UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

~~[X]~~ x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~December 3031, 2011

[o ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ___________

Commission file number: 0-21494

WNC HOUSING TAX CREDIT FUND III, L.P.

California	33-0463432
(State or other jurisdiction of	(I.R.S. Employer
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
incorporation or organization)	Identification No.)
17782 Sky Park Circle
Irvine, CA	92614-6404
(Address of principal executive offices)	(Zip Code)

(714) 662-5565

(Telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ~~X No___~~ x No o

Yes___ No X

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

Large accelerated ~~filer___~~filer o Accelerated ~~filer___~~filer o Non-accelerated ~~filer___X__~~filer ~~smaller~~x Smaller reporting ~~company___~~company o

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

WNC HOUSING TAX CREDIT FUND III, L.P.

(A California Limited Partnership)

INDEX TO FORM 10 – Q

For the Quarterly Period Ended ~~September~~December 3031, 2011

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets
Condensed Balance Sheets As of December 31, 2011 and March 31, 2011	3
As of September 30, 2011 and March 31, 2011	3
Condensed Statements of Operations For the Three and Nine Months Ended December 31, 2011 and 2010	4
Condensed Statements of Operations
Condensed Statement of Partners' Equity (Deficit) For the Nine Months Ended December 31, 2011	5
For the Three and Six Months Ended September 30, 2011 and 2010	4
Condensed Statements of Cash Flows For the Nine Months Ended December 31, 2011 and 2010	6
Condensed Statement of Partners' Equity (Deficit)
For the Six Months Ended September 30, 2011	5
Condensed Statements of Cash Flows
For the Six Months Ended September 30, 2011 and 2010	6
Notes to Condensed Financial Statements	7
Item 2. Management's Discussion and Analysis of Financial
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosures about Market Risks	20
Item 3. Quantitative and Qualitative Disclosures about Market Risks	23
Item 4. Controls and Procedures	20
Item 4. Controls and Procedures	23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	2421
Item 1A. Risk Factors	2421
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2421
Item 3. Defaults Upon Senior Securities	2421
Item 4. (Removed and Reserved)	2421
Item 5. Other Information	2421
Item 6. Exhibits	2421
Signatures	2522

WNC HOUSING TAX CREDIT FUND III, L.P.

(A California Limited Partnership)

CONDENSED BALANCE SHEETS

(Unaudited)

		September 30, 2011		March 31, 2011
		December 31, 2011			March 31, 2011
ASSETS
Cash	$	~~129,268~~$	$152,216	~~57,638~~	$	57,638
Investments in Local Limited Partnerships, net (Note 2)		-	-	-		-
Other assets		~~45,122~~	14,256	~~118,262~~		118,262
Total Assets	$	~~174,390~~$	$166,472	~~175,900~~	$	175,900
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Accrued fees and expenses due to
Accrued fees and expenses due to General Partner and affiliates (Note 3)		$	4,309,308		$	4,699,059
General Partner and affiliates (Note 3)	$	4,348,251	$	4,699,059
Accrued expenses			5,746			-
Accrued expenses		5,746		-
Total Liabilities			4,315,054			4,699,059
Total Liabilities		4,353,997		4,699,059
Partners’ Equity (Deficit):
Partners’ Equity (Deficit):
General Partner			35,147			(13,968	)
General Partner		34,837		(13,968)
Limited Partners (15,000 Partnership Units authorized; 15,000 Partnership Units issued and outstanding)			(4,183,729	)		(4,509,191	)
Limited Partners (15,000 Partnership Units authorized;
Total Partners’ Equity (Deficit)			(4,148,582	)		(4,523,159	)
15,000 Partnership Units issued and outstanding)		(4,214,444)		(4,509,191)
Total Liabilities and Partners’ Equity (Deficit)		$	166,472		$	175,900
Total Partners’ Equity (Deficit)		(4,179,607)		(4,523,159)
Total Liabilities and Partners’ Equity (Deficit)	$	174,390	$	175,900

See accompanying notes condensed to financial statements

WNC HOUSING TAX CREDIT FUND III, L.P.

(A California Limited Partnership)

CONDENSED STATEMENTS OF OPERATIONS

For the Three and ~~Six~~Nine Months Ended ~~September~~December 3031, 2011 and 2010

(Unaudited)

		2011				~~2010~~			2010
		Three Months		~~Six Months~~		~~Three~~Nine Months		~~Six Months~~	Three Months			Nine Months
Reporting fees	$	~~5,230~~$	$-	~~15,373~~	$	~~3,120~~$	$15,373	~~17,685~~	$	1,288		$	18,973
Distribution income		~~1,755~~	1,920	~~1,755~~		-	3,675	-		-			-
Total operating income		~~6,985~~	1,920	~~17,128~~		~~3,120~~	19,048	~~17,685~~		1,288			18,973
Operating expenses:
Asset management fees (Note 3)		~~40,507~~	22,304	~~91,267~~		~~69,355~~	113,571	~~140,959~~		65,112			206,071
Legal and accounting fees		~~4,373~~	25,316	~~40,212~~		~~44,026~~	65,528	~~47,736~~		36,775			84,511
Write off of advances to Local Limited Partnerships (Note 4)		-	-	-		~~1,349~~	-	~~10,299~~		-			10,299
Outsourcing expenses		14,433		14,433		-		-
Write off of other assets			16,769				16,769			-			-
Other		5,735		13,916		288		1,797
Outsourcing expenses			-				14,433			-			-
Total operating expenses		65,048		159,828		115,018		200,791
Other			2,897				16,813			3,924			5,721
Loss from operations		(58,063)		(142,700)		(111,898)		(183,106)
Total operating expenses			67,286				227,114			105,811			306,602
Gain on sale of Local Limited Partnerships (Note 2)		276,395		440,410		110,000		115,406
Loss from operations			(65,366	)			(208,066	)		(104,523	)		(287,629	)
Interest income		7		14		3		16
Gain on sale of Local Limited Partnerships (Note 2)			96,364				536,774			26,500			141,906
Net income (loss)	$	218,339	$	297,724	$	(1,895)	$	(67,684)
Interest income			27				41			1			17
Net income (loss) allocated to:
Net income (loss)		$	31,025			$	328,749		$	(78,022	)	$	(145,706	)
General Partner	$	2,183	$	2,977	$	(19)	$	(677)
Net income (loss) allocated to:
Limited Partners	$	216,156	$	294,747	$	(1,876)	$	(67,007)
General Partner		$	310			$	3,287		$	(780	)	$	(1,457	)
Net income (loss) per Partnership Unit	$	14	$	20	$	0	$	(4)
Limited Partners		$	30,715			$	325,462		$	(77,242	)	$	(144,249	)
Outstanding weighted Partnership Units		15,000		15,000		15,000		15,000
Net income (loss) per Partnership Unit		$	2			$	22		$	(5	)	$	(10	)
Outstanding weighted Partnership Units			15,000				15,000			15,000			15,000

See accompanying notes condensed to financial statements

WNC HOUSING TAX CREDIT FUND III, L.P.

(A California Limited Partnership)

CONDENSED STATEMENT OF PARTNERS’ EQUITY (DEFICIT)

For the ~~Six~~Nine Months Ended ~~September~~December 3031, 2011

(Unaudited)

		General		Limited
		General Partner				Limited Partners			Total
		Partner		Partners		Total
Partners’ deficit at March 31, 2011		$	(13,968	)		$	(4,509,191	)	$	(4,523,159	)
Partners’ deficit at March 31, 2011	$	(13,968)	$	(4,509,191)	$	(4,523,159)
Contributions (Note 5)			45,828				-			45,828
Contributions (Note 5)		45,828		-		45,828
Net income			3,287				325,462			328,749
Net income		2,977		294,747		297,724
Partners’ equity (deficit) at December 31, 2011		$	35,147			$	(4,183,729	)	$	(4,148,582	)
Partners’ equity (deficit) at September 30, 2011	$	34,837	$	(4,214,444)	$	(4,179,607)

See accompanying notes condensed to financial statements

WNC HOUSING TAX CREDIT FUND III, L.P.

(A California Limited Partnership)

CONDENSED STATEMENTS OF CASH FLOWS

For the ~~Six~~Nine Months Ended ~~September~~December 3031, 2011 and 2010

(Unaudited)

		2011		~~2010~~	2010
Cash flows from operating activities:
Net income (loss)	$	~~297,724~~$	$328,749	~~(67,684)~~	$	(145,706	)
Adjustments to reconcile net income (loss) to net
Adjustments to reconcile net income (loss) to net cash used in operating activities:
cash used in operating activities:
Gain on sale of Local Limited Partnerships			(536,774	)		(141,906	)
Gain on sale of Local Limited Partnerships		(440,410)		(115,406)
Write off of other assets			16,769			-
Increase in other assets		~~(30,426)~~	(37,748	~~(5,000~~)		(69,378	)
Decrease in accrued fees and expenses due to
Increase (decrease) in accrued fees and expenses due to General Partner and affiliates			(343,923	)		153,090
General Partner and affiliates		(304,980)		(17,099)
Increase (decrease) in accrued expenses			5,746			(1,028	)
Increase (decrease) in accrued expenses		5,746		(1,028)
Net cash used in operating activities			(567,181	)		(204,928	)
Net cash used in operating activities		(472,346)		(206,217)
Cash flows from investing activities:
Cash flows from investing activities:
Proceeds from sale of Local Limited Partnerships			661,759			145,406
Proceeds from sale of Local Limited Partnerships		543,976		115,406
Advances made to Local Limited Partnerships			-			(10,299	)
Advances made to Local Limited Partnerships		-		(10,299)
Write off of advances made to Local Limited Partnerships			-			10,299
Write off of advances made to Local Limited Partnerships		-		10,299
Net cash provided by investing activities			661,759			145,406
Net cash provided by investing activities		543,976		115,406
Net increase (decrease) in cash			94,578			(59,522	)
Net increase (decrease) in cash		71,630		(90,811)
Cash, beginning of period			57,638			110,204
Cash, beginning of period		57,638		110,204
Cash, end of period		$	152,216		$	50,682
Cash, end of period	$	129,268	$	19,393
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Taxes paid		$	-		$	-
Taxes Paid	$	-	$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES
NON-CASH INVESTING AND FINANCING ACTIVITIES
General Partner equity balance was increased and accrued fees and expenses due to the General Partner was decreased as a result of forgiveness of debt by the General Partner.		$	45,828		$	-
General Partner equity balance was increased and accrued fees and expenses due to the General Partner was decreased as a result of forgiveness of debt by the General Partner.	$	45,828	$	-

See accompanying notes condensed to financial statements

WNC HOUSING TAX CREDIT FUND III, L.P.

(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS

For the Quarterly Period Ended ~~September~~December 3031, 2011

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

The accompanying condensed unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q for quarterly reports under Section 13 or 15(d) of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the ~~six~~nine months ended ~~September~~December 3031, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2012. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-K for the fiscal year ended March 31, 2011.

Organization

WNC Housing Tax Credit Fund III, L.P. (the "Partnership") is a California Limited Partnership formed under the laws of the State of California on May 10, 1991. The Partnership was formed to acquire limited partnership interests in other limited partnerships (“Local Limited Partnerships”) which own multi-family or senior housing complexes (“Housing Complexes”) that are eligible for Federal low income housing tax credits (“Low Income Housing Tax Credits”). The local general partners (the “Local General Partners”) of each Local Limited Partnership retain responsibility for maintaining, operating and managing the Housing Complexes. Each Local Limited Partnership is governed by its agreement of limited partnership (the “Local Limited Partnership Agreement”).

The general partner of the Partnership is WNC Tax Credit Partners, L.P. (the “General Partner”). WNC & Associates, Inc., a California corporation (“Associates”), and Wilfred N. Cooper, Sr., are general partners of the General Partner. The chairman and president of Associates owns all of the outstanding stock of Associates. The business of the Partnership is conducted primarily through Associates, as the Partnership has no employees of its own.

The Partnership shall continue 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 15,000 units of limited partnership interests (“Partnership Units”) at $1,000 per Partnership Unit. The offering of Partnership Units concluded on September 30, 1993, at which time 15,000 Partnership Units representing subscriptions in the amount of $15,000,000, had been accepted. The General Partner has a 1% interest in operating profits and losses, taxable income and losses, cash available for distribution from the Partnership and Low Income Housing Tax Credits of the Partnership. The investors (the “Limited Partners”) will be allocated the remaining 99% of these items in proportion to their respective investments.

WNC HOUSING TAX CREDIT FUND III, L.P.

(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended ~~September~~December 3031, 2011

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

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

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 “Compliance Period”), the loss of any remaining future Low Income Housing Tax Credits, a fractional recapture of prior Low Income Housing Tax Credits, and a loss of the Partnership’s investment in the Housing Complex would occur. The Partnership is a limited partner or a non-managing member of each Local Limited Partnership. Accordingly, the Partnership will have very limited rights with respect to management of the Local Limited Partnerships. The Partnership will rely totally on the Local General Partners. Neither the Partnership’s investments in Local Limited Partnerships, nor the Local Limited Partnerships’ investments in Housing Complexes, are readily marketable. To the extent the Housing Complexes receive government financing or operating subsidies, they may be subject to one or more of the following risks: difficulties in obtaining tenants for the Housing Complexes; difficulties in obtaining rent increases; limitations on cash distributions; limitations on sales or refinancing of Housing Complexes; limitations on transfers of interests in Local Limited Partnerships; limitations on removal of Local General Partners; limitations on subsidy programs; and possible changes in applicable regulations. Uninsured casualties could result in loss of property and Low Income Housing Tax Credits and recapture of Low Income Housing Tax Credits previously taken. The value of real estate is subject to risks from fluctuating economic conditions, including employment rates, inflation, tax, environmental, land use and zoning policies, supply and demand of similar Housing Complexes, and neighborhood conditions, among others.

WNC HOUSING TAX CREDIT FUND III, L.P.

(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended ~~September~~December 3031, 2011

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

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

All of the Low Income Housing Tax Credits anticipated to be realized from the Local Limited Partnerships have been realized. The Partnership does not anticipate being allocated any Low Income Housing Tax Credits from the Local Limited Partnerships in the future.

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

The Partnership currently has insufficient working capital to fund its operations. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through ~~November~~February 3028, ~~2012~~2013.

Anticipated future and existing cash resources of the Partnership are not sufficient to pay existing liabilities of the Partnership. However, substantially all of the existing liabilities of the Partnership are payable to the General Partner and/or its affiliates. Though the amounts payable to the General Partner and/or its affiliates are contractually currently payable, the Partnership anticipates that the General Partner and/or its affiliates will not require the payment of these contractual obligations until capital reserves are in excess of the aggregate of then existing contractual obligations and then anticipated future foreseeable obligations of the Partnership. The Partnership would be adversely affected should the General Partner and/or its affiliates demand current payment of the existing contractual obligations and or suspend services for this or any other reason.

Exit Strategy

The Compliance Period for a Housing Complex is generally 15 years following construction or rehabilitation completion. Associates was one of the first in the industry to offer syndicated investments in Low Income Housing Tax Credits. The initial programs have completed their Compliance Periods.

Upon the sale of a Local Limited Partnership interest or Housing Complex after the end of the Compliance Period, there would be no recapture of Low Income Housing Tax Credits. A sale prior to the end of the Compliance Period could result in recapture if certain conditions are not met.

With that in mind, the General Partner is continuing its review of the Housing Complexes. 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.

WNC HOUSING TAX CREDIT FUND III, L.P.

(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended ~~September~~December 3031, 2011

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Upon identifying those Housing Complexes with the highest potential for a successful sale, refinancing or re-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 as Low Income Housing Tax Credits are no longer available. Local Limited Partnership interests may be disposed of any time by the General Partner in its discretion. While liquidation of the Housing Complexes continues to be evaluated, the dissolution of the Partnership was not imminent as of ~~September 30~~December 31, 2011. As of all periods presented, all of the Housing Complexes had completed their Compliance Period.

Upon management of the Partnership identifying a Local Limited Partnership for disposition, costs incurred by the Partnership in preparation for the disposition are deferred. Upon the sale of the Local Limited Partnership interest, the Partnership nets the costs that had been deferred against the proceeds from the sale in determining the gain or loss on sale of the Local Limited Partnership. Deferred disposition costs are included in other assets on the condensed balance sheets.

The Partnership has received the majority vote in favor of the plan of liquidation of the Partnership. Therefore, the Partnership is engaging third party appraisers to appraise several or all of the Local Limited Partnerships in this Partnership. The appraisal is one of the preliminary steps that need to be completed in order to move forward with the approved liquidation plan. The expense incurred for the appraisals, or any other disposition related expenses the Partnership incurs, are being capitalized and will remain on the balance sheet until the respective Local Limited Partnership is sold. At the time of disposition the capitalized costs will be netted with any cash proceeds that are received in order to calculate the gain or loss on the disposition.

As of March 31, 2011, the Partnership sold its Local Limited Partnership Interest in Carlinville Associates I, L.P, Lake Ridge Apartments, L.P, Heritage Colonial Homes, L.P, Meadow Run Associates L.P, Windermere Associates, L.P, Candleridge Apartments of Bondurant, L.P, Candleridge Apartments of Waukee, L.P and Logan Park Associates, L.P.

The following table reflects the 29 Local Limited Partnership interests that were sold during the nine months ended December 31, 2011:

Local Limited Partnership	Debt at 12/31/10	Appraisal Value	Date of Sale	Sales Price	Sales Related Expenses	Gain (loss) on sale
Cherokee Housing	$589,099	$335,000	May 1, 2011	$17,673	$5,534	$12,139
Coffeeville Housing	510,375	280,000	May 1, 2011	15,311	5,534	9,777
Coosa County Housing	515,037	350,000	May 1, 2011	15,451	5,534	9,917
Ft. Deposit Housing	669,824	380,000	May 1, 2011	20,095	5,534	14,561
Orange Beach	1,029,413	375,000	May 1, 2011	31,519	5,534	25,985
Wilcam Housing	591,672	450,000	May 1, 2011	17,750	5,534	12,216
Parks I	1,156,121	570,000	May 31, 2011	30,000	3,319	26,681
Cambridge Court	1,235,832	735,000	April 30, 2011	30,000	2,960	27,040
Fairview Village	542,986	260,000	June 30, 2011	30,000	4,301	25,699
Beaumont Elderly Housing	891,637	560,000	August 24, 2011	20,000	3,096	16,904

WNC HOUSING TAX CREDIT FUND III, L.P.

(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended ~~September~~December 3031, 2011

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

The following table reflects the 24 Local Limited Partnership interests that were sold during the six months ended September 30, 2011:

Local Limited Partnership	Debt at 12/31/10	Appraisal Value	Date of Sale	Sales Price	Sales Related Expenses	Gain (loss) on sale
Chester Associates	653,547	380,000	August 24, 2011	20,000	3,196	16,804
Clinton Terrace, Ltd	716,935	230,000	November 15, 2011	20,000	3,773	16,227
Crockett Manor	784,131	730,000	August 24, 2011	20,000	2,996	17,004
Crockett Manor Senior	961,186	470,000	August 24, 2011	20,000	2,996	17,004
Delta Manor, L.P.	1,180,131	550,000	September 20, 2011	30,000	4,023	25,977
Eupora Apartments	1,148,192	750,000	August 24, 2011	20,000	3,496	16,504
Fox Lake Manor L.P.	345,617	290,000	August 30, 2011	20,000	4,096	15,904
Gulf Coast Apartments	1,265,783	740,000	August 30, 2011	20,000	2,946	17,054
Gulf Coast of Long Beach	1,296,021	860,000	August 30, 2011	20,000	2,946	17,054
Killbuck, L.P.	712,840	250,000	July 31, 2011	26,471	3,813	22,658
Levelland Manor, L.P.	862,108	420,000	October 1, 2011	25,863	4,893	20,970
Post Manor, L.P.	603,294	250,000	October 1, 2011	18,099	4,251	13,848
Red Bud Associates	564,272	310,000	August 24, 2011	20,000	3,196	16,804
Steelville Associates	509,551	315,000	August 30, 2011	20,000	3,196	16,804
Tanglewood L.P.	1,015,558	740,000	July 31, 2011	39,706	3,815	35,891
Whitted Forest	828,985	605,000	September 19, 2011	-	7,084	(7,084)
Wills Point Manor, L.P.	600,357	240,000	October 1, 2011	18,011	4,251	13,760
Woodland Apartments, L.P.	1,193,654	530,000	October 1, 2011	35,810	4,251	31,559
Woodview LP	1,138,704	675,000	August 30, 2011	40,000	8,887	31,113

Local Limited Partnership	Debt at 12/31/10	Appraisal Value	Date of Sale	Sales Price	Sales Related Expenses	Gain (loss) on sale
Cherokee Housing	$589,099	$335,000	May 1, 2011	$17,673	$5,534	$12,139
Coffeeville Housing	510,375	280,000	May 1, 2011	15,311	5,534	9,777
Coosa County Housing	515,037	350,000	May 1, 2011	15,451	5,534	9,917
Ft. Deposit Housing	669,824	380,000	May 1, 2011	20,095	5,534	14,561
Orange Beach	1,029,413	375,000	May 1, 2011	31,519	5,534	25,985
Wilcam Housing	591,672	450,000	May 1, 2011	17,750	5,534	12,216
Parks I	1,156,121	570,000	May 31, 2011	30,000	3,319	26,681
Cambridge Court	1,235,832	735,000	April 30, 2011	30,000	2,960	27,040
Fairview Village	542,986	260,000	June 30, 2011	30,000	4,301	25,699
Beaumont Elderly Housing	891,637	560,000	August 24, 2011	20,000	3,096	16,904
Chester Associates	653,547	380,000	August 24, 2011	20,000	3,196	16,804
Crockett Manor	784,131	730,000	August 24, 2011	20,000	2,996	17,004
Crockett Manor Senior	961,186	470,000	August 24, 2011	20,000	2,996	17,004
Delta Manor, L.P.	1,180,131	550,000	September 20, 2011	30,000	4,023	25,977
Eupora Apartments	1,148,192	750,000	August 24, 2011	20,000	3,496	16,504
Fox Lake Manor L.P.	345,617	290,000	August 30, 2011	20,000	4,096	15,904
Gulf Coast Apartments	1,265,783	740,000	August 30, 2011	20,000	2,946	17,054
Gulf Coast of Long Beach	1,296,021	860,000	August 30, 2011	20,000	2,946	17,054
Killbuck, L.P.	712,840	250,000	July 31, 2011	26,471	3,813	22,658
Red Bud Associates	564,272	310,000	August 24, 2011	20,000	3,196	16,804
Steelville Associates	509,551	315,000	August 30, 2011	20,000	3,196	16,804
Tanglewood L.P.	1,015,558	740,000	July 31, 2011	39,706	3,815	35,891
Whitted Forest	828,985	605,000	September 19, 2011	-	7,084	(7,084)
Woodview LP	1,138,704	675,000	August 30, 2011	40,000	8,887	31,113

All Local Limited Partnerships sold during the nine months ended December 31, 2011 had reached the end of the Compliance Period. Therefore, no risk of credit recapture exists.

All Local Limited Partnerships sold during the six months ended September 30, 2011 had reached the end of the Compliance Period. Therefore, no risk of credit recapture exists.

WNC HOUSING TAX CREDIT FUND III, L.P.

(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended ~~September~~December 3031, 2011

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

The following table represents the anticipated use of the cash proceeds from the disposition of the 2429 Local Limited Partnerships that were disposed of during the ~~six~~nine months ended ~~September~~December 3031, 2011.

Local Limited Partnership	Cash Proceeds	Reimburse GP or affiliates for expenses	Payment of accrued asset management fees	Remaining cash to remain in reserves for future expenses
Cherokee Housing	$17,673	$14,672	$-	$3,001
Coffeeville Housing	15,311	12,711	-	2,600
Coosa County Housing	15,451	12,828	-	2,623
Ft. Deposit Housing	20,095	16,683	-	3,412
Orange Beach	31,519	26,168	-	5,351
Wilcam Housing	17,750	14,736	-	3,014
Parks I	30,000	15,000	-	15,000
Cambridge Count	30,000	7,500	7,500	15,000
Fairview Village	30,000	20,000	10,000	-
Beaumont Elderly Housing	20,000	7,703	7,726	4,571
Chester Associates	20,000	7,703	7,726	4,571
Clinton Terrace, Ltd	20,000	-	19,000	1,000
Crockett Manor	20,000	7,703	7,726	4,571
Crockett Manor Senior	20,000	7,703	7,726	4,571
Delta Manor, L.P.	30,000	7,340	20,000	2,660
Eupora Apartments	20,000	7,703	7,726	4,571
Fox Lake Manor L.P.	20,000	12,447	-	7,553
Gulf Coast Apartments	20,000	9,917	-	10,083
Gulf Coast of Long Beach	20,000	9,917	-	10,083
Killbuck, L.P.	26,471	10,736	-	15,735
Levelland Manor, L.P.	25,863	3,146	17,717	5,000
Post Manor, L.P.	18,099	3,146	9,953	5,000
Red Bud Associates	20,000	7,703	7,726	4,571
Steelville Associates	20,000	7,703	7,726	4,571
Tanglewood L.P.	39,706	17,353	-	22,353
Whitted Forest	-	-	-	-
Wills Point Manor, L.P.	18,011	3,146	9,865	5,000
Woodland Apartments, L.P.	35,810	3,147	27,663	5,000
Woodview LP	40,000	21,660	-	18,340

Local Limited Partnership	Cash Proceeds	Reimburse GP or affiliates for expenses	Payment of accrued asset management fees	Remaining cash to remain in reserves for future expenses
Cherokee Housing	$17,673	$14,672	$ -	$3,001
Coffeeville Housing	15,311	12,711	-	2,600
Coosa County Housing	15,451	12,828	-	2,623
Ft. Deposit Housing	20,095	16,683	-	3,412
Orange Beach	31,519	26,168	-	5,351
Wilcam Housing	17,750	14,736	-	3,014
Parks I	30,000	15,000	-	15,000
Cambridge Count	30,000	7,500	7,500	15,000
Fairview Village	30,000	20,000	10,000	-
Beaumont Elderly Housing	20,000	7,703	7,726	4,571
Chester Associates	20,000	7,703	7,726	4,571
Crockett Manor	20,000	7,703	7,726	4,571
Crockett Manor Senior	20,000	7,703	7,726	4,571
Delta Manor, L.P.	30,000	7,340	20,000	2,660
Eupora Apartments	20,000	7,703	7,726	4,571
Fox Lake Manor L.P.	20,000	12,447	-	7,553
Gulf Coast Apartments	20,000	9,917	-	10,083
Gulf Coast of Long Beach	20,000	9,917	-	10,083
Killbuck, L.P.	26,471	10,736	-	15,735
Red Bud Associates	20,000	7,703	7,726	4,571
Steelville Associates	20,000	7,703	7,726	4,571
Tanglewood L.P.	39,706	17,353	-	22,353
Whitted Forest	-	-	-	-
Woodview LP	40,000	21,660	-	18,340

WNC HOUSING TAX CREDIT FUND III, L.P.

(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended ~~September~~December 3031, 2011

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

As of ~~September~~December 3031, 2011, the Partnership has identified ~~the~~Oakdale ~~following~~Senior ~~Local~~Housing Limited Partnership (“Oakdale”) for the ~~possible~~ disposition. Oakdale aswas ~~listed~~appraised infor ~~the~~$1,710,000 ~~table~~and ~~below.~~had a mortgage note balance of $2,377,755 as of December 31, 2010. The ~~Partnership~~estimated sales price is ~~selling~~$20,000 ~~its~~and ~~Local~~the ~~Limited~~estimated ~~Partnership~~sales ~~Interest~~related inexpenses ~~each~~are of$2,950 which will be netted against the ~~Local~~proceeds ~~Limited~~from ~~Partnerships. The~~the ~~Compliance~~sale ~~Period~~in ~~for~~calculating ~~all~~the ~~Local~~gain ~~Limited~~on ~~Partnerships~~the sale. The Compliance Period has expired so there is no risk of recapture to the investors in the Partnership.

Local Limited Partnership	Debt at 12/31/10	Appraisal Value	Estimated Date of Sale	Estimated Sales Price	Estimated Sales Related Expenses	Estimated gain (loss) on sale
Clinton Terrace Apartments	$725,724	$230,000	December 31, 2011	$20,000	$3.850	$16,150
Levelland Manor *	862,108	420,000	October 12, 2011	25,863	2.750	23,113
Oakdale Senior Housing	2,377,755	1,710,000	December 31, 2011	20,000	2.950	17,050
Post Manor L.P. *	603,294	250,000	October 12, 2011	18,099	2,750	15,349
Wills Point Manor *	600,357	240,000	October 12, 2011	18,011	2,750	15,261
Woodlands Apartments *	1,193,654	530,000	October 12, 2011	35,810	2,750	33,060

* The limited partnership interest in this Local Limited Partnership was sold subsequent to September 30, 2011 but prior to the issuance of this report.

The following table represents the anticipated use of the cash proceeds from the possible disposition of the six local Limited Partnerships.

Local Limited Partnership	Expected Cash Proceeds	Reimburse GP or affiliates for expenses	Payment of accrued asset management fees	Remaining cash to remain in reserves for future expenses
Clinton Terrace Apartments	$20,000	$ -	$15,833	$4,167
Levelland Manor *	25,863	6,605	6,470	12,788
Oakdale Senior Housing	20,000	-	15,833	4,167
Post Manor L.P. *	18,099	6,605	6,470	5,024
Wills Point Manor *	18,011	6,605	6,470	4,936
Woodlands Apartments *	35,810	6,606	6,470	22,734

* The limited partnership interest in this Local Limited Partnership was sold subsequent to September 30, 2011 but prior to the issuance of this report.

WNC HOUSING TAX CREDIT FUND III, L.P.

(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended September 30, 2011

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Method of Accounting for Investments in Local Limited Partnerships

The Partnership accounts for its investments in 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 at least annually or 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 were being amortized over 27.5 years (see Note 2).

“Equity in losses of Local Limited Partnerships” for the periods ended ~~September~~December 3031, 2011 and 2010 are recorded by the Partnership. Management’s estimate for the three and ~~six~~nine-month periods is based on either actual unaudited results reported by the Local Limited Partnerships or historical trends in the operations of the Local Limited Partnerships. Equity in losses of Local Limited Partnerships allocated to the Partnership are not recognized to the extent that the investment balance would be adjusted below zero. If the Local Limited Partnerships report net income in future years, the Partnership will resume applying the equity method only after its share of such net income equals the share of net losses not recognized during the period(s) the equity method was suspended (see Note 2).

In accordance with the accounting guidance for the consolidation of variable interest entities, the Partnership determines when it should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements, and when it should disclose information about its relationship with a VIE. The analysis that must be performed to determine which entity should consolidate a VIE focuses on control and economic factors. A VIE is a legal structure used to conduct activities or hold assets, which must be consolidated by a company if it is the primary beneficiary because it has (1) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the guidance requires continual reconsideration of the primary beneficiary of a VIE.

Based on this guidance, the Local Limited Partnerships in which the Partnership invests meet the definition of a VIE because the owners of the equity at risk in these entities do not have the power to direct their operations. However, management does not consolidate the Partnership's interests in these VIEs, as it is not considered to be the primary beneficiary since it does not have the power to direct the activities that are considered most significant to the economic performance of these entities. The Partnership currently records the amount of its investment in these Local Limited Partnerships as an asset on its balance sheets, recognizes its share of partnership income or losses in the statements of operations, and discloses how it accounts for material types of these investments in its financial statements. The Partnership's balance in investment in Local Limited Partnerships, plus the risk of recapture of tax credits previously recognized on these investments, represents its maximum exposure to loss. The Partnership's exposure to loss on these 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 guarantee against credit recapture to the investors in the Partnership.

1413

WNC HOUSING TAX CREDIT FUND III, L.P.

(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended ~~September~~December 3031, 2011

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Distributions received by the Partnership are accounted for as a reduction of the investment balance. Distributions received after the investment has reached zero are recognized as income. As of ~~September~~December 3031, 2011, all of the investment balances had reached zero.

Use of Estimates

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

Cash and Cash Equivalents

The Partnership considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. As of ~~September~~December 3031, 2011 and March 31, 2011, the Partnership had no cash equivalents.

Reporting Comprehensive Income

The Partnership had no items of other comprehensive income for all periods presented.

Income Taxes

The Partnership has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns. The Partnership’s federal tax status as a pass-through entity is based on its legal status as a partnership. Accordingly, the Partnership is not required to take any tax positions in order to qualify as a pass-through entity. The Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has no other tax positions which must be considered for disclosure.

Net Loss Per Partnership Unit

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.

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.

1514

WNC HOUSING TAX CREDIT FUND III, L.P.

(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

For the Quarterly Period Ended ~~September~~December 3031, 2011

(Unaudited)

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS

As of ~~September~~December 3031, 2011 and March 31, 2011, the Partnership owns Local Limited Partnership interests in 1611 and 40 Local Limited Partnerships, respectively. Each of these Local Limited Partnership’s own one Housing Complex consisting of an aggregate of ~~695~~539 and 1,425 apartment units, respectively. The Local General Partners of the Local Limited Partnerships manage the day to day operations of the entities. Significant Local Limited Partnership business decisions require approval from the Partnership. The Partnership, as a Limited Partner, is generally entitled to 99%, as specified in the Local Limited Partnership governing agreements, of the operating profits and losses, taxable income and losses, and Low Income Housing Tax Credits of the Local Limited Partnerships.

Selected financial information for the ~~six~~nine months ended ~~September~~December 3031, 2011 and 2010 from the unaudited combined condensed financial statements of the Local Limited Partnerships in which the Partnership has invested is as follows:

COMBINED CONDENSED STATEMENTS OF OPERATIONS
			2011		2010
	Revenues	$	2,483,000	$	3,677,000
	Expenses
	Interest expense		332,000		495,000
	Depreciation and amortization		527,000		812,000
	Operating expenses		1,890,000		2,868,000
	Total expenses		2,749,000		4,175,000
	Net loss	$	(266,000)	$	(498,000)
	Net loss allocable to the Partnership	$	(264,000)	$	(492,000)
	Net loss recorded by the Partnership	$	-	$	-

COMBINED CONDENSED STATEMENTS OF OPERATIONS

	2011			2010

Revenues	$	3,263,000		$	5,267,000

Expenses
Interest expense		428,000			709,000
Depreciation and amortization		681,000			1,167,000
Operating expenses		2,466,000			4,096,000
Total expenses		3,575,000			5,972,000

Net loss	$	(312,000	)	$	(705,000	)
Net loss allocable to the Partnership	$	(309,000	)	$	(697,000	)
Net loss recorded by the Partnership	$	-		$	-

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

1615

WNC HOUSING TAX CREDIT FUND III, L.P.

(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

For the Quarterly Period Ended ~~September~~December 3031, 2011

(Unaudited)

NOTE 3 - RELATED PARTY TRANSACTIONS

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

(a) An annual asset management fee equal to 0.5% of the invested assets of the Partnership, as defined. “Invested Assets” means the sum of the Partnership’s investment in Local Limited Partnership interests and the Partnership’s ~~Allocable~~allocable share of mortgage loans on and other debts related to the Housing Complexes owned by such Local Limited Partnerships. Asset management fees of $91113,~~267~~571 and $~~140~~206,~~959~~071 were incurred during the ~~six~~nine months ended ~~September~~December 3031, 2011 and 2010, respectively. The Partnership paid the General Partner and or its affiliates $~~251~~336,~~968~~166 and $64,126 of those fees during the ~~six~~nine months ended ~~September~~December 3031, 2011 and 2010, respectively.

(b) 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 $~~225~~238,~~520~~105 and $154,060 during the ~~six~~nine months ended ~~September~~December 3031, 2011 and 2010, respectively.

(c) A subordinated disposition fee in an amount equal to 1% of the sales price of real estate sold. Payment of this fee is subordinated to the limited partners receiving a preferred return of 16% through December 31, 2002 and 6% thereafter (as defined in the Partnership Agreement) and is payable only if the General Partner or its affiliates render services in the sales effort. No such fee was incurred during the ~~six~~nine months ended ~~September~~December 3031, 2011 or ~~September~~December 3031, 2010.

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

		September 30, 2011		March 31, 2011
		December 31, 2011			March 31, 2011
Expenses paid by the General Partner or affiliates on behalf of the Partnership	$	~~12,584~~$	$35,535	~~156,864~~	$	156,864
Asset management fee payable		~~4,335,667~~	4,273,773	~~4,496,368~~		4,496,368
Advances made to the Partnership by the General Partner or an affiliate		-	-	~~45,827~~		45,827
Total	$	~~4,348,251~~$	$4,309,308	~~4,699,059~~	$	4,699,059

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

NOTE 4 – ADVANCES TO LOCAL LIMITED PARTNERSHIPS

During the ~~six~~nine months ended ~~September~~December 3031, 2011 and 2010, the Partnership voluntarily advanced $0 and $10,299, respectively, to one Local Limited Partnership, Whitted Forest as a result of the Local Limited Partnership experiencing operational issues. As of March 31, 2011, total advances made to this Local Limited Partnership were $248,850, all of which has been reserved. During the ~~six~~nine months ended ~~September~~December 3031, 2011, Whitted Forest was disposed of.

WNC HOUSING TAX CREDIT FUND III, L.P.

(A California Limited Partnership)

NOTES TO CONDENSED FINANCIAL STATEMENTS – CONTINUED

For the Quarterly Period Ended September 30, 2011

(Unaudited)

NOTE 5 – CAPITAL CONTRIBUTION BY GENERAL PARTNER

During the ~~six~~nine months ended ~~September~~December 3031, 2011, the Partnership was relieved of debt owed to the General Partner totaling $45,828. The Partnership had received $45,828 in cash advances from the General Partner, which were in turn advanced by the Partnership to certain Local Limited Partnerships to help aid the Local Limited Partnerships with their operational issues. The advances were deemed to be uncollectible by the General Partner, and as such, the debt was forgiven. The cancellation of debt was recorded by the Partnership as a capital contribution from the General Partner.

~~NOTE 6 – SUBSEQUENT EVENTS~~16

The following table reflects the limited partnership interests that were sold subsequent to September 30, 2011:

Local Limited Partnership	Debt at 12/31/10	Appraisal Value	Date of Sale	Estimated Sales Price	Estimated Sales Related Expenses	Estimated gain (loss) on sale
Levelland Manor	$862,108	$420,000	October 12, 2011	$25,863	$2,750	$23,113
Post Manor L.P.	603,294	250,000	October 12, 2011	18,099	2,750	15,349
Wills Point Manor	600,357	240,000	October 12, 2011	18,011	2,750	15,261
Woodlands Apartments	1,193,654	530,000	October 12, 2011	35,810	2,750	33,060

The following table represents the anticipated use of the cash proceeds from the disposition of the four local Limited Partnerships that were sold subsequent to September 30, 2011.

Local Limited Partnership	Expected Cash Proceeds	Reimburse GP or affiliates for expenses	Payment of accrued asset management fees	Remaining cash to remain in reserves for future expenses
Levelland Manor *	$25,863	$6,605	$6,470	$12,788
Post Manor L.P. *	18,099	6,605	6,470	5,024
Wills Point Manor *	18,011	6,605	6,470	4,936
Woodlands Apartments *	35,810	6,606	6,470	22,734

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

Forward-Looking Statements

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

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

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

The following discussion and analysis compares the results of operations for the three and ~~six~~nine months ended ~~September~~December 3031, 2011 and 2010, and should be read in conjunction with the condensed unaudited financial statements and accompanying notes included within this report.

Financial Condition

The Partnership’s assets at ~~September~~December 3031, 2011 consisted of $~~129~~152,000 in cash and $4514,000 of other assets. Liabilities at ~~September~~December 3031, 2011 consisted of $4,~~348~~309,000 of accrued fees and expenses due to the General Partner and affiliates and $6,000 in accrued expenses.

Results of Operations

Three Months Ended ~~September~~December 3031, 2011 Compared to the Three Months Ended ~~September~~December 3031, 2010. The Partnership’s net income for the three months ended ~~September~~December 3031, 2011 was $~~218~~31,000, reflecting an increase of $~~220~~109,000 from the $(278,000) net loss experienced during the three months ended ~~September~~December 3031, 2010. The change is largely due to an increase of $~~166~~70,000 in gain on sale of Local Limited Partnerships during the three months ended ~~September~~December 3031, 2011, compared to the three months ended ~~September~~December 3031, 2010. The gain on sale of Local Limited Partnerships will vary from period to period, depending on the number of Housing Complexes that have been identified for disposition, the values of such Housing Complexes and the closing dates of such transactions. The ~~There~~legal ~~was~~and ~~also~~accounting afees ~~decrease~~decreased ofby $110,000 ~~in write off of advances to Local Limited Partnerships. The Partnership advanced $(1,000) to a troubled Local Limited Partnership during the three months ended September, 2010 and reserved~~ for the ~~amount fully compared to no such advances made or reserved for during the~~ three months ended ~~September~~December 3031, 2011. ~~The advances are made based on the need of the Local Limited Partnerships. The legal and accounting fees decreased by $40,000~~ due to the timing of the accounting work performed for the Partnership. There was also a $2843,000 decrease of asset management fees for the three months ended ~~September~~December 3031, 2011. These fees are calculated based on the invested assets. As Local Limited Partnerships are sold, the invested assets decrease, thereby decreasing the asset management fees. There was a $(1417,000) increase in ~~outsourcing~~write ~~expenses~~off of other assets for the three months ended ~~September~~December 3031, 2011. ~~due~~Capitalized tocosts from the ~~fact~~potential ~~that~~disposition ~~the~~of a Local Limited Partnership ~~outsourced~~were aexpensed ~~portion~~due ofto the ~~data~~discontinuance ~~entry~~of ~~management~~the plan to ~~increase~~dispose ~~efficiency.~~of ~~Both~~ the property. The reporting fees decreased by $1,000 and the distribution income increased by $2,000 for the three months ended ~~September~~December 3031, 2011. Reporting fees and distributions fluctuate from year to year due to the fact that Local Limited Partnerships pay those fees to the Partnership when the Local Limited Partnerships’ cash flow will allow for the payment.

1917

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

~~Six~~Nine Months Ended ~~September~~December 3031, 2011 Compared to the ~~Six~~Nine Months Ended ~~September~~December 3031, 2010. The Partnership’s net income for the ~~six~~nine months ended ~~September~~December 3031, 2011 was $~~298~~329,000, reflecting an increase of $~~366~~474,000 from the $(68146,000) net loss experienced during the ~~six~~nine months ended ~~September~~December 3031, 2010. The change is largely due to an increase of $~~325~~395,000 in gain on sale of Local Limited Partnerships during the ~~six~~nine months ended ~~September~~December 3031, 2011, compared to the ~~six~~nine months ended ~~September~~December 3031, 2010. The gain on sale of Local Limited Partnerships will vary from period to period, depending on the number of Housing Complexes that have been identified for disposition, the values of such Housing Complexes and the closing dates of such transactions. There was also a decrease of $10,000 of write off of advances to Local Limited Partnerships for the ~~six~~nine months ended ~~September~~December 3031, 2011. The Partnership advanced $(10,000) to a troubled Local Limited Partnership during the ~~six~~nine months ended September, 2010 and reserved for the amount fully compared to no such advances made or reserved for during the ~~six~~nine months ended ~~September~~December 3031, 2011. The advances are made based on the needs of the Local Limited Partnerships. The legal and accounting fees decreased by $818,000 for the ~~six~~nine months ended ~~September~~December 3031, 2011 due to the timing of the accounting work performed for the Partnership. There was also a $5093,000 decrease of asset management fees for the ~~six~~nine months ended ~~September~~December 3031, 2011. These fees are calculated based on the invested assets. As Local Limited Partnerships are sold, the invested assets decrease, thereby decreasing the asset management fees. There was a $(14,000) increase in outsourcing expenses for the ~~six~~nine months ended ~~September~~December 3031, 2011 due to the fact that the Partnership outsourced a portion of the data entry management to increase efficiency. There was a $(16,000) increase in write off of other assets for the nine months ended December 31, 2011. Capitalized costs from the potential disposition of a Local Limited Partnership were expensed due to the discontinuance of the plan to dispose of the property. The reporting fees decreased by $(4,000) and the distribution income increased by $4,000 for the nine months ended December 31, 2011. Reporting fees and distributions fluctuate from year to year due to the fact that Local Limited Partnerships pay those fees to the Partnership when the Local Limited Partnerships’ cash flow will allow for the payment.

Liquidity and Capital Resources

~~Six~~Nine Months Ended ~~September~~December 3031, 2011 Compared to ~~Six~~Nine Months Ended ~~September~~December 3031, 2010. The net increase in cash during the ~~six~~nine months ended ~~September~~December 3031, 2011 was $7295,000 compared to a net decrease in cash during the ~~six~~nine months ended ~~September~~December 3031, 2010 of $(9160,000). The change is due primarily to the fact that during the ~~six~~nine months ended ~~September~~December 3031, 2011 the Partnership received $~~544~~662,000 in cash proceeds from the sale of Local Limited Partnerships compared to $~~115~~145,000 received during the ~~six~~nine months ended ~~September~~December 3031, 2010. The proceeds received will vary from period to period, depending on the number of Housing Complexes that have been identified for disposition, the values of such Housing Complexes and the closing dates of such transactions. During the ~~six~~nine months ended ~~September~~December 3031, 2011, the Partnership paid $(~~252~~336,000) and $(~~226~~238,000) to the General Partner or an affiliate for accrued asset management fees and reimbursement of operating expenses, respectively, compared to $(64,000) and $(154,000), respectively, paid during the ~~six~~nine months ended ~~September~~December 3031, 2010. Each quarter, the Partnership evaluates its cash position and determines if payments are going to be made to the General Partner and/or affiliates. There was also a $10,000 decrease in advances to Local Limited Partnerships during the ~~six~~nine months ended ~~September~~December 3031, 2011 compared to the ~~six~~nine months ended ~~September~~December 3031, 2010. As explained above advances are made to Local Limited Partnerships on an as-needed basis depending on the operations of the underlying Housing Complexes.

During the ~~six~~nine months ended ~~September~~December 3031, 2011, accrued payables, which consist primarily of related party asset management fees and advances due to the General Partner and/or its affiliates, ~~decreased~~increased by $~~351~~390,000. The General Partner does not anticipate that these accrued fees and advances will be paid until such time as capital reserves are in excess of foreseeable working capital requirements of the Partnership.

The Partnership expects its future cash flows, together with its net available assets as of ~~September~~December 3031, 2011, to be insufficient to meet all currently foreseeable future cash requirements. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through ~~November~~February 3028, ~~2012~~2013.

2018

Recent Accounting Changes

In September 2006, the Financial Accounting Standards Board (“FASB”) issued accounting guidance for Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value measurements. This guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007 and shall be applied prospectively except for very limited transactions. In February 2008, the FASB delayed for one year implementation of the guidance as it pertains to certain non-financial assets and liabilities. The Partnership adopted GAAP for Fair Value Measurements effective April 1, 2008, except as it applies to those non-financial assets and liabilities, for which the effective date was April 1, 2009. The Partnership has determined that adoption of this guidance had no material impact on the Partnership’s financial statements.

In November 2008, the FASB issued accounting guidance on Equity Method Investment Accounting Considerations that addresses how the initial carrying value of an equity method investment should be determined, how an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment should be performed, how an equity method investee’s issuance of shares should be accounted for, and how to account for a change in an investment from the equity method to the cost method. This guidance is effective in fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. The Partnership adopted the guidance for the interim quarterly period beginning April 1, 2009. The impact of adopting it did not have a material impact on the Partnership’s financial condition or results of operations.

that addresses how the initial carrying value of an equity method investment should be determined, how an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment should be performed, how an equity method investee’s issuance of shares should be accounted for, and how to account for a change in an investment from the equity method to the cost method. This guidance is effective in fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. The Partnership adopted the guidance for the interim quarterly period beginning April 1, 2009. The impact of adopting it did not have a material impact on the Partnership’s financial condition or results of operations.

In April 2009, the FASB issued accounting guidance for Interim Disclosures about Fair Value of Financial Instruments. This requires disclosure about the method and significant assumptions used to establish the fair value of financial instruments for interim reporting periods as well as annual statements. It became effective for as of and for the interim period ended June 30, 2009 and had no impact on the Partnership’s financial condition or results of operations.

In May 2009, the FASB issued guidance regarding subsequent events, which was subsequently updated in February 2010. This guidance established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this guidance sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This guidance was effective for financial statements issued for fiscal years and interim periods ending after June 15, 2009, and was therefore adopted by the Partnership for the quarter ended June 30, 2009. The adoption did not have a significant impact on the subsequent events that the Partnership reports, either through recognition or disclosure, in the financial statements. In February 2010, the FASB amended its guidance on subsequent events to remove the requirement to disclose the date through which an entity has evaluated subsequent events, alleviating conflicts with current SEC guidance. This amendment was effective immediately and therefore the Partnership did not include the disclosure in this Form 10-Q.

In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for the consolidation of variable interest entities (VIEs). The amended guidance modified the consolidation model to one based on control and economics, and replaced the quantitative primary beneficiary analysis with a qualitative analysis. The primary beneficiary of a VIE will be the entity that has (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the amended guidance requires continual reconsideration of the primary beneficiary of a VIE and adds an additional reconsideration event for determination of whether an entity is a VIE. Additionally, the amendment requires enhanced and expanded disclosures around VIEs. This amendment is effective for fiscal years beginning after November 15, 2009. The adoption of this guidance on April 1, 2010 did not have a material effect on the Partnership’s financial statements.

In June 2009, the FASB issued the Accounting Standards Codification (Codification). Effective July 1, 2009, the Codification is the single source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with GAAP. The Codification is intended to reorganize, rather than change, existing GAAP. Accordingly, all references to currently existing GAAP have been removed and have been replaced with plain English explanations of the Partnership’s accounting policies. The adoption of the Codification did not have a material impact on the Partnership’s financial position or results of operations.

2219

Item 3. Quantitative and Qualitative Disclosures About Market Risks

NOT APPLICABLE

Item 4. Controls and Procedures

(a) Disclosure controls and procedures

As of the end of the period covered by this report, the Partnership’s General Partner, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of Associates, carried out an evaluation of the effectiveness of the Partnership’s “disclosure controls and procedures” as defined in Securities Exchange Act of 1934 Rule 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Partnership’s disclosure controls and procedures were not effective to ensure that material information required to be disclosed in the Partnership’s periodic report filings with SEC is recorded, processed, summarized and reported within the time period specified by the SEC’s rules and forms, consistent with the definition of “disclosure controls and procedures” under the Securities Exchange Act of 1934.

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

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

(b) Changes in internal controls

There were no changes in the Partnership’s internal control over financial reporting that occurred during the quarter ended ~~September~~December 3031, 2011 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

2320

Part II.	Other Information
Item 1.	Legal Proceedings
	NONE
Item 1A.	Risk Factors
	No material changes in risk factors as previously disclosed in the Partnership’s Form 10-K.
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	NONE
Item 3	Defaults Upon Senior Securities
	NONE
Item 4.	(Removed and Reserved)
Item 5	Other Information
	NONE
Item 6.	Exhibits

PART II. OTHER INFORMATION

32.1 Certification of the Principal Executive Officer pursuant to Rule 13a-14 and 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)

Item 1.	Legal Proceedings

	NONE

Item 1A.	Risk Factors

	No material changes in risk factors as previously disclosed in the Partnership’s Form 10-K.

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

	NONE

Item 3	Defaults Upon Senior Securities

	NONE

Item 4.	(Removed and Reserved)

Item 5	Other Information

	NONE

Item 6.	Exhibits

32.2 Certification of the Principal Financial Officer pursuant to Rule 13a-14 and 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)

	31.1	Certification of the Principal Executive Officer pursuant to Rule 13a-14 and 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
	31.2	Certification of the Principal Financial Officer pursuant to Rule 13a-14 and 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
	32.1	Section 1350 Certification of the Chief Executive Officer. (filed herewith)
	32.2	Section 1350 Certification of the Chief Financial Officer. (filed herewith)
	101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets at December 31, 2011 and March 31, 2011, (ii) the Consolidated Statements of Operations for the three-month and nine-month periods ended December 31, 2011 and December 31, 2010, (iii) the Consolidated Statements of Cash Flows for the nine months ended December 31, 2011 and December 31, 2010 and (iv) the Notes to Consolidated Financial Statements.

Exhibits 32.31, 32.2 and 101 shall not be deemed “filed” for purposes of Section ~~1350~~18 ~~Certification~~of the Securities Exchange Act of 1934, or otherwise subject to the ~~Chief~~liability ~~Executive~~of ~~Officer~~that Section. ~~(filed~~Such ~~herewith)~~exhibits shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934.

~~32.4 Section 1350 Certification of the Chief Financial Officer. (filed herewith)~~21

24SIGNATURES

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

WNC HOUSING TAX CREDIT FUND III, L.P.

WNC HOUSING TAX CREDIT FUND III, L.P.

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

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

Date: February 10, 2012


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

Date: February 10, 2012

~~By: WNC Tax Credit Partners, L.P. General Partner~~22

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

Wilfred N. Cooper, Jr.

President and Chief Executive Officer of WNC & Associates, Inc.

Date: November 14, 2011

By: /s/ Melanie R. Wenk

Melanie R. Wenk

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

Date: November 14, 2011

Filing Compare · WNC HOUSING TAX CREDIT FUND III L P