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 March 31, 1998

                                       OR

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: 0-23908


                  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 ____ No X




<PAGE>


Part I.  Financial Information

Item 1.  Financial Statements


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

                               INDEX TO FORM 10-Q

                      FOR THE QUARTER ENDED MARCH 31, 1998




PART I. FINANCIAL INFORMATION

 Item 1. Financial Statements

   Balance Sheets, March 31, 1998 and
     December 31, 1997.......................................................3

   Statement of Operations
            For the three months ended March 31, 1998 and 1997...............4

   Statement of Partners' Equity
            For the three months ended March 31, 1998 and 1997...............5

   Statement of Cash Flows
            For the three months ended March 31, 1998 and 1997...............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>



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

                                 BALANCE SHEETS
                      March 31, 1998 and December 31, 1997

                                            1998                     1997
                                            ----                     ----

                                     ASSETS

Cash and cash equivalents         $          563,949       $        1,451,071
 Investment in limited
  partnerships - Note 2                   10,137,867               10,400,720
 Other assets                                      -                    2,242
                                          ----------               ----------

                                  $       10,701,816        $      11,854,033
                                          ==========               ==========


                        LIABILITIES AND PARTNERS' EQUITY

Liabilities:
Payable to limited partnerships 
 -Note 3                         $           16,836        $          16,836
Payable to limited partners                                           900,000
 Accrued fees and expenses due to
   general partner and affiliates 
   - Note 4                                  416,586                  370,223
                                          ----------               ----------
                                             433,422                1,287,059
                                          ----------               ----------
Partners' equity (deficit):
 General partner                             (67,447)                 (64,461)
 Limited partners (30,000 units
  authorized, 18,000 units issued
  and outstanding)                        10,335,841               10,631,435
                                          ----------               ----------

Total partners' equity                    10,268,394               10,566,974
                                          ----------               ----------

                                    $     10,701,816        $      11,854,033
                                          ==========               ==========

                                    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 Months Ended March 31, 1998 and 1997


                                             1998                      1997
                                             ----                      ----

Interest income                   $            9,889        $         13,059
                                           ---------               ---------
                                                                       

Operating expenses:
Amortization                                  15,116                  14,649
Asset management fees (Note 4)                46,542                  46,541
Legal and accounting                             500                   2,000
Other                                          1,774                     675
                                           ---------               ---------

Total operating expenses                      63,932                  63,865
                                              ------                  ------
                                                                      
Loss from operations                         (54,043)                (50,806)

Equity in loss from
 limited partnerships                       (244,537)               (277,000)
                                           ---------               ---------

Net loss                         $          (298,580)       $       (327,806)
                                           =========               =========

Net loss allocated to:
  General partner                $            (2,986)       $         (3,278)
                                           =========               =========

  Limited partners               $          (295,594)       $       (324,528)
                                           =========               =========

Net loss per weighted 
limited partner interest
outstanding                      $               (16)       $            (18)
                                           =========               =========   


                                    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 Three Months Ended March 31, 1998 and 1997


For the Three Months Ended March 31, 1998

                                         General      Limited
                                         Partner      Partner        Total

Equity (deficit), December 31, 1997   $  (64,461)  $ 10,631,435  $  10,566,974
                                                        

Net loss for the three months ended
  March 31, 1998                          (2,986)      (295,594)      (298,580)
                                       ---------     ----------     ----------
                                                        

Equity (deficit), March 31, 1998      $  (67,447)  $ 10,335,841  $  10,268,394
                                       =========    ===========    ===========
                                                        


For the Three Months Ended March 31, 1997

                                         General       Limited
                                         Partner       Partner        Total

Equity (deficit), December 31, 1996   $  (52,119)  $ 12,753,286  $  12,701,167
                                                        

Net loss for the three months ended
  March 31, 1997                          (3,278)      (324,528)      (327,806)
                                       ---------     ----------    -----------
                                                        

Equity (deficit), March 31, 1997      $  (55,397)  $ 12,428,758   $ 12,373,361
                                       =========    ===========    ===========
                                                        




                                    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 Three Months Ended March 31, 1998 and 1997

                                                      1998                1997
                                                      ----                ----
Cash flows provided by operating activities:
 Net loss                                         $  (298,580)   $    (327,806)
  Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
   Equity in loss of limited partnerships             244,537          277,000
   Amortization of acquisition costs and fees          15,116           14,649
   Decrease (increase) in other assets                  2,242            4,847
   Increase (decrease) in asset management fee         46,542           46,542
   Increase (decrease accrued fees and expense
    due to general partner and affiliates                (179)           2,279
                                                   ----------       ----------  
                                                           
 Net cash provided by operating activities              9,678           17,511
                                                   ----------       ----------  

Cash flows used in investing activities:
 Investment in limited partnerships                                    (55,994)
 Distribution from limited partnerships                 3,200            3,600
                                                        -----            -----
  Net cash provided by (used in) investing activities   3,200          (52,394)
                                                        -----          --------

Cash flows used in financing activities:
   Return of capital to limited partners             (900,000)
                                                   ----------  

Net decrease in cash and cash equivalents            (887,122)         (34,883)

Cash and cash equivalents, beginning of period      1,451,071        1,498,036
                                                   ----------       ----------

Cash and cash equivalent, end of period        $      563,949   $    1,463,153
                                                   ==========       ==========





                                    UNAUDITED
                 See Accompanying Notes to Financial Statements

                                        6



<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 1998


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 Annual Report for the year ended December 31, 1997.

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 March 31,
1998 and the  results  of  operations  and  changes  in cash flows for the three
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 just
less than 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  just  less  than  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.


                                        7


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                 March 31, 1998

NOTE 1 - GENERAL AND ORGANIZATION (CONTINUED)
---------------------------------------------

Method of Accounting For Investment in Limited Partnerships
-----------------------------------------------------------

The Partnership  accounts for its investments in limited  partnerships using the
equity method of  accounting,  whereby the  Partnership  adjusts its  investment
balance for its share of each limited  partnership's  results of operations  and
for any distributions  received.  Costs incurred by the Partnership in acquiring
the  investments  in  limited  partnerships  are  capitalized  as  part  of  the
investment.

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

The  Partnership  considers all bank  certificates of deposit with a maturity of
less than six months to be cash equivalents.

NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS
-------------------------------------------

At March 31, 1998, 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 March 31,
1998.

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 March 31, 1998 and December 31, 1997:

                                             1998                      1997
                                             ----                      ----
  Investment balance,
    beginning of period                  $ 10,400,720            $ 11,447,928
  Equity in loss of limited
    partnership                              (244,537)             (1,028,617)
  Distributions                                (3,200)                (15,989)
  Capitalized acquisition cost 
    & fees                                                             55,994
  Amortization of capitalized
    acquisition costs                         (15,116)                (58,596)
                                          -----------             ----------- 
  Investment balance,
    end of period                        $ 10,137,867            $ 10,400,720
                                          ===========             ===========


                                        8


<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                 March 31, 1998

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  March 31,  1998 and 1997,  respectively,  is
presented below:
                                           1998                      1997
                                           ----                      ----

Total revenue                  $           725,000         $        696,000
                                         ---------                ---------   
Interest expense                           254,000                  236,000
Depreciation                               298,000                  318,000
Operating expenses                         430,000                  422,000
                                         ---------                ---------   
Total expenses                             982,000                  976,000
                                         ---------                ---------   

Net loss                       $          (257,000)        $       (280,000)
                                         ==========               ==========
Net loss allocable to 
 the Partnership               $          (244,537)        $       (277,000)
                                         ==========               ==========

NOTE 3 - PAYABLE TO LIMITED PARTNERSHIPS
----------------------------------------

Payable to limited  partnerships at March 31, 1998 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 $46,542 and $46,541 were  incurred for the three
months ended March 31, 1998 and 1997.

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

                                       9



<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 has applied 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 March 31,  1998,  the  Partnership  has received  subscription  in cash of
$17,100,000  for 18,000  Units  consisting  of  subscriptions  from the offering
terminated  on July 22,  1995 at  which  time  subscriptions  for  18,000  units
($18,000,000) were accepted, offset by a return of capital of $900,000 ($500 per
unit) was made in 1998.

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  $887,000 for the three
months ended March 31, 1998. This decrease in cash was due to the  Partnership's
financing  activities,   offset  by  investing  and  operating  activities,   of
approximately $(900,000), 3,000 and 10,000,  respectively.  The entire amount of
cash flows used in  financing  activities  consisted  of the return of caital to
investors of $900,000.  The amount returned represented price adjusters realized
by the Partnership.  Cash provided by investing activities consisted of entirely
of cash  distributions  from local limited  partnerships.  The cash reserves are
sufficient  to fund the  Partnership's  remaining  capital  contributions.  Cash
provided from operations consisted primarily of interest received.  Cash used by
the Partnership's operating activities was minimal compared to the Partnership's
other  activities  and consisted  primarily of payments for  operating  fees and
expenses.

Overall,  as reflected in its Statement of Cash Flows, the Partnership had a net
decrease in cash and cash  equivalents  of  approximately  $35,000 for the three
months ended March 31, 1997. This decrease in cash consisted of cash provided by
the Partnership's  operating activities,  and cash used in investing activities.
Investing  activities used a net of approximately  $52,000 consisting of uses of
cash for purchases of interests in limited  partnerships and acquisition fees of
approximately   $56,000  and  cash   provided  of   approximately   $4,000  from
distributions  from  limited  partnerships.   Cash  used  in  the  Partnership's
operating  activities was minimal compared to the Partnership's other activities
and  consisted  primarily  of payments for  operating  fees and  expenses.  Cash
provided from operations consisted primarily of interest The major components of
all these activities are discussed in greater detail below.

As of March 31, 1998 the  Partnership  had received a net of $17,100,000 in cash
from the sale of Units consisting of $18,000,000 in cash from the sale of Units,
offset by a retun of capital of $900,000 in 1998. Approximately  $12,536,000 has
been committed to the purchase price of eighteen limited partnership  interests.
As of March 31, 1998,  the  Partnership  had made capital  contributions  to its
limited partnerships in the amount of approximately $12,520,000.

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.

                                       10


<PAGE>


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).

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 March 31,  1998 the  Partnership  has  identified  and  acquired  eighteen
limited partnership interests. Each of the eighteen apartment complexes owned by
such limited  partnerships  received 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 March 31, 1998
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).



                                       11


<PAGE>


As reflected on its  Statements of  Operations,  the  Partnership  has losses of
approximately  $299,000  and  $328,000 for the three months ended March 31, 1998
and 1997, respectively. The component items of revenue and expense are discussed
below.

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 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.

Item 3:  Quantitative and Qualitative Disclosures Above Market Risks

NONE

Part II.  Other Information

Item 1.  Legal Proceedings

NONE

Item 6.  Exhibits and Reports on Form 8-K

1.  NONE

2. No reports on Form 8-K were filed  during the first  quarter  ended March 31,
1998.


                                       12






<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: May 11, 1998

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

Date: May 11, 1998







                                       13