FORM 10-K

                       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, 1997

                                       OR

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

For the transition period from ________ to ___________

Commission file number: 0-23908


                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.

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

California                                                   33-0563307

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

                                                            (714) 662-5565

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

Title of Securities                                Exchanges on which Registered

NONE                                                         NOT APPLICABLE



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

NONE

<PAGE>


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes 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



                       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>


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  local   limited   partnerships   ("Local   Limited
Partnerships")  which own multifamily  apartment complexes that are eligible for
Federal and (in some cases)  California  low-income Low Income  Housing  Credits
(the "Low Income Housing Credit").

The general  partner of the  Partnership  is WNC Tax Credits  Partners III, L.P.
(the "General  Partner" or "TCP III").  The general  partner of TCP III is WNC &
Associates,  Inc.  ("Associates").  The business of the Partnership is conducted
primarily  through  Associates  as  neither  TCP  III nor  the  Partnership  has
employees of its own.

On February  17, 1993,  the  Partnership  commenced a public  offering of 30,000
Units of Limited Partnership Interests ("Units"), at a price of $1,000 per Unit.
The Partnership  closed its Offering July 22, 1994, with a total of 18,000 Units
representing  $18,000,000  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  in  Local  Limited
Partnerships each of which will own and operate an apartment complex ("Apartment
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  against  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  Apartment  Complex  is
subject to a fifteen-year compliance period (the "Compliance Period").

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 a Local Limited  Partnership of any Apartment Complex prior to the end of the
applicable 15 year Compliance Period. Because of (i) the nature of the Apartment
Complexes,  (ii) the  difficulty of predicting  the resale market for low-income
housing  15 or  more  year  in  the  future,  and  (iii)  the  inability  of the
Partnership  to directly  cause the sale of  Apartment  Complexes by the general
partners  of  the  respective   Local  Limited   Partnerships   ("Local  General

                                       3
<PAGE>

Partners"),  but generally  only to require such Local  General  Partners to use
their  respective best efforts to find a purchaser for the Apartment  Complexes,
it is  not  possible  at  this  time  to  predict  whether  the  liquidation  of
substantially  all  of the  Partnership's  assets  and  the  disposition  of the
proceeds,  if any, in accordance with 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 an Apartment  Complex,  it is anticipated that the
Local General Partner will either continue to operate such Apartment  Complex or
take such other actions as the Local General Partner  believes to be in the best
interest of the Local Limited Partnership. In addition, circumstances beyond the
control of the General  Partner may occur  during the  Compliance  Period  which
would require the Partnership to approve the disposition of an Apartment Complex
prior to the end thereof.


As of  December  31,  1997,  CHTC III had  invested in  eighteen  Local  Limited
Partnerships. Each of these Local Limited Partnerships owns an Apartment Complex
that is or is expected to be eligible for the Low Income Housing Credit.  All of
the Local  Limited  Partnerships  also benefit or will  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 multifamily  residential real estate.  Some of these
risks are that the Low Income Housing Credit could be recaptured and neither the
Partnership's  investments  nor the Apartment  Complexes  owned by Local Limited
Partnerships will be readily marketable. Additionally, there can be no assurance
that the  Partnership  will be able to dispose of its interests in Local Limited
Partnerships at the end of the Compliance Period. 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  Apartment
Complexes and the Partnership.  The Apartment Complexes could be subject to loss
through foreclosure.  In addition,  each Local Limited Partnership is subject to
risks relating to environmental hazards which might be uninsurable.  Because the
Partnership's  ability to control its operations  will depend on these and other
factors  beyond the control of the General  Partner and the general  partners of
the Local  Limited  Partnerships,  there can be no  assurance  that  Partnership
operations will be profitable or that the anticipated Low Income Housing Credits
will be available to Limited Partners.

As of December 31, 1997, the eighteen  Apartment  Complexes acquired by CHTC III
were completed and in operation,  the final one completed construction in May of
1995. The Apartment  Complexes owned by the Local Limited  Partnerships in which
CHTC III has invested were developed by the Local General  Partners who acquired
the sites and applied for applicable  mortgages and  subsidies.  CHTC III became
the principal  limited partner in these Local Limited  Partnerships  pursuant to
arm's-length negotiations with the Local General Partners. As a limited partner,
CHTC III's liability for obligations of the Local Limited Partnership is limited
to its investment.  The Local General  Partner of the Local Limited  Partnership
retains responsibility for developing, constructing,  maintaining, operating and
managing the Apartment Complex.

                                       4
<PAGE>

The  following  is a schedule  of the status as of  December  31,  1997,  of the
Apartment  Complexes owned by Local Partnerships in which CHTC III was a limited
partner as of December 31, 1997.
<TABLE>
<CAPTION>

                             SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS
                                        IN WHICH CHTC III HAS AN INVESTMENT
                                              AS OF DECEMBER 31, 1997
                                                                                                    Percentage of
                                            No. of         Units                Units                Total Units
                                            Units          Completed            Occupied             Occupied
                                            -----          ---------            --------             -----------
Name & Location
<S>                                            <C>           <C>                 <C>                  <C>            
Almond Garden                                   34               34                  34                100%
  Delhi, California
Almond View                                     72               72                  69                 96%
  Stockton, California
Buccaneer                                       48               48                  46                 96%
  Fernandia Beach, Florida
Candleridge - Perry II                          24               24                  24                100%
  Perry, Iowa
Colonial Village                                56               56                  54                 97%
  Roseville, California
Dallas County Housing                           19               19                  18                 95%
  Dallas, North Carolina
La Paloma del Sol                               38               38                  34                 90%
  Deming, New Mexico
Memory Lane                                     18               18                  18                100%
  Yankton, South Dakota
Neuva Sierra Vista                              35               35                  34                 97%
  Richgrove, California
Old Fort                                        40               40                  40                100%
  Hidalgo, Texas
Orosi                                           42               42                  41                 98%
  Orosi, California
Parlier Garden                                  41               41                  41                100%
  Parlier, California
Rosewood Housing                                20               20                  19                 95%
  Superior, Wisconsin
Sun Manor                                       36               36                  36                100%
  Itta Bena, Mississippi
Tahoe Pines                                     56               56                  56                100%
  South Lake Tahoe, California
Venus Retirement                                24               24                  23                 96%
  Venus, Texas
Walnut Pixlie                                   22               22                  22                100%
  Orange, California
Winters Seniors                                 38               38                  38                100%
  Winters, California
                                               ---              ---                 ---                ----
                                               663              663                 647                 98%
                                               ===              ===                 ===                ====
</TABLE>


                                       5
<PAGE>


Item 2.  Properties

Through its investment in Local Limited Partnerships CHTC III holds interests in
Apartment  Complexes.  See Item 1 for information  pertaining to these Apartment
Complexes.


Item 3.  Legal Proceedings

NONE.

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

NONE


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.  Units  can  be  assigned  only  if  certain
requirements in the Partnership's Agreement of Limited Partnership ("Partnership
Agreement") are satisfied.

(b) At December 31, 1997, there were 961 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.  The Limited  Partners  received Low
Income Housing Credits per Unit as follows

                           1997     1996
                           ------   ------
Federal                    $113     $113
California                   66       85
                           ----     ----
                           $179     $198
                           ====     ====

                                       6
<PAGE>

Item 6.  Selected Financial Data


<TABLE>
<CAPTION>

                             Years ended December 31
                            -------------------------------------------------------------------------------------
                                 1997            1996             1995             1994                1993
                                 ----            ----             ----             ----                ----
<S>                      <C>            <C>               <C>            <C>                <C>    

Revenues                       $57,270         $74,947          $145,959         $ 156,271         $  22,885


Partnership operating
expenses                      (262,855)       (272,670)         (251,382)         (128,063)           (7,204)

Equity in losses from
limited partnerships        (1,028,617)     (1,132,216)       (1,115,114)         (352,511)          (33,260)
                            -----------     -----------       ----------          --------           -------

Net loss                   $(1,234,193)    ($1,329,939)      $(1,260,537)       $ (324,303)        $ (17,579)
                             =========     ============        =========         =========          ========

Net loss per weighted
 limited partner unit             $(68)           $(73)            $ (69)            $ (49)          $    (4)
                                    ==              ==               ===             =====            ======

Total assets                $11,854,033    $12,951,383       $14,948,952       $19,495,570      $ 11,068,449
                             ==========    ===========        ==========        ==========       ===========

Investments in
 limited partnerships       $10,400,720    $11,447,928       $13,032,752       $14,368,908        $6,639,387
                             ==========     ==========        ==========       ===========         =========

Payable to
 limited partnerships           $16,836        $16,836          $651,094       $ 4,400,927       $ 4,205,150
                                 ======        =======           =======       ===========       ===========

Accrued fees and expenses
due to
affiliates                     $370,223       $233,380          $240,188             $   0           $66,449
                                =======        =======           =======             =====           =======

Due to Limited Partners        $900,000          $   0             $   0             $   0             $   0
                                =======          =====             =====             =====             =====
</TABLE>




The Partnership  was organized on October 5, 1992 and had only minimal  activity
until July 19, 1993, the date the Partnership's minimum offering requirement was
satisfied.  The Partnership's  Offering of Units commenced on February 17, 1993.
Due to these factors and the nature of the Partnership's business (i.e., raising
capital and acquiring Local Limited Partnership Interests over the first several
years of its term), the data provided above will not be directly comparable from
year to year. See "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations."

                                       7

<PAGE>






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

Liquidity and Capital Resources
-------------------------------

The  Partnership  raised  approximately  $18,000,000  from the sale of Units and
returned  to its Limited  Partners  $900,000  ($50 per Unit) in  January,  1998.
Approximately  $14,400,000 of which has been committed to the purchase price and
acquisition  fees and  costs of  investments  in 18  Local  Limited  Partnership
Interests.  The  Partnership  had made capital  contributions  to Local  Limited
Partnerships in the amount of approximately  $12,576,000 as of December 31, 1997
and an additional 17,000 has been so committed.

At December 31, 1997 the  Partnership is indebted to an affiliate of the General
Partner in the amount of  approximately  $370,200.  The component  items of such
indebtedness are as follows:  accrued  management fees and advances for expenses
of approximately $369,500 and 700, respectively.

Overall,  as reflected in its Statement of Cash Flows, the Partnership had a net
decrease  in cash and cash  equivalents  of  approximately  $47,000 for the year
ended  December 31,  1997.  This  decrease in cash  consists of cash used in the
Partnership's  operating  activities and investing  activities of  approximately
$7,000 and  $40,000,  respectively.  Cash  provided  from  investing  activities
consisted of  distributions  from Local Limited  Partnerships  of  approximately
$16,000  and  cash  used  consisted  primarily  acquisition  fees  and  costs of
approximately $56,000. Cash provided by operating activities consisted primarily
of interest income. Cash used consisted primarily of payments for operating fees
and  expenses.  The major  components of all these  activities  are discussed in
greater detail below.

Overall,  as reflected in its Statement of Cash Flows, the Partnership had a net
decrease in cash and cash  equivalents  of  approximately  $418,200 for the year
ended  December 31,  1996.  This  decrease in cash  consists of cash used in the
Partnership's   operating   activities,   investing   activities  and  financing
activities of approximately $143,300, $248,300 and $26,600,  respectively.  Cash
provided from investing activities consisted of distributions from Local Limited
Partnerships  of  approximately  $6,400  and cash used  consisted  primarily  of
capital  contributions to Local Limited  Partnerships and acquisition  costs and
fees of approximately $220,700 and 33,900, respectively.  Cash used in financing
activities  consisted  payments of offering  costs.  Cash  provided by operating
activities consisted primarily of interest income. Cash used consisted primarily
of payments for operating fees and expenses.  The major  components of all these
activities are discussed in greater detail below.

Prior to sale of the  Apartment  Complexes,  it is not expected  that any of the
Local Limited  Partnerships in which the Partnership has invested or will invest
will generate cash sufficient to provide distributions to The Partnership of any
material amount.  Distributions  to the Partnership  would first by used to meet
operating  expenses  of the  Partnership,  including  the  payment  of the Asset
Management Fee to the General Partner.  See Item 11 hereof.  As a result,  it is
not anticipated that the Partnership  will provide  distributions to the Limited
Partners prior to the same of the Apartment Complexes.

                                       8
<PAGE>

The Partnership's  investments are not readily marketable and may be affected by
adverse general economic conditions which, in turn, could substantially increase
the risk of operating  losses for the  Apartment  Complexes,  the Local  Limited
Partnerships  and the  Partnership.  These  problems may result from a number of
factors,   many  of  which  cannot  be  controlled   by  the  General   Partner.
Nevertheless,  the General Partner anticipates that capital raised from the sale
of the Limited  Partnership  Interests is sufficient  to fund the  Partnership's
operations.

Upon  completion  of  its  public  offering  (July  22,  1994)  the  Partnership
established  working  capital  reserves  of  approximately  3%  of  the  Limited
Partners' capital contributions.  This amount is anticipated to be sufficient to
satisfy general working capital and administrative  expense  requirements of the
Partnership  including  payment of the asset  management fee as well as expenses
attendant to the preparation of tax returns and reports to the Limited  Partners
and other investor  servicing  obligations of the Partnership.  Liquidity would,
however,  be adversely  affected by  unanticipated  or greater than  anticipated
operating costs. The Partnership's  liquidity could also be affected by defaults
or delays in payment of the Limited  Partners'  promissory  notes,  from which a
portion of the working capital reserves is expected to be funded.  To the extent
that working capital reserves are insufficient to satisfy the cash  requirements
of the  Partnership,  it is anticipated  that  additional  funds would be sought
through bank loans or other  institutional  financing.  The General  Partner may
also apply any cash distributions  received from the Local Limited  Partnerships
for such purposes or to replenish or increase working capital reserves.

As part  of its  application  for  government  assistance,  each  Local  Limited
Partnership  must  establish to the  satisfaction  of the agency  providing  the
government  assistance that the Local Limited  Partnership  will have sufficient
funds to complete  construction or rehabilitation of its apartment complex. None
of the Local Limited  Partnerships  has any material capital  commitments  other
than the completion of its Apartment Complex.

Under its  partnership  agreement the  Partnership  does not have the ability to
assess its partners for additional  capital  contributions to provide capital if
needed  by the  Partnership  or  Local  Limited  Partnerships.  Accordingly,  if
circumstances arise that cause the Local Limited Partnerships to require capital
in addition to that  contributed by the  Partnership and any equity of the local
general partners, the only sources from which such capital needs will be able to
be  satisfied  (other than the limited  reserves  available  at the  Partnership
level) will be (i) third-party debt financing  (which may not be available,  if,
as expected, the apartment complexes owned by the local limited partnerships are
already  substantially  leveraged),  (ii)  additional  equity  contributions  or
advances of the local general partners,  (iii) other equity sources (which could
adversely  affect the  Partnership's  interest in tax credits,  cash flow and/or
proceeds of sale or refinancing of the apartment complexes and result in adverse
tax  consequences to the limited  partners),  or (iv) the sale or disposition of
the apartment  complexes (which could have the same adverse effects as discussed
in (iii) above).  There can be no assurance  that funds from any of such sources
would be readily available in sufficient amounts to fund the capital requirement
of the local limited partnerships in question.  If such funds are not available,
the  Local  Limited  Partnerships  would  risk  foreclosure  on their  apartment
complexes if they were unable to renegotiate  the terms of their first mortgages
and any other debt secured by the apartment  complexes to the extent the capital
requirements of the local limited partnerships relate to such debt.

The  Partnership's  capital  needs and  resources  are expected to undergo major
changes at least  through 1994 as a result of the  completion of its offering of
Units and its acquisition of investments.  Thereafter, the Partnership's capital
needs and  resources  are  expected  to be  relatively  stable  over the holding
periods of the investments.

                                       9
<PAGE>

Item 8.  Financial Statements and Supplementary Data

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

                              FINANCIAL STATEMENTS

              For The Years Ended December 31, 1997, 1996 and 1995

                                      with

                      INDEPENDENT AUDITORS' REPORT THEREON



<PAGE>





                          INDEPENDENT AUDITORS' REPORT



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


We have audited the  accompanying  balance sheets of WNC California  Housing Tax
Credits III, L.P. (a California Limited  Partnership) (the  "Partnership") as of
December 31, 1997 and 1996, and the related statements of operations,  partners'
equity  (deficit) and cash flows for the years ended December 31, 1997, 1996 and
1995. These financial  statements are the  responsibility  of the  Partnership's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits. We 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 III, L.P. at December 31, 1997 and 1996.  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  other  auditors  provide  a
reasonable basis for our opinion.

In our  opinion,  based on our audits 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,  1997 and 1996,  and the
results of its  operations  and its cash flows for the years ended  December 31,
1997,  1996  and  1995,  in  conformity  with  generally   accepted   accounting
principles.



                                                              /s/Corbin & Wertz
                                                              -----------------
                                                                  CORBIN &WERTZ

Irvine, California
April 6, 1998


<PAGE>


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

                                 BALANCE SHEETS

                           December 31, 1997 and 1996



<TABLE>
<CAPTION>

                                                                               1997                    1996
                                                                         -----------------       ------------------
<S>                                                                     <C>                    <C>    

ASSETS

Cash and cash equivalents                                               $      1,451,071        $       1,498,036

Investments in limited partnerships (Note 2)                                  10,400,720               11,447,928
Other assets                                                                       2,242                    5,419
                                                                        ----------------        ----------------- 
                                                                        $     11,854,033        $      12,951,383
                                                                        ================        =================
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)

Liabilities:
   Payables to limited partnerships (Note 4)                            $         16,836        $          16,836
   Due to General Partner and affiliates (Note 3)                                370,223                  233,380
   Due to limited partners (Note 7)                                              900,000                        -
                                                                        ----------------        -----------------
         Total liabilities                                                     1,287,059                  250,216
                                                                        ----------------        -----------------
Partners' equity (deficit):
   General partners                                                              (64,461)                 (52,119)
   Limited partners (30,000 units authorized; 18,000
    units issued and outstanding at December 31, 1997
    and 1996)                                                                 10,631,435               12,753,286
                                                                        ----------------        -----------------
         Total partners' equity                                               10,566,974               12,701,167
                                                                        ----------------        -----------------
                                                                        $     11,854,033        $      12,951,383
                                                                        ================        =================

</TABLE>

                 See accompanying notes to financial statements
                                      FS-2
<PAGE>


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

                            STATEMENTS OF OPERATIONS

              For The Years Ended December 31, 1997, 1996 and 1995



<TABLE>
<CAPTION>

                                                            1997                 1996                  1995
                                                      -----------------    ------------------    ------------------
<S>                                                 <C>                   <C>                   <C>   
Interest income                                     $          57,279     $         74,947      $         145,959
                                                    -----------------     ----------------      -----------------

Operating expenses:
   Amortization                                                58,596               57,933                 57,466
   Partnership management fees (Note 3)                       186,166              186,422                173,406
   Bad debt expense                                                 -                8,680                      -
   Office                                                      18,093               19,635                 20,510
                                                    -----------------     ----------------      -----------------
         Total operating expenses                             262,855              272,670                251,382
                                                    -----------------     ----------------      -----------------
Loss from operations                                         (205,576)            (197,723)              (105,423)

Equity in losses from limited partnerships
 (Note 2)                                                  (1,028,617)          (1,132,216)            (1,155,114)
                                                    -----------------     ----------------      -----------------
Net loss                                            $      (1,234,193)    $     (1,329,939)      $     (1,260,537)
                                                    =================     ================       ================ 

Net loss allocable to:
   General partner                                  $         (12,342)    $        (13,300)      $        (12,605)
                                                    =================     ================       ================ 
   Limited partners                                 $      (1,221,851)    $     (1,316,639)      $     (1,247,932)
                                                    =================     ================       ================ 

Net loss per weighted limited partner
 units                                              $         (67.88)     $         (73.15)      $        (69.33)
                                                    ================      ================       =============== 

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

</TABLE>

                 See accompanying notes to financial statements
                                      FS-3
<PAGE>


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

                    STATEMENTS OF PARTNERS' EQUITY (DEFICIT)

              For The Years Ended December 31, 1997, 1996 and 1995



<TABLE>
<CAPTION>

                                                      General Partner      Limited Partners
                                                                                                       Total
                                                      -----------------    ------------------    ------------------
<S>                                                 <C>                   <C>                   <C>    
Equity (deficit) - January 1, 1995                  $         (26,804)    $     15,121,447      $      15,094,643


Capital contributions                                               -               10,000                 10,000

Collection of notes receivable (Note 6)                             -              205,000                205,000

Offering costs                                                    856                7,708                  8,564

Net loss                                                      (12,605)          (1,247,932)            (1,260,537)
                                                    -----------------     ----------------      -----------------
Equity (deficit) - December 31, 1995                          (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)
                                                    -----------------     ----------------      -----------------
Equity (deficit) - December 31, 1996                          (52,119)          12,753,286             12,701,167

Return of capital (Note 7)                                          -             (900,000)              (900,000)

Net loss                                                      (12,342)          (1,221,851)            (1,234,193)
                                                    -----------------     ----------------      -----------------
Equity (deficit) - December 31, 1997                $         (64,461)    $     10,631,435      $      10,566,974
                                                    =================     ================      =================

</TABLE>


                 See accompanying notes to financial statements
                                      FS-4
<PAGE>


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

                            STATEMENTS OF CASH FLOWS

              For The Years Ended December 31, 1997, 1996 and 1995




<TABLE>
<CAPTION>


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

Cash flows from operating activities:
   Net loss                                         $      (1,234,193)    $     (1,329,939)     $      (1,260,537)

   Adjustments to reconcile net loss to net
    cash provided by (used in) operating
    activities:
       Amortization                                            58,596               57,933                 57,466
       Bad debt                                                     -                8,680                      -
       Equity in loss of limited partnerships               1,028,617            1,132,216              1,155,114
       Change in other assets                                   3,177               (5,419)                19,960
       Change in receivable from affiliate                          -                    -                216,645
       Change in accrued fees and expenses
        due to general partner and affiliate                  136,843               (6,808)               248,752
                                                    -----------------     ----------------      ----------------- 
   Net cash provided by (used in) operating
    activities                                                 (6,960)            (143,337)               437,400
                                                    -----------------     ----------------      ----------------- 
Cash flows from investing activities:
   Investments in limited partnerships, net                         -             (220,733)            (3,636,150)
   Capitalized acquisition costs and fees                     (55,994)             (33,906)                     -
   Change in cash in escrow                                         -                    -              2,090,570
   Distributions from limited partnerships                     15,989                6,376                  9,893
                                                    -----------------     ----------------      ----------------- 
   Net cash used in investing activities                      (40,005)            (248,263)            (1,535,687)
                                                    -----------------     ----------------      ----------------- 
Cash flows from financing activities:
   Capital contributions from limited
    partnerships                                                    -                    -                215,000
   Offering costs                                                   -              (26,564)                     -
                                                    -----------------     ----------------      ----------------- 
   Net cash (used in) provided by financing
    activities                                                      -              (26,564)               215,000
                                                    -----------------     ----------------      ----------------- 
Net decrease in cash and cash equivalents                     (46,965)            (418,164)              (883,287)

Cash and cash equivalents, beginning of
 year                                                       1,498,036            1,916,200              2,799,487
                                                    -----------------     ----------------      ----------------- 
Cash and cash equivalents, end of year              $       1,451,071     $      1,498,036      $       1,916,200
                                                    =================     ================      =================
</TABLE>

Continued
                 See accompanying notes to financial statements
                                      FS-5
<PAGE>


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

                      STATEMENTS OF CASH FLOWS - CONTINUED

              For The Years Ended December 31, 1997, 1996 and 1995



<TABLE>
<CAPTION>

 
                                                            1997                 1996                  1995
                                                      -----------------    ------------------    ------------------
<S>                                                 <C>                   <C>                   <C>    
SUPPLEMENTAL DISCLOSURE OF CASH
 FLOW INFORMATION:
   Interest paid                                    $               -     $              -      $               -
                                                    ================      ===============       ================ 
   Taxes paid                                       $             800     $            800      $             800
                                                    =================     ================      =================

</TABLE>

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITY:

     During  1996  and  1995,  the   Partnership   had  $422,205  and  $140,766,
     respectively,  of investments in limited partnerships  returned through tax
     credit  adjustments  reflected  as a reduction  in the  payables to limited
     partnerships.

     During 1996 and 1995, the Partnership  adjusted  offering costs and accrued
     fees and expenses due to General  Partner and  affiliates  by $(26,564) and
     $8,564, respectively (see Note 1).





                See accompanying notes to financial statements
                                      FS-6
<PAGE>


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

                          NOTES TO FINANCIAL STATEMENTS

              For The Years Ended December 31, 1997, 1996 and 1995





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

Organization
------------

WNC  California  Housing Tax Credits III,  L.P. (the  "Partnership")  was formed
under the  California  Revised  Limited  Partnership  Act on October 5, 1992 and
began  operations  on July 19,  1993.  The  Partnership  was  formed  to  invest
primarily in other limited  partnerships which will own and operate multi-family
housing complexes that qualify for low income housing credits.

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

The Partnership  Agreement  authorized the sale of up to 30,000 units of Limited
Partnership  Interests  at $1,000  per Unit  ("Units").  The  offering  of Units
concluded in July 1994 at which time 17,990  Units 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 sale or refinancing  proceeds equal to
their capital  contributions  and their return on investment  (as defined in the
Partnership's  Agreement  of Limited  Partnership)  and the General  Partner has
received a subordinated disposition fee (as described in Note 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.

The Partnership's  investments in limited  partnerships are subject to the risks
incident to the management and ownership of multifamily residential real estate,
and  include  the risks  that  neither  the  Partnership's  investments  nor the
apartment   complexes  owned  by  the  limited   partnerships  will  be  readily
marketable.  Additionally there can be no assurance that the Partnership will be
able to dispose of its interests in the 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
apartment  complexes  and the  Partnership.  The  apartment  complexes  could be
subject to loss through  foreclosure.  In addition,  each limited partnership is
subject to risks relating to  environmental  hazards which might be uninsurable.
Because the Partnership's ability to control its operations will depend on these
and other  factors  beyond the  control of the  General  Partner and the general
partners of the limited partnerships, there can be no assurance that Partnership
operations will be profitable or that the  anticipated  housing tax credits will
be available to limited partners.

                                      FS-7
<PAGE>


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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

              For The Years Ended December 31, 1997, 1996 and 1995




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

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 each limited  partnership's  results of operations  and
for  any  distributions   received.  The  accounting  policies  of  the  limited
partnerships are consistent with those of the Partnership. Costs incurred by the
Partnership in acquiring the investments in limited partnerships are capitalized
as part of the  investment  account and are being  amortized  over 30 years (see
Note 2).

Losses  from  operating  partnerships  allocated  to  the  Partnership  are  not
recognized to the extent that the  investment  balance  would be adjusted  below
zero.

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

The partnership considers highly liquid investments with remaining maturities of
three months or less when purchased to be cash equivalents. At December 31, 1997
and 1996, the Partnership had cash equivalents totaling $942,685 and $1,291,287,
respectively.

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

At December  31,  1997,  the  Partnership  maintained  cash  balances at certain
financial institutions in excess of the federally insured amounts.

Offering Costs
--------------

Offering costs consist of underwriting commissions, legal fees, printing, filing
and recordation  fees, and other costs incurred with selling units.  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 costs are
reflected as a reduction of partners'  capital.  Through  December 31, 1997, the
Partnership  had  recorded   offering  and  selling  expenses  of  $926,564  and
$1,440,000, respectively.

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.

                                      FS-8
<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

              For The Years Ended December 31, 1997, 1996 and 1995

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

Net Loss Per Weighted Limited Partner Units

Net loss per weighted limited partner units was computed by dividing the limited
partners'  share of net loss by the  weighted  number of limited  partner  units
outstanding during the respective periods.

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

As of December 31,  1997,  the  Partnership  had  acquired  limited  partnership
interests  in eighteen  limited  partnerships,  which own and operate  apartment
complexes  consisting of 663 apartment units. The respective general partners of
the  limited  partnerships  manage  the  day-to-day  operations  of the  limited
partnerships.   Significant  limited  partnership   business  decisions  require
approval  from the  Partnership.  The  Partnership,  as a  limited  partner,  is
generally  entitled  to 99% of the  operating  profits and losses of the limited
partnerships.

The  Partnership's   investments  in  limited   partnerships  as  shown  in  the
accompanying  balance  sheets at December  31,  1997 and 1996 are  approximately
$1,640,000 and $1,637,000,  respectively,  greater than the Partnership's equity
as  shown  in  the  limited   partnerships'   combined   financial   statements,
respectively.  This difference is due to unrecorded  losses, as discussed below,
and to acquisition costs related to the acquisition of the investments that have
been   capitalized  in  the   Partnership's   investment   account  and  capital
contributions  accrued  but  not  paid  by  the  Partnership.   The  capitalized
acquisition costs are being amortized over 30 years (see Note 3).

Equity  in  losses  of  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 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.

At December 31, 1997, the investment  accounts in certain  limited  partnerships
have reached a zero balance.  Consequently,  the  Partnership's  share of losses
during the year ended December 31, 1997 amounting to approximately  $15,000 have
not been recognized.  As of December 31, 1997, the aggregate share of net losses
not recognized by the Partnership amounted to $15,000.

                                      FS-9
<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

              For The Years Ended December 31, 1997, 1996 and 1995

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

Following  is a summary of the equity  method  activity  of the  investments  in
limited partnerships for the years ended December 31:
<TABLE>
<CAPTION>

                                                                               1997                    1996
                                                                         -----------------       ------------------
<S>                                                                     <C>                    <C>                                

Investments, beginning of year                                          $     11,447,928        $      13,032,752

Tax credit adjustments                                                                 -                 (422,205)
Capitalized acquisition costs and acquisition fees                                55,994                   33,906
Losses in equity of limited partnerships                                      (1,028,617)              (1,132,216)
Distributions                                                                    (15,989)                  (6,376)
Amortization of capitalized acquisition costs and fees                           (58,596)                 (57,933)
                                                                        ----------------        -----------------
Investments, end of year                                                $     10,400,720        $      11,447,928
                                                                        ================        =================
</TABLE>

The  financial  information  from the  individual  financial  statements  of the
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 limited  partnerships as of December 31
and for the years then ended is as follows:
<TABLE>
<CAPTION>

                        COMBINED CONDENSED BALANCE SHEETS

ASSETS                                                                         1997                    1996
                                                                         -----------------       ------------------
<S>                                                                    <C>                      <C>   

Buildings and improvements, net of accumulated depreciation
   for 1997 and 1996 of $4,188,000 and $2,968,000,
   respectively                                                         $     31,657,000        $      32,866,000
Land                                                                           2,380,000                2,380,000
Other assets                                                                   1,746,000                1,660,000
                                                                        ----------------        -----------------
         Total assets                                                   $     35,783,000        $      36,906,000
                                                                        ================        =================

LIABILITIES

Mortgage and construction loans payable                                 $     24,528,000        $      24,593,000
Other liabilities (including due to related parties
  of $715,000 and $762,000 as of December 31,
  1997 and 1996, respectively)                                                 1,495,000                1,496,000
                                                                        ----------------        -----------------
         Total liabilities                                                    26,023,000               26,089,000
                                                                        ----------------        -----------------
PARTNERS' CAPITAL

WNC California Housing Tax Credits III, L.P.                                   8,761,000                9,811,000
Other partners                                                                   999,000                1,006,000
                                                                         ---------------        -----------------
         Total partners' capital                                               9,760,000               10,817,000
                                                                         ---------------        -----------------

                                                                        $     35,783,000        $      36,906,000
                                                                        ================        =================
</TABLE>

                                      FS-10
<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

              For The Years Ended December 31, 1997, 1996 and 1995

NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
-------------------------------------------------------
<TABLE>
<CAPTION>

                   COMBINED CONDENSED STATEMENTS OF OPERATIONS

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

Total revenues                                             $    2,895,000      $    2,786,000     $     2,622,000
                                                           --------------      --------------     ---------------

Expenses:
   Operating expenses                                           1,779,000           1,689,000           1,509,000
   Interest expense                                               950,000             968,000           1,066,000
   Depreciation and amortization                                1,220,000           1,273,000           1,214,000
                                                           --------------      --------------     ---------------
         Total expenses                                         3,949,000           3,930,000           3,789,000
                                                           --------------      --------------     ---------------
Net loss                                                   $   (1,054,000)     $   (1,144,000)    $    (1,167,000)
                                                           ==============      ==============     =============== 

Net loss allocable to the Partnership                      $   (1,044,000)     $   (1,132,000)    $    (1,155,000)
                                                           ==============      ==============     =============== 
</TABLE>

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

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

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

          Acquisition  fees equal to 9% of the gross  proceeds  from the sale of
          partnership  units as compensation to the General Partner for services
          rendered to the  Partnership  in connection  with the  acquisition  of
          limited  partnerships.  As of December 31, 1997 and 1996,  acquisition
          fees  of   $1,620,000   have  been   incurred   and  included  in  the
          Partnership's   investment   in  limited   partnerships.   Accumulated
          amortization amounted to $203,029 and $149,033 as of December 31, 1997
          and 1996, respectively.

                                      FS-11
<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

              For The Years Ended December 31, 1997, 1996 and 1995

NOTE 3 - RELATED PARTY TRANSACTIONS, continued
----------------------------------------------

          Reimbursement of costs incurred by an affiliate of the General Partner
          in connection  with the  acquisition  of limited  partnerships.  These
          reimbursements  have not exceeded  1.5% of the gross  proceeds.  As of
          December 31, 1997 and 1996, the Partnership  has incurred  acquisition
          costs of $194,019 and $138,025, respectively, which have been included
          in the Partnership's  investment in limited partnerships.  Accumulated
          amortization  amounted to $12,723  and $8,123 as of December  31, 1997
          and 1996, respectively.

          An annual  management fee equal to 0.5% of the invested  assets of the
          limited partnerships,  including the Partnership's  allocable share of
          the mortgages.  Fees of $186,166,  $186,422 and $173,406 were incurred
          for 1997,  1996 and 1995,  respectively.  Fees of $50,000 and $200,000
          were paid during  1997 and 1996,  respectively.  No amounts  were paid
          during 1995.

          A subordinated  disposition  fee in an amount equal to 1% of the sales
          price of any property sold. Payment of this fee to the General Partner
          is  subordinated  to the limited  partners  receiving  a 6%  preferred
          return (as defined in the  partnership  agreement) and is payable only
          if the General Partner or its affiliates render services.

Due to General  Partner and  affiliates as of December 31, 1997 and 1996 consist
of the following:
<TABLE>
<CAPTION>

                                                                               1997                    1996
                                                                         -----------------       ------------------
<S>                                                                     <C>                    <C>                 

Working capital advances due to affiliate                               $            688        $              11


Annual management fees accrued                                                   369,535                  233,369
                                                                        ----------------        -----------------
                                                                        $        370,223        $         233,380
                                                                        ================        =================
</TABLE>

NOTE 4 - PAYABLES TO LIMITED PARTNERSHIPS
-----------------------------------------

Payables  to limited  partnerships  at  December  31,  1997 and 1996,  represent
amounts  which are due at various  times based on  conditions  specified  in the
respective limited  partnership  agreements.  These contributions are payable in
installments  and are  generally  due upon the  limited  partnerships  achieving
certain  operating  and  development  benchmarks  and  are  expected  to be paid
generally within two years of the Partnership's initial investment.

NOTE 5 - INCOME TAXES
---------------------

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

                                      FS-12
<PAGE>


NOTE 6 - INVESTOR NOTES RECEIVABLE
----------------------------------

As of December 31,  1994,  the  Partnership  had received  notes  receivable  of
$205,000 in connection with the sale of partnership units.  Limited partners who
subscribed for ten or more units of limited partnership interest ($10,000) could
elect  to pay 50% of the  purchase  price  in  cash  upon  subscription  and the
remaining  50% by the  delivery of a  promissory  note  payable,  together  with
interest  at the rate of 11% per annum,  due no later  than 13 months  after the
subscription  date. Since such notes were not collected prior to the issuance of
the Partnerships' financial statements, the balance was reflected as a reduction
of  partners'  equity  in  previous  financial  statements.   During  1995,  the
Partnership collected the $205,000 of notes receivable.

NOTE 7 - 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.



                                      FS-13

<PAGE>

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

NONE

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 Associates  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.  Substantially  all of the  shares  of  Associates  are owned by
Wilfred N. Cooper,  Sr., through the Cooper Revocable Trust, and John B. Lester,
Jr., through the Lester Family Trust.

WILFRED  N.  COOPER,  SR.,  age 67,  has been the  principal  shareholder  and a
Director of WNC & ASSOCIATES,  INC. since its  organization  in 1971, of SHELTER
RESOURCE  CORPORATION since its organization in 1981 and of WNC RESOURCES,  INC.
from its organization in 1988 through its acquisition by WNC & ASSOCIATES,  INC.
in 1991,  serving  as  President  of  those  companies  until  1992 and as Chief
Executive Officer since 1992, and has been a Director of WNC CAPITAL CORPORATION
since its organization. He is also a general partner with WNC & ASSOCIATES, INC.
in WNC FINANCIAL GROUP,  L.P. and WNC TAX CREDIT PARTNERS,  L.P. During 1970 and
1971  he  was  a  principal  of  Creative  Equity  Development  Corporation,   a
predecessor of WNC & ASSOCIATES,  INC., and of Creative  Equity  Corporation,  a
real estate investment firm. For 12 years prior to that, Mr. Cooper was employed
by Rockwell  International  Corporation,  last serving as its manager of housing
and urban  developments.  Previously,  he had  responsibility  for new  business
development including factory-built housing evaluation and project management in
urban  planning  and  development.  Mr.  Cooper is a Director  of the  Executive
Committee  of the  National  Association  of  Home  Builders  (NAHB)  and a past
Chairman of the NAHB's Rural Housing Council, a Director of the National Housing
Conference,  a Director of the Affordable  Housing Tax Credit Coalition,  a past
President of the California Council of Affordable Housing (CCAH) (formerly Rural
Builders  Council of  California),  and a past President of Southern  California
Chapter II of the Real Estate  Syndication and Securities  Institute  (RESSI) of
the National  Association of Realtors  (NAR).  Mr. Cooper  graduated from Pomona
College in 1956 with a Bachelor of Arts degree.

JOHN B. LESTER, JR., age 64, has been a shareholder, a Director and Secretary of
WNC & ASSOCIATES,  INC. since 1986,  Executive Vice President from 1986 to 1992,
and President and Chief Operating Officer since 1992, and has been a Director of
WNC CAPITAL CORPORATION since its organization. He was a shareholder,  Executive
Vice  President,  Secretary  and a Director  of WNC  RESOURCES,  INC.  from 1988
through its acquisition by WNC & ASSOCIATES,  INC. in 1991. From 1973 to 1986 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 is a former
Director of the Los Angeles  Chapter of the  Associated  General  Contractors of
California.  His  responsibilities  at WNC & ASSOCIATES,  INC.  include property
acquisitions and company operations. Mr. Lester graduated from the University of
Southern  California  in 1956 with a Bachelor  of Science  degree in  Mechanical
Engineering.

                                       11
<PAGE>

DAVID N. SHAFER,  age 45, has been a Director of WNC &  ASSOCIATES,  INC.  since
1997, a Senior Vice President  since 1992,  and General  Counsel since 1990, and
served as Asset  Management  Director from 1990 to 1992, and has been a Director
and Secretary of WNC Management, Inc. since its organization.  Previously he was
employed as an associate attorney by the law firms of Morinello,  Barone, Holden
& Nardulli  from 1987 until  1990,  Frye,  Brandt & Lyster from 1986 to 1987 and
Simon and Sheridan from 1984 to 1986.  Mr. Shafer is a Director and President of
CCAH, a member of NAHB's Rural  Housing  Council,  a past  President of Southern
California Chapter II of RESSI, a past Director of the Council of Affordable and
Rural Housing and Development  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 and from the  University of San Diego in 1986 with a Master
of Law degree in Taxation.

WILFRED N. COOPER,  JR.,  age 35, has been  employed by WNC &  ASSOCIATES,  INC.
since 1988 and has been a Director since 1997  Executive  Vice  President  since
1998, and a Senior Vice President  since 1992. Mr. Cooper heads the  Acquisition
Originations  department  at  WNC,  has  been  President  of,  and a  registered
principal with, WNC CAPITAL  CORPORATION,  a member firm of the NASD,  since its
organization,  and  has  been  a  Director  of WNC  Management  Inc.  since  its
organization.  Previously,  he was employed as a government affairs assistant by
Honda North America from 1987 to 1988, and as a legal  assistant with respect to
Federal  legislative and regulatory  matters by the law firm of Schwartz,  Woods
and Miller from 1986 to 1987. Mr. Cooper is an alternate  director and member of
NAHB's Rural Housing Council and serves as Chairman of its Membership Committee.
Mr.  Cooper  graduated  from The American  University in 1985 with a Bachelor of
Arts degree.

THEODORE M. PAUL, age 42, has been Vice President - Finance of WNC & ASSOCIATES,
INC. since 1992 and Chief Financial  Officer since 1990, and has been a Director
and Chief  Financial  Officer of WNC  Management  Inc.  since its  organization.
Previously,  he was a Vice  President  and Chief  Financial  Officer of National
Partnership  Investments  Corp.,  a sponsor  and general  partner of  syndicated
partnerships  investing in affordable  rental housing qualified for tax credits,
from 1986 until 1990, and was employed as an associate by the  accounting  firms
of Laventhol & Horwath,  during 1985, and Mann & Pollack Accountants,  from 1979
to 1984.  Mr. Paul is a member of the  California  Society of  Certified  Public
Accountants  and the American  Institute of Certified  Public  Accountants.  His
responsibilities  at WNC &  ASSOCIATES,  INC.  include  supervision  of investor
partnership  accounting  and tax reporting  matters and monitoring the financial
condition  of the  Local  Limited  Partnerships  in which the  Partnership  will
invest.  Mr.  Paul  graduated  from the  University  of  Illinois in 1978 with a
Bachelor of Science degree and is a Certified Public  Accountant in the State of
California.

THOMAS J. RIHA,  age 43, has been Vice  President  - Asset  Management  of WNC &
ASSOCIATES, INC. since 1994, and has been a Director and Chief Executive Officer
of WNC  Management  Inc.  since  its  organization.  He has more  than 17 years'
experience in commercial and multi-family real estate investment and management.
Previously,  Mr.  Riha was  employed  by Trust  Realty  Advisor,  a real  estate
acquisition  and  management  company,  from 1988 to 1994,  last serving as Vice
President - Operations.  His responsibilities at WNC & ASSOCIATES,  INC. include
monitoring  the  operations  and  financial   performance   of,  and  regulatory
compliance  by,  properties in the WNC  portfolio.  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 in the State of  California  and a member of the
American Institute of Certified Public Accountants.

                                       12
<PAGE>

SY P. GARBAN, age 52, has 20 years' experience in the real estate securities and
syndication industry. He has been associated with WNC & ASSOCIATES,  INC., since
1989,  serving as National Sales  Director  through 1992 and as Vice President -
National  Sales since  1992.  Previously,  he was  employed  as  Executive  Vice
President by MRW,  Inc.,  Newport  Beach,  California  from 1980 to 1989, 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.

CARL FARRINGTON,  age 55, has been associated with WNC & ASSOCIATES,  INC. since
1993, and has served as Director - Originations  since 1994. Mr.  Farrington has
more  than 12  years'  experience  in  finance  and  real  estate  acquisitions.
Previously,  he served as Acquisitions Director for The Arcand Company from 1991
to 1993, and as Treasurer and Director of Finance and Administrator for Polytron
Corporation  from 1988 to 1991.  Mr.  Farrington is a member and Director of the
Council  of  Affordable  and  Rural  Housing  and  Development.  Mr.  Farrington
graduated from Yale  University  with a Bachelor of Arts degree in 1966 and from
Dartmouth College with a Master of Business Administration in 1970.

DAVID TUREK, age 43, has been Director - Originations of WNC & ASSOCIATES,  INC.
since 1996. He has 23 years' experience in real estate finance and acquisitions.
Previously,  from 1995 to 1996 Mr. Turek  served as a consultant  for a national
Low  Income  Housing  Credit  sponsor  where  he  was  responsible  for  on-site
feasibility  studies and due  diligence  analyses of Low Income  Housing  Credit
properties,  from 1992 to 1995 he served as Executive Vice President for Levcor,
Inc., a  multi-family  development  company,  and from 1990 to 1992 he served as
Vice  President  for the Paragon Group where he was  responsible  for Low Income
Housing  Credit  development  activities.  Mr.  Turek  graduated  from  Southern
Methodist University in 1976 with a Bachelor of Business Administration degree.

N. PAUL BUCKLAND, age 36, has been employed by WNC & ASSOCIATES, INC. since 1994
and currently serves as Vice President Acquisitions. He has 11 years' experience
in  analysis  pertaining  to the  development  of  multi-family  and  commercial
properties.  Previously,  from 1986 to 1994 he served on the development team of
the Bixby Ranch which  constructed  more than 700 apartment  units and more than
one million square feet of "Class A" office space in California and  neighboring
states,  and from 1984 to 1986 he served 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.

MICHELE M. TAYLOR,  age 43, has been  employed by WNC & ASSOCIATES,  INC.  since
1986,  serving as a paralegal and office manager,  and currently is the Investor
Services  Director.  Previously she was  self-employed  between 1982 and 1985 in
non-financial  services  activities  and from 1978 to 1981 she was employed as a
paralegal by a law firm which  specialized  in real estate  limited  partnership
transactions.  Ms. Taylor graduated from the University of California, Irvine in
1976 with a Bachelor of Arts degree.

                                       13
<PAGE>

THERESA I. CHAMPANY,  age 40, has been employed by WNC & ASSOCIATES,  INC. since
1989 and currently is the Marketing Services Director and a registered principal
with WNC  CAPITAL  CORPORATION.  Previously,  she was  employed  as  Manager  of
Marketing  Services  by August  Financial  Corporation  from 1986 to 1989 and as
office manager and Assistant to the Vice  President of Real Estate  Syndications
by  McCombs  Securities  Co.,  Inc.  from 1979 to 1986.  Ms.  Champany  attended
Manchester (Conn.) Community College from 1976 to 1978.

KAY L.  COOPER,  age 61, has been an officer and  Director of WNC &  ASSOCIATES,
INC. since 1971 and of WNC RESOURCES,  INC. from 1988 through its acquisition by
WNC & ASSOCIATES, INC. in 1991. Mrs. Cooper has also been the sole proprietor of
Agate 108, a manufacturer and retailer of home accessory  products,  since 1975.
She is the wife of Wilfred N. Cooper,  Sr., the mother of Wilfred N. Cooper, Jr.
and the sister of John B. Lester,  Jr. Mrs. 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 for the following fees:

(a) Organization and Offering Expenses. The Partnership paid the General Partner
or its affiliates as of December 31, 1997 $2,366,564,  consisting of commissions
and other fees and expenses of the Partnership's offering of Units of $1,440,000
and  $926,564,  respectively.  Of the total paid to the  General  Partner or its
affiliates, all of the amount of $2,366,564 was paid (reallowed) to unaffiliated
persons participating in the Partnership's  offering or rendering other services
in connection with the Partnership's offering.

(b)  Acquisition  fees in an  amount  equal to 9% of the gross  proceeds  of the
Partnership's  offering  ("Gross  Proceeds").  Through  December 31,  1997,  the
aggregate  amount of acquisition fees of $1,620,000 have been paid or are due to
the General Partner or its affiliates.

(c) The  Partnership  reimbursed  the General  Partner or its  affiliates  as of
December 31, 1997 for acquisition expenses which have not exceeded 1.5% of Gross
Proceeds, expended by such persons on behalf of the Partnership in the amount of
approximately $194,000.

(d) 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  Apartment  Complexes  owned by such Local  Limited
Partnerships.).  Fees of $186,166, $186,422 and $173,406 were incurred for 1997,
1996, and 1995,  respectively.  The Partnership  paid the General Partner or its
affiliates $50,000 and $200,000 of those fees in 1997 and 1996, respectively. No
amounts were paid in 1995.

(e) A  subordinated  disposition  fee in an amount equal to 1% of the sale price
received in connection  with the sale or disposition of an Apartment  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.

(f) The General Partner was allocated federal and California Housing Tax Credits
as follows:

                     1997                    1996
                     ----                    ----
Federal             $20,481                 $20,481
California           11,975                  15,391
                   --------                --------
Total               $32,456                 $35,872
                    =======                 =======

                                       14
<PAGE>

Item 12.  Security Ownership of Certain Beneficial Owners and Management

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.

Security Ownership of Management
--------------------------------

(a)  Security Ownership of Certain Beneficial Owners

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

(b)  Security Ownership of Management

 Neither  the  General  Partner,  its  affiliates  nor  any of the  officers  or
directors of  Associates  or its  affiliates  own directly or  beneficially  any
limited partnership interests in the Partnership.

(c)  Changes in Control

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

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

                                       15
<PAGE>

Item 13.  Certain Relationships and Related Transactions

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

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

Financial Statements:

Report of independent public accountants.

Balance sheet as of December 31, 1997 and 1996.

Statements of Operations for the years ended December 31, 1997, 1996, and 1995.

Statement of Partners'  Equity for the years ended December 31, 1997,  1996, and
1995.

Statements of Cash Flows for the years ended December 31, 1997, 1996, and 1995.

Notes to Financial Statements.

Financial Statement Schedules:
   N/A

Exhibits (3):  Articles of  incorporation  and by-laws:  The  registrant  is not
     incorporated.  The  Partnership  Agreement  is included as Exhibit B to the
     Prospectus,  filed as Exhibit 28.1 to Form 10 K for the year ended December
     31, 1994.

(10) Material contracts:

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.
                                       16
<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.

10.10Amended 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.

10.11Second   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.

10.12Amended  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.

10.13Amended  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.

10.14Second  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.

10.15Agreement   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.

10.16Agreement 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.

10.17Amended  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.

10.18Second  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.

Reports on Form 8-K

No reports of Form 8-K were filed during the fourth  quarter ended  December 31,
1997.
                                       17
<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 Partners III, L.P.    General Partner 
                                                     of the Registrant

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: April 14, 1998


By:  /s/ Theodore M. Paul
-----------------------------------------------------
Theodore M. Paul  Vice-President Finance of WNC & Associates, Inc.

Date: April 14, 1998




         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.     Director and Chairman of the Board
                              WNC & Associates, Inc.

Date: April 14, 1998


By:  /s/ John B. Lester, Jr.
-----------------------------------------------------
John B. Lester, Jr.        Director and Secretary of the Board      
                               WNC & Associates, Inc.

Date: April 14, 1998


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

Date: April 14, 1998

                                       18