periods  presented,  the Partnership has acquired limited  partnership
interests  in 18  Local  Limited  Partnerships  each of which  owns one  Housing
Complex  consisting of an aggregate of 635 apartment units. The respective 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 agreements,  of the operating profits and losses, taxable income and
losses and Low Income Housing Tax Credits of the Local Limited Partnerships.

The  Partnership's  investments  in Local Limited  Partnerships  as shown in the
balance  sheets  at  March  31,  2006 and 2005  are  approximately  $27,000  and
$487,000,  respectively,  greater than the Partnership's equity at the preceding
December  31 as shown in the  Local  Limited  Partnerships'  combined  financial
statements  presented  below.  This  difference  is primarily  due to unrecorded
losses,  as discussed below,  acquisition,  selection and other costs related to
the  acquisition  of  the  investments   which  have  been  capitalized  in  the
Partnership's  investment  account along with impairment  losses recorded in the
Partnership's  investment  account.  The Partnership's  investment is also lower
than  the  Partnership's  equity  as shown in the  Local  Limited  Partnership's
combined  financial  statements  due to the  estimated  losses  recorded  by the
Partnership for the three month period ended March 31.

A loss in value from a Local Limited  Partnership other than a temporary decline
would be recorded as an impairment loss. Impairment is measured by comparing the
investment  carrying  amount to the sum of the total amount of the remaining Low
Income  Housing Tax  Credits  allocated  to the  Partnership  and the  estimated
residual  value of the  investment.  Accordingly,  the  Partnership  recorded an
impairment loss of $101,658,  $972,589,  and $1,701,293,  during the years ended
March 31, 2006, 2005 and 2004, respectively.

At March 31, 2006 and 2005,  the  investment  accounts in certain  Local Limited
Partnerships  have  reached  a zero  balance.  Consequently,  a  portion  of the
Partnership's  estimate  of its share of losses  for the years  ended  March 31,
2006, 2005 and 2004 amounting to approximately $661,000, $316,000, and $630,000,
respectively,  have not been  recognized.  As of March 31, 2006,  the  aggregate
share of net losses not recognized by the Partnership amounted to $2,435,000.

                                       33
<PAGE>
                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS -CONTINUED

                For The Years Ended March 31, 2006, 2005 and 2004

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

Following is a summary of the equity method activity of the investments in Local
Limited Partnerships for periods presented:
<TABLE>
<CAPTION>
                                                                                                    For the Years
                                                                                                    Ended March 31
                                                                                  --------------------------------------------------
                                                                                       2006              2005              2004
                                                                                  ----------------  ---------------  ---------------
<S>                                                                            <C>                  <C>              <C>
Investments per balance sheet, beginning of period                              $        2,173,564   $   3,525,413    $   5,572,016
Distributions received from Local Limited Partnerships                                     (37,757)        (27,376)          (8,650)
Equity in losses of Local Limited Partnerships                                            (132,114)       (309,324)        (289,176)
Impairment  loss                                                                          (101,658)       (972,589)      (1,701,293)
Amortization of paid acquisition fees and costs                                            (11,006)        (42,560)         (47,484)
                                                                                  ----------------   --------------     ------------
Investments per balance sheet, end of period                                    $        1,891,029   $   2,173,564    $   3,525,413
                                                                                  ================   ==============     ============
</TABLE>
<TABLE>
<CAPTION>
                                                                                                    For the Years
                                                                                                    Ended March 31
                                                                                  --------------------------------------------------
                                                                                       2006             2005               2004
                                                                                  --------------    -------------     --------------
<S>                                                                            <C>                <C>               <C>
Investments in Local Limited Partnerships, net                                  $      1,746,236   $    1,916,105    $     2,670,751
Acquisition fees and costs, net of accumulated amortization of $1,669,226,
$1,556,562 and $959,357                                                                  144,793          257,457            854,662
                                                                                  --------------    -------------    ---------------
Investments per balance sheet, end of period                                    $      1,891,029  $     2,173,564    $     3,525,413
                                                                                  ==============    =============    ===============
</TABLE>
The financial  information from the individual financial statements of the Local
Limited Partnerships include rental and interest subsidies. Rental subsidies are
included in total revenues and interest  subsidies are generally  netted against
interest expense.  Approximate combined condensed financial information from the
individual financial statements of the Local Limited Partnerships as of December
31 and for the years then ended is as follows:

                        COMBINED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                                2005                    2004
                                                                                       --------------------      -------------------
  ASSETS
<S>                                                                               <C>                       <C>
  Buildings and improvements, net of accumulated depreciation as of December 31,
  2005 and 2004 of $13,174,000 and $12,067,000, respectively.                      $          23,128,000     $          24,179,000
  Land                                                                                         2,233,000                 2,233,000
  Other assets                                                                                 2,929,000                 2,704,000
                                                                                       --------------------      -------------------
    Total Assets                                                                   $          28,290,000     $          29,116,000
                                                                                       ====================      ===================
LIABILITIES

Mortgage loans payable                                                             $          22,673,000     $          23,545,000
Due to related parties                                                                         1,287,000                   496,000
Other liabilities                                                                              1,937,000                 1,795,000
                                                                                        --------------------      ------------------
    Total Liabilities                                                                         25,897,000                25,836,000
                                                                                        --------------------      ------------------
PARTNERS' EQUITY

WNC California Housing Tax Credits III, L.P.                                                   1,864,000                 2,661,000
Other partners                                                                                   529,000                   619,000
                                                                                        --------------------      ------------------
    Total Partners' Equity                                                                     2,393,000                 3,280,000
                                                                                        --------------------      ------------------
       Total Liabilities and Partners' Equity                                      $          28,290,000     $          29,116,000
                                                                                        ====================      ==================
</TABLE>
                                       34
<PAGE>
                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS -CONTINUED

                For The Years Ended March 31, 2006, 2005 and 2004

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

                   COMBINED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                     2005                      2004                       2003
                                                              --------------------      --------------------       -----------------
<S>                                                         <C>                       <C>                       <C>
Revenues                                                     $           3,704,000     $          3,688,000      $        3,570,000
                                                              --------------------      --------------------       -----------------
Expenses:
   Operating expenses                                                    2,524,000                2,478,000               2,597,000
   Interest expense                                                        829,000                  868,000                 872,000
   Depreciation and amortization                                         1,117,000                1,120,000               1,110,000
                                                              --------------------      --------------------       -----------------
        Total expenses                                                   4,470,000                4,466,000               4,579,000
                                                              --------------------      --------------------       -----------------
Net loss                                                     $            (766,000)    $           (778,000)     $       (1,009,000)
                                                              ====================      ====================       =================
Net loss allocable to the Partnership                        $            (758,000)    $           (741,000)     $       (1,001,000)
                                                              ====================      ====================       =================
Net loss recorded by the Partnership                         $            (132,000)    $           (309,000)     $         (289,000)
                                                              ====================      ====================       =================
</TABLE>
Certain Local Limited  Partnerships  have incurred  operating losses and/or have
working  capital  deficiencies.  In the event these Local  Limited  Partnerships
continue to incur significant operating losses, additional capital contributions
by the  Partnership  and/or the Local General Partner may be required to sustain
the  operations  of such  Local  Limited  Partnerships.  If  additional  capital
contributions are not made when they are required, the Partnership's  investment
in certain of such Local Limited  Partnerships  could be impaired,  and the loss
and recapture of the related Low Income Housing Tax Credits could occur.

NOTE 3 - RELATED PARTY TRANSACTIONS
-----------------------------------

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

     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  $1,475,207 and
     $1,368,674 as of March 31, 2006 and 2005, respectively.  Impairment expense
     related to  acquisition  fees for the years ended March 31, 2006,  2005 and
     2004 was $95,526,  $554,644 and  $233,539, respectively.  These amounts are
     included in accumulated amortization at each of the respective year ends.

     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 and $187,888 for the
     years  ended  March 31,  2006 and 2005,  respectively.  Of the  accumulated
     amortization  recorded on the balance sheet at March 31, 2006,  $6,132, $0,
     and $27,978 of the related  expense was reflected as impairment loss during
     the years ended March 31, 2006, 2005 and 2004, respectively,  to reduce the
     respective net  acquisition  cost component of investments in Local Limited
     Partnerships  to zero for those  Local  Limited  Partnerships  which  would
     otherwise be below a zero balance.

                                       35
<PAGE>
                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS -CONTINUED

                For The Years Ended March 31, 2006, 2005 and 2004
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
-------------------------------------------------------

     An annual  management fee equal to 0.5% of the invested assets of the Local
     Limited  Partnerships,  including the Partnership's  allocable share of the
     mortgages  for the life of the  Partnership.  Management  fees of $181,385,
     were  incurred  during the years ended March 31,  2006,  2005 and 2004,  of
     which,  approximately  $53,000,  $30,000,  and $50,000 were paid during the
     years ended March 31, 2006, 2005 and 2004, respectively.

     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 approximately  $35,000,  $24,000 and $24,000 during the
     years ended March 31, 2006, 2005 and 2004, respectively.

     A subordinated  disposition fee in an amount equal to 1% of the sales price
     of  real  estate  sold.  Payment  of this  fee to the  General  Partner  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 fee was incurred for the three
     year period ended March 31, 2006.

The accrued fees and expenses due to General  Partner and affiliates  consist of
the following:
<TABLE>
<CAPTION>
                                                                                                       March 31
                                                                                       ------------------------------------------
                                                                                              2006                    2005
                                                                                       ------------------     -------------------
<S>                                                                                 <C>                    <C>
Expenses paid by the General Partner or its affiliate on behalf of
   the Partnership                                                                   $             4,175    $              5,870

Accrued asset management fees                                                                  1,535,464               1,407,204
                                                                                       ------------------     -------------------
                                                                                     $         1,539,639    $          1,413,074
                                                                                       ==================     ===================
</TABLE>
The General  Partner and/or its affiliates do not anticipate  that these accrued
fees will be paid in full until such time as capital  reserves  are in excess of
the future foreseeable working capital requirements of the Partnership.

                                       36
<PAGE>
                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS -CONTINUED

                For The Years Ended March 31, 2006, 2005 and 2004

NOTE 4 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
----------------------------------------------------

The following is a summary of the quarterly operations for the years ended March
31:
<TABLE>
<CAPTION>
                                                       June 30              September 30            December 31           March 31
                                                   -----------------     ------------------      -----------------      ------------
<S>                                              <C>                   <C>                     <C>                 <C>
                    2006
                    ----
Income                                             $          6,000     $           12,000       $             -     $       (8,000)

Operating expenses                                          (62,000)               (62,000)             (152,000)           (52,000)

Loss from operations                                        (56,000)               (50,000)             (152,000)           (60,000)

Equity in losses of Local Limited
     Partnerships                                           (42,000)               (40,000)              (36,000)           (14,000)

Interest income                                                   -                      -                     -              1,000

Net loss                                                    (98,000)               (90,000)             (188,000)           (73,000)

Net Loss available to Limited Partners                      (97,000)               (89,000)             (186,000)           (72,000)

Net Loss per Partnership  Unit                                   (5)                    (5)                  (10)                (4)
</TABLE>
<TABLE>
<CAPTION>
                                                         June 30             September 30          December 31           March 31
                                                     ----------------      ----------------      ----------------      -------------
<S>                                               <C>                   <C>                 <C>                    <C>
                    2005
                    ----
Income                                             $           5,000     $              -     $                -     $        4,000

Operating expenses                                           (60,000)             (63,000)               (71,000)        (1,032,000)

Loss from operations                                         (55,000)             (63,000)               (71,000)        (1,028,000)

Equity in losses of Local Limited
     Partnerships                                            (76,000)             (76,000)              (162,000)             5,000

Interest income                                                    -                    -                      -              1,000

Net loss                                                    (131,000)            (139,000)              (233,000)        (1,022,000)

Net Loss available to Limited Partners                      (130,000)            (138,000)              (230,000)        (1,012,000)

Net Loss per Partnership Unit                                     (7)                  (8)                   (13)               (56)
</TABLE>
                                       37
<PAGE>
                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS -CONTINUED

                For The Years Ended March 31, 2006, 2005 and 2004

NOTE 4 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED), continued
---------------------------------------------------------------
<TABLE>
<CAPTION>
                                                         June 30             September 30         December 31            March 31
                                                     ----------------      ----------------      ----------------      -------------
                    2004
                    ----
<S>                                               <C>                    <C>                   <C>                   <C>
Income                                             $            2,000     $           1,000     $           1,000     $       1,000

Operating expenses                                            (65,000)             (155,000)              (64,000)       (1,671,000)

Loss from operations                                          (63,000)             (154,000)              (63,000)       (1,670,000)

Equity in losses of Local Limited
     Partnerships                                            (140,000)             (134,000)             (126,000)          111,000

Interest income                                                     -                 1,000                     -             1,000

Net loss                                                     (203,000)             (287,000)             (189,000)       (1,558,000)

Net Loss available to Limited Partners                       (201,000)             (284,000)             (187,000)       (1,543,000)

Net Loss per Partnership Unit                                     (11)                  (16)                  (10)              (86)
</TABLE>

                                       38
<PAGE>
Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          ----------------------------------------------------------------------
          Financial Disclosure
          --------------------
NONE

Item 9A. Controls and Procedures

(a)  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 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.

(b)  There were no changes in the Partnership's  internal control over financial
     reporting  that  occurred  during the  quarter  ended  March 31,  2006 that
     materially  affected,  or are reasonably likely to materially  affect,  the
     Partnership's internal control over financial reporting.

Item 9B. Other Information

NONE

PART III

Item 10. Directors and Executive Officers of the Registrant

      (a) Identification of Directors, (b) Identification of Executive Officers,
      --------------------------------------------------------------------------
      (c) Identification of Certain Significant Employees, (d) Family
      ----------------------------------------------------------------
       Relationships, and (e) Business Experience
      -------------------------------------------

Neither  the General  Partner  nor the  Partnership  has  directors,  executives
officers or employees of its own. The business of the  Partnership  is conducted
primarily through Associates.  Associates is a California  corporation which was
organized in 1971. The following  biographical  information is presented for the
officers and  employees of  Associates  with  principal  responsibility  for the
Partnership's affairs.

Wilfred N. Cooper, Sr.         Chairman
Wilfred N. Cooper, Jr.         President and Chief Executive Officer
David N. Shafer, Esq.          Executive Vice President
Michael J. Gaber               Executive Vice President
Sylvester P. Garban            Senior Vice President - Institutional Investments
Thomas J. Riha, CPA            Senior Vice President - Chief Financial Officer
Thomas J. Hollingsworth        Vice President - Asset Management
Gregory S. Hand                Vice President - Acquisitions
Melanie R. Wenk                Vice President - Portfolio Management

In addition to Wilfred N. Cooper,  Sr., the directors of Associates  are Wilfred
N. Cooper,  Jr., Kay L. Cooper, and Jennifer Cooper. The principal  shareholders
of Associates are a trust established by the Coopers.

Wilfred N.  Cooper,  Sr.,  age 76, is the founder  and  Chairman of the Board of
Directors of Associates,  a Director of WNC Capital  Corporation,  and a general
partner in some of the  partnerships  previously  sponsored  by  Associates  Mr.
Cooper has been actively involved in the affordable housing industry since 1968.
Previously,  during 1970 and 1971,  he was  founder and a principal  of Creative
Equity  Development  Corporation,  a predecessor of Associates,  and of Creative
Equity Corporation, a real estate investment firm. For 12 years before that, Mr.
Cooper was employed by Rockwell International  Corporation,  last serving as its
manager  of  housing  and urban  developments  where he had  responsibility  for
factory-built  housing  evaluation and project  management in urban planning and
development.  He has testified before committees of the U.S. Senate and the U.S.
House  of  Representatives  on  matters  pertaining  to the  affordable  housing
industry.  Mr.  Cooper is a Life  Director of the National  Association  of Home
Builders,  a National Trustee for NAHB's Political Action Committee,  and a past
Chairman of NAHB's Multifamily Council. He is a Director of the National Housing
Conference and a member of NHC's Board of Governors,  and a founder and Director
of the California  Housing  Consortium.  He is the husband of Kay Cooper and the
father of Wilfred N. Cooper,  Jr. Mr. Cooper  graduated  from Pomona  College in
1956 with a Bachelor of Arts degree.
                                       39
<PAGE>
Wilfred  N.  Cooper,  Jr.,  age  44,  is  President,  Chief  Executive  Officer,
Secretary,  a Director and a member of the Acquisition  Committee of Associates.
He is President and a Director of, and a registered  principal with, WNC Capital
Corporation, and is a Director and Vice President of WNC Management, Inc. He has
been involved in real estate  investment and acquisition  activities  since 1988
when he  joined  Associates.  Previously,  he  served  as a  Government  Affairs
Assistant with Honda North America in Washington, D.C. Mr. Cooper is a member of
the Editorial  Advisory  Boards of Affordable  Housing Finance and LIHTC Monthly
                                   ---------------------------     -------------
Report,  a  Steering  Member  of  the  Housing  Credit  Group  of  the  National
------
Association  of Home  Builders,  a  member  of the Tax  Policy  Council  for the
National  Trust for Historical  Preservation,  a member of the Advisory Board of
the New York State  Association  for Affordable  Housing,  a member of the Urban
Land Institute and a member of TEC  International,  a global network of business
leaders  and chief  executives.  He is the son of  Wilfred  Cooper,  Sr. and Kay
Cooper.  Mr.  Cooper  graduated  from The  American  University  in 1985  with a
Bachelor of Arts degree.

David N. Shafer,  age 55, is an Executive  Vice  President,  and a member of the
Acquisition  Committee  of  Associates,  and  a  Director,  Vice  President  and
Secretary of WNC Management,  Inc. Mr. Shafer has been active in the real estate
industry  since 1984.  Before  joining  Associates in 1990, he was engaged as an
attorney  in the private  practice  of law with a  specialty  in real estate and
taxation.  Mr. Shafer is a Director and past President of the California Council
of Affordable Housing,  and a member of the State Bar of California.  Mr. Shafer
graduated  from the  University  of  California  at Santa Barbara in 1978 with a
Bachelor of Arts degree, from the New England School of Law in 1983 with a Juris
Doctor  degree  cum  laude and from the  University  of San Diego in 1986 with a
Master of Law degree in Taxation.

Michael  J.  Gaber,  age 41, is an  Executive  Vice  President  -  Oversees  the
Originations,  Acquisitions  and Real Estate  Development  Department,  and is a
member of the  Acquisition  Committee of  Associates  and Vice  President of WNC
Management,  Inc...  Mr.  Gaber has been  involved in real  estate  acquisition,
valuation and  investment  activities  since 1989 and has been  associated  with
Associates  since  1997.  Prior to joining  Associates,  he was  involved in the
valuation and classification of major assets, restructuring of debt and analysis
of real estate  taxes with H.F.  Ahmanson & Company,  parent of Home  Savings of
America. Mr. Gaber graduated from the California State University,  Fullerton in
1991 with a Bachelor of Science degree in Business Administration - Finance.

Sylvester  P.  Garban,   age  61,  is  Senior  Vice  President  -  Institutional
Investments of Associates and registered principal with WNC Capital Corporation.
Mr. Garban has been involved in real estate  investment  activities  since 1978.
Before  joining  Associates in 1989, he served as Executive  Vice President with
MRW, Inc., a real estate development and management firm. Mr. Garban is a member
of the National  Association  of  Affordable  Housing  Lenders and the Financial
Planning Association. He graduated from Michigan State University in 1967 with a
Bachelor of Science degree in Business Administration.

Thomas J. Riha, age 52, is Senior Vice President - Chief Financial Officer and a
member of the  Acquisition  Committee  and the  Commercial  Real Estate Group of
Associates and Vice President,  Treasurer and a Director of WNC Management, Inc.
He has been involved in real estate acquisition and investment  activities since
1979.  Before joining  Associates in 1994, Mr. Riha was employed by Trust Realty
Advisor, a real estate acquisition and Management Company,  last serving as Vice
President - Operations.  He is a founding member of the Housing Credit Certified
Professional Board of Governors,  a national professional  certification program
administered  by  the  NAHB  and  the  National  Affordable  Housing  Management
Association. Mr. Riha graduated from the California State University,  Fullerton
in 1977 with a Bachelor of Arts degree cum laude in Business Administration with
a concentration in Accounting and is a Certified Public  Accountant and a member
of the American Institute of Certified Public Accountants.

Thomas J.  Hollingsworth,  CPA, age 56, is Vice President - Asset  Management of
WNC  &  Associates,   Inc.  and  oversees  WNC's  asset  management  group.  Mr.
Hollingsworth  has been  involved in real estate  acquisitions,  operations  and
syndication  of  multifamily  properties  for 25 years.  Prior to joining WNC in
2005,  he  was  the  senior  workout  specialist  at  Key  Corporation   Housing
Management,  Inc.,  a division  of Key Bank.  He has also been  responsible  for
structuring  several tax sheltered  multifamily  acquisitions during his career.
Mr. Hollingsworth  graduated from the University of Utah in 1973 with a Bachelor
of Science degree (cum laude) in Business Administration.

                                       40
<PAGE>
Gregory S. Hand, age 43, is Vice  President -  Acquisitions  and a member of the
Commercial Real Estate Group of Associates.  He is responsible for the oversight
of property  underwriting.  Mr. Hand has been involved in real estate  analysis,
development and management since 1987.  Prior to joining  Associates in 1998, he
was  a  portfolio  asset  manager  with  a  national  tax  credit  sponsor  with
responsibility  for the management of $200 million in assets.  Prior to that, he
was a finance  manager  with The Koll  Company and a financial  analyst with The
Irvine  Company.  Mr. Hand graduated  from Iowa State  University in 1987 with a
Bachelor of Business Administration degree in finance.

Melanie  R.  Wenk,  CPA,  age 39,  is  Vice  President-Portfolio  Management  of
Associates.  She is  responsible  for overseeing  institutional  and retail fund
portfolio management, including partnership accounting, SEC reporting, quarterly
and  annual  investor  reporting  and  monitoring  investment  returns  for  all
stabilized WNC  institutional  funds.  Prior to joining  Associates in 2003, Ms.
Wenk was associated as a public accountant with BDO Seidman,  LLP. She graduated
from  the  California  Polytechnic  State  University,  Pomona,  in 1999  with a
Bachelor of Science degree in accounting.

(f)  Involvement in Certain Legal Proceedings
     ----------------------------------------

     Two Local Limited  Partnerships  invested in by other  Associates-sponsored
     public limited  partnerships  were unable to meet their obligations as they
     became due,  and each has filed a voluntary  petition in  bankruptcy.   The
     local general partner of one of them is not affiliated with Associates. The
     original  unaffiliated  local general  partner of the other was removed and
     replaced  with a  general  partner  wholly-owned  by  two of the  executive
     officers of WNC identified above.

(g)  Promoters and Control Persons
     -----------------------------
     Inapplicable.

(h)  Audit Committee Financial Expert, and (i) Identification of the Audit
     ---------------------------------------------------------------------
     Committee
     ---------

     Neither the Partnership, the General Partner, nor Associates have an audit
     committee.

(j)  Changes to Nominating Procedures
     --------------------------------

     Inapplicable.

(k)  Compliance With Section 16(a) of the Exchange Act
     -------------------------------------------------

     None.

(l)  Code of Ethics
     --------------

     Associates  has  adopted  a Code  of  Ethics  which  applies  to the  Chief
     Executive Officer and Chief Financial Officer of WNC & Associates. The Code
     of Ethics will be provided  without  charge to any person who  requests it.
     Such requests  should be directed to: Investor  Relations at  (714)662-5565
     extension 187.

Item 11.  Executive Compensation

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:
                                       41
<PAGE>
(a)  Annual Asset  Management Fee. An annual asset  management fee accrues 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 Partnerships 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 $181,385,  were incurred
     during  each of the  years  ended  March  31,  2006,  2005  and  2004.  The
     Partnership  paid the  General  Partner  or its  affiliates,  approximately
     $53,000,  $30,000,  and  $50,000 of those fees during the years ended March
     31, 2006, 2005 and 2004, respectively.

(b)  Subordinated  Disposition Fee. A subordinated  disposition fee in an amount
     equal to 1% of the sale price may be received in  connection  with the sale
     or disposition of a Housing Complex or Local Limited Partnership  interest.
     Subordinated  disposition  fees will be subordinated to the prior return of
     the Limited  Partners'  capital  contributions and payment of the return on
     investment to the Limited  Partners.  Return on investment means an annual,
     cumulative but not compounded,  "return" to the Limited Partners (including
     Low  Income  Housing  Tax  Credits)  as a class on their  adjusted  capital
     contributions  commencing  for each Limited  Partner on the last day of the
     calendar quarter during which the Limited Partner's capital contribution is
     received by the  Partnership,  calculated at the following  rates:  (i) 16%
     through  December 31, 2003, and (ii) 6% for the balance of the Partnerships
     term. No disposition fees have been paid.

(c)  Operating  Expense.  The Partnership  reimbursed the General Partner or its
     affiliates for operating expenses of approximately  $35,000,  $24,000,  and
     $24,000,   during  the  years  ended  March  31,   2006,   2005  and  2004,
     respectively.

(d)  Interest  in  Partnership.   The  General   Partner   receives  1%  of  the
     Partnership's  allocated Low Income Housing Tax Credits, which approximated
     $4,000,  $15,000,  and $20,000  for the  General  Partner for the tax years
     ended December 31, 2005, 2004 and 2003,  respectively.  The General Partner
     is also  entitled  to receive a  percentage  of  partnership  gain and loss
     allocations,,  and of cash  distributions.  There were no  distributions of
     cash to the General Partner during the years ended March 31, 2006, 2005 and
     2004.

Item 12.  Security  Ownership of Certain  Beneficial  Owners and  Management and
          ----------------------------------------------------------------------
          Related Stockholder Matters
          ---------------------------

(a)      Securities Authorized for Issuance Under Equity Compensation Plans
         ------------------------------------------------------------------

         The Partnership has no compensation plans under which interests in the
         Partnership are authorized for issuance.

(b)      Security Ownership of Certain Beneficial Owners
         -----------------------------------------------

         No person is known to own beneficially in excess of 5% of the
         outstanding Partnership Units.

(c)      Security Ownership of Management
         --------------------------------

         Neither the General Partner,  Associates,  its affiliates,  nor any of
         the officers or directors of the General Partner,  Associates,  or its
         affiliates own directly or beneficially any Partnership Units.

(d)      Changes in Control
         ------------------

         The  management  and control of the General  Partner and of Associates
         and their  affiliates  may be changed at any time in  accordance  with
         their  respective  organizational  documents,  without  the consent or
         approval  of  the  Limited  Partners.  In  addition,  the  Partnership
         Agreement  provides for the  admission of one or more  additional  and
         successor General Partners in certain circumstances.

         First,   with  the  consent  of  any  other  General  Partners  and  a
         majority-in-interest  of the Limited Partners, any General Partner may
         designate  one or more persons to be successor or  additional  General
         Partners. In addition, any General Partner may, without the consent of
         any other General Partner or the Limited  Partners,  (i) substitute in
         its  stead as  General  Partner  any  entity  which  has,  by  merger,

                                       42
<PAGE>
          consolidation or otherwise,  acquired substantially all of its assets,
          stock or other evidence of equity interest and continued its business,
          or (ii) cause to be admitted to the Partnership an additional  General
          Partner or  Partners if it deems such  admission  to be  necessary  or
          desirable so that the Partnership will be classified a partnership for
          Federal income tax purposes.  Finally, a  majority-in-interest  of the
          Limited  Partners  may at any time remove the  General  Partner of the
          Partnership and elect a successor General Partner.

Item 13.  Certain Relationships and Related Transactions

The General Partner manages all of the Partnership's  affairs.  The transactions
with  the  General  Partner  are  primarily  in the  form  of  fees  paid by the
Partnership for services rendered to the Partnership, reimbursement of expenses,
and the General Partner's  interest in the Partnership,  as discussed in Item 11
and in the notes to the Partnership's financial statements.

Item 14. Principal Accountant Fees and Services

The following is a summary of fees paid to the Partnership principal independent
registered public accounting firm for the years ended March 31:
<TABLE>
<CAPTION>
                                                            2006                      2005
                                                     --------------------      --------------------
<S>                                               <C>                       <C>
Audit Fees                                         $              23,472     $              18,025
Audit-related Fees                                                     -                         -
Tax Fees                                                           3,000                     3,000
All Other Fees                                                         -                         -
                                                     --------------------      --------------------
TOTAL                                              $              26,472     $              21,025
                                                     ====================      ====================
</TABLE>
The  Partnership  has no Audit  Committee.  All audit services and any permitted
non-audit  services  performed  by the  Partnership's  independent  auditors are
pre-approved by the General Partner.

PART IV

Item 15.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)(1)   List of financial statements included in Part II hereof:
         --------------------------------------------------------

         Balance Sheets as of March 31, 2006 and 2005
         Statements of Operations for the years ended March 31, 2006, 2005 and
         2004
         Statements of Partners' Equity (Deficit) for the years ended March 31,
         2006, 2005 and 2004
         Statements of Cash Flows for the years ended March 31, 2006, 2005 and
         2004
         Notes to Financial Statements

(a)(2)   List of financial statement schedules included in Part IV hereof:
         -----------------------------------------------------------------

         Schedule III - Real Estate Owned by Local Limited Partnerships

(a)(3)   Exhibits.
         ---------

3.1  Agreement of Limited Partnership dated October 5, 1992 was filed as Exhibit
     28.1  to  Form  10-K  for the  year  ended  December  31,  1994  is  hereby
     incorporated herein by reference as Exhibit 3.1.

31.1 Certification  of the Chief 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)
                                       43
<PAGE>
31.2 Certification  of the Chief 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)

99.1 Amended and Restated  Agreement of Limited  Partnership of Colonial Village
     Roseville  (1)  filed as  exhibit  10.1 to Form  8-K/A  Amendment  No. 1 to
     Current  Report dated  December 27, 1993 is hereby  incorporated  herein by
     reference as exhibit 99.1.

99.2 Amended and Restated  Agreement  of Limited  Partnership  of Almond  Garden
     Apartment Associates filed as exhibit 10.2 to Form 8-K/A Amendment No. 1 to
     Current  Report dated  December 27, 1993 is hereby  incorporated  herein by
     reference as exhibit 99.2.

99.3 Amended and Restated Agreement of Limited Partnership of Winters Investment
     Group filed as exhibit 10.3 to Form 8-K/A Amendment No. 1 to Current Report
     dated  December  27, 1993 is hereby  incorporated  herein by  reference  as
     exhibit 99.3.

99.4 Third  Amended and Restate  Articles of Limited  Partnership  of  Buccaneer
     Associates, Limited filed as exhibit 10.2 to Post-Effective Amendment No. 2
     to Form S-11 dated  September  17,  1993 is hereby  incorporated  herein by
     reference as exhibit 10.4.

99.5 Amended and Restated  Agreement and  Certificate of Limited  Partnership of
     Dallas  County  Housing,  Ltd.  filed  as  exhibit  10.3 to  Post-Effective
     Amendment  No.  2  to  Form  S-11  dated   September  17,  1993  is  hereby
     incorporated herein by reference as exhibit 10.5.

99.6 Amended and Restated Agreement of Limited  Partnership of La Paloma Del Sol
     Phase II  Limited  Partnership  filed  as  exhibit  10.4 to  Post-Effective
     Amendment  No.  2  to  Form  S-11  dated   September  17,  1993  is  hereby
     incorporated herein by reference as exhibit 99.6.

99.7 Second  Amended and Restated  Agreement of Limited  Partnership of Old Fort
     Limited Partnership filed as exhibit 10.5 to Post-Effective Amendment No. 2
     to Form S-11 dated  September  17,  1993 is hereby  incorporated  herein by
     reference as exhibit 99.7.

99.8 Amended and Restated Agreement of Limited  Partnership of Orosi Apartments,
     Ltd. filed as exhibit 10.6 to  Post-Effective  Amendment No. 2 to Form S-11
     dated  September  17, 1993 is hereby  incorporated  herein by  reference as
     exhibit 99.8.

99.9 Amended and Restated  Agreement of Limited  Partnership of Sun Manor,  L.P.
     filed as exhibit 10.7 to Post-Effective  Amendment No. 2 to Form S-11 dated
     September  17, 1993 is hereby  incorporated  herein by reference as exhibit
     99.9.

99.10 Amended and Restated Agreement of Limited  Partnership of Venus Retirement
      Village,  Ltd. filed as exhibit 10.8 to Post-Effective  Amendment No. 2 to
      Form  S-11  dated  September  17,  1993 is  hereby incorporated  herein by
      reference as exhibit 99.10.
                                       44
<PAGE>
99.11 Second   Amended  and  Restated   Agreement  of  Limited   Partnership  of
      Walnut-Pixley, L.P. filed as exhibit 10.9 to Post-Effective  Amendment No.
      2 to Form S-11 dated September 17,  1993 is hereby incorporated  herein by
      reference as exhibit 99.11.

99.12 Amended  and  Restated  Agreement  of Limited  Partnership  of Almond View
      Apartments, Ltd. filed as exhibit 10.11 to Form  10K  dated  December  31,
      1993 is hereby incorporated herein by reference as exhibit 99.12.

99.13 Amended and  Restated  Agreement  of Limited  Partnership  of  Candleridge
      Apartments  of Perry, L.P. II filed as exhibit  10.1 to Form 8-K dated May
      26, 1994 is hereby incorporated herein by reference as exhibit 99.13.

99.14 Second  Amended and Restated  Agreement of Limited  Partnership of Parlier
      Garden Apts. filed as exhibit 10.2  to  Form 8-K  dated  May 26,  1994  is
      hereby incorporated herein by reference as exhibit 10.14.

10.15 Agreement  of  Limited   Partnership   of  Rosewood   Apartments   Limited
      Partnership filed as exhibit 10.3 to Form 8-K dated May 26, 1994 is hereby
      incorporated herein by reference as exhibit 99.15.

99.16 Agreement of Limited  Partnership  of Limited  Partnership of Nueva Sierra
      Vista  Associates filed as exhibit 10.4 to Form 8-K/A  Amendment  No. 1 to
      Current  Report  dated  May  26,  1994 is  hereby  incorporated  herein by
      reference as exhibit 99.16.

99.17 Amended  and  Restated  Agreement  of Limited  Partnership  of Memory Lane
      Limited  Partnership  filed as exhibit 10.1 to Form 8-K dated July 7, 1994
      is hereby incorporated herein by reference as exhibit 99.17.

99.18 Second  Amended and  Restated  Agreement of Limited  Partnership  of Tahoe
      Pines  Apartments filed as exhibit 10.1 to Form 8-K dated July 27, 1994 is
      hereby  incorporated herein by reference as exhibit 10.18.

99.19 Financial Statements of Colonial Village - Roseville,  for the years ended
      December  31, 2003 and 2002  together  with  Independent  Auditors' Report
      thereon; a significant subsidiary of the Partnership.

                                       45
<PAGE>
WNC California Housing Tax Credits III, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2006
<TABLE>
<CAPTION>
                                                  --------------------------------------------    ----------------------------------
                                                                As of March 31, 2006                    As of December 31, 2005
                                                  --------------------------------------------    ----------------------------------
                                                         Amount   Mortgage Balances
                                  Total Investment        of         of Local                  Buildings                    Net
Local Limited                         in Local         Investment    Limited                      and        Accumulated    Book
Partnership Name     Location   Limited Partnerships  Paid to Date Partnerships        Land    equipment     Depreciation  Value
------------------------------------------------------------------------------------------------------------------------------------
<S>           <C>            <C>               <C>              <C>               <C>        <C>           <C>          <C>
Almond Garden    Delhi,           $ 391,000          $ 391,000       $ 1,359,000      $93,000   $1,693,000    $ 759,000  $ 1,027,000
Apartment        California
Associates

Almond View      Stockton,        1,639,000          1,639,000         1,718,000      110,000    3,415,000    1,428,000    2,096,000
Apartments,      California
Ltd.

Buccaneer        Fernandia          365,000            365,000         1,443,000       60,000    2,158,000      676,000    1,542,000
Associates,      Beach,
Limited          Florida

Candleridge      Perry,             126,000            126,000           677,000       50,000      880,000      378,000      552,000
Apartments       Iowa
of Perry L.P.
II

Colonial Village Roseville,       2,811,000          2,811,000         1,898,000      315,000    5,043,000    2,085,000    3,273,000
Roseville        California

Dallas County    Orrville,          130,000            130,000           601,000       35,000      764,000      276,000      524,000
Housing, Ltd.    Alabama

La Paloma del    Deming,            254,000            254,000         1,400,000      101,000    1,756,000      559,000    1,297,000
Sol Limited      New Mexico
Partnership

Memory Lane      Yankton,           151,000            151,000           666,000       25,000      889,000      486,000      428,000
Limited          South
Partnership      Dakota

Nueva Sierra     Richgrove,       1,688,000          1,688,000         1,623,000      115,000    3,137,000      850,000    2,402,000
Vista            California
Associates

Old Fort Highway Hidalgo,           249,000            249,000         1,248,000       77,000    1,661,000      543,000    1,195,000
Limited          Texas
Partnership
</TABLE>
                                       46
<PAGE>
WNC California Housing Tax Credits III, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2006
<TABLE>
<CAPTION>
                                   --------------------------------------------    -------------------------------------------------
                                                 As of March 31, 2006                             As of December 31, 2005
                                   --------------------------------------------    -------------------------------------------------
                                                         Amount   Mortgage Balances
                                  Total Investment        of         of Local                  Buildings                    Net
Local Limited                         in Local         Investment    Limited                      and        Accumulated    Book
Partnership Name     Location   Limited Partnerships  Paid to Date Partnerships       Land    equipment     Depreciation    Value
------------------------------------------------------------------------------------------------------------------------------------
<S>              <C>             <C>             <C>            <C>            <C>          <C>              <C>          <C>
Orosi Apartments,   Orosi,           461,000            461,000      1,865,000      100,000     2,391,000        572,000   1,919,000
Ltd.                California

Parlier Garden      Parlier,         453,000            453,000      1,673,000      138,000     2,070,000        637,000   1,571,000
Apts.               California

Rosewood            Superior,        185,000            185,000        428,000            -       767,000        234,000     534,000
Apartments          Wisconsin
Limited
Partnership

Sun Manor, L.P.     Itta Bena,       230,000            230,000      1,036,000       40,000     1,319,000        559,000     800,000
                    Mississippi

Tahoe Pines         South Lake     1,633,000          1,633,000      1,607,000       87,000     3,236,000      1,356,000   1,967,000
Apartments          Tahoe,
                    California

Venus Retirement    Venus,           161,000            161,000        710,000       32,000       618,000        381,000     269,000
Village, Ltd.       Texas

Walnut - Pixley,    Orange,        1,078,000          1,078,000        927,000      690,000     2,078,000        798,000   1,970,000
L.P.                California

Winters             Winters,         531,000            531,000      1,794,000      165,000     2,427,000        597,000   1,995,000
Investment          California  ------------       ------------   ------------   ----------   -----------   ------------ -----------
Group
                                $ 12,536,000       $ 12,536,000   $ 22,673,000   $2,233,000   $36,302,000   $ 13,174,000 $25,361,000
                                ============       ============   ============   ==========   ===========   ============ ===========
</TABLE>
                                       47
<PAGE>
WNC California Housing Tax Credits III, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2006
<TABLE>
<CAPTION>
                                              --------------------------------------------------------------------------------------
                                                                        For the year ended December 31, 2005
                                              --------------------------------------------------------------------------------------
                                                                                 Year                                  Estimated
Local Limited                                            Net Income            Investment                              Useful Life
Partnership Name             Rental Income                 (Loss)               Acquired            Status               (Years)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>            <C>                    <C>              <C>                 <C>
Almond Garden Apartment Associates        $ 190,000        $ (47,000)                1994          Completed             27.5

Almond View Apartments, Ltd.                245,000         (238,000)                1994          Completed             27.5

Buccaneer Associates, Limited               245,000          (33,000)                1994          Completed               40

Candleridge Apartments of Perry L.P. II     151,000          (10,000)                1994          Completed             27.5

Colonial Village Roseville                  541,000          (12,000)                1993          Completed             27.5

Dallas County Housing, Ltd.                  67,000          (29,000)                1993          Completed               40

La Paloma del Sol Limited Partnership       182,000           (3,000)                1993          Completed               40

Memory Lane Limited Partnership              79,000          (13,000)                1994          Completed               25

Nueva Sierra Vista Associates               168,000         (128,000)                1994          Completed               40

Old Fort Limited Partnership                203,000          (31,000)                1993          Completed               40

Orosi Apartments, Ltd.                      232,000          (10,000)                1993          Completed               50

Parlier Garden Apts.                        293,000           16,000                 1994          Completed               40

Rosewood Apartments Limited Partnership      89,000           (5,000)                1994          Completed               40

Sun Manor, L.P.                             147,000          (60,000)                1993          Completed             27.5

Tahoe Pines Apartments                      226,000         (140,000)                1994          Completed             27.5

Venus Retirement Village, Ltd.               99,000          (27,000)                1993          Completed               25

Walnut - Pixley, L.P.                       168,000          (20,000)                1993          Completed               40

Winters Investment Group                    278,000           24,000                 1994          Completed               50
                                        -----------        ----------
                                        $ 3,603,000        $(766,000)
                                        ===========        ==========
</TABLE>
                                       48
<PAGE>
WNC California Housing Tax Credits III, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2005
<TABLE>
<CAPTION>
                                   --------------------------------------------    -------------------------------------------------
                                                 As of March 31, 2005                             As of December 31, 2004
                                   --------------------------------------------    -------------------------------------------------
                                                         Amount   Mortgage Balances
                                  Total Investment        of         of Local                  Buildings                    Net
Local Limited                         in Local         Investment    Limited                     and        Accumulated     Book
Partnership Name     Location   Limited Partnerships  Paid to Date Partnerships       Land    equipment     Depreciation    Value
------------------------------------------------------------------------------------------------------------------------------------
<S>            <C>             <C>              <C>             <C>             <C>          <C>           <C>          <C>
Almond Garden       Delhi,          $ 391,000         $ 391,000    $ 1,365,000      $ 93,000   $ 1,686,000   $ 695,000   $ 1,084,000
Apartment           California
Associates

Almond View         Stockton,       1,639,000         1,639,000      1,729,000       110,000     3,414,000   1,307,000     2,217,000
Apartments, Ltd.    California

Buccaneer           Fernandia Beach,  365,000           365,000      1,450,000        60,000     2,158,000     622,000     1,596,000
Associates,         Florida
Limited

Candleridge         Perry, Iowa       126,000           126,000        682,000        50,000       874,000     344,000       580,000
Apartments of
Perry L.P. II

Colonial Village    Roseville,      2,811,000         2,811,000      1,940,000       315,000     5,039,000   1,906,000     3,448,000
Roseville           California

Dallas County       Orrville,         130,000           130,000        604,000        35,000       764,000     252,000       547,000
Housing, Ltd.       Alabama

La Paloma del       Deming,           254,000           254,000      1,407,000       101,000     1,726,000     511,000     1,316,000
Sol Limited         New Mexico
Partnership

Memory Lane         Yankton,          151,000           151,000        670,000        25,000       888,000     457,000       456,000
Limited             South
Partnership         Dakota

Nueva Sierra        Richgrove,      1,688,000         1,688,000      1,624,000       115,000     3,137,000     771,000     2,481,000
Vista               California
Associates

Old Fort            Hidalgo, Texas    249,000           249,000      1,254,000        77,000     1,647,000     496,000     1,228,000
Highway
Limited
Partnership
</TABLE>
                                       49
<PAGE>
WNC California Housing Tax Credits III, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2005
<TABLE>
<CAPTION>
                                   --------------------------------------------    -------------------------------------------------
                                                 As of March 31, 2005                             As of December 31, 2004
                                   --------------------------------------------    -------------------------------------------------
                                                         Amount   Mortgage Balances
                                  Total Investment        of         of Local                 Buildings                     Net
Local Limited                         in Local         Investment    Limited                     and        Accumulated     Book
Partnership Name     Location   Limited Partnerships  Paid to Date Partnerships       Land    equipment     Depreciation    Value
------------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>           <C>             <C>            <C>          <C>          <C>             <C>         <C>
Orosi Apartments, Ltd. Orosi,         461,000          461,000      1,883,000       100,000    2,385,000      516,000      1,969,000
                       California

Parlier Garden Apts.   Parlier,       453,000          453,000      1,680,000       138,000    2,070,000      584,000      1,624,000
                       California

Rosewood Apartments    Superior,      185,000          185,000        443,000             -      767,000      215,000        552,000
Limited Partnership    Wisconsin

Sun Manor, L.P.        Itta Bena,     230,000          230,000      1,040,000        40,000    1,312,000      510,000        842,000
                       Mississippi

Tahoe Pines            South Lake   1,633,000        1,633,000      1,624,000        87,000    3,236,000    1,240,000      2,083,000
Apartments             Tahoe,
                       California

Venus Retirement       Venus,         161,000          161,000        713,000        32,000      618,000      350,000        300,000
Village, Ltd.          Texas

Walnut - Pixley,       Orange,      1,078,000        1,078,000      1,635,000       690,000    2,078,000      742,000      2,026,000
L.P.                   California

Winters                Winters,       531,000          531,000      1,802,000       165,000    2,427,000      549,000      2,043,000
Investment             California  ----------     ------------  -------------   -----------  ----------- ------------   ------------
Group
                                 $ 12,536,000     $ 12,536,000  $  23,545,000   $ 2,233,000  $36,226,000 $ 12,067,000   $ 26,392,000
                                 ============     ============  =============   ===========  =========== ============   ============
</TABLE>
                                       50
<PAGE>
WNC California Housing Tax Credits III, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2005
<TABLE>
<CAPTION>
                                              --------------------------------------------------------------------------------------
                                                                        For the year ended December 31, 2004
                                              --------------------------------------------------------------------------------------
                                                                                 Year                                  Estimated
Local Limited                                            Net Income            Investment                              Useful Life
Partnership Name                         Rental Income     (Loss)               Acquired            Status               (Years)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>              <C>                   <C>             <C>                  <C>
Almond Garden Apartment Associates        $ 219,000        $ (39,000)                1994          Completed             27.5

Almond View Apartments, Ltd.                240,000         (228,000)                1994          Completed             27.5

Buccaneer Associates, Limited               241,000          (40,000)                1994          Completed               40

Candleridge Apartments of Perry L.P. II     148,000          (15,000)                1994          Completed             27.5

Colonial Village Roseville                  545,000            1,000                 1993          Completed             27.5

Dallas County Housing, Ltd.                  76,000          (22,000)                1993          Completed               40

La Paloma del Sol Limited Partnership       182,000           (5,000)                1993          Completed               40

Memory Lane Limited Partnership              80,000          (22,000)                1994          Completed               25

Nueva Sierra Vista Associates               159,000         (161,000)                1994          Completed               40

Old Fort Limited Partnership                195,000          (29,000)                1993          Completed               40

Orosi Apartments, Ltd.                      234,000          (12,000)                1993          Completed               50

Parlier Garden Apts.                        303,000           27,000                 1994          Completed               40

Rosewood Apartments Limited Partnership      91,000           (7,000)                1994          Completed               40

Sun Manor, L.P.                             150,000          (31,000)                1993          Completed             27.5

Tahoe Pines Apartments                      202,000         (138,000)                1994          Completed             27.5

Venus Retirement Village, Ltd.               95,000          (30,000)                1993          Completed               25

Walnut - Pixley, L.P.                       167,000          (35,000)                1993          Completed               40

Winters Investment Group                    279,000            8,000                 1994          Completed               50
                                        -----------        ----------
                                        $ 3,606,000        $(778,000)
                                        ===========        ==========
</TABLE>
                                       51
<PAGE>
WNC California Housing Tax Credits III, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2004
<TABLE>
<CAPTION>
                                   --------------------------------------------    -------------------------------------------------
                                                 As of March 31, 2004                             As of December 31, 2003
                                   --------------------------------------------    -------------------------------------------------
                                                         Amount   Mortgage Balances
                                  Total Investment        of         of Local                 Buildings                     Net
Local Limited                         in Local         Investment    Limited                     and        Accumulated     Book
Partnership Name     Location   Limited Partnerships  Paid to Date Partnerships       Land    equipment     Depreciation    Value
------------------------------------------------------------------------------------------------------------------------------------
<S>           <C>                  <C>            <C>            <C>           <C>           <C>           <C>          <C>
Almond Garden    Delhi, California     $ 391,000       $ 391,000   $ 1,371,000   $   93,000   $ 1,680,000     $ 631,000  $ 1,142,000
Apartment
Associates

Almond View      Stockton, California  1,639,000       1,639,000     1,738,000      110,000     3,414,000     1,183,000    2,341,000
Apartments,
Ltd.

Buccaneer        Fernandia Beach,        365,000         365,000     1,456,000       60,000     2,158,000       568,000    1,650,000
Associates,      Florida
Limited

Candleridge      Perry, Iowa             126,000         126,000       687,000       50,000       866,000       306,000      610,000
Apartments
of Perry L.P.
II

Colonial Village  Roseville,           2,811,000       2,811,000     1,977,000      315,000     4,987,000     1,728,000    3,574,000
Roseville         California

Dallas County     Orrville, Alabama      130,000         130,000       607,000       35,000       761,000       229,000      567,000
Housing, Ltd.

La Paloma del     Deming, New Mexico     254,000         254,000     1,413,000      101,000     1,738,000       463,000    1,376,000
Sol Limited
Partnership

Memory Lane       Yankton, South         151,000         151,000       673,000       25,000       849,000       429,000      445,000
Limited           Dakota
Partnership

Nueva Sierra      Richgrove,            1,688,000      1,688,000     1,623,000      115,000     3,183,000       691,000    2,562,000
Vista Associates  California

Old Fort Highway  Hidalgo, Texas          249,000        249,000     1,260,000       77,000     1,640,000       449,000    1,268,000
Limited
Partnership
</TABLE>
                                       52
<PAGE>
WNC California Housing Tax Credits III, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2004
<TABLE>
<CAPTION>
                                   --------------------------------------------    -------------------------------------------------
                                                 As of March 31, 2004                             As of December 31, 2003
                                   --------------------------------------------    -------------------------------------------------
                                                         Amount   Mortgage Balances
                                  Total Investment        of         of Local                 Buildings                     Net
Local Limited                         in Local         Investment    Limited                     and        Accumulated     Book
Partnership Name     Location   Limited Partnerships  Paid to Date Partnerships       Land    equipment     Depreciation    Value
------------------------------------------------------------------------------------------------------------------------------------
<S>               <C>                    <C>          <C>        <C>            <C>        <C>            <C>           <C>
Orosi Apartments,     Orosi, California      461,000     461,000    1,900,000       100,000    2,361,000       464,000     1,997,000
Ltd.

Parlier Garden        Parlier, California    453,000     453,000    1,687,000       138,000    2,069,000       530,000     1,677,000
Apts.

Rosewood Apartments   Superior, Wisconsin    185,000     185,000      456,000             -      768,000       196,000       572,000
Limited Partnership

Sun Manor, L.P.       Itta Bena,             230,000     230,000    1,044,000        40,000    1,309,000       460,000       889,000
                      Mississippi

Tahoe Pines           South Lake Tahoe,    1,633,000   1,633,000    1,640,000        87,000    3,214,000     1,125,000     2,176,000
Apartments            California

Venus Retirement      Venus, Texas           161,000     161,000      716,000        32,000      618,000       319,000       331,000
Village, Ltd.

Walnut - Pixley,      Orange, California   1,078,000   1,078,000    1,656,000       690,000    2,078,000       687,000     2,081,000
L.P.

Winters Investment    Winters, California    531,000     531,000    1,810,000       165,000    2,427,000       501,000     2,091,000
Group                                  -------------  ----------  -----------    ----------  -----------   -----------   -----------
                                       $  12,536,000 $12,536,000  $23,714,000    $2,233,000  $36,075,000   $10,959,000   $27,349,000
                                       =============  ==========  ===========    ==========  ===========   ===========   ===========
</TABLE>
                                       53
<PAGE>
WNC California Housing Tax Credits III, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
March 31, 2004
<TABLE>
<CAPTION>
                                              --------------------------------------------------------------------------------------
                                                                        For the year ended December 31, 2003
                                              --------------------------------------------------------------------------------------
                                                                                 Year                                  Estimated
Local Limited                                            Net Income            Investment                              Useful Life
Partnership Name                         Rental Income     (Loss)               Acquired            Status               (Years)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>               <C>                 <C>            <C>                  <C>
Almond Garden Apartment Associates        $   219,000        $  (1,000)             1994          Completed               27.5

Almond View Apartments, Ltd.                  244,000         (221,000)             1994          Completed               27.5

Buccaneer Associates, Limited                 235,000          (40,000)             1994          Completed                 40

Candleridge Apartments of Perry L.P. II       150,000          (15,000)             1994          Completed               27.5

Colonial Village Roseville                    529,000                -              1993          Completed               27.5

Dallas County Housing, Ltd.                    77,000          (17,000)             1993          Completed                 40

La Paloma del Sol Limited Partnership         163,000          (25,000)             1993          Completed                 40

Memory Lane Limited Partnership                80,000          (12,000)             1994          Completed                 25

Nueva Sierra Vista Associates                 153,000         (129,000)             1994          Completed                 40

Old Fort Limited Partnership                  178,000          (27,000)             1993          Completed                 40

Orosi Apartments, Ltd.                        217,000          (37,000)             1993          Completed                 50

Parlier Garden Apts.                          302,000           49,000              1994          Completed                 40

Rosewood Apartments Limited Partnership        86,000           (9,000)             1994          Completed                 40

Sun Manor, L.P.                               151,000          (42,000)             1993          Completed               27.5

Tahoe Pines Apartments                        201,000         (112,000)             1994          Completed               27.5

Venus Retirement Village, Ltd.                 90,000         (304,000)             1993          Completed                 25

Walnut - Pixley, L.P.                         166,000          (22,000)             1993          Completed                 40

Winters Investment Group                      253,000          (45,000)             1994          Completed                 50
                                         ------------      -----------
                                         $  3,494,000      $(1,009,000)
                                         ============      ============
</TABLE>
                                       54
<PAGE>
                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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 & Associates, Inc.,
    General Partner



By: /s/ Wilfred N. Cooper, Jr.
    --------------------------
    Wilfred N. Cooper, Jr.,
    President of WNC & Associates, Inc.

Date:  October 26, 2007


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.




By:  /s/ Wilfred N. Cooper, Jr.
     --------------------------
     Wilfred N. Cooper, Jr.,
     Chief Executive Officer, President and Director of WNC & Associates, Inc.
     (Chief executive officer)

Date:  October 26, 2007





By: /s/ Thomas J. Riha
    -------------------
    Thomas J. Riha,
    Senior Vice-President - Chief Financial Officer of WNC & Associates, Inc.
    (Chief financial officer and Chief accounting officer)

Date:  October 26, 2007





By: /s/ Wilfred N. Cooper, Sr.
    --------------------------
    Wilfred N. Cooper, Sr.,
    Chairman of the Board of WNC & Associates, Inc.

Date:  October 26, 2007




By:  /s/ Kay L. Cooper
     -----------------
     Kay L. Cooper,
     Director of WNC & Associates, Inc.

Date:  October 26, 2007

                                       55
<PAGE>