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, 1996

                                       OR

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

For the transition period from ________ to ___________

Commission file number: 0-23908


                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.

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

California                                                   33-0563307

                  WNC CALIFORNIA HOUSING TAX CREDITS III, L.P.
              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                                               NONE



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

UNITS OF LIMITED PARTNERSHIP INTERESTS

<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




<PAGE>


Item 1.  Business


Organization

WNC California  Housing Tax Credits III, L.P. ("CHTCF 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 housing tax credits (the "Low
Income Housing Credit").

The general  partner of the  Partnership  is WNC Tax Credits  Partners III, L.P.
("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 17,990 Units
representing  $17,990,000 sold. During 1995, an additional 10 units amounting to
$10,000  was  collected  on   subscriptions   accepted  and  previously   deemed
uncollectible.  Holders of Limited Partnership  Interests 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 Partnerships each
of which will own and operate an apartment complex  ("Apartment  Complex") which
will  qualify for the Housing Tax Credit.  In general,  under  Section 42 of the
Internal  Revenue Code,  an owner of low-income  housing can receive the Housing
Tax 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 15-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  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  years  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 Partnerships  ("Local General  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's   Agreement  of  Limited   Partnership   ("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  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.
<PAGE>


As of December 31, 1996, CHTCF III had invested in 18 Local  Partnerships.  Each
of these Local  Partnerships  owns an Apartment Complex that is 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  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 that
neither the Partnership's  investments nor the Apartment  Complexes owned by the
Local Limted Partnerships will be readily marketable. Additionally, there can be
no assurance that the Partnership will be able to dispose of its interest in the
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  Local  General  Partners,  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, 1996, the 18 Apartment  Complexes  acquired by CHTCF III were
completed  and in  operation.  The  Apartment  Complexes  were  developed by the
respective  Local  General  Partners  who  acquired  the sites and  applied  for
applicable  mortgages  and  subsidies.  CHTCF III became the  principal  limited
partner in these Local Partnerships  pursuant to arm's-length  negotiations with
the Local General  Partners.  As a limited  partner,  CHTCF III's  liability for
obligations of each Local Limited Partnership is limited to its investment.  The
Local General Partners of the Local Limited  Partnership  retain  responsibility
for maintaining, operating and managing the Apartment Complex.

The  following  is a schedule  of the status as of  December  31,  1996,  of the
Apartment Complexes owned by Local Partnerships in which CHTCF III was a limited
partner as of March 31, 1997.

<PAGE>


<TABLE>
<CAPTION>

                          SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS                             
                                    IN WHICH CHTCF III HAS AN INVESTMENT
                                           AS OF DECEMBER 31, 1996

                                                                                                   Percentage of
                                               No. of          Units               Units            Total Units
Name & Location                                Units         Completed            Occupied            Occupied
---------------                                -----         ---------            --------            --------
<S>                                            <C>           <C>                  <C>              <C>

Almond Garden                                   34               34                  33                 97%
  Delhi, California
Almond View                                     72               72                  57                 81
  Stockton, California
Buccaneer                                       48               48                  48                100
  Fernandia Beach, Florida
Candleridge - Perry II                          24               24                  23                 96
  Perry, Iowa
Colonial Village                                56               56                  55                 98
  Roseville, California
Dallas County Housing                           19               19                  18                 95
  Dallas, North Carolina
La Paloma del Sol                               38               38                  38                100
  Deming, New Mexico
Memory Lane                                     18               18                  17                 94
  Yankton, South Dakota
Neuva Sierra Vista                              35               35                  35                100
  Richgrove, California
Old Fort                                        40               40                  38                 95
  Hidalgo, Texas
Orosi                                           42               42                  41                 98
  Orosi, California
Parlier Garden                                  41               41                  40                 98
  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
  Winter, California                            --               --                  --                ---
  
                                               663              663                 617                100%
                                               ====             ===                 ===                ====
</TABLE>



<PAGE>


Item 2.  Properties


Through  its  investment  in Local  Partnerships  CHTCF 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

No matters were  submitted  during the fourth quarter of the fiscal year covered
by this report to a vote of security holders, through the solicitaion of proxies
or otherwise.


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


The  Units are not  traded on a public  exchange  but are being  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 CHTCF  III's  Agreement  of Limited  Partnership  ("Partnership
Agreement") are satisfied.


At December 31, 1996, there were 947 registered  holders of Limited  Partnership
Interests in CHTCF III ("Limited Partners"). The Partnership was not designed to
provide  cash  distributions  to Limited  Partners in  circumstances  other than
refinancing or disposition of its investments in Local Partnerships. The Limited
Partners  invested  in the  Partnership  for the  full  years  of 1996  and 1995
received Low Income Housing Credits per Unit as follows:

                            1996     1995
                           ------   ------
Federal                    $113       $95
California                   85        85
                           -------  -------
                           $198      $180
                           ====      ====


<PAGE>


Item 6.  Selected Financial Data


<TABLE>
<CAPTION>

                                                                                                   Period from
                                                            Years ended December 31,             October 5, 1992
                                                            -----------------------              to December 31,
                                    1996             1995             1994             1993            1992
                                    ----             ----             ----             ----            ----
<S>                           <C>              <C>              <C>               <C>               <C>

Revenues                         $ 74,947         $145,959         $156,271         $  22,885           $ 0
                                   ------          -------          -------            ------            --

Partnership operating
expenses                         (272,670)        (251,382)        (128,063)           (7,204)          (11)

Equity in losses from
limited partnerships           (1,132,216)      (1,155,114)        (352,511)          (33,260)
                               ----------       ----------         --------           -------         ------

Net loss                      $(1,329,939)     $(1,260,537)       $(324,303)        $ (17,579)        $ (11)
                                =========         ========          =======            ======           ===

Net loss per weighted
limited partner                     $ (73)           $ (69)           $ (49)             $ (4)         $ (1)
                                      ===              ===              ===                ==            ==

Total assets                  $12,951,383      $14,948,952      $19,495,570       $11,068,449       $ 1,089
                               ==========       ==========       ==========        ==========        ======

Investments in
limited partnerships          $11,447,928      $13,032,752      $14,368,908        $6,639,387          $  0
                               ==========       ==========       ==========         =========           ===

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



<PAGE>


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

Liquidity and Capital Resources

Overall,  as reflected in its Statement of Cash Flows, the Partnership had a net
decrease in cash and cash  equivalents  of $418,000 for the year ended  December
31, 1996.  This  decrease in cash consists of cash (used in) and provided by the
Partnership's   operating   activities,   investing   activities  and  financing
activities of approximately $(143,000), $(248,000) and $(27,000),  respectively.
Cash provided from investing  activities  consisted of distributions  from Local
Partnerships  of  approximately  $6,000  and cash used  consisted  primarily  of
capital contributions to Local Partnerships of approximately $221,000. Cash used
by financing activities consisted of payment of offering costs of $27,000.  Cash
provided by operating  activities consisted primarily of interest earned on cash
balances.  Cash used in operating activities 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 $883,287 for the year ended  December
31, 1995.  This  decrease in cash consists of cash (used in) and provided by the
Partnership's   operating   activities,   investing   activities  and  financing
activities of approximately $437,400,  $(1,535,700) and $215,000,  respectively.
Cash provided from investing  activities  consisted of distributions  from Local
Partnerships  of  approximately  $9,900  and cash used  consisted  primarily  of
capital contributions to Local Partnerships of approximately $1,545,600,  net of
amounts released from escrow.. Cash provided from financing activities consisted
of  collection  of notes  receivable  of  $215,000.  Cash  provided by operating
activities  consisted  primarily of payment of receivable from affiliates.  Cash
used consisted primarily of payments for operating fees and expenses.  The major
components of all these activities are discussed in greater detail below.

At December 31, 1996, the Partnership is indebted to an affiliate of the General
Partner in the amount of approximately  $233,400  consisting  almost entirely of
accrued management fees.

As of March 31,  1997 and  December  31,  1996,  the  Partnership  has  received
approximately $18,000,000 from the sale of the Limited Partnership Interests and
approximately  $14,300,000  (79%) 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  $12,520,000  as of December 31, 1996 and March 31,
1997.

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.

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 Partnerships
and the Partnership. These problems may result from a number of factors, many of
which cannot be controlled  by the General  Partner.  Nevertheless,  the General
Partner anticipates that capital raised from the sale of the Units is sufficient
to fund the Partnership's operations.


<PAGE>


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 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  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 Partnerships.  Accordingly,  if circumstances
arise that cause the Local  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  as  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 Low Income Housing 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  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.

<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, 1996, 1995 and 1994

                                      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, 1996 and 1995, and the related statements of operations,  partners'
equity  (deficit) and cash flows for the years ended December 31, 1996, 1995 and
1994. 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%  and  87% of  the  total  assets  of WNC
California  Housing  Tax  Credits  III,  L.P.  at  December  31,  1996 and 1995,
respectively.  Substantially  all of the  financial  statements  of the  limited
partnerships were audited by other auditors whose reports have been furnished to
us, and our  opinion,  insofar as it relates to the amounts  included  for these
limited partnerships, is based solely on the reports of the other auditors.

We  conducted  our  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,  1996 and 1995,  and the
results of its  operations  and its cash flows for the years ended  December 31,
1996,  1995  and  1994,  in  conformity  with  generally   accepted   accounting
principles.









                                                         /s/ Corbin & Wertz
                                                        _____________________
                                                        CORBIN & WERTZ

Irvine, California
April 23, 1997



<PAGE>


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

                                 BALANCE SHEETS

                           December 31, 1996 and 1995





ASSETS                                                  1996            1995
                                                     ----------      ----------

Cash and cash equivalents                          $  1,498,036    $  1,916,200
Investments in limited partnerships
 (Note 2)                                            11,447,928      13,032,752
Other assets                                              5,419            --
                                                     ----------       ---------

                                                   $ 12,951,383    $ 14,948,952
                                                     ==========      ==========

LIABILITIES AND PARTNERS' EQUITY (DEFICIT)

Liabilities:
  Payables to limited partnerships (Note 4)        $     16,836    $    651,094
  Due to General Partner and affiliates
   (Note 3)                                             233,380         240,188
                                                     ----------      ----------

     Total liabilities                                  250,216         891,282
                                                     ----------      ----------

Partners' equity (deficit):
  General partner                                       (52,119)        (38,553)
  Limited partners (30,000 units authorized;
   18,000 units issued and outstanding at
   December 31, 1996 and 1995)                       12,753,286      14,096,223
                                                     ----------      ----------

     Total partners' equity                          12,701,167      14,057,670
                                                     ----------      ----------

                                                   $ 12,951,383    $ 14,948,952
                                                     ==========      ==========



                 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, 1996, 1995 and 1994





                                          1996           1995           1994
                                       ----------     ----------     ----------


Interest income                       $    74,947    $   145,959    $   156,271
                                       ----------     ----------     ----------

Operating expenses:
  Amortization                             57,933         57,466         41,757
  Partnership management fee (Note 3)     186,422        173,406         71,307
  Bad debt expense                          8,680           --             --
  Office                                   19,635         20,510         14,999
                                       ----------     ----------     ----------

     Total operating expenses             272,670        251,382        128,063
                                       ----------     ----------     ----------

Income (loss) from operations            (197,723)      (105,423)        28,208

Equity in losses from limited
 partnerships (Note 2)                 (1,132,216)    (1,155,114)      (352,511)
                                       ----------     ----------     ----------

Net loss                              $(1,329,939)   $(1,260,537)   $  (324,303)
                                       ==========     ==========     ==========

Net loss allocable to:
  General partner                     $   (13,300)   $   (12,605)   $    (3,243)
                                       ==========     ==========     ==========
  Limited partners                    $(1,316,639)   $(1,247,932)   $  (321,060)
                                       ==========     ==========     ==========

Net loss per weighted limited
 partner units                        $    (73.15)   $    (69.33)   $    (48.71)
                                        =========      =========      =========

Outstanding weighted limited
 partner units                        $    18,000    $    18,000    $     6,591
                                       ==========     ==========     ==========


                 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, 1996, 1995 and 1994





                                        General        Limited
                                        Partner        Partners           Total
                                        -------        --------           -----
Equity (deficit) -
 January 1, 1994                   $    (12,172)   $  6,809,022    $  6,796,850

Capital contributions                      --         9,640,000       9,640,000

Collection of notes receivable             --           326,000         326,000

Notes received in exchange
 for capital contributions                 --          (205,000)       (205,000)

Offering costs                          (11,389)     (1,127,515)     (1,138,904)

Net loss                                 (3,243)       (321,060)       (324,303)
                                     ----------      ----------      ----------
Equity (deficit) -
 December 31, 1994                      (26,804)     15,121,447      15,094,643

Capital contributions                      --            10,000          10,000

Collection of notes
 receivable                                --           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
                                     ==========      ==========      ==========




                 See accompanying notes to financial statements
                                      FS-4

<PAGE>


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

<TABLE>
<CAPTION>
                                 STATEMENTS OF CASH FLOWS

                   For The Years Ended December 31, 1996, 1995 and 1994                  


                                                  1996            1995            1994
                                               ----------      ----------      ----------
<S>                                          <C>             <C>             <C>
Cash flows from operating activities:
  Net loss                                   $ (1,329,939)   $ (1,260,537)   $   (324,303)
  Adjustments to reconcile net loss
   to net cash provided (used) by
   operating activities:
    Amortization                                   57,933          57,466          41,757
    Bad debt                                        8,680            --              --
    Equity in loss of limited
     partnerships                               1,132,216       1,155,114         352,511
    Change in other assets                         (5,419)         19,960         (11,876)
    Change in receivable from affiliate              --           216,645        (216,645)
    Change in accrued fees and expenses
     due to general partner and
     affiliates                                    (6,808)        248,752         (66,449)
                                               ----------      ----------      ----------
Net cash provided (used) by operating
 activities                                      (143,337)        437,400        (225,005)
                                               ----------      ----------      ----------
Cash flows used by investing activities:
  Investments in limited partnerships, net       (220,733)     (3,636,150)     (6,961,371)
  Capitalized acquisition costs and
   fees                                           (33,906)           --          (966,641)
  Change in cash in escrow                           --         2,090,570      (2,090,570)
  Change in loans receivable                         --              --         1,000,000
  Distributions from limited
   partnerships                                     6,376           9,893            --
                                               ----------      ----------         -------
Net cash used in investing activities            (248,263)     (1,535,687)     (9,018,582)
                                               ----------      ----------      ----------
Cash flows from financing activities:
  Capital contributions from limited
   partners                                          --           215,000      10,875,100
  Offering costs                                  (26,564)           --        (1,138,904)
                                               ----------      ----------      ----------
Net cash provided by financing activities         (26,564)        215,000       9,736,196
                                               ----------      ----------      ----------
Net change in cash                               (418,164)       (883,287)        492,609

Cash and cash equivalents,
   beginning of period                          1,916,200       2,799,487       2,306,878
                                               ----------      ----------      ----------
Cash and cash equivalents,
   end of period                             $  1,498,036    $  1,916,200    $  2,799,487
                                               ==========      ==========      ==========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
 INFORMATION:

  Interest paid                              $       --      $       --      $       --
                                               ==========      ==========      ==========
  Taxes paid                                 $        800    $        800    $        800
                                               ==========      ==========      ==========
</TABLE>




Continued

                                      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, 1996, 1995 and 1994





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).

  During  1994,  the  Partnership  received  subscription  notes  receivable  of
   $205,000 in exchange for capital contributions.




                 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, 1996, 1995 and 1994





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 Trusts,
30% of the outstanding stock of WNC & Associates, Inc.

The Partnership  Agreement  authorized the sale of up to 30,000 units of Limited
Partnership  Interest  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  interest 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.


Continued

                                      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, 1996, 1995 and 1994





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.  Cash  equivalents
represent U.S. Treasury Bills and totaled $1,291,287, at December 31, 1996.

Concentration of Credit Risk
----------------------------
At December  31,  1996,  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, 1996, 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.

NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
--------------------------------------------
As of  December  31,  1996  and  1995,  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.


Continued

                                      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, 1996, 1995 and 1994





NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
-------------------------------------------------------
The  Partnership's   investments  in  limited   partnerships  as  shown  in  the
accompanying  balance  sheets at December  31,  1996 and 1995 are  approximately
$1,637,000 and $2,089,000,  respectively,  greater than the Partnership's equity
as  shown  in  the  limited   partnerships'   combined   financial   statements,
respectively.  This difference is due primarily to acquisition  costs related to
the   acquisition  of  the  investment   that  have  been   capitalized  in  the
Partnership's  investment account and capital contributions accrued but not paid
by the Partnership and  syndication  costs incurred by the limited  partnerships
which are  reflected  as a reduction of  partners'  equity in the  Partnership's
accounts.  The capitalized  acquisition  costs are being amortized over 30 years
(see Note 3).

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

                                                       1996             1995
                                                    ----------       ----------

Investments, beginning of year                    $ 13,032,752     $ 14,368,908

Capital contributions payable                             --             27,083

Tax credit adjustments                                (422,205)        (140,766)

Capitalized acquisition costs and
 acquisition fees                                       33,906             --

Losses in equity of limited partnerships            (1,132,216)      (1,155,114)

Distributions                                           (6,376)          (9,893)

Amortization of capitalized acquisition
 costs and fees                                        (57,933)         (57,466)
                                                    ----------       ----------

Investments, end of year                          $ 11,447,928     $ 13,032,752
                                                    ==========       ==========




Continued

                                      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, 1996, 1995 and 1994





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

                        COMBINED CONDENSED BALANCE SHEETS

Assets                                                    1996           1995
------                                                 ----------     ----------
Buildings and improvements, net of
 accumulated depreciation for 1996
 and 1995 of $2,968,000 and $1,711,000,
 respectively                                         $32,866,000    $34,273,000
Land                                                    2,380,000      2,213,000
Construction in progress                                     --             --
Other assets                                            1,660,000      2,057,000
                                                       ----------     ----------

Total assets                                          $36,906,000    $38,543,000
                                                       ==========     ==========
Liabilities
-----------
Mortgage and construction loans payable               $24,593,000    $25,026,000
Other liabilities                                       1,496,000      1,596,000
                                                       ----------     ----------

Total liabilities                                      26,089,000     26,622,000
                                                       ----------     ----------
Partners' Capital
-----------------
WNC California Housing Tax Credits III, L.P.            9,811,000     10,944,000
Other partners                                          1,006,000        977,000
                                                       ----------     ----------

Total partners' capital                                10,817,000     11,921,000
                                                       ----------     ----------

Total liabilities and partners' capital               $36,906,000    $38,543,000
                                                       ==========     ==========

                   COMBINED CONDENSED STATEMENTS OF OPERATIONS

                                      1996             1995             1994
                                   ----------       ----------       ----------

Total revenues                    $ 2,786,000      $ 2,622,000      $ 1,171,000
                                   ----------       ----------       ----------
Expenses:
  Operating expenses                1,689,000        1,509,000          668,000
  Interest expense                    968,000        1,066,000          386,000
  Depreciation and amortization     1,273,000        1,214,000          475,000
                                   ----------       ----------       ----------

Total expenses                      3,930,000        3,789,000        1,529,000
                                   ----------       ----------       ----------

Net loss                          $(1,144,000)     $(1,167,000)     $  (358,000)
                                   ==========       ==========       ========== 
Net loss allocable to
 the Partnership                  $(1,132,000)     $(1,155,000)     $  (353,000)
                                   ==========       ==========       ========== 


Continued

                                      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, 1996, 1995 and 1994





NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS, continued
-------------------------------------------------------
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, 1996 and 1995,  acquisition
          fees  of   $1,620,000   have  been   incurred   and  included  in  the
          Partnership's   investment   in  limited   partnerships.   Accumulated
          amortization  amounted to $149,033 and $95,038 as of December 31, 1996
          and 1995, respectively.

          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, 1996 and 1995, the Partnership  has incurred  acquisition
          costs  of  $138,025,  and  $104,119,  respectively,  which  have  been
          included  in the  Partnership's  investment  in limited  partnerships.
          Accumulated  amortization amounted to $8,123 and $4,185 as of December
          31, 1996 and 1995, 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 $186,422,  $173,406 and $71,307 were incurred
          for 1996,  1995 and 1994,  respectively.  Fees of  $200,000  were paid
          during 1996. No amounts were paid during 1995 and 1994.

          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, 1996 and 1995 consist
of the following:

                                                         1996            1995
                                                      ----------      ----------
Working capital advances due to (from)
 affiliate                                             $      11      $  (6,759)
Annual management fees accrued                           233,369        246,947
                                                      ----------     ----------

                                                       $ 233,380      $ 240,188
                                                      ==========     ==========





                                     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, 1996, 1995 and 1994





NOTE 4 - PAYABLES TO LIMITED PARTNERSHIPS
-----------------------------------------
Payables  to limited  partnerships  at  December  31,  1996 and 1995,  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.

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 the accompanying  financial statements.  During 1995, the
Partnership collected $205,000 of notes receivable.






























                                      FS-12



<PAGE>


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



Item 10.  Directors and Executive Officers of the Registrant



Directors of Registrant

Directors and Executive Officers of WNC & Associates, Inc.
         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.

WILFRED  N.  COOPER,  SR.,  age 65,  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 and a member of the
Executive  Committee of the National  Association of Home Builders  (NAHB) and a
Chairman of the NAHB's Rural Housing Council, a Director of the National Housing
Conference,  a Director of the Affordable Low Income Housing Credit Coalition, a
past  President of the Rural  Builders  Council of California  (RBCC) 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 62, 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.

DAVID N. SHAFER,  age 44, has been a Senior Vice  President of WNC & ASSOCIATES,
INC. since 1992 and General  Counsel since 1990, and served as Asset  Management
Director from 1990 to 1992.  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 RBCC, 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 33, has been  employed by WNC &  ASSOCIATES,  INC.
since 1988 and has been a Senior Vice  President or Vice  President  since 1992.
Mr.  Cooper heads the  Acquisition  Origination  department  at WNC and has been
President of and a registered principal with WNC CAPITAL  CORPORATION,  a member
firm of the NASD,  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 a
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 40, has been Vice President - Finance of WNC & ASSOCIATES,
INC. since 1992 and Chief  Financial  Officer since 1990.  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 41, has been Vice  President  - Asset  Management  of WNC &
ASSOCIATES, INC. since 1994. 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  California  Society  of  Certified  Public
Accountants and the American Institute of Certified Public Accountants.

SY GARBAN,  age 50, has 19 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 by MRW,  Inc.,  Newport
Beach, California from 1980 to 1989, a real estate acquisition,  development and
management  firm.  Mr. Garban is a member of the  International  Association  of
Financial Planners.  Mr. Garban graduated from Michigan State University in 1967
with a Bachelor of Science degree in Business Administration.

CARL FARRINGTON,  age 50, has been associated with WNC & ASSOCIATES,  INC. since
1993,  currently  serving 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.

MICHELE M. TAYLOR,  age 41, 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.

THERESA I. CHAMPANY, age 38, 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 59, 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 Associates for the following fees:

(a) 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  Compleses  owned by such Local  Limited
Partnerships.).  Fees of $186,422, $173,406, and $71,307 were incurred for 1996,
1995, and 1994 respectively.

(b) 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  Parners.  "Return on
Investment"  means an annual,  cumulative  but not  compounded,  "return" to the
Limited  Partners  (including  Low Income  Housing  Credits) as a class on their
adjusted capital  contributions  commencing for each Limited Partner on the last
day  of  the  calendar  quarter  during  which  the  Limited  Partner's  capital
contribution is received by the Partnership,  calculated at the following rates:
(i)  16%  through  December  31,  2003,  and  (ii)  6% for  the  balance  of the
Partnerships term. No disposition fees have been paid.

(c) The General Partner was allocated federal and California Housing Tax Credits
for 1996 as follows:

                     1996     
                     ----     
Federal           $20,481     
California         15,391     
                   ------     
                  $35,872
                  =======


Item 12. Security Ownership of Certain Beneficial Owners and Management

(a)      Security Ownership of Certain Beneficial Owners

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

(b)      Security Ownership of Management

         Neither  the General  Partner,  Associates  nor any of the  officers or
directors of Associates  own directly or  beneficially  any  Units in CHTCF III.

(c)      Changes in Control

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

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


Item 13.  Certain Relationships and Related Transactions

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 sheets as of December 31, 1996 and 1995.

Statements of Operations for the years ended December 31, 1996, 1995, and 1994.

Statement of Partners'  Equity for the years ended December 31, 1996,  1995, and
1994.

Statements of Cash Flows for the years ended December 31, 1996, 1995, and 1994.

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

10.18 Second  Amended and Restated  Agreement  of Limited  Partnership  of Tahoe
Pines  Apartnments  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 on Form 8-K were filed during the fourth  quarter ended  December 31,
1996.

<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 and Chief Opertating Officer of WNC & Associates,
Inc.

Date: May 9, 1997

By:   /s/    Theodore M. Paul
   _____________________________________________________
Theodore M. Paul  Vice-President  Finance and Chief  Financial  Officer of WNC &
Associates, Inc.

Date: May 9, 1997




         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: May 9, 1997

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

Date: May 9, 1997