FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

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

For the quarterly period ended SEPTEMBER 30, 1996

                                       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.

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

CALIFORNIA                                       33-0531301

WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
3158 REDHILL AVENUE, SUITE 120, COSTA MESA, CA  92626

(714) 662-5565


         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 ____




<PAGE>


Part I.  Financial Information

Item 1.  Financial Statements

         INDEX

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

                          INDEX TO FORM 10-Q

                           FOR THE QUARTER ENDED September 30, 1996




PART I. FINANCIAL INFORMATION

   Item 1. Financial Statements

        Balance Sheets, September 30, 1996 and
          December 31, 1995...................................................3

        Statement of Operations
                 For the nine months ended September 30, 1996 and 1995........4

        Statement of Partners' Equity
                 For the nine months ended September 30, 1996 and 1995........5

        Statement of Cash Flows
                 For the nine months ended September 30, 1996 and 1995........6

        Notes to Financial Statements.........................................8

   Item 2. Management's Discussion and Analysis of Financial
            Condition and Results of Operations..............................12



PART II. OTHER INFORMATION

    Item 6. Exhibits and Reports on Form 8-K.................................16

    Signatures ..............................................................17



<PAGE>


FINANCIAL STATEMENTS

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

                                 BALANCE SHEETS
                    September 30, 1996 and December 31, 1995

                                                   1996                 1995
                                                   ----                 ----

                                     ASSETS

Cash and cash equivalents                $      1,484,240       $     1,916,200
Investment in limited
partnerships - Note 2                          11,833,819            13,032,752
Other assets  
                                                    4,539                    -
                                                   ------               ------
                                          $    13,322,598        $   14,948,952
                                              ===========            ==========


                                    LIABILITIES AND PARTNERS' EQUITY

Liabilities:
Payable to limited partnerships - Note 3  $      34,184           $     651,094
Accrued fees and expenses due to
general partner and affiliates - Note 4         179,287                 240,188
                                               --------                 -------
                                                213,471                 891,282
                                               --------                 -------
Partners' equity (deficit):
General partner                                 (48,038)                (38,553)
Limited partners (30,000 units
authorized, 18,000 units issued
and outstanding)                             13,157,165              14,096,223
                                            -----------              ----------

Total partners' equity                       13,109,127              14,057,670
                                            -----------              ----------

                                          $  13,322,598           $  14,948,952
                                            ===========              ==========


                                    UNAUDITED
                 See Accompanying Notes to Financial Statements


                                      -3-
<PAGE>



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

                             STATEMENT OF OPERATIONS

         For the Three and Nine Months Ended September 30, 1996 and 1995

                                    1996                          1995
                                    ----                          ----

                                Three       Nine           Three         Nine
                                Months      Months         Months        Months
 
Interest income               $ 19,054     $ 56,814     $  43,391    $  120,242
                               -------      -------        -------      -------

Operating expenses:
Amortization                    14,554       43,286        14,366        43,100
Asset management fees (Note 4)  46,605      139,819        46,604       126,801
Legal and accounting                 -        6,867                       7,000
                                     
Other                              940       10,385         1,460         9,726
                               -------      -------        -------      -------
                                                  
Total operating expenses        62,099      200,357        62,430       186,627
                               -------      -------       -------       -------

Loss from operations           (43,045)    (143,543)      (19,039)      (66,385)
Equity in loss from
limited partnerships          (262,000)    (787,000)     (126,050)     (388,400)
                               --------    ---------     ---------    ---------

Net loss                    $ (305,045)  $ (930,543)   $ (145,089)   $ (454,785)
                              =========    =========     =========     =========

Net loss allocated to:
General partner             $   (3,050)      (9,305)        (1,451)      (4,548)
                              =========    =========      =========    =========
Limited partners            $ (301,995)    (921,238)      (143,638)    (450,237)
                              =========    =========      =========    =========

Net loss per 18,000 and 17,990
weighted limited partner interest
outstanding, 1996 and 1995
respectively                $      (17)  $      (51)       $     (8)   $    (25)
                              =========    =========       =========   =========
                                                              
                              



                                    UNAUDITED
                 See Accompanying Notes to Financial Statements

                                      -4-

<PAGE>



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

                          STATEMENT OF PARTNERS' EQUITY

              For the Nine Months Ended September 30, 1996 and 1995


For the  Nine Months Ended September 30, 1996

                                         General      Limited
                                         Partner      Partner         Total
                                         -------      -------         -----

Equity (deficit), December 31, 1995   $ (38,553)    $ 14,096,223   $ 14,057,670

Less offering costs                        (180)          17,820)       (18,000)
                                                    
Net loss for the nine months ended
September 30, 1996                       (9,305)        (921,238)      (930,543)
                                         -------        ---------      ---------
                                      
                                                  

Equity (deficit), September 30, 1996  $ (48,038)    $ 13,157,165   $ 13,109,127
                                      ==========     ===========     ==========




For the  Nine Months Ended September 30, 1995

                                        General        Limited
                                        Partner        Partner        Total
                                        -------        -------        -----

Equity (deficit), December 31, 1994   $ (26,804)    $ 15,121,447   $ 15,094,643

Collection of investor notes receivable                  205,000        205,000

Net loss for the nine months ended                    
September 30, 1995                     (450,237)          (4,548)      (454,785)
                                       ---------          -------      ---------
                              
                                                                

Equity (deficit), September 30, 1995  $ (31,352)     $ 14,876,210  $ 14,844,858
                                      ==========       ==========    ==========



                                    UNAUDITED
                 See Accompanying Notes to Financial Statements

                                      -5-
<PAGE>



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

                      STATEMENT OF CASH FLOWS For the Nine
                    Months Ended September 30, 1996 and 1995

                                                           1996         1995
                                                           ----         ----
                                                           
                                                  
Cash flows provided (used) by operating activities:
 Net loss                                               $ (930,543)  $ (454,785)
  Adjustments to reconcile net loss to net
        cash used in operating activities:
        Equity in loss of limited partnerships             787,000      388,400
        Amortization of acquisition costs and fees          43,286       43,100 
        Increase in cash in escrow                                       30,233
        Decrease (increase) in other assets                 (4,539)      (2,443)
        Decrease (increase) in receivable for affiliate                 310,112
        Increase (decrease) in asset management fee        (60,179)     126,801
        Increase (decrease accrued fees and expense
        due to general partner and affiliates                 (722)      (2,108)
                                                             -----       -------
         Net cash provided (used) by operating activities (165,697)     439,310
                                                          ---------      -------
                                                           

Cash flows provided (used) by investing activities:
    Investment in limited partnerships                    (220,734)  (1,292,987)
     Acquisition costs and fees                            (33,906)      (5,169)
    Distribution from limited partners                       6,377        7,604
                                                             ------        -----
      Net cash provided by investing activities           (248,263)  (1,290,552)
                                                          ---------  -----------

Cash flows used by financing activities:
    Collection of subscriptions and investors
    notes receivable                                                    205,000
    Offering costs                                         (18,000)     (11,503)
                                                           --------     --------
      Net cash used by financing activities                (18,000)     193,497
                                                           -------       -------
                                                             
Net decrease in cash and cash equivalents                 (431,960)    (657,745)

Cash and cash equivalents, beginning of period           1,916,200    2,799,487
                                                         ---------   ----------

Cash and cash equivalent, end of period               $  1,484,240 $  2,141,742
                                                         =========   ==========
  Continued

                                    UNAUDITED
                 See Accompanying Notes to Financial Statements


                                      -6-
<PAGE>


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

                       STATEMENT OF CASH FLOWS (CONTINUED)

              For the Nine months Ended September 30, 1996 and 1995


Supplemental disclosure of non-cash investing activity:

    During the nine months ended September 30, 1996, the Partnership's  Payables
to  Limited   Partnerships  (in  connection  with  its  investments  in  limited
partnerships)  decreased by  $396,176.  This  decrease was due to various  price
adjuster provisions in the respective limited partnership agreements.


--------------------------------------------------------------------------------


   During the nine months ended September 30, 1995, the  Partnership's  Payables
to  Limited   Partnerships  (in  connection  with  its  investments  in  limited
partnerships)  decreased by  $2,202,792.  This decrease was due to various price
adjuster provisions in the respective limited partnership agreements of $142,455
and cash in escrow of  $860,377  and  $1,200,000  released  for payment to Nueva
Sierra Vista and Colonial Village Roseville, respectively.
















                                    UNAUDITED

                 See Accompanying Notes to Financial Statements


                                      -7-
<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS
                               September 30, 1996


NOTE 1 - GENERAL AND ORGANIZATION

General

The information  contained in the following notes to the financial statements is
condensed  from that  which  would  appear in the annual  financial  statements;
accordingly,  the  financial  statements  included  herein should be reviewed in
conjunction with the financial statements and related notes thereto contained in
the Partnership's

In  the  opinion  of  the  Partnership,  the  accompanying  unaudited  financial
statements  contain  all  adjustments   (consisting  of  only  normal  recurring
accruals) necessary to present fairly the financial position as of September 30,
1996 and  changes  in cash  flows for the nine  months  then  ended.  Accounting
measurements at interim dates  inherently  involve greater reliance on estimates
than at year end. The results of operations for the interim period presented are
not necessarily indicative of the results for the entire year.

Organization

WNC  California  Housing Tax Credits III,  L.P. (the  "Partnership")  was formed
under the  California  Revised  Limited  Partnership  Act on October 5, 1992 and
commenced  operations  on July 20, 1993.  The  Partnership  was formed to invest
primarily in other limited  partnerships which will own and operate multi-family
housing complexes that will qualify for low income housing credits.

The  general  partner is WNC  California  Tax Credit  Partners  III,  L.P.  (the
"General Partner"), a California limited partnership.  WNC & Associates, Inc. is
the general partner of the General Partner.  The Cooper Revocable Trust owns 70%
of the outstanding  stock of WNC & Associates,  Inc. John B. Lester,  Jr. is the
original  limited  partner of the  Partnership  and,  through the Lester  Family
Trust, owns 30% of the outstanding stock of WNC & Associates, Inc.

The General Partner has a 1% interest in operating  profits and losses,  taxable
income and loss and in cash available for distribution from the Partnership. The
limited  partners  will  be  allocated  the  remaining  99% of  these  items  in
proportion to their respective investments.

 After the limited partners have received sale or refinancing  proceeds equal to
their capital  contributions  and their return on investment  (as defined in the
Partnership's  Agreement  of Limited  Partnership)  and the General  Partner has
received a  subordinated  disposition  fee (as  described in Note 5 below),  any

                                      -8-
<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                               September 30, 1996

NOTE 1 - GENERAL AND ORGANIZATION (CONTINUED)

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.


NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS

At  September  30,  1996,  the  Partnership  had  acquired  limited  partnership
interests  in  eighteen  limited  partnerships  which own and  operate  eighteen
apartment  complexes.  All eighteen of these have completed  construction  as of
September 30, 1996.

The Partnership,  as a limited partner, is a 99% owner and is entitled to 99% of
the  operating  profits and losses of the limited  partnerships.  Following is a
summary  of  the   components  of  the   Partnership's   investment  in  limited
partnerships as of September 30, 1996 and December 31, 1995:

                                                 1996                   1995
                                                 ----                   ----

     Investment balance,
       beginning of period                    $13,032,752          $ 14,368,908
     Increase (decrease in Investment in
      limited partnerships                       (396,176)          $  (113,683)
     Increase in acquisition fees                  33,906
     Equity in loss of limited
       partnership                               (787,000)           (1,155,114)
     Distributions                                 (6,377)               (9,893)
     Amortization of capitalized
       acquisition costs                          (43,286)              (57,466)
                                                  --------              --------
     Investment balance,
       end of period                         $ 11,833,819          $ 13,032,752
                                             ============          ============



                                      -9-
<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                               September 30, 1996


NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIP (CONTINUED)

Selected  operating  information from the financial  statements of the seventeen
twelve limited  partnerships with operations and three limited partnerships with
operations for the period ended  September 30, 1996 and 1995,  respectively,  is
presented below:

                                                    1996                 1995
                                                    ----                 ----

         Total revenue                       $   1,967,000         $  1,707,600
                                                 ----------           ---------

         Interest expense                          720,000              468,100
         Depreciation                              911,000              645,600
         Operating expenses                      1,131,000              986,300
                                                   --------             -------
         Total expenses                          2,762,000            2,100,000
                                                 ----------           ---------

         Net loss                            $   (795,000)        $    (392,400)
                                                 ==========           ==========
         Net loss allocable to the
           Partnership                       $   (787,000)        $    (388,400)
                                                 ==========           ==========
NOTE 3 - PAYABLE TO LIMITED PARTNERSHIPS

Payable to limited  partnerships at September 30, 1996 represents  amounts which
are due at various times based on conditions  specified in the respective  local
limited partnership agreements. These contributions are payable in installments,
generally due upon the local limited  partnership  achieving  certain  operating
benchmarks,  and are  generally  expected  to be paid  within  two  years of the
Partnership's initial investment.

NOTE 4 - RELATED PARTY TRANSACTIONS

Under the terms of its  Agreement of Limited  Partnership,  the  Partnership  is
obligated to the General Partner or its affiliates for an annual  management fee
equal  to .5% of the  invested  assets  (defined  as the  Partnership's  capital
contributions plus its allocable  percentage of the permanent  financing) of the
limited  partnerships.  Fees of $139,819 and $126,801 were incurred for the nine
months ended September 30, 1996 and 1995.

                                      -10-
<PAGE>




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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                               September 30, 1996


NOTE 5 - INCOME TAXES

The  Partnership  will not make a provision  for income taxes since all items of
taxable income and loss will be allocated to the partners for inclusion in their
respective income



                                      -11-
<PAGE>



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

         The Partnership raised funds from investors through its public offering
of units of limited  partnership  interest  ("Units")  and intends to apply such
funds,  including the installment  payments of the limited partners'  promissory
notes  as  received,   to  the  acquisition  of  investments  in   partnerships,
acquisition  fees,  the  establishment  of  reserves,  the payment of  operating
expenses and the payment of expenses of this offering.

As of September 30, 1996, the Partnership has received  subscriptions for 18,000
Units  consisting of cash of  $18,000,000.  The offering  terminated on July 22,
1995 at which time subscriptions for 18,000 units were accepted.

Liquidity and Capital Resources

The Partnership's primary source of capital is the proceeds from its offering.

Overall,  as reflected in its Statement of Cash Flows, the Partnership had a net
decrease in cash and cash equivalents of approximately $432,000 and $658,000 for
the nine months ended  September  30, 1996 and 1995.  In 1996,  this decrease in
cash was  consisted  of cash  used by the  Partnership's  operating  activities,
investing activities and financing  activities.  Investing activities used a net
of approximately  $248,000 consisting of uses of cash for purchases of interests
in limited partnerships and acquisition fees of approximately  $254,000 and cash
provided of approximately  $6,000 from distributions from limited  partnerships.
Financing  activities used $18,000 which consisted of offering costs.  Operating
activities used cash of approximately $166,000 which consisted  substantially of
the payment of asset management fee of $200,000.  In 1995, this decrease in cash
was consisted of cash used by the  Partnership's  investing  activities and cash
provided by the  Partnership's  operating  activities and financing  activities.
Investing activities used a net of approximately  $1,291,000  consisting of uses
of cash for purchases of interests in limited  partnerships and acquisition fees
of  approximately  $1,298,000  and provided  cash of  approximately  $5,000 from
distributions  from  limited   partnerships.   Financing   activities   provided
approximately  $193,000  which  consisted of  collection  of  subscriptions  and
investors notes receivables less offering costs.  Operating  activities provided
cash of approximately $439,000 which consisted substantially of the repayment of
a receivable from an affiliate. The major components of all these activities are
discussed in greater detail below.

As of September 30, 1996 the Partnership  had received  $18,000,000 in cash from
the sale of Units.  Approximately $12,562,000 has been committed to the purchase
price of eighteen limited partnership  interests.  As of September 30, 1996, the
Partnership had made capital  contributions  to its limited  partnerships in the
amount of approximately $12,528,000.

                                      -12-
<PAGE>

It is not  expected  that any of the  local  limited  partnerships  in which the
Partnership will invest will generate cash from operations sufficient to provide
distributions to the limited partners in any significant  amount. Such cash from
operations,  if any,  would  first  be used to meet  operating  expenses  of the
Partnership,  including the payment of the asset  management  fee to the General
Partner.

The Partnership's investments will not be readily marketable and may be affected
by adverse  general  economic  conditions  which, in turn,  could  substantially
increase the risk of operating  losses for the  apartment  complexes,  the local
limited  partnerships  and the  Partnership.  These  problems  may result from a
number of factors,  many of which cannot be controlled  by the General  Partner.
Nevertheless,  the General Partner anticipates that capital raised from the sale
of the Units will be  sufficient  to fund the  Partnership's  future  investment
commitments and proposed operations.

The  Partnership  has  established  working  capital  reserves of at least 3% of
capital  contributions,  an amount  which is  anticipated  to be  sufficient  to
satisfy general working capital and administrative  expense  requirements of the
Partnership  including  payment of the asset  management fee as well as expenses
attendant to the preparation of tax returns and reports to the limited  partners
and other investor  servicing  obligations of the Partnership.  Liquidity would,
however,  be adversely  affected by  unanticipated  or greater than  anticipated
operating costs. The Partnership's  liquidity could also be affected by defaults
or delays in  payment  of the  promissory  notes,  from  which a portion  of the
working  capital  reserves is expected to be funded.  To the extent that working
capital  reserves  are  insufficient  to satisfy  the cash  requirements  of the
Partnership,  it is anticipated  that  additional  funds would be sought through
bank loans or other institutional  financing. The General Partner may also apply
any cash  distributions  received from the local limited  partnerships  for such
purposes or to replenish or increase working capital reserves.

Under its  partnership  agreement the  Partnership  does not have the ability to
assess its partners for additional  capital  contributions to provide capital if
needed  by the  Partnership  or  local  limited  partnerships.  Accordingly,  if
circumstances arise that cause the local limited partnerships to require capital
in addition to that  contributed by the  Partnership and any equity of the local
general partners, the only sources from which such capital needs will be able to
be  satisfied  (other than the limited  reserves  available  at the  Partnership
level) will be (i) third-party debt financing  (which may not be available,  if,
as expected, the apartment complexes owned by the local limited partnerships are
already  substantially  leveraged),  (ii)  additional  equity  contributions  or
advances of the local general partners,  (iii) other equity sources (which could
adversely  affect the  Partnership's  interest in tax credits,  cash flow and/or
proceeds of sale or refinancing of the apartment complexes and result in adverse
tax  consequences to the limited  partners),  or (iv) the sale or disposition of
the apartment  complexes (which could have the same adverse effects as discussed
in (iii) above).

                                      -13-
<PAGE>

There can be no assurance  that funds from any of such sources  would be readily
available in sufficient  amounts to fund the capital  requirements  of the local
limited  partnerships  in question.  If such funds are not available,  the local
limited partnerships would risk foreclosure on their apartment complexes if they
were unable to  re-negotiate  the terms of their first  mortgages  and any other
debt secured by the apartment  complexes to the extent the capital  requirements
of the local limited partnerships relate to such debt.

The  Partnership's  capital  needs and  resources  are expected to undergo major
changes during the first several years of its term as a result of the completion
of its offering of Units and its  acquisition of  investments.  Thereafter,  the
Partnership's  capital needs and resources are expected to be relatively  stable
over the holding periods of the investments.

  Results of Operations

As of September 30, 1996 the  Partnership  has identified and acquired  eighteen
limited partnership interests. Each of the eighteen apartment complexes owned by
such  limited  partnerships  received  or  is  expected  to  receive  government
assistance  and each of them has received a  reservation  for federal low income
housing  credits.  All  eighteen  of these have  completed  construction  of its
apartment complex as of September 30, 1996 and had operations for the period.

Consistent  with  the   Partnership's   investment   objectives,   each  limited
partnership is generating or is expected to generate  federal low income housing
credits for a period of approximately  ten years,  commencing with completion of
construction or rehabilitation of its apartment  complex(es),  and (as discussed
below) is  generating  or is  expected  to  generate  losses  until  sale of the
apartment complex(es).

As reflected on its  Statements of  Operations,  the  Partnership  has losses of
approximately $931,000 and $455,000 for the nine months ended September 30, 1996
and 1995, respectively. The component items of revenue and expense are discussed
below.

                                      -13-
<PAGE>

Revenue  -  Partnership  revenues  consisted  of  interest  earned  on  investor
promissory  note and on cash  deposits  held in  financial  institutions  (i) as
reserves,  or (ii) pending investment in local limited partnerships and increase
in investment in local limited  partnerships.  Interest  revenue in future years
will be a function of prevailing interest rates and the amount of cash balances.
It is anticipated  that the Partnership will maintain cash reserves in an amount
not  materially  in excess of the minimum  amount  required  by its  partnership
agreement, which is 3% of capital contributions.

Expenses - The most  significant  component  of  operating  expenses  is, and is
expected to be, the asset management fee (called "Partnership management fee" in
the  Statements of  Operations).  The asset  management  fee is equal to 0.5% of
invested  assets in local limited  partnerships;  accordingly,  the amount to be
incurred in the future is a function of the level of such invested assets (i.e.,
the  sum  of the  Partnership's  capital  contributions  to  the  local  limited
partnerships plus the Partnership's  share of the debts related to the apartment
complexes owned by such local limited partnerships).

Amortization  expense consists of the amortization  over a period of 30 years of
the 9% selection fee and other expenses attributable to the acquisition of local
limited partnership interests.

Office  expenses  and  legal  and  accounting   consists  of  the  Partnership's
administrative  expenses,  such as accounting  and legal fees,  bank charges and
investor reporting expenses.

The amount of the asset management fee is increased over the amounts reported to
date.  This is due to the completion of  construction  on two additional 
apartment  complexes and the commencement of asset management fees on those 
buildings.

                                      -14-

<PAGE>

Equity in losses from  limited  partnerships  - As indicated  above,  two of the
eighteen  Apartment  Complexes  acquired as of June 30, 1996 and 1995  completed
construction or rehabilitation  during the nine months ended September 30, 1995.
Accordingly,  the amount of equity in losses from limited  partnerships  for the
nine months ended September 30, 1996 reflected on the  Partnership's  Statements
of Operations has increased over the amounts reported in previous periods.

The Partnership's  equity in losses from limited partnerships is equal to 99% of
the aggregate net loss of the limited  partnerships.  After rent-up, the limited
partnerships  are expected to generate  losses  during each year of  operations;
this is so because,  although rental income is expected to exceed cash operating
expenses,  depreciation  and  amortization  deductions  claimed  by the  limited
partnerships are expected to exceed net rental income.

                                      -15-
<PAGE>

Part II.  Other Information

Item 1.  Legal Proceedings

         None.

Item 6.  Exhibits and Reports on Form 8-K

1.  None..


         No reports on Form 8-K were filed during the quarter ended September
30, 1996.


                                      -16-
<PAGE>


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

WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.

By:  WNC California Tax Credit Partners III General Partner

By:  WNC & Associates, Inc.                 General Partner


By:   /s/  John B. Lester, Jr
John B. Lester, Jr.        President

Date: November 12, 1996

By:    /s/  Theodore M. Paul
Theodore M. Paul  Vice President-Finance

Date: November 12, 1996


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