FORM 10-K/A
                                 AMENDMENT NO. 1

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   (Mark One)

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

                   For the fiscal year ended December 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.

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

              3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626

                                 (714) 662-5565

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

                                      NONE

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

                      UNITS OF LIMITED PARTNERSHIP INTEREST

     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 ____

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

                                       1
<PAGE>


State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant.

                                  INAPPLICABLE


                       DOCUMENTS INCORPORATED BY REFERENCE

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

                                      NONE














                                       2

<PAGE>

PART I.

Item 1.  Business

Organization

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

The general partner of the Partnership is WNC Tax Credit Partners III, L.P. (the
"General  Partner"  or  "TCP  III").  The  general  partner  of TCP III is WNC &
Associates,  Inc.  ("Associates").  Wilfred N. Cooper,  Sr.,  through the Cooper
Revocable  Trust,  owns 66.8% of the  outstanding  stock of Associates.  John B.
Lester,  Jr.  was the  original  limited  partner of the  Partnership  and owns,
through the Lester Family Trust,  28.6% of the outstanding  stock of Associates.
The business of the Partnership is conducted  primarily through  Associates,  as
TCP III and the Partnership have no employees of their own.

Pursuant to a  registration  statement  filed with the  Securities  and Exchange
Commission, on February 17, 1993, the Partnership commenced a public offering of
30,000 Units of Limited Partnership  Interest ("Units") at a price of $1,000 per
Unit.  As of the close of the offering on July 22, 1994, a total of 18,000 Units
representing  $18,000,000 had been sold. Holders of Units are referred to herein
as "Limited Partners."

Description of Business

The  Partnership's  principal  business  objective  is to  provide  its  Limited
Partners with Low Income Housing Credits.  The Partnership's  principal business
therefore  consists of investing as a limited partner or non-managing  member in
Local  Limited  Partnerships  each of which will own and operate a  multi-family
housing  complex (the "Housing  Complex")  which will qualify for the Low Income
Housing Credit.  In general,  under Section 42 of the Internal  Revenue Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
to reduce  Federal  taxes  otherwise due in each year of a ten-year  period.  In
general,  under Section 17058 of the  California  Revenue and Taxation  Code, an
owner of low-income housing can receive the Low Income Housing Credit to be used
against  California taxes otherwise due in each year of a four-year period.  The
Housing Complex is subject to a fifteen-year  compliance period (the "Compliance
Period"),  and under state law may have to be maintained  as low income  housing
for 30 or more years.

In general,  in order to avoid  recapture  of Low Income  Housing  Credits,  the
Partnership  does not  expect  that it will  dispose of its  interests  in Local
Limited Partnerships ("Local Limited Partnership Interests") or approve the sale
by any Local Limited  Partnership of its Housing Complex prior to the end of the
applicable  Compliance  Period.  Because  of  (i)  the  nature  of  the  Housing
Complexes,  (ii) the  difficulty of predicting  the resale market for low-income
housing  15 or more years in the  future,  and (iii) the  ability of  government
lenders to  disapprove  of transfer,  it is not possible at this time to predict
whether the liquidation of the  Partnership's  assets and the disposition of the
proceeds,  if any, in  accordance  with the  Partnership's  Agreement of Limited
Partnership,  as amended by Supplement No. 1 thru  Supplement No. 9 thereto (the
"Partnership Agreement"), will be able to be accomplished promptly at the end of
the 15-year period. If a Local Limited Partnership is unable to sell its Housing
Complex,  it is  anticipated  that the local  general  partner  ("Local  General
Partner")  will either  continue to operate  such  Housing  Complex or take such
other actions as the Local General  Partner  believes to be in the best interest
of the Local Limited Partnership.  Notwithstanding the preceding,  circumstances
beyond the  control of the General  Partner or the Local  General  Partners  may
occur during the  Compliance  Period,  which would  require the  Partnership  to
approve the disposition of an Housing Complex prior to the end thereof, possibly
resulting in recapture of Low Income Housing Credits.

                                       3
<PAGE>


As of December 31, 1998, the  Partnership had invested in eighteen Local Limited
Partnerships.  Each of these Local Limited  Partnerships  owns a Housing Complex
that is eligible  for the federal  Low Income  Housing  Credit and eight of them
were  eligible for the  California  Low Income  Housing  Credit.  Certain  Local
Limited Partnerships may also benefit from government programs promoting low- or
moderate-income housing.

The Partnership's  investments in Local Limited  Partnerships are subject to the
risks incident to the management and ownership of low-income  housing and to the
management and ownership of multi-unit  residential  real estate.  Some of these
risks  are that the Low  Income  Housing  Credit  could be  recaptured  and that
neither the  Partnership's  investments  nor the Housing  Complexes owned by the
Local Limited Partnerships will be 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 Local Limited Partnership Interests;  limitations on
removal of Local General Partners; limitations on subsidy programs; and possible
changes in applicable regulations. The Housing Complexes are subject to mortgage
indebtedness.  If a Local  Limited  Partnership  does  not  makes  its  mortgage
payments,  the lender could foreclose resulting in a loss of the Housing Complex
and Low Income Housing Credits.  As a limited partner or non-managing  member of
the Local Limited  Partnerships,  the Partnership  will have very limited rights
with respect to  management  of the Local  Limited  Partnerships;  and will rely
totally  on the  general  partners  or  managing  members  of the Local  Limited
Partnerships for management of the Local Limited Partnerships.  The value of the
Partnership's  investments  will be subject to  changes  in  national  and local
economic conditions,  including unemployment  conditions,  which could adversely
impact vacancy levels, rental payment defaults and operating expenses.  This, in
turn, could substantially  increase the risk of operating losses for the Housing
Complexes and the Partnership.  In addition,  each Local Limited  Partnership is
subject to risks relating to environmental hazards and natural disasters,  which
might be uninsurable.  Because the Partnership's operations will depend on these
and other  factors  beyond the  control  of the  General  Partner  and the Local
General  Partners,  there can be no assurance  that the  anticipated  Low Income
Housing Credits will be available to Limited Partners.

In addition,  Limited  Partners are subject to risks in that the rules governing
the Low Income  Housing  Credit are  complicated,  and the use of credits can be
limited.  The only  material  benefit from an investment in Units may be the Low
Income Housing Credits. There are limits on the transferability of Units, and it
is unlikely that a market for Units will  develop.  All  Partnership  management
decisions are made by the General Partner.

As a limited partner or non-managing  member,  the  Partnership's  liability for
obligations of each Local Limited Partnership is limited to its investment.  The
Local General Partners of each Local Limited  Partnership retain  responsibility
for developing,  constructing,  maintaining,  operating and managing the Housing
Complexes.

Item 2.  Properties

Through its investments in Local Limited  Partnerships,  the  Partnership  holds
limited  partnership  interests in the Housing  Complexes.  The following  table
reflects the status of the eighteen  Housing  Complexes as of December 31, 1998,
and for the periods indicated:


                                       4
<PAGE>


<TABLE>
<CAPTION>


                          ----------------------------------------------------------------------------------------------------------
                                                                As of December 31, 1998
                          ----------------------------------------------------------------------------------------------------------


                                                                            Partnership's
                                                                               Total       Amount of      Estimated     Encumbrances
                                 General                 Number             Investment in  Investment     Low Income     of Local
Partnership        Location      Partner Name             of    Occupancy   Local Limited  Paid to        Housing         Limited
Name                                                     Units              Partnerships   Date           Credits       Partnerships

------------------------------------------------------------------------------------------------------------------------------------
<S>                <C>           <C>                        <C>   <C>     <C>            <C>           <C>            <C>


Almond Garden      Delhi,        Anthony Donovan            34     94%    $   391,000    $  391,000     $  807,000     $ 1,394,000
Apartment          California
Associates

Almond View        Stockton,     Daniel C. Logue and
Apartments, Ltd.   California    Cyrus Youssefi             72     97%      1,639,000     1,639,000      3,523,000       1,774,000

Buccaneer          Fernandia     Clifford E. Olsen          48     94%        365,000       365,000        768,000       1,482,000
Associates,        Beach,
Limited            Florida

Candleridge        Perry,        Eric A. Sheldahl           24    100%        126,000       126,000        245,000         705,000
Apartments of      Iowa
Perry L.P. II

Colonial Village   Roseville,    S.P. Thomas Company of
Roseville          Calfornia     Northern California Inc.
                                 and Project Go, Inc.       56     86%      2,811,000     2,811,000      5,872,000       2,128,000

Dallas County      Orrville,     Thomas H. Cooksey and
Housing, Ltd.      Alabama       Apartment Developers, Inc. 19    100%        130,000       130,000        287,000         617,000

La Paloma del Sol  Deming,       Dean Greenwalt             38     94%        254,000       254,000        625,000       1,438,000
Limited            New Mexico
Partnership

Memory Lane        Yankton,      Skogen - Peterson, Inc.    18    100%        151,000       151,000        295,000         688,000
Limited            South
Partnership        Dakota

Nueva Sierra       Richgrove,    Self-Help Enterprises,
Vista Associates   California    Inc. and Nueva Sierra
                                 Vista Corporation          35     91%      1,688,000     1,688,000      3,516,000       1,805,000

</TABLE>

                                       5
<PAGE>

<TABLE>
<CAPTION>


                          ----------------------------------------------------------------------------------------------------------
                                                                As of December 31, 1998
                          ----------------------------------------------------------------------------------------------------------


                                                                            Partnership's
                                                                               Total       Amount of      Estimated     Encumbrances
                                 General                 Number             Investment in  Investment     Low Income     of Local
Partnership        Location      Partner Name             of    Occupancy   Local Limited  Paid to        Housing         Limited
Name                                                     Units              Partnerships   Date           Credits       Partnerships

------------------------------------------------------------------------------------------------------------------------------------
<S>                <C>           <C>                       <C>    <C>      <C>             <C>           <C>            <C>


Old Fort Limited   Hidalgo,      Alan Deke Noftsker and
Partnership        Texas         ABO Corporation           40      97%     $  249,000      $  249,000    $  547,000     $ 1,282,000


Orosi Apartments,  Orosi,        Douglas W. Young          42     100%        461,000         461,000       902,000       1,966,000
Ltd.               California

Parlier Garden     Parlier,      David J. Micheal and
Apts.              California    Proffesional Apartment
                                 Management, Inc.          41     100%        453,000         453,000       917,000       1,715,000


Rosewood           Superior,     Duffy Development
Apartments         Wisconsin     Company, Inc.             20      75%        185,000         168,000       375,000         518,000
Limited
Partnership

Sun Manor, L.P.    Itta Bena,    Glenn D. Miller           36      97%        230,000         230,000       464,000       1,061,000
                   Mississippi


Tahoe Pines        South Lake    David J. Michael, Bucky
Apartments         Tahoe,        Fong, Dean Pearson, Coy
                   California    Elvis and Dr. Patricia
                                 Hatton                    28     100%      1,633,000       1,633,000     3,171,000       1,702,000

Venus Retirement   Venus,        W. Joseph Chamy           24      96%        161,000         161,000       318,000         728,000
Village, Ltd.      Texas


Walnut - Pixley,   Orange,       Walnut - Pixley, Inc.     22     100%      1,078,000       1,078,000     2,309,000       1,742,000
L.P.               California

Winters            Winters,      John P. Casper            38     100%        531,000         531,000     1,072,000       1,842,000
Investment Group   California                           -----    ----      ----------      ----------    ----------      ----------

                                                          635      96%   $ 12,536,000    $ 12,519,000  $ 26,013,000    $ 24,587,000
                                                        =====    ====      ==========      ==========    ==========      ==========


</TABLE>

                                       6
<PAGE>







                   ------------------------------------------
                      For the year ended December 31, 1998
                   ------------------------------------------
                                                             Low Income Housing
                                Rental          Net          Credits Allocated
Partnership Name                Income          Loss         to Partnerships
--------------------------------------------------------------------------------
Almond Garden Apartment
Associates                   $   155,000  $   (59,000)             99%


Almond View
Apartments, Ltd.                 185,000     (233,000)             99%

Buccaneer Associates,
Limited                          200,000      (34,000)             99%

Candleridge Apartments of
Perry L.P. II                    139,000      (11,000)             99%

Colonial Village Roseville       380,000     (155,000)             99%

Dallas County Housing, Ltd.       62,000      (12,000)             99%

La Paloma del Sol Limited
Partnership                      134,000      (11,000)             99%

Memory Lane Limited
Partnership                       65,000      (30,000)             99%

Nueva Sierra Vista
Associates                       141,000     (119,000)             99%

Old Fort Limited
Partnership                      163,000       (3,000)             99%

Orosi Apartments, Ltd.           184,000      (24,000)             99%

Parlier Garden Apts.             191,000      (28,000)             95%

Rosewood Apartments
Limited Partnership               71,000       (9,000)             99%

Sun Manor, L.P.                  139,000      (15,000)             99%

Tahoe Pines Apartments           180,000     (101,000)             99%

Venus Retirement Village,
Ltd.                              83,000      (24,000)             99%

Walnut - Pixley, L.P.            136,000      (49,000)             99%

Winters Investment Group         185,000      (41,000)             99%
                               ---------     --------
                           $   2,793,000  $  (958,000)
                               =========     ========




                                       7

<PAGE>

Item 3.  Legal Proceedings

NONE.

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

NONE

PART II.

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

Item 5a.

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

(b)  At December 31, 1998, there were 942 Limited Partners.

(c)  The Partnership was not designed to provide cash  distributions  to Limited
     Partners in  circumstances  other than  refinancing  or  disposition of its
     investments in Local Limited Partnerships.

(d)  No unregistered securities were sold by the Partnership during 1998.

Item 5b.

NOT APPLICABLE

Item 6.  Selected Financial Data

Selected  balance  sheet  information  for the  Partnership  is as follows as of
December 31:

<TABLE>

                                        1998              1997              1996             1995              1994
                                        ----              ----              ----             ----              ----
<S>                                     <C>               <C>               <C>              <C>               <C>

ASSETS
Cash and cash equivalents        $   561,751      $  1,451,071      $  1,498,036     $  1,916,200      $  2,799,487
Cash in escrow                             -                 -                 -                -         2,090,570
Investments in limited
 partnerships, net                 9,415,032        10,400,720        11,447,928       13,032,752        14,368,908
Due from affiliates                        -                 -                 -                -           216,645
Other assets                               -             2,242             5,419                -            19,960
                                   ---------        ----------        ----------       ----------        ----------
                                 $ 9,976,783      $ 11,854,033      $ 12,951,383     $ 14,948,952      $ 19,495,570
                                   =========        ==========        ==========       ==========        ==========


LIABILITIES
Payables to limited
 partnerships                    $    16,836      $     16,836    $       16,836     $    651,094      $  4,400,927
Due to General Partner and
 affiliates                          561,391           370,223           233,380          240,188                 -
Due to limited partners                    -           900,000                 -                -                 -

PARTNERS' EQUITY                   9,398,556        10,566,974        12,701,167       14,057,670        15,094,643
                                   ---------       -----------        ----------       ----------        ----------
                                 $ 9,976,783      $ 11,854,033     $  12,951,383     $ 14,948,952      $ 19,495,570
                                   =========        ==========        ==========       ==========        ==========
</TABLE>

                                        8

<PAGE>


Selected  results  of  operations,  cash  flows  and other  information  for the
Partnership are as follows for the years ended December 31:

<TABLE>

                                        1998              1997              1996            1995            1994
                                        ----              ----              ----            ----            ----
<S>                                     <C>               <C>               <C>              <C>               <C>
Loss from operations           $    (249,631)    $    (205,576)    $    (197,723)  $    (105,423)     $     28,208

Equity in income(loss) from
 limited partnerships               (918,787)       (1,028,617)       (1,132,216)     (1,155,114)         (352,511)
                                  ----------        ----------        ----------      ----------         ---------
Net income(loss)               $  (1,168,418)    $  (1,234,193)    $  (1,329,939)  $  (1,260,537)     $   (324,303)
                                  ==========        ==========        ==========      ==========         =========

Net income(loss) allocated
to:
     General partner           $     (11,684)    $     (12,342)    $     (13,300)   $     (12,605)    $     (3,243)
                                  ==========        ==========        ==========       ==========        =========
     Limited partners          $  (1,156,734)    $  (1,221,851)    $  (1,316,639)   $  (1,247,932)    $   (321,060)
                                  ==========        ==========        ==========       ==========        =========
Net income(loss) per limited
 partner unit                  $      (64.26)    $      (67.88)    $      (73.15)   $      (69.33)    $     (48.71)
                                  ==========        ==========        ==========       ==========        =========
Outstanding weighted limited
    partner units                     18,000            18,000            18,000           18,000            6,591
                                  ==========        ==========        ==========       ==========        =========

</TABLE>
<TABLE>

                                        1998              1997              1996             1995             1994
                                        ----              ----              ----             ----             ----
<S>                                     <C>               <C>               <C>              <C>               <C>
Net cash provided by (used
in):
     Operating activities       $      4,243      $     (6,960)     $   (143,337)    $    437,400     $   (225,005)
     Investing activities              6,437           (40,005)         (248,263)      (1,535,687)      (9,018,582)
     Financing activities           (900,000)                -           (26,564)         215,000        9,736,196
                                   ---------         ---------         ---------        ---------        ---------
Net change in cash and cash
  equivalents                       (889,320)          (46,965)         (418,164)        (883,287)         492,609
Cash and cash equivalents,
  beginning of period              1,451,071         1,498,036         1,916,200        2,799,487        2,306,878
                                   ---------         ---------         ---------        ---------        ---------
Cash and cash equivalents,
  end of period                 $    561,751      $  1,451,071      $  1,498,036     $  1,916,200     $  2,799,487
                                   =========         =========         =========        =========        =========
</TABLE>
<TABLE>

Low Income  Housing  Credit per Unit was as follows for the years ended December 31:

                                       1998              1997              1996             1995             1994
                                       ----              ----              ----             ----             ----
<S>                                     <C>               <C>               <C>              <C>              <C>
Federal                          $      113        $      113       $       113       $       95      $        32
State                                    17                66                85               48               85
                                  ---------         ---------         ---------        ---------        ---------
Total                            $      130        $      179       $       198       $      143      $       117
                                  =========         =========         =========        =========        =========

</TABLE>


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
of Operation

Financial Condition

The Partnership's assets at December 31, 1998 consisted primarily of $562,000 in
cash and aggregate  investments  in the eighteen Local Limited  Partnerships  of
$9,415,000.  Liabilities at December 31, 1998 primarily consisted of $556,000 of
accrued annual management fees due to the General Partners.

                                       9
<PAGE>

Results of Operations

Year Ended  December 31, 1998  Compared to Year Ended  December  31,  1997.  The
Partnership's  net loss for 1998 was  $(1,168,000),  reflecting  a  decrease  of
$66,000  from  the net loss  experienced  in 1997.  The  decline  in net loss is
primarily due to equity in losses from limited  partnerships  which  declined to
$(919,000) in 1998 from  $(1,029,000)  in 1997. This decrease was partially as a
result of the Partnership  not  recognizing  certain losses of the Local Limited
Partnerships.  The  investments  in such Local Limited  Partnerships  reached $0
during 1998. Since the  Partnership's  liability with respect to its investments
is limited, losses in excess of investment are not recognized.  The reduction in
equity  losses  recognized  was  partially  offset by an  increase  in loss from
operations of $(44,000) in 1998 to $(250,000), from $(206,000) in 1997, due to a
comparable  increase in operating expense allocations and a decrease in interest
income.

Year Ended  December 31, 1997  Compared to Year Ended  December  31,  1996.  The
Partnership's  net loss for 1997 was  $(1,234,000),  reflecting  a  decrease  of
$96,000  from  the net loss  experienced  in 1996.  The  decline  in net loss is
primarily due to equity in losses from limited  partnerships  which  declined to
$(1,029,000) in 1997 from $(1,132,000) in 1996,  because of improved  operations
of  certain  investments  and that the  investments  in  certain  Local  Limited
Partnerships  reached $0 during 1997.  Losses from operations  were  essentially
unchanged between years.

Cash Flows

Year Ended  December 31, 1998 Compared to Year Ended December 31, 1997. Net cash
used in 1998 was $(889,000), compared to net cash used in 1997 of $(47,000). The
change was due primarily to an increase in financing activities, which consisted
of a return of capital to the limited partners of $50 per unit or $900,000.

Year Ended  December 31, 1997 Compared to Year Ended December 31, 1996. Net cash
used in 1997 was  $(47,000),  compared to $(418,000) in 1996. The change was due
primarily to a decrease in investments in Limited partnerships and a decrease in
the payment of management fees.

During  1998  accrued  payables,   which  consist  primarily  of  related  party
management fees due to the General Partner, increased by $(191,000). The General
Partner does not anticipate that these accrued fees will be paid until such time
as  capital  reserves  are  in  excess  of  future  forseeable  working  capital
requirements of the partnership.

The Partnership  expects its future cash flows,  together with its net available
assets at December 31, 1998, to be  sufficient to meet all currently  forseeable
future cash requirements.

Impact of Year 2000

The General  Partner has assessed the  Partnership's  exposure to date sensitive
computer  systems that may not be operative  subsequent  to 1999. As a result of
this  assessment,  the  General  Partner  has  executed a plan to  minimize  the
Partnership's  exposure to financial loss and/or  disruption of normal  business
operations  that may  occur  as a result  of Year  2000  non-compliant  computer
systems.

                                       10
<PAGE>

Business Computer Systems

These systems include both computer hardware and software  applications relating
to operations such as financial reporting. The Partnership does not maintain its
own systems and thus utilizes the computer systems of the General  Partner.  The
General Partner  developed a compliance  plan for each of its business  computer
systems,  with  particular  attention  given to  critical  systems.  The General
Partner  contracted  with an outside  vendor to  evaluate,  test and repair such
systems.  The assessment  consisted of determining the compliance with Year 2000
of critical  computer hardware and software.  Incidences of non-compliance  were
found with respect to computer  software  applications  and were corrected.  The
vendor found no instances of non-compliance  with respect to computer  hardware.
The amount expended and to be expended by the General Partner is nominal.

The Local General Partners or property  managers  maintain the business computer
systems that relate to the  operations  of the Local Limited  Partnerships.  The
General  Partner is in the process of obtaining  completed  questionnaires  from
such Local General  Partners and property  management  companies to assess their
respective  Year 2000  readiness.  The General Partner intends to identify those
Local  General  Partners and  property  management  companies  that have systems
critical to the operations of the Local Limited  Partnerships  that are not Year
2000  compliant.  For those  Local  General  Partners  and  property  management
companies  which  have  business  computer  systems  which will not be Year 2000
compliant  prior  to the Year  2000 and  where  the lack of such  compliance  is
determined to have a potential  material effect on the  Partnership's  financial
condition  and results of  operations,  the General  Partner  intends to develop
contingency plans which may include changing property management companies.

Outside Vendors

The General  Partner has obtained  assurances  from its  suppliers of electrical
power and banking and telecommunication services that their critical systems are
all Year 2000 compliant.  There exists,  however,  inherent uncertainty that all
systems of outside vendors or other third parties on which the General  Partner,
and thus the Partnership, and the Local General Partners and property management
companies,  and thus the  Local  Limited  Partnerships  rely  will be Year  2000
compliant. Therefore, the Partnership remains susceptible to the consequences of
third party critical computer systems being non-compliant.

Personal Computers

The General  Partner has  determined  that its  personal  computers  and related
software critical to the operations of the Partnership are Year 2000 compliant.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

NOT APPLICABLE

Item 8.  Financial Statements and Supplementary Data

                                       11
<PAGE>


               Report of Independent Certified Public Accountants



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


We have audited the  accompanying  balance sheet of WNC  California  Housing Tax
Credits III, L.P. (a California Limited  Partnership) (the  "Partnership") as of
December 31, 1998, and the related  statements of operations,  partners'  equity
(deficit) and cash flows for the year then ended. These financial statements are
the  responsibility of the Partnership's  management.  Our  responsibility is to
express an opinion on these financial  statements based on our audit. We did not
audit  the  financial  statements  of the  limited  partnerships  in  which  WNC
California Housing Tax Credits III, L.P. is a limited partner. These investments
as discussed in Note 2 to the  financial  statements  are  accounted  for by the
equity method. The investments in these limited partnerships  represented 94% of
the total assets of WNC California Housing Tax Credits III, L.P. at December 31,
1998.  Substantially all of the financial statements of the limited partnerships
were audited by other  auditors whose reports have been furnished to us, and our
opinion,  insofar  as it  relates  to the  amounts  included  for these  limited
partnerships, is based solely on the reports of the other auditors.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit and the reports of other auditors provide a reasonable
basis for our opinion.

In our  opinion,  based on our  audit and the  reports  of other  auditors,  the
financial statements referred to above present fairly, in all material respects,
the  financial  position of WNC  California  Housing Tax  Credits  III,  L.P. (a
California Limited  Partnership) as of December 31, 1998, and the results of its
operations  and its cash  flows  for the year then  ended,  in  conformity  with
generally accepted accounting principles.




                                                         BDO SEIDMAN, LLP

Orange County, California
April 12, 1999















                                       12
<PAGE>



                          INDEPENDENT AUDITORS' REPORT



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


We have audited the  accompanying  balance sheet of WNC  California  Housing Tax
Credits III, L.P. ( a California Limited  Partnership) (the "Partnership") as of
December 31, 1997, and the related  statements of operations,  partners'  equity
(deficit)  and cash  flows for each of the years in the  two-year  period  ended
December 31, 1997.  These  financial  statements are the  responsibility  of the
Partnership's  management.  Our responsibility is to express an opinion on these
financial  statements  based  on our  audit.  We did  not  audit  the  financial
statements  of the  limited  partnerships  in which WNC  California  Housing Tax
Credits III, L.P. is a limited partner. These investments,  as discussed in Note
2 to the  financial  statements,  are accounted  for by the equity  method.  The
investments in these limited partnerships represented 88% of the total assets of
WNC California Housing Tax Credits II, L.P. at December 31, 1997.  Substantially
all of the  financial  statements  of the limited  partnerships  were audited by
other auditors whose reports have been furnished to us, and our opinion, insofar
as it relates to the amounts included for those limited  partnerships,  is based
solely on the reports of the other auditors.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We  believe  that our audits and the  reports  of the other  auditors  provide a
reasonable basis for our opinion.

In our opinion,  based on our audits and the reports of the other auditors,  the
financial statements referred to above present fairly, in all material respects,
the  financial  position of WNC  California  Housing Tax  Credits  III,  L.P. (a
California Limited  Partnership) as of December 31, 1997, and the results of its
operations and its cash flows for each of the years in the two-year period ended
December 31, 1997, in conformity with generally accepted accounting principles.



                                                          CORBIN & WERTZ

Irvine, California
April 6, 1998













                                       13
<PAGE>

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

                                 BALANCE SHEETS

                           December 31, 1998 and 1997



                                                      1998                1997
                                                      ----                ----
ASSETS

Cash and cash equivalents                     $      561,751    $    1,451,071
Investments in limited
 partnerships, net (Note 2)                        9,415,032        10,400,720
Other assets                                               -             2,242
                                                   ---------        ----------

                                              $    9,976,783    $   11,854,033
                                                   =========        ==========

LIABILITIES AND PARTNERS' EQUITY (DEFICIT)

Liabilities:
 Payables to limited partnerships (Note 4)    $       16,836    $       16,836
 Accrued fees and expenses due to General
  Partner and affiliates (Note  3)                   561,391           370,223
 Due to limited partners (Note 5)                          -           900,000
                                                   ---------        ----------
           Total liabilities                         578,227         1,287,059
                                                   ---------        ----------

Commitments and contingencies

Partners' equity (deficit):
 General partner                                     (76,145)          (64,461)
 Limited partners (30,000 units authorized;
  18,000 units issued and outstanding at
  December 31, 1998 and 1997)                      9,474,701        10,631,435
                                                   ---------        ----------
           Total partners' equity                  9,398,556        10,566,974
                                                   ---------        ----------
                                               $   9,976,783    $   11,854,033
                                                   =========        ==========








                 See accompanying notes to financial statements
                                       14


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

                            STATEMENTS OF OPERATIONS

              For The Years Ended December 31, 1998, 1997 and 1996

                                      1998             1997             1996
                                      ----             ----             ----

 Interest income              $     26,577    $      57,279    $       74,947
                               -----------      -----------       -----------

 Operating expenses:
    Amortization (Note 2)           60,464           58,596            57,933
    Asset management fees
     (Note 3)                      186,167          186,166           186,422
    Bad debt expense                     -                -             8,680
    Other                           29,577           18,093            19,635
                               -----------      -----------       -----------

   Total operating expenses        276,208          262,855           272,670
                               -----------      -----------       -----------

 Loss from operations             (249,631)        (205,576)         (197,723)

 Equity in losses from limited
  partnerships (Note 2)           (918,787)      (1,028,617)       (1,132,216)
                               -----------      -----------       -----------

 Net loss                     $ (1,168,418)   $  (1,234,193)   $   (1,329,939)
                               ===========      ===========       ===========

 Net loss allocated to:
    General partner           $    (11,684)   $     (12,342)   $      (13,300)
                               ===========      ===========       ===========

    Limited partners          $ (1,156,734)   $  (1,221,851)   $   (1,316,639)
                               ===========      ===========       ===========

 Net loss per limited
  partner unit                $     (64.26)   $      (67.88)   $       (73.15)
                               ===========      ===========       ===========

 Outstanding weighted limited
  partner units                     18,000           18,000            18,000
                               ===========      ===========       ===========





                 See accompanying notes to financial statements
                                       15


<PAGE>


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

                    STATEMENTS OF PARTNERS' EQUITY (DEFICIT)

              For The Years Ended December 31, 1998, 1997 and 1996


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


Partners' equity (deficit)
 at January 1, 1996           $    (38,553)   $    14,096,223    $   14,057,670

Offering costs                        (266)           (26,298)          (26,564)

Net loss                           (13,300)        (1,316,639)       (1,329,939)
                               -----------        -----------       -----------

Partners' equity (deficit)
 at December 31, 1996              (52,119)        12,753,286        12,701,167

Return of capital (Note 5)               -           (900,000)         (900,000)

Net loss                           (12,342)        (1,221,851)       (1,234,193)
                               -----------        -----------       -----------

Partners' equity (deficit)
 at December 31, 1997              (64,461)        10,631,435        10,566,974

Net loss                           (11,684)        (1,156,734)       (1,168,418)
                               -----------        -----------       -----------

Partners' equity (deficit)
 at December 31, 1998         $    (76,145)   $     9,474,701    $    9,398,556
                               ===========        ===========       ===========




                 See accompanying notes to financial statements
                                       16

<PAGE>

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

                            STATEMENTS OF CASH FLOWS

              For The Years Ended December 31, 1998, 1997 and 1996

<TABLE>


                                                                   1998               1997                1996
                                                                   ----               ----                ----
<S>                                                                <C>                <C>                 <C>
Cash flows from operating activities:
   Net loss                                               $    (1,168,418)    $    (1,234,193)    $    (1,329,939)
   Adjustments to reconcile net loss to net cash
     (used in) provided by operating activities:
         Amortization                                              60,464              58,596              57,933
         Bad debt                                                       -                   -               8,680
         Equity in loss of limited partnerships                   918,787           1,028,617           1,132,216
         Change in other assets                                     2,242               3,177              (5,419)
         Increase in accrued fees and expenses due
           to General Partner and affiliates                      191,168             136,843              (6,808)
                                                              -----------         -----------         -----------

   Net cash (used in) provided by operating
     activities                                                     4,243              (6,960)           (143,337)
                                                              -----------         -----------         -----------

Cash flows from investing activities:
    Investments in limited partnerships, net                            -                   -            (220,733)
    Capitalized acquisition costs and fees                              -             (55,994)            (33,906)
    Distributions from limited partnerships                         6,437              15,989               6,376
                                                              -----------         -----------         -----------

    Net cash provided by (used in) investing
      activities                                                    6,437             (40,005)           (248,263)
                                                              -----------         -----------         -----------

Cash flows from financing activities:
    Return of capital                                            (900,000)                  -                   -
    Offering costs                                                      -                   -             (26,564)
                                                              -----------         -----------         -----------

   Net cash used in financing activities                         (900,000)                  -             (26,564)
                                                              -----------         -----------         -----------

Net decrease in cash and cash equivalents                        (889,320)            (46,965)           (418,164)

Cash and cash equivalents, beginning of year                    1,451,071           1,498,036           1,916,200
                                                              -----------         -----------         -----------

Cash and cash equivalents, end of year                    $       561,751    $      1,451,071    $      1,498,036
                                                              ===========         ===========         ===========
</TABLE>



                 See accompanying notes to financial statements
                                       17

<PAGE>


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

                      STATEMENTS OF CASH FLOWS - CONTINUED

              For The Years Ended December 31, 1998, 1997 and 1996



                                           1998           1997           1996
                                           ----           ----           ----

SUPPLEMENTAL DISCLOSURE OF CASH
  FLOW INFORMATION:
   Taxes paid                        $       800   $       800   $        800
                                      ==========    ==========     ==========



SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITY:

     During  1996,  the  Partnership  had  $422,205  of  investments  in limited
     partnerships  returned  through  tax  credit  adjustments  reflected  as  a
     reduction in the payables to limited partnerships.

     During 1996, the Partnership  adjusted  offering costs and accrued fees and
     expenses due to General Partner and affiliates by $(26,564).





















                 See accompanying notes to financial statements
                                       18



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

                          NOTES TO FINANCIAL STATEMENTS

              For The Years Ended December 31, 1998, 1997 and 1996



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

WNC California  Housing Tax Credits III, L.P. a California  Limited  Partnership
(the  "Partnership"),  was formed on October 5, 1992 under the laws of the state
of California and began  operations on July 19, 1993. The Partnership was formed
to  invest  primarily  in  other  limited   partnerships   (the  "Local  Limited
Partnerships")  which  own  and  operate  multi-family  housing  complexes  (the
"Housing  Complex") that are eligible for low income housing credits.  The local
general   partners  (the  "Local  General   Partners")  of  each  Local  Limited
Partnership retain  responsibility  for maintaining,  operating and managing the
Housing Complex.

The  general  partner  is WNC  Tax  Credit  Partners  III,  L.P.  (the  "General
Partner").  WNC &  Associates,  Inc.  ("WNC") is the general  partner of WNC Tax
Credit Partners III, L.P.  Wilfred N. Cooper,  Sr., through the Cooper Revocable
Trust owns 66.8% of the outstanding stock of WNC. John B. Lester is the original
limited partner of the  Partnership  and owns,  through the Lester Family Trust,
28.6% of the outstanding stock of WNC.

The financial  statements  include only activity relating to the business of the
Partnership,  and do not give  effect to any assets that the  partners  may have
outside of their interests in the Partnership, or to any obligations,  including
income taxes, of the partners.

The  Partnership  Agreement  authorized the sale of up to 30,000 units at $1,000
per Unit  ("Units").  The offering of Units concluded in July 1994 at which time
17,990 Units  representing  subscriptions  in the amount of $17,990,000 had been
accepted. During 1995, an additional 10 units amounting to $10,000 was collected
on  subscriptions  accepted and  previously  deemed  uncollectible.  The General
Partner has a 1% interest in operating  profits and losses,  taxable  income and
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 proceeds from sale or refinancing equal
to their capital contributions and their return on investment (as defined in the
Partnership's  Agreement)  and the General  Partner has received a  subordinated
disposition  fee (as described in Note 3), 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

The Partnership's  investments in Local Limited  Partnerships are subject to the
risks incident to the management and ownership of low-income  housing and to the
management and ownership of multi-unit  residential  real estate.  Some of these
risks  are that the low  income  housing  credit  could be  recaptured  and that
neither the  Partnership's  investments  nor the Housing  Complexes owned by the
Local Limited Partnerships will be 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 Local Limited Partnership Interests;  limitations on
removal of Local Partners; limitations on subsidy programs; and possible changes
in  applicable  regulations.  The  Housing  Complexes  are or will be subject to
mortgage indebtedness. If a Local Limited Partnership does not make its mortgage
payments,  the lender could foreclose resulting in a loss of the Housing Complex
and low  income  housing  credits.  As a limited  partner  of the Local  Limited
Partnerships,  the  Partnership  will have very  limited  rights with respect to
management of the Local Limited Partnerships, and will rely totally on the Local
General  Partners of the Local Limited  Partnerships for management of the Local
Limited Partnerships. The value of the Partnership's investments will be subject

                                       19
<PAGE>
                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS -CONTINUED

              For The Years Ended December 31, 1998, 1997 and 1996


NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

to changes in national and local  economic  conditions,  including  unemployment
conditions, which could adversely impact vacancy levels, rental payment defaults
and operating expenses.  This, in turn, could substantially increase the risk of
operating  losses for the Housing  Complexes and the  Partnership.  In addition,
each Local Limited  Partnership  is subject to risks  relating to  environmental
hazards  and  natural   disasters  which  might  be  uninsurable.   Because  the
Partnership's  operations  will  depend on these and other  factors  beyond  the
control of the General Partner and the Local General  Partners,  there can be no
assurance that the  anticipated  low income housing credits will be available to
Limited Partners.

In addition  Limited  Partners are subject to risks in that the rules  governing
the low income  housing  credit are  complicated,  and the use of credits can be
limited.  The only  material  benefit from an investment in Units may be the low
income housing credits. There are limits in the transferability of Units, and it
is unlikely that a market for Units will develop.  All management decisions will
be made by the General Partner.

Method of Accounting For Investments in Limited Partnerships

The Partnership  accounts for its investments in limited  partnerships using the
equity method of  accounting,  whereby the  Partnership  adjusts its  investment
balance for its share of the Local Limited  Partnership's  results of operations
and for any distributions received. The accounting policies of the Local Limited
Partnerships are consistent with those of the Partnership. Costs incurred by the
Partnership  in  acquiring  the  investments  are  capitalized  as  part  of the
investment account and are being amortized over 30 years (see Note 2).

Losses from Local  Limited  Partnerships  allocated to the  Partnership  are not
recognized to the extent that the  investment  balance  would be adjusted  below
zero.

Offering Expenses

Offering  expenses consist of underwriting  commissions,  legal fees,  printing,
filing and  recordation  fees,  and other costs  incurred  with selling  limited
partnership  interests in the  Partnership.  The General Partner is obligated to
pay all  offering  and  organization  costs in  excess of 15%  (including  sales
commissions) of the total offering proceeds.  Offering expenses are reflected as
a reduction of partners'  capital and amounted to  $2,366,564 as of December 31,
1998 and 1997.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles 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 highly liquid investments with remaining maturities of
three months or less when purchased to be cash  equivalents.  As of December 31,
1998 and 1997, the  Partnership had cash  equivalents  totaling $0 and $942,685,
respectively.

                                       20
<PAGE>
                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS -CONTINUED

              For The Years Ended December 31, 1998, 1997 and 1996


NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Concentration of Credit Risk

At December  31,  1998,  the  Partnership  maintained  cash  balances at certain
financial institutions in excess of the maximum federally insured amounts.

Net Loss Per Limited Partner Unit

Net loss per limited  partnership  unit is  calculated  pursuant to Statement of
Financial  Accounting  Standards No. 128,  Earnings Per Share. Net loss per unit
includes no dilution  and is computed  by  dividing  loss  available  to limited
partners by the weighted average number of units outstanding  during the period.
Calculation of diluted net income per unit is not required.

Reporting Comprehensive Income

In June 1997,  the FASB  issued  Statement  of  Financial  Accounting  Standards
("SFAS") No. 130, Reporting  Comprehensive  Income.  This statement  establishes
standards for reporting the components of comprehensive income and requires that
all items that are  required to be  recognized  under  accounting  standards  as
components of comprehensive  income be included in a financial statement that is
displayed with the same prominence as other financial statements.  Comprehensive
income  includes net income as well as certain items that are reported  directly
within a separate  component  of  partners'  equity and bypass net  income.  The
Partnership  adopted the  provisions  of this  statement in 1998.  For the years
presented,  the Partnership has no elements of other  comprehensive  income,  as
defined by SFAS No. 130.

NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS

As of December 31,  1998,  the  Partnership  had  acquired  limited  partnership
interests in eighteen Local Limited Partnerships, each of which owns one Housing
Complex  consisting  of an  aggregate of 635  apartment  units.  The  respective
general  partners  of the  Local  Limited  Partnerships  manage  the  day-to-day
operations  of the entities.  Significant  Local  Limited  Partnership  business
decisions require approval from the Partnership.  The Partnership,  as a limited
partner,  is  generally  entitled  to 99%,  as  specified  in the Local  Limited
Partnership  agreements,  of the  operating  profits  and losses of the  Limited
Partnerships.

The  Partnership's  investments  in Local Limited  Partnerships  as shown in the
balance  sheets at December 31, 1998 and 1997 are  approximately  $1,602,000 and
$1,640,000,  greater than the Partnership's equity as shown in the Local Limited
Partnerships'  financial  statements.   This  difference  is  primarily  due  to
unrecorded  losses, as discussed below,  acquisition,  selection and other costs
related to the acquisition of the investments which have been capitalized in the
Partnership's  investment  account and to capital  contributions  payable to the
limited  partnerships  which were netted  against  partner  capital in the Local
Limited Partnership's financial statements (see Note 4).

Equity  in  losses  of the  Local  Limited  Partnerships  is  recognized  in the
financial  statements until the related  investment account is reduced to a zero
balance. Losses incurred after the investment account is reduced to zero are not
recognized. If the Local Limited Partnerships report net income in future years,
the  Partnership  will resume applying the equity method only after its share of
such net  income  equals  the share of net  losses  not  recognized  during  the
period(s) the equity method was suspended.

Distributions  received by limited  partners are accounted for as a reduction of
the investment balance.  Distributions received after the investment has reached
zero are recognized as income.

                                       21

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

                    NOTES TO FINANCIAL STATEMENTS -CONTINUED

              For The Years Ended December 31, 1998, 1997 and 1996


NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued

At  December  31,  1998,  the  investment  accounts  in  certain  Local  Limited
Partnerships have reached a zero balance.  Consequently, the Partnership's share
of losses  during the year ended  December 31, 1998  amounting to  approximately
$29,226 have not been  recognized.  As of December 31, 1998, the aggregate share
of net losses not recognized by the Partnership amounted to $44,553.

Following is a summary of the equity method activity of the investments in Local
Limited  Partnerships for the years ended December 31:

                                              1998             1997
                                              ----             ----
 Investments per balance
   sheet, beginning of year           $     10,400,720    $     11,447,928
 Capitalized acquisition
   fees and costs                                    -              55,994
 Equity in losses of
   limited partnerships                       (918,787)         (1,028,617)
 Distributions paid                             (6,437)            (15,989)
 Amortization of paid
   acquisition fees and costs                  (60,464)            (58,596)
                                       ---------------     ---------------

 Investments per balance
   sheet, end of year                 $      9,415,032    $     10,400,720
                                       ===============     ===============













                                       22

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

                    NOTES TO FINANCIAL STATEMENTS -CONTINUED

              For The Years Ended December 31, 1998, 1997 and 1996

NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued

The financial  information from the individual financial statements of the Local
Limited Partnerships include rental and interest subsidies. Rental subsidies are
included in total  revenues  and  interest  subsidies  are  generally  netted in
interest expense.  Approximate combined condensed financial information from the
individual financial statements of the Local Limited Partnerships as of December
31 and for the years then ended is as follows:

                        COMBINED CONDENSED BALANCE SHEETS

                                                  1998                1997
                                                  ----                ----


ASSETS

Buildings and improvements,
 net of accumulated depreciation
 for 1998 and 1997 of $5,360,000
 and $4,188,000, respectively,               $ 30,690,000        $ 31,657,000
Land                                            2,213,000           2,380,000
Other assets                                    1,958,000           1,746,000
                                             ------------        ------------

                                             $ 34,861,000        $ 35,783,000
                                             ============        ============

LIABILITIES

Mortgage and construction
 loans payable                               $ 24,587,000        $ 24,528,000
Other liabilities (including due
 to related parties of $792,000 and
 $715,000 as of December 31, 1998
 and 1997, respectively.                        1,453,000           1,495,000
                                             ------------        ------------


Total liabilities                              26,040,000          26,023,000
                                             ------------        ------------

PARTNERS' CAPITAL

WNC California Housing Tax
 Credits III, L.P                               7,813,000           8,761,000
Other partners                                  1,008,000             999,000
                                             ------------        ------------

                                                8,821,000           9,760,000
                                             ------------        ------------

                                             $ 34,861,000        $ 35,783,000
                                             ============        ============





                                       23
<PAGE>
                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
                       (A California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS -CONTINUED

              For The Years Ended December 31, 1998, 1997 and 1996

NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued

                   COMBINED CONDENSED STATEMENTS OF OPERATIONS

                               1998               1997                1996
                               ----               ----                ----

Revenues                $     2,901,000    $      2,895,000    $      2,786,000

Expenses:
 Operating expenses           1,800,000           1,779,000           1,689,000
 Interest expense               871,000             950,000             968,000
 Depreciation and
  amortization                1,188,000           1,220,000           1,273,000
                             ----------          ----------          ----------

    Total expenses            3,859,000           3,949,000           3,930,000
                             ----------          ----------          ----------

Net loss                $      (958,000)   $     (1,054,000)   $     (1,144,000)
                             ==========          ==========          ==========

Net loss allocable
 to the Partnership     $      (948,000)   $     (1,044,000)   $     (1,132,000)
                             ==========          ==========          ==========

Net loss recorded
 by the Partnership     $      (919,000)   $     (1,029,000)   $     (1,132,000)
                             ==========          ==========          ==========

Certain Local Limited  Partnerships have incurred  significant  operating losses
and  have  working  capital  deficiencies.  In the  event  these  Local  Limited
Partnerships continue to incur significant operating losses,  additional capital
contributions  by the  Partnership  and/or  the  Local  General  Partner  may be
required  to sustain  the  operations  of such Local  Limited  Partnerships.  If
additional  capital  contributions  are not made  when  they are  required,  the
Partnership's  investment in certain of such Local Limited Partnerships could be
impaired.

NOTE 3 - RELATED PARTY TRANSACTIONS

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

         Acquisition  fees of up to 9% of the  gross  proceeds  from the sale of
         Units as  compensation  for services  rendered in  connection  with the
         acquisition of Local Limited Partnerships.  As of December 31, 1998 and
         1997  the  Partnership   incurred   acquisition   fees  of  $1,620,000.
         Accumulated  amortization of these  capitalized  costs was $257,025 and
         $203,029 as of December 31, 1998 and 1997, respectively.

         Reimbursement  of costs  incurred by the General  Partner in connection
         with   the   acquisition   of   Local   Limited   Partnerships.   These
         reimbursements  have not  exceeded  1.5% of the gross  proceeds.  As of
         December 31, 1998 and 1997, the Partnership  incurred acquisition costs
         of  $194,019,  which  have been  included  in  investments  in  limited
         partnerships.  Accumulated  amortization  was $19,191 and $12,723 as of
         December 31, 1998 and 1997, respectively.

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

                    NOTES TO FINANCIAL STATEMENTS -CONTINUED

              For The Years Ended December 31, 1998, 1997 and 1996

NOTE 3 - RELATED PARTY TRANSACTIONS, continued

         An annual  management  fee equal to 0.5% of the invested  assets of the
         Local Limited Partnerships, including the Partnership's allocable share
         of the mortgages.  Management  fees of $186,167,  $186,166 and $186,422
         were  incurred for 1998,  1997 and 1996,  respectively,  of which,  $0,
         $50,000  and   $200,000   were  paid  during   1998,   1997  and  1996,
         respectively.

         A  subordinated  disposition  fee in an amount equal to 1% of the sales
         price of real estate sold.  Payment of this fee is  subordinated to the
         limited  partners  receiving a preferred return of 16% through December
         31, 2003 and 6% thereafter  (as defined in the  Partnership  Agreement)
         and is payable  only if the General  Partner or its  affiliates  render
         services in the sales effort.

The  accrued  fees and  expenses  due to General  Partner and  affiliates  as of
December 31, 1998 and 1997 consist of the following:

                                           1998                1997
                                           ----                ----

Reimbursement for expenses
 paid by an affiliate of
 the General Partner                 $     5,690       $         688

Asset management fee payable             555,701             369,535
                                         -------             -------
                                     $   561,391       $     370,223
                                         =======             =======

The General  Partner does 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 - PAYABLES TO LIMITED PARTNERSHIPS

Payables  to limited  partnerships  represent  amounts  which are due at various
times based on conditions specified in the limited partnership agreements. These
contributions  are  payable  in  installments  and  are  due  upon  the  limited
partnerships  achieving certain operating and development  benchmarks (generally
within two years of the Partnership's initial investment).

NOTE 5 - DUE TO LIMITED PARTNERS

Due to limited partners at December 31, 1997,  represents a return of capital to
Unit holders of $50 per Unit. Such amounts were paid in January 1998.

NOTE 6 - INCOME TAXES

No provision for income taxes has been  recorded in the financial  statements as
any  liability  for  income  taxes  is the  obligation  of the  partners  of the
Partnership.


                                       25

<PAGE>

Item  9.  Changes  in and  Disagreements  With  Accountants  on  Accounting  and
Financial Disclosure

(a)(1)

(i)   On December 16, 1998, Corbin & Wertz, Irvine,  California was dismissed as
      the Partnership's principal independent accountant.

(ii)  During the last two fiscal years of the Partnership, the reports of Corbin
      & Wertz  respecting  the financial  statements of the Partnership  did not
      contain an adverse  opinion or a disclaimer  of opinion, nor were any such
      reports qualified or modified as to uncertainty, audit scope or accounting
      principles.

(iii) The decision to change  accountants was approved by the board of directors
      of WNC & Associates, Inc., the general partner of the Partnership.

(iv)  During  the last two  fiscal  years and  subsequent interim  period of the
      Partnership  there  were no  disagreements  between Corbin & Wertz and the
      Partnership on any matter of accounting principles or practices, financial
      statement  disclosure,  or  auditing  scope  or procedure  of  the  nature
      described in Item  304(a)(1)(iv) of  Securities  and  Exchange  Commission
      Regulation S-K.

(v)   During  the last two  fiscal  years and  subsequent interim  period of the
      Partnership there  were no reportable  events of  the nature  described in
      Item 304(a)(1)(v) of Securities and Exchange Commission Regulation S-K.

(a)(2)

On December 16, 1998, BDO Seidman,  LLP,  Costa Mesa,  California was engaged as
the Partnership's principal independent  accountant.  During the last two fiscal
years and subsequent interim period of the Partnership,  the Partnership did not
consult BDO Seidman,  LLP regarding (i) either,  the  application  of accounting
principles to a specified  transaction;  or the type of audit opinion that might
be rendered on the Partnership's  financial statements,  or (ii) any matter that
was  the  subject  of a  disagreement  (as  defined  in  Item  304(a)(1)(iv)  of
Securities and Exchange Commission Regulation S-K) or was a reportable event (as
defined in Item  304(a)(1)(v) of Securities and Exchange  Commission  Regulation
S-K).

PART III.

Item 10.  Directors and Executive Officers of the Registrant

The Partnership has no directors or executive officers of its own. The following
biographical  information is presented for the directors and executive  officers
of Associates which has principal responsibility for the Partnership's affairs.

Directors and Executive Officers of WNC & Associates, Inc.

The directors of WNC & Associates,  Inc. are Wilfred N. Cooper,  Sr., who serves
as Chairman of the Board,  John B.  Lester,  Jr.,  David N.  Shafer,  Wilfred N.
Cooper, Jr. and Kay L. Cooper.  The principal  shareholders of WNC & Associates,
Inc. are trusts established by Wilfred N. Cooper, Sr. and John B. Lester, Jr.

Wilfred N. Cooper,  Sr., age 68, is the founder,  Chief Executive  Officer and a
Director of WNC & Associates, Inc., a Director of WNC Capital Corporation, and a
general partner in some of the programs previously sponsored by the Sponsor. Mr.
Cooper has been involved in real estate  investment and  acquisition  activities
since 1968.  Previously,  during 1970 and 1971,  he was founder and principal of
Creative  Equity  Development  Corporation,  a predecessor  of WNC & Associates,
Inc., and of Creative Equity Corporation,  a real estate investment firm. For 12

                                       26
<PAGE>

years  prior  to  that,  Mr.  Cooper  was  employed  by  Rockwell  International
Corporation, last serving as its manager of housing and urban developments where
he  had  responsibility   for  factory-built   housing  evaluation  and  project
management in urban  planning and  development.  Mr. Cooper is a Director of the
National  Association of Home Builders (NAHB) and a National  Trustee for NAHB's
Political Action Committee,  a Director of the National Housing Conference (NHC)
and a  member  of NHC's  Executive  Committee  and a  Director  of the  National
Multi-Housing  Council (NMHC).  Mr. Cooper graduated from Pomona College in 1956
with a Bachelor of Arts degree.

John B. Lester, Jr., age 65, is President, a Director, Secretary and a member of
the  Acquisition  Committee  of WNC &  Associates,  Inc.,  and a Director of WNC
Capital  Corporation.  Mr. Lester has 27 years of experience in engineering  and
construction  and has been involved in real estate  investment  and  acquisition
activities since 1986 when he joined the Sponsor. Previously, he was Chairman of
the Board and Vice President or President of E & L Associates,  Inc., a provider
of engineering and construction  services to the oil refinery and  petrochemical
industries,  which  he  co-founded  in  1973.  Mr.  Lester  graduated  from  the
University of Southern  California in 1956 with a Bachelor of Science  degree in
Mechanical Engineering.

Wilfred N. Cooper,  Jr., age 36, is Executive Vice  President,  a Director and a
member of the  Acquisition  Committee of WNC & Associates,  Inc. He is President
of, and a registered principal with, WNC Capital  Corporation,  a member firm of
the NASD,  and is a Director of WNC  Management,  Inc.  He has been  involved in
investment  and  acquisition  activities  with  respect to real estate  since he
joined  the  Sponsor in 1988.  Prior to this,  he served as  Government  Affairs
Assistant with Honda North America in Washington, D.C. Mr. Cooper is a member of
the Advisory Board for LIHC Monthly Report,  a Director of NMHC and an Alternate
Director of NAHB.  He  graduated  from The  American  University  in 1985 with a
Bachelor of Arts degree.

David N. Shafer, age 46, is Senior Vice President, a Director,  General Counsel,
and a member of the  Acquisition  Committee  of WNC &  Associates,  Inc.,  and a
Director and Secretary of WNC  Management,  Inc. Mr. Shafer has been involved in
real estate  investment and acquisition  activities since 1984. Prior to joining
the Sponsor in 1990, he was  practicing  law with a specialty in real estate and
taxation.  Mr. Shafer is a Director and President of the  California  Council of
Affordable  Housing  and a member  of the State Bar of  California.  Mr.  Shafer
graduated  from the  University  of  California  at Santa Barbara in 1978 with a
Bachelor of Arts degree, from the New England School of Law in 1983 with a Juris
Doctor  degree (cum laude) and from the  University  of San Diego in 1986 with a
Master of Law degree in Taxation.

Michael L. Dickenson, age 42, is Vice President and Chief Financial Officer, and
a member of the  Acquisition  Committee  of WNC &  Associates,  Inc.,  and Chief
Financial Officer of WNC Management,  Inc. He has been involved with acquisition
and  investment  activities  with  respect to real estate  since 1985.  Prior to
joining the Sponsor in March 1999, he was the Director of Financial  Services at
TrizecHahn  Centers Inc., a developer  and operator of  commercial  real estate,
from 1995 to 1999,  a Senior  Manager  with E&Y  Kenneth  Leventhal  Real Estate
Group, Ernst & Young, LLP, from 1988 to 1995, and Vice President of Finance with
Great Southwest  Companies,  a commercial and residential real estate developer,
from  1985 to 1988.  Mr.  Dickenson  is a  member  of the  Financial  Accounting
Standards  Committee for the National  Association of Real Estate  Companies and
the  American  Institute  of  Certified  Public  Accountants,  and a Director of
HomeAid  Southern  California,  a charitable  organization  affiliated  with the
building  industry.  He  graduated  from  Texas Tech  University  in 1978 with a
Bachelor of Business  Administration  -  Accounting  degree,  and is a Certified
Public Accountant in California and Texas.

Thomas J. Riha, age 44, is Vice President - Asset Management and a member of the
Acquisition  Committee  of WNC &  Associates,  Inc.  and a  Director  and  Chief
Executive  Officer  of WNC  Management,  Inc.  Mr.  Riha  has been  involved  in
acquisition  and investment  activities  with respect to real estate since 1979.
Prior to joining the  Sponsor in 1994,  Mr.  Riha was  employed by Trust  Realty
Advisor, a real estate acquisition and management company,  last serving as Vice
President - Operations. Mr. Riha graduated from the California State University,
Fullerton  in 1977 with a  Bachelor  of Arts  degree  (cum  laude)  in  Business
Administration  with a  concentration  in Accounting  and is a Certified  Public
Accountant  and  a  member  of  the  American   Institute  of  Certified  Public
Accountants.

                                       27

<PAGE>


Sy P. Garban,  age 53, is Vice  President - National  Sales of WNC & Associates,
Inc.  and has been  employed by the  Sponsor  since  1989.  Mr.  Garban has been
involved in real estate  investment  activities since 1978. Prior to joining the
Sponsor he served as  Executive  Vice  President  by MRW,  Inc.,  a real  estate
development  and management  firm.  Mr. Garban is a member of the  International
Association of Financial  Planners.  He graduated from Michigan State University
in 1967 with a Bachelor of Science degree in Business Administration.

N. Paul Buckland,  age 36, is Vice President - Acquisitions of WNC & Associates,
Inc. He has been involved in real estate acquisitions and investments since 1986
and has been employed with WNC & Associates,  Inc. since 1994. Prior to that, he
served on the  development  team of the Bixby Ranch that  constructed  apartment
units and Class A office space in California and  neighboring  states,  and as a
land  acquisition  coordinator with Lincoln Property Company where he identified
and analyzed multi-family  developments.  Mr. Buckland graduated from California
State  University,  Fullerton  in 1992  with a  Bachelor  of  Science  degree in
Business Finance.

David Turek, age 44, is Vice President - Originations of WNC & Associates,  Inc.
He has been involved with real estate  investment and finance  activities  since
1976 and has been employed by WNC & Associates,  Inc.  since 1996.  From 1995 to
1996,  Mr. Turek served as a consultant  for a national Tax Credit sponsor where
he was responsible for on-site feasibility studies and due diligence analyses of
Tax Credit properties.  From 1990 to 1995, he was involved in the development of
conventional  and tax credit  multi-family  housing.  He is a Director  with the
Texas Council for Affordable Rural Housing and graduated from Southern Methodist
University in 1976 with a Bachelor of Business Administration degree.

Kay L. Cooper,  age 62, is a Director of WNC & Associates,  Inc. Mrs. Cooper was
the founder and sole  proprietor  of Agate 108, a  manufacturer  and retailer of
home  accessory  products,  from 1975 until 1998.  She is the wife of Wilfred N.
Cooper,  Sr.,  the mother of Wilfred  N.  Cooper,  Jr. and the sister of John B.
Lester,  Jr. Ms. Cooper graduated from the University of Southern  California in
1958 with a Bachelor of Science degree.

Item 11.  Executive Compensation

The Partnership has no officers,  employees,  or directors.  However,  under the
terms of the  Partnership  Agreement the Partnership is obligated to the General
Partner or its  affiliates  during the current or future years for the following
fees:

(a)  Annual Asset  Management  Fee. An annual asset  management fee in an amount
     equal to 0.5% of invested assets (the sum of the  Partnership's  Investment
     in Local  Limited  Partnership  Interests and the  Partnership's  allocable
     share of the amount of the  mortgage  loans on and other debts  related to,
     the Housing  Complexes owned by such Local Limited  Partnerships).  Fees of
     $186,167 were incurred for 1998. The  Partnership  paid the General Partner
     or its affiliates $0 of those fees in 1998.

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

(c)  Operating  Expense.  The Partnership  reimbursed the General Partner or its
     affiliates for operating  expenses of approximately  $6,000 during the year
     ended December 31, 1998.

                                       28

<PAGE>


(d)  Interest  in  Partnership.   The  General   Partner   receives  1%  of  the
     Partnership's  allocated Low Income  Housing  Credits,  which  approximated
     $24,000 for the General  Partner for the year ended  December 31, 1998. The
     General Partner is also entitled to receive 1% of cash distributions. There
     were no  distributions of cash to the General Partner during the year ended
     December 31, 1998.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

(a)      Security Ownership of Certain Beneficial Owners

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

(b)      Security Ownership of Management

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

(c)      Changes in Control

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

         First,   with  the  consent  of  any  other  General   Partners  and  a
         majority-in-interest  of the Limited Partners,  any General Partner may
         designate  one or more persons to be successor  or  additional  General
         Partners. In addition,  any General Partner may, without the consent of
         any other General  Partner or the Limited  Partners,  (i) substitute in
         its  stead  as  General  Partner  any  entity  which  has,  by  merger,
         consolidation or otherwise,  acquired  substantially all of its assets,
         stock or other evidence of equity  interest and continued its business,
         or (ii) cause to be admitted to the  Partnership an additional  General
         Partner or  Partners  if it deems such  admission  to be  necessary  or
         desirable so that the Partnership  will be classified a partnership for
         Federal income tax purposes.  Finally,  a  majority-in-interest  of the
         Limited  Partners  may at any time  remove the  General  Partner of the
         Partnership and elect a successor General Partner.

Item 13.  Certain Relationships and Related Transactions

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

                                       29

<PAGE>



PART IV.

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)(1)   Financial statements included in Part II hereof:

         Report of Independent Certified Public Accountants
         Independent Auditors' Report
         Balance Sheets, December 31, 1998 and 1997
         Statements of Operations  for the years ended  December 31, 1998,  1997
          and 1996
         Statements of  Partners' Equity (Deficit) for  the years ended December
          31, 1998, 1997 and 1996
         Statements of Cash Flows for  the  years  ended December 31, 1998, 1997
          and 1996
         Notes to Financial Statements

(a)(2)   Financial statement schedule included in Part IV hereof:

         Report  of  Independent  Certified   Public  Accountants  on  Financial
          Statement Schedule
         Schedule III - Real Estate Owned by Local Limited Partnerships

(b)      Reports on Form 8-K.

1.       A Form  8-K  dated  December 16, 1998  was  filed on  December 22, 1998
         reporting the dismissal  of the   Partnership's former auditors and the
         engagement of new auditors.  No financial statements were included.

(c)      Exhibits.

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

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

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

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

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

                                       30
<PAGE>

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

10.6  Amended and Restated Agreement of Limited Partnership of La Paloma Del Sol
      Phase II  Limited  Partnership  filed  as  exhibit 10.4 to  Post-Effective
      Amendment  No.  2  to  Form  S-11  dated   September  17, 1993  is  hereby
      incorporated herein by reference as exhibit 10.6.

10.7  Second  Amended  and  Restated  Agreement of  Limited  Partnership  of Old
      Fort Limited Partnership filed as exhibit 10.5 to Post-Effective Amendment
      No. 2 to Form S-11 dated  September 17, 1993 is hereby incorporated herein
      by reference as exhibit 10.7.

10.8  Amended and Restated Agreement of Limited Partnership of Orosi Apartments,
      Ltd. filed as exhibit 10.6 to Post-Effective  Amendment No. 2 to Form S-11
      dated  September  17, 1993 is hereby  incorporated herein by  reference as
      exhibit 10.8.

10.9  Amended and Restated  Agreement of Limited  Partnership of Sun Manor, L.P.
      filed as exhibit 10.7 to Post-Effective Amendment No. 2 to Form S-11 dated
      September  17, 1993 is hereby  incorporated herein by reference as exhibit
      10.9.

10.10 Amended and Restated  Agreement of Limited Partnership of Venus Retirement
      Village,  Ltd. filed as exhibit 10.8 to Post-Effective  Amendment No. 2 to
      Form  S-11  dated  September  17,  1993 is hereby  incorporated  herein by
      reference as exhibit 10.10.

10.11 Second   Amended  and  Restated  Agreement  of  Limited   Partnership   of
      Walnut-Pixley,  L.P. filed as exhibit 10.9 to Post-Effective Amendment No.
      2 to Form S-11 dated  September  17,  1993 is hereby  incorporated  herein
      by reference as exhibit 10.11.

10.12 Amended  and Restated  Agreement  of Limited  Partnership  of Almond  View
      Apartments, Ltd. filed  as  exhibit  10.11  to Form 10K dated December 31,
      1993 is hereby incorporated herein by reference as exhibit 10.12.

10.13 Amended  and  Restated Agreement  of Limited  Partnership  of  Candleridge
      Apartments  of Perry, L.P. II filed as exhibit  10.1 to Form 8-K dated May
      26, 1994 is hereby incorporated herein by reference as exhibit 10.13.

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

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

10.16 Agreement of Limited Partnership  of Limited  Partnership  of Nueva Sierra
      Vista  Associates  filed as exhibit 10.4 to Form 8-K/A  Amendment No. 1 to
      Current  Report  dated  May  26,  1994 is  hereby  incorporated  herein by
      reference as exhibit 10.16.

10.17 Amended  and  Restated  Agreement  of Limited Partnership  of Memory  Lane
      Limited  Partnership  filed as exhibit 10.1 to Form 8-K dated July 7, 1994
      is hereby incorporated herein by reference as exhibit 10.17.

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

21.1  Financial  Statements of Colonial  Village  Roseville, for the years ended
      December  31, 1998 and 1997  together  with  Independent  auditors' report
      thereon; a significant subsidiary of the partnership.

(d) Financial  statement  schedule  follows,  as set forth in subsection  (a)(2)
hereof.

                                       31
<PAGE>


               Report of Independent Certified Public Accountants
                        on Financial Statement Schedule





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


The audit  referred to in our report dated April 12, 1999,  relating to the 1998
financial  statements  of WNC  California  Housing Tax Credits  III,  L.P.  (the
"Partnership"),  which is  contained  in Item 8 of this Form 10-K,  included the
audit of the accompanying  financial statement schedule. The financial statement
schedule  is  the   responsibility   of  the   Partnership's   management.   Our
responsibility  is to express an opinion on this  financial  statement  schedule
based upon our audit.

In our opinion,  such  financial  statement  schedule  presents  fairly,  in all
material respects, the financial information set forth therein.



                                                  BDO SEIDMAN, LLP


Orange County, California
April 12, 1999















                                       32

<PAGE>


WNC Housing Tax Credit Fund III, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships

<TABLE>
<CAPTION>

                                ----------------------------------------------------------------------------------------------------
                                                                       As of December 31, 1998
                                ----------------------------------------------------------------------------------------------------

                                            Total Investment   Amount of     Encumbrances of
                                            in Local Limited   Investment    Local Limited    Property and   Accumulated    Net Book
Partnership Name               Location     Partnerships       Paid to Date  Partnerships     Equipment      Depreciation      Value
------------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>            <C>              <C>             <C>            <C>            <C>            <C>

Almond Garden Apartment       Delhi,
Associates                    California      $391,000        $391,000       $1,394,000     $1,756,000       $318,000     $1,438,000

Almond View Apartments,       Stockton,
Ltd.                          California     1,639,000       1,639,000        1,774,000      3,525,000        552,000      2,973,000

Buccaneer Associates,         Fernandia
Limited                       Beach, Florida   365,000         365,000        1,482,000      2,218,000        298,000      1,920,000

Candleridge Apartments        Perry, Iowa      126,000         126,000          705,000        878,000        136,000        742,000
of Perry L.P. II

Colonial Village Roseville    Roseville,
                              Calfornia      2,811,000       2,811,000        2,128,000      5,285,000        791,000      4,494,000

Dallas County Housing, Ltd.   Orrville,
                              Alabama          130,000         130,000          617,000        760,000        116,000        644,000

La Paloma del Sol Limited     Deming, New
Partnership                   Mexico           254,000         254,000        1,438,000      1,762,000        228,000      1,534,000

Memory Lane Limited           Yankton,
Partnership                   South Dakota     151,000         151,000          688,000        874,000        257,000        617,000

Nueva Sierra Vista            Richgrove,
Associates                    California     1,688,000       1,688,000        1,805,000      3,253,000        293,000      2,960,000

Old Fort Highway Limited      Hidalgo, Texas   249,000         249,000        1,282,000      1,646,000        223,000      1,423,000
Partnership


</TABLE>
                                       33
<PAGE>





WNC Housing Tax Credit Fund III, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships

<TABLE>
<CAPTION>

                                                                      As of December 31, 1998
                                ----------------------------------------------------------------------------------------------------
                                ----------------------------------------------------------------------------------------------------
                                          Total Investment    Amount of      Encumbrances of
                                          in Local Limited    Investment     Local Limited    Property and    Accumulated   Net Book
Partnership Name             Location     Partnerships        Paid to Date   Partnerships     Equipment       Depreciation     Value
------------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>            <C>              <C>             <C>            <C>            <C>            <C>
Orosi Apartments, Ltd.       Orosi,
                             California        461,000        461,000        1,966,000      2,437,000        220,000       2,217,000

Parlier Garden Apts.         Parlier,
                             California        453,000        453,000        1,715,000      2,187,000        265,000       1,922,000

Rosewood Apartments          Superior,
Limited Partnership          Wisconsin         185,000        168,000          518,000        767,000         96,000         671,000

Sun Manor, L.P.              Itta Bena,
                             Mississippi       230,000        230,000        1,061,000      1,338,000        217,000       1,121,000

Tahoe Pines Apartments       South Lake
                             Tahoe,
                             California      1,633,000      1,633,000        1,702,000      3,290,000        515,000       2,775,000

Venus Retirement Village,    Venus, Texas      161,000        161,000          728,000        929,000        174,000         755,000
 Ltd.

Walnut - Pixley, L.P.        Orange,
                             California      1,078,000      1,078,000        1,742,000      2,766,000        401,000       2,365,000

Winters Investment Group     Winters,
                             California        531,000        531,000        1,842,000      2,592,000        260,000       2,332,000
                                              --------       --------       ----------     ----------       --------      ---------

                                     $      12,536,000  $  12,519,000    $  24,587,000  $  38,263,000   $  5,360,000   $  32,903,000
                                    ================== ==============    ============= ==============   ============   =============

</TABLE>
                                       34


<PAGE>



WNC Housing Tax Credit Fund III, L.P.
Schedule III
Real Estate Owned by Local Limited Partnerships
<TABLE>
<CAPTION>

                                                    For the year ended December 31, 1998
                                  -------------------------------------------------------------------------
                                  -------------------------------------------------------------------------
                                                                     Year                      Estimated
                                                                  Investment                  Useful Life
Partnership Name                   Rental Income     Net Loss      Acquired        Status       (Years)
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
<S>                                    <C>             <C>           <C>            <C>            <C>

Almond Garden Apartment
Associates                         $ 155,000 $    (59,000)          1994         Completed         27.5

Almond View Apartments, Ltd.         185,000     (233,000)          1994         Completed         27.5

Buccaneer Associates, Limited        200,000      (34,000)          1994         Completed           40

Candleridge Apartments of Perry
L.P. II                              139,000      (11,000)          1994         Completed         27.5

Colonial Village Roseville           380,000     (155,000)          1993         Completed         27.5

Dallas County Housing, Ltd.           62,000      (12,000)          1993         Completed           40

La Paloma del Sol Limited
Partnership                          134,000      (11,000)          1993         Completed           40

Memory Lane Limited Partnership
                                      65,000      (30,000)          1994         Completed           25

Nueva Sierra Vista Associates        141,000     (119,000)          1994         Completed           40

Old Fort Limited Partnership         163,000       (3,000)          1993         Completed           40

Orosi Apartments, Ltd.               184,000      (24,000)          1993         Completed           50

Parlier Garden Apts.                 191,000      (28,000)          1994         Completed           40

Rosewood Apartments Limited
Partnership                           71,000       (9,000)          1994         Completed           40

Sun Manor, L.P.                      139,000      (15,000)          1993         Completed         27.5

Tahoe Pines Apartments               180,000     (101,000)          1994         Completed         27.5

Venus Retirement Village, Ltd.        83,000      (24,000)          1993         Completed           25

Walnut - Pixley, L.P.                136,000      (49,000)          1993         Completed           40

Winters Investment Group             185,000      (41,000)          1994         Completed           50
                                  ----------   -----------

                             $     2,793,000  $  (958,000)
                             ===============  ============


</TABLE>
                                       35
<PAGE>





     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.

By:  WNC California Tax Credit      General Partner of the Registrant
     Partners III, L.P.

By:  WNC & Associates, Inc.         General Partner of WNC California Tax Credit
                                    Partners III, L.P.

By:  /s/ John B. Lester, Jr.
John B. Lester, Jr., President of WNC & Associates, Inc.

Date: June 16, 1999


By:  /s/ Michael L. Dickenson
Michael L. Dickenson, Vice-President - Chief Financial Officer of WNC &
Associates, Inc.

Date: June 16, 1999


By:  /s/ Wilfred N. Cooper, Sr.
Wilfred N. Cooper, Sr., General Partner

Date: June 16, 1999

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


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

Date: June 16, 1999

By: /s/ John B. Lester, Jr.
John B. Lester, Jr., Director of WNC & Associates, Inc.

Date: June 16, 1999


By:  /s/ David N. Shafer
David N Shafer, Director of WNC & Associates, Inc.

Date: June 16, 1999


                                       36