FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER
                             SECTION 13 OR 15(d)

                                   Form 10-KSB
(Mark One)
[X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 [No Fee Required]

                 For the fiscal year ended December 31, 2001

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 [No Fee Required]

             For the transition period from _________to _________

                         Commission file number 0-14369

                  SHELTER PROPERTIES VII LIMITED PARTNERSHIP
                (Name of small business issuer in its charter)

      South Carolina                                           54-0784852
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)

                          55 Beattie Place, PO Box 1089
                       Greenville, South Carolina 29602
                   (Address of principal executive offices)

                            Issuer's telephone number
                                 (864) 239-1000

        Securities registered under Section 12(b) of the Exchange Act:

                                      None

        Securities registered under Section 12(g) of the Exchange Act:

                      Units of Limited Partnership Interest
                                (Title of class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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___

Check if there is no disclosure  of delinquent  filers in response to Item 405
of  Regulation  S-B  contained  in  this  form,  and  no  disclosure  will  be
contained,  to the best of the Partnership's  knowledge in definitive proxy or
information  statements  incorporated  by  reference  in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year.  $7,221,000

State the aggregate  market value of the voting  partnership  interests  held by
non-affiliates  computed  by  reference  to the price at which  the  partnership
interests  were sold,  or the average bid and asked  prices of such  partnership
interests as of December 31, 2001. No market exists for the limited  partnership
interests of the Registrant;  and,  therefore,  no aggregate market value can be
determined.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      NONE

<PAGE>
                                     PART I

Item 1.     Description of Business

Shelter  Properties VII (the  "Partnership" or "Registrant")  was organized as a
limited partnership under the laws of the State of South Carolina on October 29,
1984.  The general  partner  responsible  for  management  of the  Partnership's
business is Shelter Realty VII  Corporation,  a South Carolina  corporation (the
"Corporate General  Partner").  The Corporate General Partner is a subsidiary of
Apartment  Investment and Management Company  ("AIMCO"),  a publicly traded real
estate investment trust. The other general partner is AIMCO Properties, L.P., an
affiliate of the Corporate General Partner and AIMCO. The Partnership  Agreement
provides  that the  Partnership  is to  terminate  on  December  31, 2024 unless
terminated prior to such date.

The  Registrant  is engaged in the business of operating and holding real estate
properties  for  investment.  The  Registrant  acquired two  existing  apartment
properties  and a  newly  constructed  apartment  property  during  1985  in its
acquisition  phase.  The  Registrant  continues  to own and operate one of these
properties. See "Item 2. Description of Property".

Commencing  March 18, 1985 the  Registrant  offered,  pursuant to a Registration
Statement filed with the Securities and Exchange Commission,  up to 40,000 Units
of Limited Partnership  Interest (the "Units") at a purchase price of $1,000 per
Unit with a minimum  purchase of 5 Units  ($5,000),  or 2 Units  ($2,000) for an
Individual Retirement Account.

The offering  terminated on November 5, 1985. Upon  termination of the offering,
the Registrant had accepted  subscriptions for 17,343 Units, including 100 Units
purchased by the Corporate  General  Partner,  for an aggregate of  $17,343,000.
Since its initial  offering,  the Registrant  has not received,  nor are limited
partners required to make any additional capital contributions.

There have been, and it is possible there may be other, Federal, state and local
legislation  and  regulations   enacted   relating  to  the  protection  of  the
environment.  The Partnership is unable to predict the extent,  if any, to which
such new  legislation  or  regulations  might occur and the degree to which such
existing or new legislation or regulations  might adversely  affect the property
owned by the Partnership.

The  Partnership  monitors its property for evidence of  pollutants,  toxins and
other dangerous substances, including the presence of asbestos. In certain cases
environmental  testing has been performed which resulted in no material  adverse
conditions or liabilities.  In no case has the Partnership  received notice that
it is a potentially  responsible party with respect to an environmental clean up
site.

Both the income and expenses of operating the property owned by the  Partnership
are subject to factors outside of the Partnership's  control, such as changes in
the supply and demand for  similar  properties  resulting  from  various  market
conditions, increases/decreases in unemployment or population shifts, changes in
the  availability of permanent  mortgage  financing,  changes in zoning laws, or
changes in patterns or needs of users. In addition,  there are risks inherent in
owning  and  operating  residential   properties  because  such  properties  are
susceptible  to the  impact of  economic  and other  conditions  outside  of the
control of the Partnership.

The  real  estate  business  in which  the  Partnership  is  engaged  is  highly
competitive.  There are other  residential  properties within the market area of
the  Registrant's  property.  The number and quality of competitive  properties,
including  those which may be managed by an affiliate of the  Corporate  General
Partner,  in such market area could have a material  effect on the rental market
for the  apartments  at the  Partnership's  property  and the rents  that may be
charged  for such  apartments.  While  the  Corporate  General  Partner  and its
affiliates  own and/or  control a significant  number of apartment  units in the
United  States,  such  units  represent  an  insignificant  percentage  of total
apartment units in the United States and competition for the apartment is local.

The Registrant  has no employees.  Management  and  administrative  services are
provided  by the  Corporate  General  Partner  and  by  agents  retained  by the
Corporate  General  Partner.  An affiliate of the Corporate  General Partner has
been providing such property management services.

A further description of the Partnership's business is included in "Management's
Discussion and Analysis or Plan of Operation"  included in "Item 6" of this Form
10-KSB.

Item 2.     Description of Property

The following table sets forth the Registrant's investment in a property:
<TABLE>
<CAPTION>

                                    Date of
Property                           Purchase       Type of Ownership           Use

<S>                                <C>   <C>
Governor's Park Apartments         09/30/85  Fee ownership, subject to   Apartment
  Ft. Collins, Colorado                      first and second            188 units
                                             mortgages (1)
</TABLE>

(1)   Property  is held by a Limited  Partnership  which the  Registrant  owns a
      99.99% interest in.

On July 16, 2001, the Partnership  sold Hickory Ridge Apartments to an unrelated
third  party for net  proceeds of  approximately  $11,333,000  after  payment of
closing costs. The Partnership realized a gain of approximately  $4,173,000 as a
result of the sale. The  Partnership  used  approximately  $5,990,000 of the net
proceeds to repay the  mortgage  encumbering  the  property.  In  addition,  the
Partnership  recorded an extraordinary  loss on early  extinguishment of debt of
approximately $7,000 as a result of unamortized loan costs being written off.

Schedule of Property

Set forth  below for the  Registrant's  property  is the gross  carrying  value,
accumulated depreciation,  depreciable life, method of depreciation, and Federal
tax basis.
<TABLE>
<CAPTION>

                            Gross
                           Carrying    Accumulated                          Federal
Property                    Value     Depreciation     Rate     Method     Tax Basis
                               (in thousands)                           (in thousands)
Governor's Park
<S>                        <C>           <C>         <C>                    <C>
  Apartments               $ 8,029       $ 4,070     5-39 yrs     S/L       $ 2,513
</TABLE>

See "Note A" to the consolidated financial statements included in "Item 7" for a
description of the Partnership's depreciation policy.

Schedule of Property Indebtedness

The  following  table  sets  forth  certain  information  relating  to the loans
encumbering the Registrant's property.
<TABLE>
<CAPTION>

                         Principal                                           Principal
                         Balance At      Stated                               Balance
                        December 31,    Interest     Period     Maturity       Due At
Property                    2001          Rate     Amortized      Date      Maturity (2)
                       (in thousands)                                      (in thousands)
Governor's Park
  Apartments
<S>            <C>          <C>          <C>       <C>          <C>   <C>     <C>
  1st mortgage (3)          4,241        7.83%     344 months   10/15/03      $ 4,083
  2nd mortgage (3)            147        7.83%        (1)       10/15/03          147
                            4,388
Less unamortized
  mortgage
  discounts                   (31)

        Total             $ 4,357                                             $ 4,230
</TABLE>

(1)   Interest only payments.

(2)   See "Item 7. Financial  Statements - Note C" for information  with respect
      to the  Registrant's  ability  to repay  these  loans and  other  specific
      details about the loans.

(3)   These loans were  refinanced  subsequent to December 31, 2001. See "Item
      7. Financial Statements - Note I" for further information.

Schedule of Rental Rates and Occupancy

Average annual rental rates and occupancy for 2001 and 2000 for the Registrant's
property are as follows:
<TABLE>
<CAPTION>

                                       Average Annual                 Average
                                        Rental Rates                 Occupancy
                                         (per unit)
 Property                           2001           2000           2001        2000

<S>                               <C>             <C>             <C>          <C>
 Governor's Park Apartments       $ 9,109         $ 8,847         92%          93%
</TABLE>

As noted under "Item 1.  Description of Business",  the real estate  industry is
highly  competitive.  The Partnership's  property is subject to competition from
other residential apartment complexes in the area. The Corporate General Partner
believes that the property is adequately  insured.  The property is an apartment
complex  which  leases its units for lease terms of one year or less.  No tenant
leases  10% or more of the  available  rental  space.  The  property  is in good
physical  condition,  subject to normal  depreciation  and  deterioration  as is
typical for assets of this type and age.

Schedule of Real Estate Taxes and Rates

Real estate taxes and rates in 2001 for the property was:

                                            2001            2001
                                           Billing          Rate
                                       (in thousands)

       Governor's Park Apartments           $ 85            8.73%

Capital Improvements

Hickory Ridge Apartments: Prior to its sale, the Partnership spent approximately
$325,000 in capital  improvements  at Hickory  Ridge  Apartments.  These capital
improvements  consisted primarily of floor covering and appliance  replacements,
fencing improvements and reconstruction from fire damage.

Governor's Park Apartments:  The Partnership completed approximately $102,000 in
capital  expenditures  at  Governor's  Park  Apartments  during  the year  ended
December  31,  2001,  consisting  primarily  of  floor  covering  and  appliance
replacements.  These  improvements  were funded  primarily  from  operations and
replacement  reserves.  The  Partnership  is  currently  evaluating  the capital
improvement  needs of the property for the upcoming  year. The minimum amount to
be budgeted is expected to be $300 per unit or $56,400.  Additional improvements
may be considered  and will depend on the physical  condition of the property as
well  as  Partnership  reserves  and  anticipated  cash  flow  generated  by the
property.

Item 3.     Legal Proceedings

In March 1998, several putative unit holders of limited partnership units of the
Partnership  commenced an action  entitled  Rosalie  Nuanes,  et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of  California  for the  County  of San  Mateo.  The  plaintiffs  named as
defendants,  among others,  the Partnership,  its Corporate  General Partner and
several of their  affiliated  partnerships  and corporate  entities.  The action
purports  to  assert  claims  on  behalf  of a class  of  limited  partners  and
derivatively  on behalf  of a number  of  limited  partnerships  (including  the
Partnership)  which are named as nominal  defendants,  challenging,  among other
things,  the  acquisition  of interests  in certain  Corporate  General  Partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one  time,  affiliates  of  Insignia;  past  tender  offers  by the  Insignia
affiliates to acquire limited partnership units;  management of the partnerships
by the  Insignia  affiliates;  and the series of  transactions  which  closed on
October 1, 1998 and February 26, 1999 whereby  Insignia and Insignia  Properties
Trust,  respectively,  were merged  into AIMCO.  The  plaintiffs  seek  monetary
damages and equitable relief, including judicial dissolution of the Partnership.
On June 25, 1998, the Corporate General Partner filed a motion seeking dismissal
of the action.  In lieu of responding  to the motion,  the  plaintiffs  filed an
amended complaint.  The Corporate General Partner filed demurrers to the amended
complaint which were heard February 1999.

Pending the ruling on such  demurrers,  settlement  negotiations  commenced.  On
November 2, 1999,  the parties  executed and filed a Stipulation  of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the  settlement  was obtained on November 3, 1999 from the Court,  at which time
the Court set a final  approval  hearing for  December  10,  1999.  Prior to the
December  10,  1999  hearing,  the  Court  received  various  objections  to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement.  On
December 14, 1999, the Corporate  General Partner and its affiliates  terminated
the  proposed  settlement.  In  February  2000,  counsel  for some of the  named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated  the  settlement.  On June  27,  2000,  the  Court  entered  an order
disqualifying  them  from the case and an  appeal  was  taken  from the order on
October 5, 2000. On December 4, 2000, the Court  appointed the law firm of Lieff
Cabraser  Heimann & Bernstein  LLP as new lead  counsel for  plaintiffs  and the
putative class.  Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001,  the  Corporate  General  Partner and its  affiliates  filed a
demurrer to the third amended  complaint.  On May 14, 2001,  the Court heard the
demurrer to the third amended  complaint.  On July 10, 2001, the Court issued an
order  sustaining  defendants'  demurrer on certain  grounds.  On July 20, 2001,
Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order
granting in part and denying in part defendants' demurrer. On September 7, 2001,
Plaintiffs  filed a fourth amended class and  derivative  action  complaint.  On
September 12, 2001, the Court denied Plaintiffs' motion for reconsideration.  On
October 5, 2001, the Corporate General Partner and affiliated defendants filed a
demurrer to the fourth amended complaint,  which was heard on December 11, 2001.
On February 2, 2002,  the Court served its order  granting in part the demurrer.
The  Court has  dismissed  without  leave to amend  certain  of the  plaintiffs'
claims.  On February 11, 2002,  plaintiffs  filed a motion  seeking to certify a
putative  class  comprised of all  non-affiliated  persons who own or have owned
units  in  the  partnerships.  The  Corporate  General  Partner  and  affiliated
defendants  intend  to  oppose  the  motion  and are  scheduled  to  file  their
opposition  brief on March 26, 2002. A hearing on the motion has been  scheduled
for April 29, 2002. The Court has set the matter for trial in January 2003.

During the third  quarter of 2001, a complaint  (the "Heller  action") was filed
against  the same  defendants  that are named in the  Nuanes  action,  captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended  complaint.  The first amended complaint in the Heller action is
brought as a purported  derivative  action,  and asserts  claims for among other
things  breach  of  fiduciary  duty;  unfair  competition;   conversion,  unjust
enrichment;  and judicial  dissolution.  Plaintiffs in the Nuanes action filed a
motion to  consolidate  the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed  without  leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the Corporate  General Partner and affiliated
defendants  moved to strike the first  amended  complaint  in its  entirety  for
violating  the Court's July 10, 2001 order  granting in part and denying in part
defendants'  demurrer in the Nuanes action, or alternatively,  to strike certain
portions of the complaint based on the statute of limitations.  Other defendants
in the action  demurred to the fourth  amended  complaint,  and,  alternatively,
moved to strike the complaint. On December 11, 2001, the court heard argument on
the motions  and took the matters  under  submission.  On February 4, 2002,  the
Court  served  notice of its order  granting  defendants'  motion to strike  the
Heller complaint as a violation of its July 10, 2001 order in the Nuanes action.

The Corporate General Partner does not anticipate that any costs,  whether legal
or  settlement  costs,  associated  with  these  cases will be  material  to the
Partnership's overall operations.

The  Partnership is unaware of any other pending or outstanding  litigation that
is not of a routine nature arising in the ordinary course of business.

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

During the quarter ended December 31, 2001, no matter was submitted to a vote of
the Unit holders through the solicitation of proxies or otherwise.

                                     PART II

Item 5.     Market for the Partnership Equity and Related Partner Matters

The Partnership,  a publicly-held  limited partnership,  offered and sold 17,343
limited  partnership  units  ("Units")  including  100  Units  purchased  by the
Corporate General Partner aggregating $17,343,000. The Partnership currently has
720 holders of record  owning an aggregate of 17,343  Units.  Affiliates  of the
Corporate General Partner owned 10,552 Units or approximately 60.84% at December
31, 2001. No public  trading  market has developed for the Units,  and it is not
anticipated that such a market will develop in the future.

The following table sets forth the distributions made by the Partnership for the
years ended December 31, 2000 and 2001.

                                                  Distributions
                                                               Per Limited
                                         Aggregate          Partnership Unit

       01/01/00 - 12/31/00             $ 200,000 (1)            $ 11.42
       01/01/01 - 12/31/01             5,462,000 (2)             314.88

(1)   Distributions were made from cash from operations.

(2)   Distributions of $86,000 from  operations,  $4,809,000 from sales proceeds
      of Hickory  Ridge,  and $567,000 from  refinancing  proceeds (See "Item 7.
      Financial Statements - Note F").

Future cash  distributions  will depend on the levels of net cash generated from
operations,  the availability of cash reserves, the timing of the debt maturity,
refinancing   and/or  property  sale.  The  Partnership's   cash  available  for
distribution is reviewed on a monthly basis.  There can be no assurance that the
Partnership  will generate  sufficient  funds from  operations,  after  required
capital  expenditures,  to permit any  distributions  to its partners in 2002 or
subsequent   periods.   See  "Item  2.   Description  of  Properties  -  Capital
Improvements"   for  information   relating  to  capital   expenditures  at  the
properties.   In  addition,  the  Partnership  may  be  restricted  from  making
distributions  if  the  amount  in  the  reserve  account  for  Governor's  Park
Apartments maintained by the mortgage lender is equal to a minimum of $200 and a
maximum of $400 per apartment unit at such property for a total of approximately
$38,000 to  $75,000.  As of December  31,  2001,  the reserve  account was fully
funded with approximately $76,000 on deposit with the mortgage lender.

In addition to its indirect  ownership of the general  partner  interests in the
Partnership,  AIMCO and its affiliates  owned 10,552 limited  partnership  units
(the "Units") in the Partnership representing 60.84% of the outstanding Units at
December  31,  2001.  A number of these Units were  acquired  pursuant to tender
offers  made by  AIMCO  or its  affiliates.  It is  possible  that  AIMCO or its
affiliates will make one or more additional offers to acquire additional limited
partnership  interests in the  Partnership  for cash or in exchange for units in
the operating partnership of AIMCO. Under the Partnership Agreement, unitholders
holding a majority of the Units are  entitled  to take action with  respect to a
variety of matters,  which would  include  voting on certain  amendments  to the
Partnership  Agreement and voting to remove the Corporate General Partner.  As a
result  of its  ownership  of  60.84% of the  outstanding  Units,  AIMCO is in a
position to control all such voting  decisions  with respect to the  Registrant.
When voting on matters, AIMCO would in all likelihood vote the Units it acquired
in a manner  favorable to the interest of the Corporate  General Partner because
of its affiliation with the Corporate General Partner.

Item 6.     Management's Discussion and Analysis or Plan of Operation

The  matters  discussed  in this Form  10-KSB  contain  certain  forward-looking
statements  and  involve  risks and  uncertainties  (including  changing  market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained  in this Form 10-KSB and the other  filings  with the  Securities  and
Exchange  Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations,  including  forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to the Registrant's business and results of operation.  Accordingly,
actual   results   could  differ   materially   from  those   projected  in  the
forward-looking  statements as a result of a number of factors,  including those
identified herein.

This  item  should  be read  in  conjunction  with  the  consolidated  financial
statements and other items contained elsewhere in this report.

Results of Operations

The  Partnership's  net  income  for  the  year  ended  December  31,  2001  was
approximately  $4,300,000 compared to approximately  $315,000 for the year ended
December 31, 2000. The increase in net income is largely due to the gain on sale
of Hickory Ridge Apartments.

On July 16, 2001, the Partnership  sold Hickory Ridge Apartments to an unrelated
third  party for net  proceeds of  approximately  $11,333,000  after  payment of
closing costs. The Partnership realized a gain of approximately  $4,173,000 as a
result of the sale. The  Partnership  used  approximately  $5,990,000 of the net
proceeds to repay the  mortgages  encumbering  the  property.  In addition,  the
Partnership  recorded an extraordinary  loss on early  extinguishment of debt of
approximately  $7,000 as a result of the  prepayment  penalties and  unamortized
loan costs and debt discount being written off.

Excluding the impact of the operations and sale of Hickory Ridge, net income was
approximately  $270,000 and  $111,000 for the years ended  December 31, 2001 and
2000,  respectively.  The  increase in net income is due to an increase in total
revenues. The increase in total revenues was due to an increase in rental income
and other  income.  Rental  income  increased as a result of increase in average
rental rates,  reduced concession costs and reduced bad debt expense,  partially
offset  by  reduced  occupancy  at  Governor's  Park  Apartments.  Other  income
increased  due to an increase in tenant and utility  reimbursements  and fees at
Governor's Park Apartments.

Total expenses  remained constant for the years ended December 31, 2001 and 2000
as an increase in general and administrative expense was offset by a decrease in
operating  expenses.  Operating expenses decreased due to a decrease in salaries
and contract  work at Governor's  Park  Apartments.  General and  administrative
expenses increased due to increases in audit fees and taxes and fees,  partially
offset by  reduced  professional  fees and  costs of  services  included  in the
reimbursements to the Corporate General Partner as allowed under the Partnership
Agreement.  Also included in general and administrative expense at both December
31,  2001  and  2000  are  costs   associated  with  the  quarterly  and  annual
communications  with investors and regulatory  agencies and the annual audit and
appraisals required by the Partnership Agreement.

During the year ended  December 31, 2001, a net casualty  gain of  approximately
$18,000 was recognized at Hickory Ridge Apartments. The casualty gain related to
a fire that  damaged  5  apartment  units in May 2000.  The gain was a result of
final insurance proceeds of approximately $18,000 received in February 2001. The
related  assets  were  written  off  during the year ended  December  31,  2000;
therefore, the entire proceeds were recognized as a gain.

As part of the ongoing  business plan of the Registrant,  the Corporate  General
Partner  monitors the rental market  environment of its  investment  property to
assess the feasibility of increasing rents,  maintaining or increasing occupancy
levels and protecting the Partnership from increases in expense. As part of this
plan, the Corporate General Partner attempts to protect the Partnership from the
burden of  inflation-related  increases  in  expenses  by  increasing  rents and
maintaining a high overall  occupancy  level.  However,  due to changing  market
conditions,  which  can  result  in the use of  rental  concessions  and  rental
reductions to offset softening market conditions, there is no guarantee that the
Corporate General Partner will be able to sustain such a plan.

Liquidity and Capital Resources

At  December  31,  2001,  the  Registrant  had  cash  and  cash  equivalents  of
approximately  $212,000 compared to approximately $344,000 at December 31, 2000.
The  decrease  in cash and cash  equivalents  of  approximately  $132,000  since
December 31, 2000 is due to approximately  $11,644,000 of cash used in financing
activities, offset by approximately $10,866,000 and $646,000 of cash provided by
investing  and  operating  activities,  respectively.  Cash  used  in  financing
activities  consisted of distributions to partners,  repayment of mortgage notes
payable,  loan costs paid, principal payments made on the mortgages  encumbering
the Registrant's properties and payments on advances from an affiliate offset by
advances from an affiliate.  Cash provided by investing  activities consisted of
proceeds  from the sale of Hickory  Ridge  and,  to a lesser  extent,  insurance
proceeds  received and net receipts from  restricted  escrows  maintained by the
mortgage lender offset by property improvements and replacements. The Registrant
invests its working capital reserves in interest bearing accounts.

The sufficiency of existing  liquid assets to meet future  liquidity and capital
expenditure   requirements   is  directly   related  to  the  level  of  capital
expenditures  required at the  Partnership's  remaining  property to  adequately
maintain the physical  assets and other operating needs of the Registrant and to
comply with Federal,  state,  and local legal and regulatory  requirements.  The
Partnership  is  currently  evaluating  the  capital  improvement  needs  of the
property  for the  upcoming  year.  The minimum to be budgeted is expected to be
$300 per unit or $56,400.  Additional capital improvements will be incurred only
if cash is available from  operations and  Partnership  reserves.  To the extent
that  such  budgeted  capital  improvements  are  completed,   the  Registrant's
distributable cash flow, if any, may be adversely affected at least in the short
term.

The  Registrant's  current assets are thought to be sufficient for any near-term
needs  (exclusive  of capital  improvements)  of the  Partnership.  The mortgage
indebtedness of approximately $4,357,000, net of discount, is amortized over 344
months with a balloon payment due at maturity, October 15, 2003.

On  February  8, 2002,  the  Partnership  refinanced  the  mortgage  encumbering
Governor's  Park. The refinancing  replaced the first mortgage of  approximately
$4,234,000 and the second mortgage of approximately $147,000 with a new mortgage
balance of $6,990,000.  The new mortgage carries a stated interest rate of 7.12%
compared to the 7.83% interest rate on the old mortgages. Principal and interest
payments on the mortgage of approximately $55,000 are due monthly until the loan
matures in March of 2022 at which time the loan will be fully  amortized.  Total
capitalized loan costs were approximately  $278,000.  The Partnership recognized
an  extraordinary  loss on the  early  extinguishment  of debt of  approximately
$241,000 due to the  write-off of  unamortized  loan costs and debt discount and
prepayment penalties.

During the year ended  December  31,  2001,  the  Partnership  declared and paid
distributions of  approximately  $86,000  (approximately  $85,000 to the limited
partners  or  $4.90  per  limited   partnership   unit)  from   operations   and
approximately   $4,809,000  to  the  limited   partners   ($277.29  per  limited
partnership  unit)  from the net  proceeds  of the sale of  Hickory  Ridge.  The
Partnership  also paid a  distribution  of  previously  undistributed  refinance
proceeds of approximately  $567,000 ($32.69 per limited partnership unit) to the
limited partners during the year ended December 31, 2001.  During the year ended
December 31, 2000,  the  Partnership  paid a  distribution  from  operations  of
approximately $200,000 (approximately $198,000 to the limited partners or $11.42
per limited  partnership  unit).  Future cash  distributions  will depend on the
levels of net cash generated from operations, the availability of cash reserves,
the timing of the debt  maturity  and  refinancing  and/or  property  sale.  The
Partnership's  cash available for  distribution  is reviewed on a monthly basis.
There can be no assurance that the Partnership  will generate  sufficient  funds
from operations, after planned capital expenditures,  to permit distributions to
its partners  during the remainder of 2002 or subsequent  periods.  In addition,
the Partnership may be restricted from making distributions if the amount in the
reserve account for Governor's Park Apartments maintained by the mortgage lender
is equal to a minimum of $200 and a maximum of $400 per  apartment  unit at such
property  for a total of  approximately  $38,000 to $75,000.  As of December 31,
2001, the reserve account was fully funded with approximately $76,000 on deposit
with the mortgage lender.

In addition to its indirect  ownership of the general  partner  interests in the
Partnership,  AIMCO and its affiliates  owned 10,552 limited  partnership  units
(the "Units") in the Partnership representing 60.84% of the outstanding Units at
December  31,  2001.  A number of these Units were  acquired  pursuant to tender
offers  made by  AIMCO  or its  affiliates.  It is  possible  that  AIMCO or its
affiliates will make one or more additional offers to acquire additional limited
partnership  interests in the  Partnership  for cash or in exchange for units in
the operating partnership of AIMCO. Under the Partnership Agreement, unitholders
holding a majority of the Units are  entitled  to take action with  respect to a
variety of matters,  which would  include  voting on certain  amendments  to the
Partnership  Agreement and voting to remove the Corporate General Partner.  As a
result  of its  ownership  of  60.84% of the  outstanding  Units,  AIMCO is in a
position to control all such voting  decisions  with respect to the  Registrant.
When voting on matters, AIMCO would in all likelihood vote the Units it acquired
in a manner  favorable to the interest of the Corporate  General Partner because
of its affiliation with the Corporate General Partner.

Recent Accounting Pronouncements

In August 2001, the Financial  Accounting Standards Board issued SFAS No. 144,
"Accounting  for the  Impairment or Disposal of Long-Lived  Assets".  SFAS No.
144 provides  accounting  guidance for financial  accounting and reporting for
the impairment or disposal of long-lived assets.  SFAS No. 144 supersedes SFAS
No.  121,  "Accounting  for  the  Impairment  of  Long-Lived  Assets  and  for
Long-Lived  Assets to be Disposed  Of".  SFAS No. 144 is effective  for fiscal
years  beginning  after December 15, 2001. The Corporate  General Partner does
not anticipate  that its adoption will have a material effect on the financial
position or results of operations of the Partnership.

Item 7.     Financial Statements

SHELTER PROPERTIES VII LIMITED PARTNERSHIP

LIST OF FINANCIAL STATEMENTS

      Independent Auditors' Report

      Consolidated Balance Sheet - December 31, 2001

      Consolidated  Statements of  Operations - Years ended  December 31, 2001
      and 2000

      Consolidated  Statements of Changes in Partners' (Deficit) Capital - Years
      ended December 31, 2001 and 2000

      Consolidated  Statements  of Cash Flows - Years ended  December 31, 2001
      and 2000

      Notes to Consolidated Financial Statements



<PAGE>


              Report of Ernst & Young LLP, Independent Auditors



The Partners
Shelter Properties VII Limited Partnership


We  have  audited  the  accompanying   consolidated  balance  sheet  of  Shelter
Properties  VII Limited  Partnership  as of December 31,  2001,  and the related
consolidated  statements of operations,  changes in partners' (deficit) capital,
and cash flows for each of the two years in the period ended  December 31, 2001.
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 conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 the  Partnership's  management,  as  well  as  evaluating  the  overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the consolidated financial position of Shelter Properties
VII Limited  Partnership at December 31, 2001, and the  consolidated  results of
its  operations and its cash flows for each of the two years in the period ended
December 31, 2001, in conformity with accounting  principles  generally accepted
in the United States.

                                                          /s/ERNST & YOUNG LLP



Greenville, South Carolina
February 15, 2002


<PAGE>




                  SHELTER PROPERTIES VII LIMITED PARTNERSHIP

                           CONSOLIDATED BALANCE SHEET
                       (in thousands, except unit data)

                                December 31, 2001

<TABLE>
<CAPTION>


Assets
<S>                                                                          <C>
   Cash and cash equivalents                                                 $  212
   Receivables and deposits                                                      87
   Restricted escrows                                                            76
   Other assets                                                                  43
   Investment properties (Note C and D):
      Land                                                     $ 714
      Buildings and personal property                           7,315
                                                                8,029
      Less accumulated depreciation                            (4,070)        3,959
                                                                            $ 4,377

Liabilities and Partners' Deficit

Liabilities
      Accounts payable                                                        $ 19
      Tenant security deposit liabilities                                        35
      Accrued property taxes                                                    105
      Other liabilities                                                         131
      Mortgage notes payable (Note C)                                         4,357

Partners' Deficit
   General partners                                            $ (99)
   Limited partners (17,343 units issued and
      outstanding)                                               (171)         (270)
                                                                            $ 4,377

        See Accompanying Notes to Consolidated Financial Statements

</TABLE>

<PAGE>

                  SHELTER PROPERTIES VII LIMITED PARTNERSHIP

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                       (in thousands, except unit data)

<TABLE>
<CAPTION>


                                                            Years Ended December 31,
                                                              2001            2000
Revenues:
<S>                                                          <C>            <C>
  Rental income                                              $ 2,755        $ 3,795
  Other income                                                   275            243
  Gain on sale of investment property (Note H)                 4,173             --
  Casualty gain (Note G)                                          18             81
      Total revenues                                           7,221          4,119

Expenses:
  Operating                                                    1,159          1,548
  General and administrative                                     249            219
  Depreciation                                                   577            840
  Interest                                                       668            844
  Property taxes                                                 261            353
      Total expenses                                           2,914          3,804

Income before extraordinary loss                               4,307            315
Extraordinary loss on early extinguishment of debt
  (Note H)                                                        (7)            --

Net income                                                   $ 4,300         $ 315

Net income allocated to general partners (1%)                 $ 43            $ 3
Net income allocated to limited partners (99%)                 4,257            312

                                                             $ 4,300         $ 315
Per limited partnership unit:
  Income before extraordinary loss                           $245.86        $ 17.99
  Extraordinary loss                                           (0.40)            --

                                                             $245.46        $ 17.99

Distributions per limited partnership unit                   $314.88        $ 11.42

        See Accompanying Notes to Consolidated Financial Statements
</TABLE>


<PAGE>


                  SHELTER PROPERTIES VII LIMITED PARTNERSHIP

      CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
                       (in thousands, except unit data)


<TABLE>
<CAPTION>

                                         Limited
                                       Partnership    General     Limited
                                          Units       Partners   Partners     Total

<S>                                       <C>           <C>       <C>        <C>
Original capital contributions            17,343        $ 2       $17,343    $17,345

Partners' (deficit) capital at
  December 31, 1999                       17,343         (142)        919        777

Distributions paid to partners                --           (2)       (198)      (200)

Net income for the year ended
  December 31, 2000                           --            3         312        315

Partners' (deficit) capital at
  December 31, 2000                       17,343         (141)      1,033        892

Distributions paid to partners                --           (1)     (5,461)    (5,462)

Net income for the year ended
  December 31, 2001                           --           43       4,257      4,300

Partners' deficit at
  December 31, 2001                       17,343       $ (99)     $ (171)     $ (270)

        See Accompanying Notes to Consolidated Financial Statements

</TABLE>

<PAGE>


                  SHELTER PROPERTIES VII LIMITED PARTNERSHIP

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)

<TABLE>
<CAPTION>
                                                                    Years Ended December 31,
                                                                       2001          2000
Cash flows from operating activities:
<S>                                                                   <C>           <C>
  Net income                                                          $ 4,300       $ 315
  Adjustments to reconcile net income to net cash provided by
   operating activities:
     Depreciation                                                         577           840
     Amortization of discounts and loan costs                              62            44
     Gain on sale of investment property                               (4,173)           --
     Casualty gain                                                        (18)          (81)
     Bad debt                                                             105           126
     Extraordinary loss on early extinguishment of debt                     7            --
     Change in accounts:
      Receivables and deposits                                             10          (148)
      Other assets                                                         42           (24)
      Accounts payable                                                    (79)            3
      Tenant security deposits liabilities                                (57)           13
      Accrued taxes                                                      (121)            6
      Other liabilities                                                    19           (49)
          Net cash provided by operating activities                       646         1,045

Cash flows from investing activities:
  Property improvements and replacements                                 (487)         (822)
  Net insurance proceeds                                                   18           125
  Net receipts from (deposits to) restricted escrows                        2           (39)
  Net proceeds on sale of investment property                          11,333            --
          Net cash provided by (used in) investing activities          10,866          (736)

Cash flows from financing activities:
  Payments on mortgage notes payable                                     (160)         (239)
  Repayment of mortgage note payable                                   (5,990)           --
  Distributions paid to partners                                       (5,462)         (200)
  Advances from affiliate                                                 150            --
  Payments on advances from affiliate                                    (150)           --
  Loan costs paid                                                         (32)           --
          Net cash used in financing activities                       (11,644)         (439)

Net decrease in cash and cash equivalents                                (132)         (130)
Cash and cash equivalents at beginning of period                          344           474

Cash and cash equivalents at end of period                             $ 212        $ 344

Supplemental disclosure of cash flow information:
  Cash paid for interest                                               $ 595        $ 853
Supplemental disclosure of non-cash activity:
  Property improvements and replacements included in accounts
   payable                                                             $ --          $ 60

Property  improvements  and  replacements  and  accumulated   depreciation  were
adjusted  during the year  ended  December  31,  2000 by  $92,000  and  $48,000,
respectively, as a result of a May 2000 casualty at Hickory Ridge Apartments.

        See Accompanying Notes to Consolidated Financial Statements

</TABLE>

<PAGE>

                  SHELTER PROPERTIES VII LIMITED PARTNERSHIP

                  Notes to Consolidated Financial Statements

                                December 31, 2001


Note A - Organization and Significant Accounting Policies

Organization:

Shelter  Properties VII Limited  Partnership (the "Partnership" or "Registrant")
was  organized  as a  limited  partnership  under the laws of the State of South
Carolina on October 29, 1984. The general partner  responsible for management of
the Partnership's  business is Shelter Realty VII Corporation,  a South Carolina
corporation (the "Corporate General Partner").  The Corporate General Partner is
a subsidiary of Apartment  Investment  Management Company ("AIMCO"),  a publicly
traded  real  estate  investment  trust.  The  other  general  partner  is AIMCO
Properties,  L.P., an affiliate of the Corporate  General Partner and AIMCO. The
Partnership  Agreement provides that the Partnership is to terminate on December
31,  2024  unless  terminated  prior to such  date.  The  Partnership  commenced
operations  on August  27,  1985 and  completed  its  acquisition  of  apartment
properties on December 6, 1985.  The  Partnership  owns one  apartment  property
located in Colorado.

Principles of Consolidation:

The Registrant's financial statements include all the accounts of the Registrant
and its 99.99%  owned  partnership.  The  general  partner  of the  consolidated
partnership is Shelter Realty VII  Corporation.  Shelter Realty VII  Corporation
may be removed by the Registrant;  therefore,  the  consolidated  partnership is
controlled and consolidated by the Registrant. All significant  interpartnership
transactions have been eliminated.

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 amounts reported in the financial  statements and accompanying notes.
Actual results could differ from those estimates.

Allocation of Cash Distributions:

Cash  distributions by the Partnership are allocated between general and limited
partners in accordance  with the provisions of the  Partnership  Agreement.  The
Partnership  Agreement defines net cash from operations as revenue received less
operating  expenses paid,  adjusted for certain  specified items which primarily
include mortgage  payments on debt,  property  improvements and replacements not
previously reserved,  and the effects of other adjustments to reserves including
reserve  amounts  deemed  necessary by the  Corporate  General  Partner.  In the
following notes to the  consolidated  financial  statements,  whenever "net cash
from operations" is used, it has the aforementioned  meaning. The following is a
reconciliation  of the subtotal in the accompanying  consolidated  statements of
cash flows  captioned  "net cash provided by operating  activities" to "net cash
from operations",  as defined in the Partnership  Agreement.  However, "net cash
from  operations"  should not be considered an  alternative  to net income as an
indicator  of the  Partnership's  operating  performance  or to cash  flows as a
measure of liquidity.

                                                        Years Ended December 31,
                                                             2001         2000
                                                              (in thousands)

Net cash provided by operating activities                   $ 646       $ 1,045
  Property improvements and replacements                      (487)        (822)
  Payments on mortgage notes payable                          (160)        (239)
  Changes in reserves for net operating liabilities            109           73
  Changes in restricted escrows, net                             2          (39)
  (Additional) release of reserves                            (110)          68

   Net cash from operations                                  $ --       $    86

The Corporate  General Partner reserved  approximately  $110,000 at December 31,
2001 to fund capital improvements and repairs at its remaining property.

The Corporate General Partner released previously reserved cash of approximately
$68,000 during the year ended December 31, 2000.

Distributions made from reserves no longer considered necessary by the Corporate
General  Partner are  considered to be additional  net cash from  operations for
allocation purposes.

The Partnership  Agreement  provides that 99% of  distributions of net cash from
operations  are  allocated to the limited  partners  until they receive net cash
from  operations  for such  fiscal  year equal to 7% of their  adjusted  capital
values (as  defined in the  Partnership  Agreement),  at which point the general
partners will be allocated all net cash from operations until they have received
distributions equal to 10% of the aggregate net cash from operations distributed
to partners  for such fiscal  year.  Thereafter,  the general  partners  will be
allocated 10% of any  distributions  of remaining net cash from  operations  for
such fiscal year.

All  distributions of distributable  net proceeds (as defined in the Partnership
Agreement) from property  dispositions and refinancings will be allocated to the
limited  partners  until each limited  partner has received an amount equal to a
cumulative 7% per annum of the average of the limited partners' adjusted capital
value,   less  any  prior   distributions   of  net  cash  from  operations  and
distributable net proceeds, and has also received an amount equal to the limited
partners' adjusted capital value. Thereafter, the general partners receive 1% of
the selling prices of properties sold where they acted as a broker, and then the
limited  partners  will  be  allocated  85% of any  remaining  distributions  of
distributable net proceeds and the general partners will receive 15%.

Distributions  may be  restricted  by the  requirement  to deposit net operating
income (as  defined in the  mortgage  note) into the Reserve  Account  until the
Reserve  Account  is funded in an amount  equal to $200 per  apartment  unit for
Governor's  Park  Apartments.  As of December 31, 2001,  the Reserve  Account is
fully funded.

Undistributed Net Proceeds from Sale:

At December 31, 2001,  approximately  $638,000 of net proceeds  from the sale of
Hickory Ridge remained undistributed.

Allocation of Profits, Gains and Losses:

Profits,  gains, and losses of the Partnership are allocated between general and
limited partners in accordance with the provisions of the Partnership Agreement.

For any fiscal  year,  to the extent  that  profits,  not  including  gains from
property dispositions,  do not exceed distributions of net cash from operations,
such profits are allocated in the same manner as such distributions.

Any gain from property  dispositions  attributable to the excess, if any, of the
indebtedness relating to a property immediately prior to the disposition of such
property  over  the  Partnership's  adjusted  basis  in the  property  shall  be
allocated to each partner  having a negative  capital  account  balance,  to the
extent of such negative  balance.  The balance of any gain shall be treated on a
cumulative basis as if it constituted an equivalent  amount of distributable net
proceeds  and shall be  allocated  to the  general  partners  to the extent that
general  partners would have received  distributable  net proceeds in connection
therewith; the balance shall be allocated to the limited partners.  However, the
interest  of the general  partners  will be equal to at least 1% of each gain at
all times during the existence of the  Partnership.  Accordingly,  net income as
shown in the statement of operations and changes in partners'  (deficit) capital
for  2001  was  allocated  99% to the  limited  partners  and 1% to the  general
partners.  Net income per limited  partnership unit was computed by dividing the
net income allocated to the limited partners by 17,343 units outstanding.

All  losses,  including  losses  attributable  to  property  dispositions,   are
allocated 99% to the limited partners and 1% to the general partners.

Other Reserves:

The Corporate  General  Partner may designate a portion of cash  generated  from
operations as "other  reserves" in  determining  net cash from  operations.  The
general  partners  designated  as  other  reserves  an  amount  equal to the net
liabilities related to the operations of apartment properties during the current
fiscal year that are  expected to require the use of cash during the next fiscal
year. The increase in other reserves during 2001 was approximately  $109,000, as
compared to an increase of approximately $73,000 during 2000. These amounts were
determined by considering  changes in the balance of,  receivables and deposits,
other assets,  accounts payable,  tenant security deposits liabilities,  accrued
property  taxes  due to  affiliate  and other  liabilities.  At this  time,  the
Corporate  General Partner expects to continue to adjust other reserves based on
the net change in the aforementioned account balances.

Cash and Cash Equivalents:

Cash and cash  equivalents  include cash on hand and in banks. At certain times,
the amount of cash deposited at a bank may exceed the limit on insured deposits.
Cash  balances  include  approximately  $157,000 at  December  31, 2001 that are
maintained by an affiliated  management company on behalf of affiliated entities
in cash concentration accounts.

Restricted Escrows:

At the time of the  refinancing of the Governor's  Park mortgage note payable in
1993, a General Reserve Account was  established  with the refinancing  proceeds
from Governor's Park.  These funds were  established to cover necessary  repairs
and replacements of existing improvements,  debt service, out of pocket expenses
incurred for ordinary and necessary  administrative  tasks,  and payment of real
property taxes and insurance  premiums.  The  Partnership is required to deposit
net operating  income (as defined in the mortgage note) to the  Governor's  Park
reserve  account  until it equals a  minimum  of $200 per  apartment  unit and a
maximum of $400 per apartment  unit or $37,600 to $75,000 in total.  The balance
in the reserve  account at December 31, 2001, is  approximately  $76,000,  which
includes interest earned on these funds.

Investment Property:

Investment  property  consists of one  apartment  complex and is stated at cost.
Acquisition  fees are  capitalized as a cost of real estate.  In accordance with
Statement of Financial  Accounting  Standards ("SFAS") No. 121,  "Accounting for
the  Impairment of Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed
Of," the  Partnership  records  impairment  losses on long-lived  assets used in
operations  when  events and  circumstances  indicate  that the assets  might be
impaired  and the  undiscounted  cash flows  estimated  to be generated by those
assets are less than the carrying  amounts of those  assets.  Costs of apartment
properties  that have  been  permanently  impaired  have  been  written  down to
appraised value. The Corporate  General Partner relies on the annual  appraisals
performed by the outside appraisers for the estimated value of the Partnership's
property.  There are three recognized  approaches or techniques available to the
appraiser.  When  applicable,  these  approaches  are used to  process  the data
considered  significant to each to arrive at separate value indications.  In all
instances the experience of the appraiser,  coupled with his objective judgment,
plays a major role in arriving at the  conclusions  of the  indicated  value for
which the final estimate of value is made. The three  approaches  commonly known
are the cost approach,  the sales  comparison  approach and the income approach.
The cost approach is often not considered to be reliable due to the lack of land
sales and the significant  amount of depreciation and,  therefore,  is often not
presented.  Upon receipt of the appraisals,  any property which is stated on the
books of the Partnership  above the estimated  value given in the appraisal,  is
written  down to the  estimated  value  given by the  appraiser.  The  appraiser
assumes a stabilized occupancy at the time of the appraisal and, therefore,  any
impairment  of value is  considered  to be  permanent by the  Corporate  General
Partner. No adjustments for impairment of value were recorded in the years ended
December 31, 2001 and 2000. See "Recent Accounting Pronouncements" below.

Depreciation:

Depreciation is calculated by the  straight-line  method over the estimated life
of the apartment property and related personal property.  For Federal income tax
purposes, the accelerated cost recovery method is used for real property over 18
years for  additions  after March 15, 1984 and before May 9, 1985,  and 19 years
for additions  after May 8, 1985, and before January 1, 1987. As a result of the
Tax Reform Act of 1986,  for  additions  after  December 31, 1986,  the modified
accelerated  cost recovery method is used for  depreciation of (1) real property
over 27 1/2 years and (2) personal property additions over 5 years.

Loan Costs:

Loan  costs  of  approximately  $197,000,  net of  accumulated  amortization  of
approximately  $162,000, are included in other assets and are being amortized on
a straight-line basis over the life of the loans.

Tenant Security Deposits:

The Partnership  requires security deposits from lessees for the duration of the
lease and such deposits are included in receivables  and deposits.  Deposits are
refunded when the tenant vacates,  provided the tenant has not damaged its space
and is current on rental payments.

Fair Value of Financial Instruments:

SFAS No.  107,  "Disclosures  about Fair  Value of  Financial  Instruments",  as
amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and
Fair  Value  of  Financial  Instruments",  requires  disclosure  of  fair  value
information  about  financial  instruments,  whether  or not  recognized  in the
balance sheet, for which it is practicable to estimate fair value. Fair value is
defined in the SFAS as the amount at which the instruments could be exchanged in
a  current  transaction  between  willing  parties,  other  than in a forced  or
liquidation  sale.  The  Partnership  believes that the carrying  amounts of its
financial  instruments (except for long term debt) approximate their fair values
due to the short  term  maturity  of these  instruments.  The fair  value of the
Partnership's  long term debt, after  discounting the scheduled loan payments to
maturity, approximates its carrying balance.

Leases:

The Partnership generally leases apartment units for twelve-month terms or less.
The  Partnership  recognizes  income as earned on its leases.  In addition,  the
Corporate  General  Partner's  policy  is to  offer  rental  concessions  during
particularly  slow months or in response to heavy competition from other similar
complexes in the area. Concessions are charged to rental income as incurred.

Advertising Costs:

The Partnership expenses the costs of advertising as incurred. Advertising costs
of  approximately  $66,000 and $68,000 for the years ended December 31, 2001 and
2000, respectively, were charged to operating expense.

Segment Reporting:

SFAS  No.  131,   "Disclosure  about  Segments  of  an  Enterprise  and  Related
Information"  established standards for the way that public business enterprises
report information about operating  segments in annual financial  statements and
requires that those  enterprises  report  selected  information  about operating
segments in interim financial reports. It also established standards for related
disclosures about products and services,  geographic areas, and major customers.
As defined in SFAS 131, the  Partnership  has only one reportable  segment.  The
Corporate  General  Partner  believes  that segment based  disclosures  will not
result  in a  more  meaningful  presentation  than  the  consolidated  financial
statements as currently presented.

Recent Accounting Pronouncements:

In August 2001, the Financial  Accounting Standards Board issued SFAS No. 144,
"Accounting  for the  Impairment or Disposal of Long-Lived  Assets".  SFAS No.
144 provides  accounting  guidance for financial  accounting and reporting for
the impairment or disposal of long-lived assets.  SFAS No. 144 supersedes SFAS
No.  121,  "Accounting  for  the  Impairment  of  Long-Lived  Assets  and  for
Long-Lived  Assets to be Disposed  Of".  SFAS No. 144 is effective  for fiscal
years  beginning  after December 15, 2001. The Corporate  General Partner does
not anticipate  that its adoption will have a material effect on the financial
position or results of operations of the Partnership.

Note B - Transactions with Affiliated Parties

The  Partnership  has no employees  and is dependent  on the  Corporate  General
Partner  and  its  affiliates  for  the  management  and  administration  of all
partnership  activities.  The  Partnership  Agreement  provides  for (i) certain
payments to affiliates for services and (ii)  reimbursement  of certain expenses
incurred by affiliates on behalf of the Partnership. The following payments were
paid or accrued to the Corporate General Partner and affiliates during the years
ended December 31, 2001 and 2000:

                                                              2001        2000
                                                               (in thousands)

Property management fees (included in operating
  expenses)                                                   $170        $209
Reimbursements for services of affiliates (included in
  general and administrative, operating expenses and
  investment properties)                                       398         137

Affiliates of the Corporate  General Partner are entitled to receive 5% of gross
receipts  from  both  of the  Registrant's  properties  for  providing  property
management  services.  The  Registrant  paid  to such  affiliates  approximately
$170,000  and  $209,000  for  the  years  ended  December  31,  2001  and  2000,
respectively.

An  affiliate  of the  Corporate  General  Partner  received  reimbursements  of
accountable  administrative  expenses  amounting to  approximately  $398,000 and
$136,000 for the year ended December 31, 2001 and 2000,  respectively.  Included
in these amounts are fees related to construction  management  services provided
by an affiliate of the Corporate  General Partner of approximately  $265,000 for
the year ended December 31, 2001. The construction  management  service fees are
calculated  based upon a percentage of current and certain prior year  additions
to investment  properties and are being depreciated over 15 years. There were no
such costs during the year ended December 31, 2000.

In  accordance  with the  Partnership  Agreement,  an affiliate of the Corporate
General Partner loaned the Partnership  $150,000 to cover operating  expenses at
Hickory Ridge  Apartments.  The entire  balance was repaid during the year ended
December  31,  2001.  Interest  was charged at the prime rate plus 2%.  Interest
expense was  approximately  $2,000 for the year ended  December 31, 2001.  There
were no loans from the General Partner or associated interest expense during the
year ended December 31, 2000.

Beginning in 2001, the  Partnership  began insuring its properties up to certain
limits through coverage provided by AIMCO which is generally  self-insured for a
portion of losses and  liabilities  related  to workers  compensation,  property
casualty and vehicle liability. The Partnership insures its properties above the
AIMCO  limits  through  insurance  policies  obtained  by  AIMCO  from  insurers
unaffiliated with the Corporate General Partner.  During the year ended December
31, 2001, the Partnership  paid AIMCO and its affiliates  approximately  $49,000
for insurance coverage and fees associated with policy claims administration.

In addition to its indirect  ownership of the general  partner  interests in the
Partnership,  AIMCO and its affiliates  owned 10,552 limited  partnership  units
(the "Units") in the Partnership representing 60.84% of the outstanding Units at
December  31,  2001.  A number of these Units were  acquired  pursuant to tender
offers  made by  AIMCO  or its  affiliates.  It is  possible  that  AIMCO or its
affiliates will make one or more additional offers to acquire additional limited
partnership  interests in the  Partnership  for cash or in exchange for units in
the operating partnership of AIMCO. Under the Partnership Agreement, unitholders
holding a majority of the Units are  entitled  to take action with  respect to a
variety of matters,  which would  include  voting on certain  amendments  to the
Partnership  Agreement and voting to remove the Corporate General Partner.  As a
result  of its  ownership  of  60.84% of the  outstanding  Units,  AIMCO is in a
position to control all voting  decisions with respect to the  Registrant.  When
voting on matters, AIMCO would in all likelihood vote the Units it acquired in a
manner favorable to the interest of the Corporate General Partner because of its
affiliation with the Corporate General Partner.

Note C - Mortgage Notes Payable

The principal terms of mortgage notes payable are as follows:
<TABLE>
<CAPTION>

                         Principal      Monthly                             Principal
                         Balance At     Payment     Stated                   Balance
                        December 31,   Including   Interest   Maturity       Due At
                            2001       Interest      Rate       Date        Maturity
Property                     (in thousands)                              (in thousands)

Governor's Park
  Apartments
<S>            <C>        <C>                <C>    <C>       <C>   <C>      <C>
  1st mortgage (1)        $ 4,241            35     7.83%     10/15/03       $ 4,083
  2nd mortgage (1)            147             1     7.83%     10/15/03           147
                            4,388
Less unamortized
  discounts                   (31)
                          $ 4,357        $ 36                                $ 4,230
</TABLE>

(1)   Subsequent to December 31, 2001 these mortgages were refinanced. See "Note
      I" for further discussion.

The  mortgage  notes  payable are  nonrecourse  and are secured by pledge of the
Partnership's  rental  property  and by pledge of revenues  from the  respective
rental property.  Prepayment penalties are required if repaid prior to maturity.
Further, the property may not be sold subject to existing indebtedness.

Scheduled  principal  payments  of the  mortgage  notes  payable  subsequent  to
December 31, 2001 are as follows (in thousands):

                               2002             $    88
                               2003               4,300
                                                $ 4,388

Note D - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>

                                                Initial Cost
                                               To Partnership
                                               (in thousands)

                                                        Buildings           Cost
                                                       and Related      Capitalized
                                                        Personal       Subsequent to
Description               Encumbrances      Land        Property        Acquisition
                         (in thousands)                                (in thousands)
Governor's Park
<S>                         <C>             <C>          <C>               <C>
  Apartments                $ 4,388         $ 714        $ 6,496           $ 819

</TABLE>

<TABLE>
<CAPTION>

                             Gross Amount At Which Carried
                                  At December 31, 2001
                                     (in thousands)

                           Buildings
                          And Related
                           Personal           Accumulated    Date of      Date    Depreciation
Description        Land    Property    Total  Depreciation Construction Acquired  Life-Years

<S>               <C>       <C>       <C>        <C>           <C>      <C>   <C>    <C>
Governor's Park   $ 714     $7,315    $8,029     $4,070        1983     09/30/85     5-39

</TABLE>

Reconciliation of "Real Estate and Accumulated Depreciation":


                                                  December 31,
                                              2001           2000
                                                 (in thousands)
Real Estate
Balance at beginning of year                $ 23,624       $ 22,834
  Property improvements                          427            882
  Sale of investment property                (16,022)            --
  Disposal of assets                              --            (92)
Balance at end of year                      $ 8,029        $ 23,624

Accumulated Depreciation
Balance at beginning of year                $ 12,377       $ 11,585
  Additions charged to expense                   577            840
  Sale of investment property                 (8,884)            --
  Disposal of assets                              --            (48)
Balance at end of year                      $ 4,070        $ 12,377


The  aggregate  cost of investment  property for Federal  income tax purposes at
December  31,  2001  and  2000  is  approximately  $8,572,000  and  $26,361,000,
respectively. The accumulated depreciation taken for Federal income tax purposes
at  December  31, 2001 and 2000 is  approximately  $6,059,000  and  $17,402,000,
respectively.

Note E - Income Taxes

The Partnership has received a ruling from the Internal  Revenue Service that it
will  be  classified  as  a  partnership   for  Federal   income  tax  purposes.
Accordingly, no provision for income taxes is made in the consolidated financial
statements of the  Partnership.  Taxable  income or loss of the  Partnership  is
reported in the income tax returns of its partners.

The  following is a  reconciliation  of reported net income and Federal  taxable
income (in thousands, except per unit data):

                                                     2001         2000

Net income as reported                             $ 4,300       $ 315
Add (deduct):
   Depreciation differences                           (166)        (301)
   Unearned income                                     (16)          21
   Other                                               (45)        (208)
   Gain on sale of investment property               1,107           --

Federal taxable loss                               $ 5,180       $ (173)

Federal taxable loss per limited
   partnership unit                                $295.68      $ (9.86)

The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands):

               Net liabilities as reported            $ (270)
               Buildings                                 544
               Accumulated depreciation               (1,990)
               Syndication fees                        2,292
               Other                                     132

               Net assets - tax basis                 $ 708

Note F - Distributions

During the year ended  December  31,  2001,  the  Partnership  declared and paid
distributions of  approximately  $86,000  (approximately  $85,000 to the limited
partners  or  $4.90  per  limited   partnership   unit)  from   operations   and
approximately   $4,809,000  to  the  limited   partners   ($277.29  per  limited
partnership  unit)  from the net  proceeds  of the sale of  Hickory  Ridge.  The
Partnership  also paid a  distribution  of  previously  undistributed  refinance
proceeds of approximately  $567,000 ($32.69 per limited partnership unit) to the
limited partners during the year ended December 31, 2001.  During the year ended
December 31, 2000,  the  Partnership  paid a  distribution  from  operations  of
approximately $200,000 (approximately $198,000 to the limited partners or $11.42
per limited partnership unit).

Note G - Casualty Gain

During the year ended  December 31, 2000, a net casualty  gain of  approximately
$81,000 was recognized at Hickory Ridge Apartments. The casualty gain related to
a fire that  damaged 5 apartment  units in May 2000.  The gain was the result of
insurance proceeds of approximately  $125,000 offset by the write-off of the net
book  value of damaged  units of  approximately  $44,000.  During the year ended
December 31, 2001 an additional  casualty gain of approximately  $18,000 related
to this fire was recorded.  The additional  gain was a result of final insurance
proceeds of  approximately  $18,000 received in February 2001. Since the related
assets  were  written  off during the year ended  December  31,  2000 the entire
proceeds were recognized as a gain.

Note H - Sale of Investment Property

On July 16, 2001, the Partnership  sold Hickory Ridge Apartments to an unrelated
third  party for net  proceeds of  approximately  $11,333,000  after  payment of
closing costs. The Partnership realized a gain of approximately  $4,173,000 as a
result of the sale. The  Partnership  used  approximately  $5,990,000 of the net
proceeds to repay the  mortgage  encumbering  the  property.  In  addition,  the
Partnership  recorded an extraordinary  loss on early  extinguishment of debt of
approximately $7,000 as a result of unamortized loan costs being written off.

Note I - Subsequent Event

On  February  8, 2002,  the  Partnership  refinanced  the  mortgage  encumbering
Governor's  Park. The refinancing  replaced the first mortgage of  approximately
$4,234,000 and the second mortgage of approximately $147,000 with a new mortgage
balance of $6,990,000.  The new mortgage carries a stated interest rate of 7.12%
compared to the 7.83% interest rate on the old mortgages. Principal and interest
payments on the mortgage of approximately $55,000 are due monthly until the loan
matures in March of 2022 at which time the loan will be fully  amortized.  Total
capitalized loan costs were approximately  $278,000.  The Partnership recognized
an  extraordinary  loss on the  early  extinguishment  of debt of  approximately
$241,000 due to the  write-off of  unamortized  loan costs and debt discount and
prepayment penalties.

Note J - Legal Proceedings

In March 1998, several putative unit holders of limited partnership units of the
Partnership  commenced an action  entitled  Rosalie  Nuanes,  et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of  California  for the  County  of San  Mateo.  The  plaintiffs  named as
defendants,  among others,  the Partnership,  its Corporate  General Partner and
several of their  affiliated  partnerships  and corporate  entities.  The action
purports  to  assert  claims  on  behalf  of a class  of  limited  partners  and
derivatively  on behalf  of a number  of  limited  partnerships  (including  the
Partnership)  which are named as nominal  defendants,  challenging,  among other
things,  the  acquisition  of interests  in certain  Corporate  General  Partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one  time,  affiliates  of  Insignia;  past  tender  offers  by the  Insignia
affiliates to acquire limited partnership units;  management of the partnerships
by the  Insignia  affiliates;  and the series of  transactions  which  closed on
October 1, 1998 and February 26, 1999 whereby  Insignia and Insignia  Properties
Trust,  respectively,  were merged  into AIMCO.  The  plaintiffs  seek  monetary
damages and equitable relief, including judicial dissolution of the Partnership.
On June 25, 1998, the Corporate General Partner filed a motion seeking dismissal
of the action.  In lieu of responding  to the motion,  the  plaintiffs  filed an
amended complaint.  The Corporate General Partner filed demurrers to the amended
complaint which were heard February 1999.

Pending the ruling on such  demurrers,  settlement  negotiations  commenced.  On
November 2, 1999,  the parties  executed and filed a Stipulation  of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the  settlement  was obtained on November 3, 1999 from the Court,  at which time
the Court set a final  approval  hearing for  December  10,  1999.  Prior to the
December  10,  1999  hearing,  the  Court  received  various  objections  to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement.  On
December 14, 1999, the Corporate  General Partner and its affiliates  terminated
the  proposed  settlement.  In  February  2000,  counsel  for some of the  named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated  the  settlement.  On June  27,  2000,  the  Court  entered  an order
disqualifying  them  from the case and an  appeal  was  taken  from the order on
October 5, 2000. On December 4, 2000, the Court  appointed the law firm of Lieff
Cabraser  Heimann & Bernstein  LLP as new lead  counsel for  plaintiffs  and the
putative class.  Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001,  the  Corporate  General  Partner and its  affiliates  filed a
demurrer to the third amended  complaint.  On May 14, 2001,  the Court heard the
demurrer to the third amended  complaint.  On July 10, 2001, the Court issued an
order  sustaining  defendants'  demurrer on certain  grounds.  On July 20, 2001,
Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order
granting in part and denying in part defendants' demurrer. On September 7, 2001,
Plaintiffs  filed a fourth amended class and  derivative  action  complaint.  On
September 12, 2001, the Court denied Plaintiffs' motion for reconsideration.  On
October 5, 2001, the Corporate General Partner and affiliated defendants filed a
demurrer to the fourth amended complaint,  which was heard on December 11, 2001.
On February 2, 2002,  the Court served its order  granting in part the demurrer.
The  Court has  dismissed  without  leave to amend  certain  of the  plaintiffs'
claims.  On February 11, 2002,  plaintiffs  filed a motion  seeking to certify a
putative  class  comprised of all  non-affiliated  persons who own or have owned
units  in  the  partnerships.  The  Corporate  General  Partner  and  affiliated
defendants  intend  to  oppose  the  motion  and are  scheduled  to  file  their
opposition  brief on March 26, 2002. A hearing on the motion has been  scheduled
for April 29, 2002. The Court has set the matter for trial in January 2003.

During the third  quarter of 2001, a complaint  (the "Heller  action") was filed
against  the same  defendants  that are named in the  Nuanes  action,  captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended  complaint.  The first amended complaint in the Heller action is
brought as a purported  derivative  action,  and asserts  claims for among other
things  breach  of  fiduciary  duty;  unfair  competition;   conversion,  unjust
enrichment;  and judicial  dissolution.  Plaintiffs in the Nuanes action filed a
motion to  consolidate  the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed  without  leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the Corporate  General Partner and affiliated
defendants  moved to strike the first  amended  complaint  in its  entirety  for
violating  the Court's July 10, 2001 order  granting in part and denying in part
defendants'  demurrer in the Nuanes action, or alternatively,  to strike certain
portions of the complaint based on the statute of limitations.  Other defendants
in the action  demurred to the fourth  amended  complaint,  and,  alternatively,
moved to strike the complaint. On December 11, 2001, the court heard argument on
the motions  and took the matters  under  submission.  On February 4, 2002,  the
Court  served  notice of its order  granting  defendants'  motion to strike  the
Heller complaint as a violation of its July 10, 2001 order in the Nuanes action.

The Corporate General Partner does not anticipate that any costs,  whether legal
or  settlement  costs,  associated  with  these  cases will be  material  to the
Partnership's overall operations.

The  Partnership is unaware of any other pending or outstanding  litigation that
is not of a routine nature arising in the ordinary course of business.

Item 8.     Changes in and  Disagreements  with  Accountants on Accounting and
            Financial Disclosure

            None.


                                    PART III

Item 9.     Directors,  Executive  Officers,  Promoters  and Control  Persons;
            Compliance with Section 16(a) of the Exchange Act

The Registrant has no officers or directors.  The Corporate  General  Partner is
Shelter Realty VII Corporation.  The names and ages of, as well as the positions
and  offices  held by,  the  present  executive  officers  and  director  of the
Corporate General Partner are set forth below. There are no family relationships
between or among any officers or directors.

Name                        Age    Position

Patrick J. Foye              44    Executive Vice President and Director

Martha L. Long               42    Senior Vice President and Controller

Patrick  J.  Foye  has been  Executive  Vice  President  and  Director  of the
Corporate  General  Partner  since  October  1, 1998.  Mr.  Foye has served as
Executive  Vice  President  of AIMCO since May 1998.  Prior to joining  AIMCO,
Mr.  Foye was a partner in the law firm of  Skadden,  Arps,  Slate,  Meagher &
Flom LLP from 1989 to 1998 and was  Managing  Partner of the firm's  Brussels,
Budapest and Moscow  offices from 1992 through  1994.  Mr. Foye is also Deputy
Chairman of the Long Island Power  Authority and serves as a member of the New
York State  Privatization  Council.  He received a B.A.  from Fordham  College
and a J.D. from Fordham University Law School.

Martha L. Long has been  Senior Vice  President  and  Controller  of the General
Partner since October 1998 as a result of the acquisition of Insignia  Financial
Group, Inc. As of February 2001, Ms. Long was also appointed head of the service
business for AIMCO.  From June 1994 until January 1997,  she was the  Controller
for Insignia, and was promoted to Senior Vice President - Finance and Controller
in January 1997,  retaining  that title until  October  1998.  From 1988 to June
1994,  Ms. Long was Senior Vice  President and  Controller for The First Savings
Bank, FSB in Greenville, South Carolina.

One or more of the above persons are also directors and/or officers of a general
partner (or general partner of a general partner) of limited  partnerships which
either have a class of  securities  registered  pursuant to Section 12(g) of the
Securities Exchange Act of 1934, or are subject to the reporting requirements of
Section  15(d) of such Act.  Further,  one or more of the above persons are also
directors and/or officers of Apartment Investment and Management Company and the
general  partner  of  AIMCO  Properties,  L.P.,  entities  that  have a class of
securities  registered  pursuant to Section 12(g) of the Securities Exchange Act
of 1934, or are subject to the reporting  requirements of Section 15 (d) of such
Act.

The executive officers and director of the Corporate General Partner fulfill the
obligations  of the Audit  Committee  and  oversee the  Partnership's  financial
reporting process on behalf of the Corporate General Partner. Management has the
primary  responsibility  for the financial  statements and the reporting process
including  the  systems  of  internal  controls.  In  fulfilling  its  oversight
responsibilities,  the executive  officers and director of the Corporate General
Partner reviewed the audited  financial  statements with management  including a
discussion  of the  quality,  not  just  the  acceptability,  of the  accounting
principles,  the  reasonableness  of significant  judgments,  and the clarity of
disclosures in the financial statements.

The executive  officers and director of the Corporate  General Partner  reviewed
with the independent auditors,  who are responsible for expressing an opinion on
the conformity of those audited financial statements with accounting  principles
generally accepted in the United States,  their judgments as to the quality, not
just the  acceptability,  of the  Partnership's  accounting  principles and such
other  matters as are required to be discussed  with the Audit  Committee or its
equivalent under auditing standards  generally accepted in the United States. In
addition,  the  Partnership  has  discussed  with the  independent  auditors the
auditors' independence from management and the Partnership including the matters
in the written  disclosures  required by the  Independence  Standards  Board and
considered  the   compatibility   of  non-audit   services  with  the  auditors'
independence.

The executive  officers and director of the Corporate  General Partner discussed
with the  Partnership's  independent  auditors  the overall  scope and plans for
their audit. In reliance on the reviews and discussions  referred to above,  the
executive  officers and director of the Corporate  General Partner have approved
the  inclusion of the audited  financial  statements  in the Form 10-KSB for the
year  ended  December  31,  2001 for filing  with the  Securities  and  Exchange
Commission.

The Corporate  General Partner has reappointed  Ernst & Young LLP as independent
auditors to audit the financial  statements of the  Partnership  for the current
fiscal year. Fees for the last fiscal year were audit services of  approximately
$45,000  and  non-audit  services  (principally  tax-related)  of  approximately
$24,000.

Item 10.    Executive Compensation

None of the directors and officers of the Corporate General Partner received any
remuneration from the Registrant.

Item 11.    Security Ownership of Certain Beneficial Owners and Management

Except as noted below, no person or entity was known by the Registrant to be the
beneficial  owner  of  more  than 5% of the  Limited  Partnership  Units  of the
Registrant as of December 31, 2001.

                Name and Address           Number of Units   Percentage of Total

       Madison River Properties, LLC            2,180               12.57%
         (an affiliate of AIMCO)
       Cooper River Properties, LLC             1,450                8.36%
         (an affiliate of AIMCO)
       AIMCO Properties, L.P.                   6,675               38.49%
         (an affiliate of AIMCO)
       Insignia Properties, LP                    247                1.42%
          (an affiliate of AIMCO)

Insignia  Properties,  LP,  Madison  River  Properties,  LLC  and  Cooper  River
Properties,  LLC are all indirectly  ultimately  owned by AIMCO.  Their business
addresses are 55 Beattie Place, Greenville, SC 29602.

AIMCO Properties,  L.P. is indirectly  ultimately owned by AIMCO. Its business
address is 2000 South Colorado Blvd., Denver, Colorado 80222.

No director or officer of the  Corporate  General  Partner  owns any Units.  The
Corporate  General  Partner  owns 100  Units  as  required  by the  terms of the
Partnership  Agreement  governing the Partnership.  AIMCO Properties,  L.P., the
other general partner, owns 6,675 Units.

Item 12.    Certain Relationships and Related Transactions

The  Partnership  has no employees  and is dependent  on the  Corporate  General
Partner  and  its  affiliates  for  the  management  and  administration  of all
partnership  activities.  The  Partnership  Agreement  provides  for (i) certain
payments to affiliates for services and (ii)  reimbursement  of certain expenses
incurred by affiliates on behalf of the Partnership. The following payments were
paid or accrued to the Corporate  General Partner and affiliates during the year
ended December 31, 2001 and 2000:

                                                          2001       2000
                                                          (in thousands)

Property management fees                                  $170       $209
Reimbursements for services of affiliates                  398        137

Affiliates of the Corporate  General Partner are entitled to receive 5% of gross
receipts  from  both  of the  Registrant's  properties  for  providing  property
management  services.  The  Registrant  paid  to such  affiliates  approximately
$170,000  and  $209,000  for  the  years  ended  December  31,  2001  and  2000,
respectively.

An  affiliate  of the  Corporate  General  Partner  received  reimbursements  of
accountable  administrative  expenses  amounting to  approximately  $398,000 and
$137,000 for the year ended December 31, 2001 and 2000,  respectively.  Included
in these amounts are fees related to construction  management  services provided
by an affiliate of the Corporate  General Partner of approximately  $265,000 for
the year ended December 31, 2001. The construction  management  service fees are
calculated  based upon a percentage of current and certain prior year  additions
to investment  properties and are being depreciated over 15 years. There were no
such costs during the year ended December 31, 2000.

In  accordance  with the  Partnership  Agreement,  an affiliate of the Corporate
General Partner loaned the Partnership  $150,000 to cover operating  expenses at
Hickory Ridge  Apartments.  The entire  balance was repaid during the year ended
December  31,  2001.  Interest  was charged at the prime rate plus 2%.  Interest
expense was  approximately  $2,000 for the year ended  December 31, 2001.  There
were no loans from the General Partner or associated interest expense during the
year ended December 31, 2000.

Beginning in 2001, the  Partnership  began insuring its properties up to certain
limits through coverage provided by AIMCO which is generally  self-insured for a
portion of losses and  liabilities  related  to workers  compensation,  property
casualty and vehicle liability. The Partnership insures its properties above the
AIMCO  limits  through  insurance  policies  obtained  by  AIMCO  from  insurers
unaffiliated with the Corporate General Partner.  During the year ended December
31, 2001, the Partnership  paid AIMCO and its affiliates  approximately  $49,000
for insurance coverage and fees associated with policy claims administration.

In addition to its indirect  ownership of the general  partner  interests in the
Partnership,  AIMCO and its affiliates  owned 10,552 limited  partnership  units
(the "Units") in the Partnership representing 60.84% of the outstanding Units at
December  31,  2001.  A number of these Units were  acquired  pursuant to tender
offers  made by  AIMCO  or its  affiliates.  It is  possible  that  AIMCO or its
affiliates will make one or more additional offers to acquire additional limited
partnership  interests in the  Partnership  for cash or in exchange for units in
the operating partnership of AIMCO. Under the Partnership Agreement, unitholders
holding a majority of the Units are  entitled  to take action with  respect to a
variety of matters,  which would  include  voting on certain  amendments  to the
Partnership  Agreement and voting to remove the Corporate General Partner.  As a
result  of its  ownership  of  60.84% of the  outstanding  Units,  AIMCO is in a
position to control all voting  decisions with respect to the  Registrant.  When
voting on matters, AIMCO would in all likelihood vote the Units it acquired in a
manner favorable to the interest of the Corporate General Partner because of its
affiliation with the Corporate General Partner.

Item 13.    Exhibits and Reports on Form 8-K

      (a)   Exhibits:

            Exhibit  10(iii)(k),  Multifamily  Note  secured by a Mortgage  or
            Deed of Trust dated  February  6, 2002,  between  Governor's  Park
            Apartments VII Limited  Partnership and ARCS  Commercial  Mortgage
            Co., L.P. related to Governor's Park Apartments.

      (b)   Reports on Form 8-K filed in the fourth  quarter of calendar  year
            2001:

            None.


<PAGE>


                                   SIGNATURES



In accordance  with Section 13 or 15(d) of the Exchange Act, the  Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                    SHELTER PROPERTIES VII LIMITED PARTNERSHIP


                                    By:   Shelter Realty VII Corporation
                                          Corporate General Partner


                                    By:   /s/Patrick J. Foye
                                          Patrick J. Foye
                                          Executive Vice President


                                    By:   /s/Martha L. Long
                                          Martha L. Long
                                          Senior Vice President and
                                          Controller


                                      Date:


In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the Partnership and in the capacities and on the
dates indicated.


/s/Patrick J. Foye            Executive Vice President      Date:
Patrick J. Foye               and Director


/s/Martha L. Long             Senior Vice President         Date:
Martha L. Long                and Controller



<PAGE>


                                  EXHIBIT INDEX


Exhibit

 3                See Exhibit 4(a)

 4     (a)        Amended and Restated  Certificate  and  Agreement of Limited
                  Partnership.  [included  as Exhibit A to the  Prospectus  of
                  Registrant  dated March 18, 1985  contained in Amendment No.
                  1 to  Registration  Statement  No.  2-94604,  of  Registrant
                  filed March 18,  1985 (the  "Prospectus")  and  incorporated
                  herein by reference].

       (b)        Subscription  Agreements  and  Signature  Pages  [Filed with
                  Amendment No. 1 of Registration  Statement No.  2-94604,  of
                  Registrant filed March 18, 1985 and  incorporated  herein by
                  reference].

       (c)        Wrap around Deed of Trust Note and Deed of Trust and  Personal
                  Property Security Agreement between Boyle Trust and Investment
                  Company and Shelter  Properties  VII to acquire  Hickory Ridge
                  Apartments.*

       (d)        Promissory  Note  and  Combination  Deed  of  Trust,  Security
                  Agreement and Fixture Financing Statement between State Mutual
                  Life Assurance  Company of America and Shelter  Properties VII
                  to acquire Governor's Park Apartments.*

                  *Filed as Exhibit 4(d) and 4(e), respectively, to Form 10-K of
                  Registrant for year ended  December 31, 1987 and  incorporated
                  herein by reference.

10(i)             Contracts related to acquisition or sale of properties.

       (a)        Purchase  Agreement  dated  October  8, 1984 as  Amended  by
                  Addendum  dated  December 27, 1984  between  Boyle Trust and
                  Investment Company,  Trustee and U.S. Shelter Corporation to
                  acquire  Hickory Ridge  Apartments.  [Filed as Exhibit 10(E)
                  to Amendment No. 1 of Registration  Statement No. 2-94604 of
                  the Registrant filed March 18, 1985 and incorporated  herein
                  by reference].

       (b)        Purchase  Agreement dated January 14, 1985,  between NFC/TDM
                  Joint  Venture  and  U.S.  Shelter  Corporation  to  acquire
                  Governor's  Park  Apartments.  [Filed  as  Exhibit  10(F) to
                  Post-Effective  Amendment  No. 2 of  Registration  Statement
                  No.  2-94604  of the  Registrant  filed  June  27,  1985 and
                  incorporated herein by reference].

       (c)        Purchase  and  Sale  Contract  for  Hickory  Ridge  Apartments
                  between  Registrant  and  Harbor  Group  International,   LLC.
                  Incorporated by reference to Exhibit 10.28 to the Registrant's
                  Current Report on Form 8-K dated July 16, 2001.

       (d)        First  Amendment to Purchase  and Sale  Contract for Hickory
                  Ridge  Apartments.  Incorporated  by  reference  to  Exhibit
                  10.29 to the  Registrant's  Current Report on Form 8-K dated
                  July 16, 2001.

       (e)        Second  Amendment to Purchase and Sale  Contract for Hickory
                  Ridge  Apartments.  Incorporated  by  reference  to  Exhibit
                  10.30 to the  Registrant's  Current Report on Form 8-K dated
                  July 16, 2001.

       (f)        Reinstatement  and  Amendment to Purchase and Sale  Contract
                  for Hickory Ridge  Apartments.  Incorporated by reference to
                  Exhibit  10.31 to the  Registrant's  Current  Report on Form
                  8-K dated July 16, 2001.

10(ii)            Form of Management  Agreement with U.S. Shelter  Corporation
                  subsequently  assigned  to Shelter  Management  Group,  L.P.
                  (now known as Insignia  Management Group, L.P.). [Filed with
                  Amendment No. 1 of  Registration  Statement,  No. 2-94604 of
                  Registrant filed March 18, 1985 and  incorporated  herein by
                  reference].

10(iii)           Contracts related to refinancing of debt:

 2.1              Agreement  and Plan of Merger,  dated as of October 1, 1998,
                  by and between AIMCO and IPT  [incorporated  by reference to
                  Exhibit 2.1 of IPT's  Current  Report on Form 8-K,  File No.
                  1-14179, dated October 1, 1998].

       (a)        Tennessee Deed of Trust and Security  Agreement dated December
                  28, 1988 between  Shelter  Properties VII Limited  Partnership
                  and John Hancock  Mutual Life  Insurance  Company  relating to
                  Hickory Ridge Apartments.*

       (b)        Promissory  Note  dated  December  28,  1988  between  Shelter
                  Properties  VII Limited  Partnership  and John Hancock  Mutual
                  Life Insurance Company, a Massachusetts corporation,  relating
                  to  Hickory  Ridge  Apartments.  First  Amendment  to Note and
                  Certification  and Release by Borrower  between  John  Hancock
                  Mutual  Life  Insurance  Company and  Shelter  Properties  VII
                  Limited Partnership and dated July 5, 1992.*

                  *Filed as Exhibits 10(iii) (a) and (b), respectively,  to Form
                  10-KSB for the year ended  December 31, 1992 and  incorporated
                  herein by reference.

       (c)        First Deed of Trust  Note  dated  December  31,  1993  between
                  Governor's  Park   Apartments  VII  Limited   Partnership  and
                  Lexington Mortgage Company, a Virginia  corporation,  relating
                  to Governor's Park.**

       (d)        Second  Deed of Trust Note dated  December  31,  1993  between
                  Governor's  Park   Apartments  VII  Limited   Partnership  and
                  Lexington Mortgage Company, a Virginia  corporation,  relating
                  to Governor's Park.**

       (e)        First Deed of Trust and Security  Agreement between Governor's
                  Park Apartments VII Limited Partnership and Lexington Mortgage
                  Company,  a Virginia  corporation,  securing  Governor's  Park
                  Apartments.**

       (f)        Second Deed of Trust and Security Agreement between Governor's
                  Park Apartments VII Limited Partnership and Lexington Mortgage
                  Company,  a Virginia  corporation,  securing  Governor's  Park
                  Apartments.**

       (g)        First Collateral Assignment of Leases and Rents dated December
                  31,  1993  between  Governor's  Park  Apartments  VII  Limited
                  Partnership  and  Lexington   Mortgage  Company,   a  Virginia
                  corporation, securing Governor's Park Apartments.**

       (h)        Second  Collateral   Assignment  of  Leases  and  Rents  dated
                  December  31, 1993  between  Governor's  Park  Apartments  VII
                  Limited Partnership and Lexington Mortgage Company, a Virginia
                  corporation, securing Governor's Park Apartments.**

                  **Filed as Exhibits 10(iii) (a) through (h) to Form 10-QSB for
                  the quarter ended December 31, 1993 and incorporated herein by
                  reference.

       (i)        Note   Modification   Agreement   and  Amended  and   Restated
                  Promissory  Note both dated February 28, 1994 between  Shelter
                  Properties  VII Limited  Partnership  and John Hancock  Mutual
                  Life   Insurance    Company    relating   to   Hickory   Ridge
                  Apartments.***

       (j)        Modifications  to Security  Instruments  dated  February 28,
                  1994 between Shelter Properties VII Limited  Partnership and
                  John  Hancock  Mutual  Life  Insurance  Company  relating to
                  Hickory Ridge Apartments.***

                  ***Filed  as  Exhibits  10(iii) (i) through (j) to Form 10-KSB
                  for the year ended December 31, 1993 and  incorporated  herein
                  by reference.

       (k)        Multifamily  Note  secured  by a  Mortgage  or Deed of Trust
                  dated February 6, 2002,  between  Governor's Park Apartments
                  VII Limited  Partnership and ARCS  Commercial  Mortgage Co.,
                  L.P. related to Governor's Park Apartments.

21                Subsidiaries of the Registrant

99     (a)        Prospectus of Registrant  dated March 18, 1985  [included in
                  Registration   Statement  No.  2-94604  of  Registrant]  and
                  incorporated herein by reference.

       (b)        Agreement  of  Limited   Partnership   for   Governor's   Park
                  Apartments VII Limited  Partnership between Shelter Properties
                  VII GP Limited  Partnership and Shelter Properties VII Limited
                  Partnership entered into September 9, 1993.****

       (c)        Agreement of Limited  Partnership for Shelter Properties VII
                  GP  Limited   Partnership   between   Shelter   VII  Limited
                  Partnership and Shelter Realty VII Corporation.****

                  ****Filed  as  Exhibits  28 (a) and (b) to Form  10-QSB  dated
                  December 31, 1993 and incorporated herein by reference.

<PAGE>

                                   EXHIBIT 22


                  SHELTER PROPERTIES VII LIMITED PARTNERSHIP


                                 Subsidiary List



                                        State of Incorporation/
         Name of Subsidiary                    Formation                  Date

Governor's Park Apartments VII
  Limited Partnership                       South Carolina                1993

Shelter VII GP Limited Partnership          South Carolina                1993

<PAGE>

                                                    FHLMC Loan No.: 002655888

                                MULTIFAMILY NOTE
                    (MULTISTATE - REVISION DATE 11-01-2000)
                          (Governor's Park Apartments )


US $6,990,000.00                                          as of February 6, 2002

      FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if
more than one)  promises to pay to the order of ARCS  COMMERCIAL  MORTGAGE  CO.,
L.P., a California  limited  partnership,  the principal sum of Six Million Nine
Hundred Ninety Thousand Dollars and No Cents (US  $6,990,000.00),  with interest
on the unpaid  principal  balance at the annual rate of Seven and 12/100 percent
(7.12 %).

      1. Defined  Terms.  As used in this Note,  (i) the term "Lender" means the
holder of this Note,  and (ii) the term  "Indebtedness"  means the principal of,
interest  on,  and any other  amounts  due at any time  under,  this  Note,  the
Security Instrument or any other Loan Document,  including  prepayment premiums,
late  charges,  default  interest,  and  advances to protect the security of the
Security  Instrument  under  Section 12 of the  Security  Instrument.  "Event of
Default"  and other  capitalized  terms used but not  defined in this Note shall
have the meanings given to such terms in the Security Instrument.

      2. Address for Payment.  All payments due under this Note shall be payable
at 26901 Agoura Road,  Suite 200,  Calabasas  Hills,  California  91301, or such
other place as may be designated by written notice to Borrower from or on behalf
of Lender.

      3. Payment of Principal and Interest. Principal and interest shall be paid
as follows:

      (a) Unless  disbursement of principal is made by Lender to Borrower on the
first  day of the  month,  interest  for the  period  beginning  on the  date of
disbursement and ending on and including the last day of the month in which such
disbursement is made shall be payable  simultaneously with the execution of this
Note.  Interest under this Note shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.

      (b) Consecutive  monthly  installments of principal and interest,  each in
the amount of Fifty Four Thousand Six Hundred  Ninety-Eight  and 03/100  Dollars
(US  $54,698.03),  shall be payable on the first day of each month  beginning on
April 1, 2002, until the entire unpaid principal  balance evidenced by this Note
is fully paid.

      (c) Any accrued  interest  remaining  past due for 30 days or more may, at
Lender's discretion, be added to and become part of the unpaid principal balance
and shall bear  interest at the rate or rates  specified  in this Note,  and any
reference below to "accrued  interest" shall refer to accrued interest which has
not become part of the unpaid  principal  balance.  Any remaining  principal and
interest  shall be due and  payable on March 1, 2022 or on any  earlier  date on
which the unpaid  principal  balance of this Note  becomes due and  payable,  by
acceleration or otherwise (the "Maturity  Date").  The unpaid principal  balance
shall  continue to bear interest after the Maturity Date at the Default Rate set
forth in this Note until and including the date on which it is paid in full.

      (d) Any regularly  scheduled monthly installment of principal and interest
that is  received  by Lender  before  the date it is due shall be deemed to have
been  received on the due date solely for the  purpose of  calculating  interest
due.

      4. Application of Payments. If at any time Lender receives,  from Borrower
or otherwise,  any amount applicable to the Indebtedness  which is less than all
amounts due and payable at such time,  Lender may apply that  payment to amounts
then due and  payable in any manner and in any order  determined  by Lender,  in
Lender's  discretion.  Borrower  agrees that neither  Lender's  acceptance  of a
payment  from  Borrower in an amount that is less than all amounts  then due and
payable nor Lender's  application of such payment shall  constitute or be deemed
to  constitute  either  a  waiver  of  the  unpaid  amounts  or  an  accord  and
satisfaction.

      5.  Security.  The  Indebtedness  is  secured,  among other  things,  by a
multifamily mortgage,  deed to secure debt or deed of trust dated as of the date
of this Note (the "Security Instrument"),  and reference is made to the Security
Instrument for other rights of Lender as to collateral for the Indebtedness.

      6.  Acceleration.  If an Event of Default has occurred and is  continuing,
the entire  unpaid  principal  balance,  any accrued  interest,  the  prepayment
premium  payable under Paragraph 10, if any, and all other amounts payable under
this Note and any other Loan Document  shall at once become due and payable,  at
the option of Lender,  without any prior notice to Borrower (except if notice is
required by applicable  law,  then after such notice).  Lender may exercise this
option to accelerate regardless of any prior forbearance.

      7. Late Charge. If any monthly amount payable under this Note or under the
Security  Instrument or any other Loan Document is not received by Lender within
ten (10) days after the amount is due (unless  applicable  law requires a longer
period of time before a late  charge may be imposed,  in which event such longer
period shall be  substituted),  Borrower  shall pay to Lender,  immediately  and
without  demand by Lender,  a late  charge  equal to five  percent  (5%) of such
amount  (unless  applicable  law requires a lesser  amount be charged,  in which
event such lesser amount shall be substituted).  Borrower  acknowledges that its
failure to make timely payments will cause Lender to incur  additional  expenses
in servicing and processing  the loan  evidenced by this Note (the "Loan"),  and
that it is extremely  difficult and  impractical to determine  those  additional
expenses.  Borrower  agrees  that  the  late  charge  payable  pursuant  to this
Paragraph  represents a fair and  reasonable  estimate,  taking into account all
circumstances  existing  on the date of this Note,  of the  additional  expenses
Lender will incur by reason of such late payment.  The late charge is payable in
addition  to,  and not in lieu of, any  interest  payable  at the  Default  Rate
pursuant to Paragraph 8.

      8. Default  Rate. So long as (a) any monthly  installment  under this Note
remains past due for thirty (30) days or more, or (b) any other Event of Default
has occurred  and is  continuing,  interest  under this Note shall accrue on the
unpaid  principal  balance  from the earlier of the due date of the first unpaid
monthly  installment  or the  occurrence  of such  other  Event of  Default,  as
applicable,  at a rate  (the  "Default  Rate")  equal to the  lesser of four (4)
percentage  points above the rate stated in the first paragraph of this Note and
the maximum  interest rate which may be collected from Borrower under applicable
law. If the unpaid  principal  balance and all accrued  interest are not paid in
full on the Maturity Date, the unpaid principal balance and all accrued interest
shall bear interest  from the Maturity  Date at the Default Rate.  Borrower also
acknowledges that its failure to make timely payments will cause Lender to incur
additional  expenses in servicing and processing the Loan, that, during the time
that any monthly  installment under this Note is delinquent for more than thirty
(30) days, Lender will incur additional costs and expenses arising from its loss
of the use of the money due and from the adverse  impact on Lender's  ability to
meet  its  other   obligations  and  to  take  advantage  of  other   investment
opportunities,  and that it is extremely  difficult and impractical to determine
those additional costs and expenses. Borrower also acknowledges that, during the
time that any monthly  installment  under this Note is delinquent  for more than
thirty (30) days or any other Event of Default has occurred  and is  continuing,
Lender's risk of nonpayment of this Note will be materially increased and Lender
is entitled to be compensated for such increased risk.  Borrower agrees that the
increase in the rate of  interest  payable  under this Note to the Default  Rate
represents a fair and reasonable estimate, taking into account all circumstances
existing on the date of this Note, of the additional  costs and expenses  Lender
will incur by reason of the  Borrower's  delinquent  payment and the  additional
compensation Lender is entitled to receive for the increased risks of nonpayment
associated with a delinquent loan.

      9.    Limits on Personal Liability.

      (a) Except as otherwise  provided in this Paragraph 9, Borrower shall have
no personal liability under this Note, the Security Instrument or any other Loan
Document for the repayment of the  Indebtedness  or for the  performance  of any
other  obligations  of Borrower  under the Loan  Documents,  and  Lender's  only
recourse for the  satisfaction of the  Indebtedness  and the performance of such
obligations  shall be Lender's  exercise of its rights and remedies with respect
to the Mortgaged  Property and any other  collateral  held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair  Lender's  enforcement  of  its  rights  against  any  guarantor  of  the
Indebtedness or any guarantor of any obligations of Borrower.

      (b) Borrower  shall be personally  liable to Lender for the repayment of a
portion of the Indebtedness equal to zero percent (0%) of the original principal
balance of this Note,  plus any other  amounts for which  Borrower  has personal
liability under this Paragraph 9.

      (c) In addition to Borrower's  personal  liability  under  Paragraph 9(b),
Borrower  shall be  personally  liable to Lender for the  repayment of a further
portion of the Indebtedness  equal to any loss or damage suffered by Lender as a
result of (1) failure of Borrower to pay to Lender upon demand after an Event of
Default all Rents to which Lender is entitled under Section 3(a) of the Security
Instrument  and the amount of all security  deposits  collected by Borrower from
tenants  then in  residence;  (2)  failure of  Borrower  to apply all  insurance
proceeds and condemnation  proceeds as required by the Security  Instrument;  or
(3)  failure of Borrower to comply  with  Section  14(d) or (e) of the  Security
Instrument relating to the delivery of books and records, statements,  schedules
and reports.

      (d) For  purposes  of  determining  Borrower's  personal  liability  under
Paragraph  9(b)  and  Paragraph  9(c),  all  payments  made by  Borrower  or any
guarantor of this Note with respect to the Indebtedness and all amounts received
by Lender from the enforcement of its rights under the Security Instrument shall
be applied first to the portion of the  Indebtedness  for which  Borrower has no
personal liability.

      (e) Borrower shall become personally liable to Lender for the repayment of
all of the  Indebtedness  upon the occurrence of any of the following  Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not  permitted  by  Section  33 of  the  Security  Instrument;  (2)  a  Transfer
(including,  but not  limited  to,  a lien or  encumbrance)  that is an Event of
Default  under  Section  21 of the  Security  Instrument,  other than a Transfer
consisting  solely of the  involuntary  removal or  involuntary  withdrawal of a
general  partner in a limited  partnership  or a manager in a limited  liability
company; or (3) fraud or written material  misrepresentation  by Borrower or any
officer,  director,  partner,  member or employee of Borrower in connection with
the  application  for or  creation  of the  Indebtedness  or any request for any
action or consent by Lender.

      (f) In addition to any personal  liability for the Indebtedness,  Borrower
shall  be  personally  liable  to  Lender  for  (1)  the  performance  of all of
Borrower's  obligations under Section 18 of the Security Instrument (relating to
environmental  matters);  (2) the costs of any audit under  Section 14(d) of the
Security  Instrument;  and (3) any  costs  and  expenses  incurred  by Lender in
connection  with the  collection of any amount for which  Borrower is personally
liable under this  Paragraph  9,  including  fees and out of pocket  expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's  books and records to determine the amount for which  Borrower has
personal liability.

      (g)  To the  extent  that  Borrower  has  personal  liability  under  this
Paragraph 9, Lender may exercise its rights against Borrower  personally without
regard to whether Lender has exercised any rights against the Mortgaged Property
or any other security,  or pursued any rights against any guarantor,  or pursued
any other rights  available to Lender under this Note, the Security  Instrument,
any other Loan Document or applicable law. For purposes of this Paragraph 9, the
term "Mortgaged Property" shall not include any funds that (1) have been applied
by Borrower as required or  permitted by the  Security  Instrument  prior to the
occurrence  of an  Event of  Default  or (2)  Borrower  was  unable  to apply as
required  or  permitted  by the  Security  Instrument  because of a  bankruptcy,
receivership, or similar judicial proceeding. To the fullest extent permitted by
applicable  law, in any action to enforce  Borrower's  personal  liability under
this  Paragraph  9,  Borrower  waives  any  right  to set off the  value  of the
Mortgaged Property against such personal liability.

      10.   Voluntary and Involuntary Prepayments.

      (a)  A  prepayment  premium  shall  be  payable  in  connection  with  any
prepayment (any receipt by Lender of principal, other than principal required to
be paid in  monthly  installments  pursuant  to  Paragraph  3(b),  prior  to the
scheduled  Maturity Date set forth in Paragraph 3(c) under this Note as provided
below:

            (1)  Borrower  may  voluntarily  prepay all of the unpaid  principal
balance  of this  Note  on a  Business  Day  designated  as the  date  for  such
prepayment  in a written  notice from  Borrower to Lender given at least 30 days
prior to the date of such  prepayment.  Such prepayment  shall be made by paying
(A) the amount of principal  being prepaid,  (B) all accrued  interest,  (C) all
other sums due  Lender at the time of such  prepayment,  and (D) the  prepayment
premium  calculated  pursuant to Paragraph 10(c). For all purposes including the
accrual of interest, any prepayment received by Lender on any day other than the
last calendar day of the month shall be deemed to have been received on the last
calendar day of such month.  For  purposes of this Note, a "Business  Day" means
any day other than a  Saturday,  Sunday or any other day on which  Lender is not
open for business. Unless expressly provided for in the Loan Documents, Borrower
shall not have the  option to  voluntarily  prepay  less than all of the  unpaid
principal balance.  However, if a partial prepayment is provided for in the Loan
Documents or is accepted by Lender in Lender's discretion,  a prepayment premium
calculated pursuant to Paragraph 10(c) shall be due and payable by Borrower.

            (2) Upon Lender's  exercise of any right of acceleration  under this
Note,  Borrower shall pay to Lender,  in addition to the entire unpaid principal
balance  of this  Note  outstanding  at the  time of the  acceleration,  (A) all
accrued interest and all other sums due Lender,  and (B) the prepayment  premium
calculated pursuant to Paragraph 10(c).

            (3) Any application by Lender of any collateral or other security to
the repayment of any portion of the unpaid principal  balance of this Note prior
to the Maturity Date and in the absence of acceleration  shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium.

      (b)  Notwithstanding  the  provisions  of Paragraph  10(a),  no prepayment
premium  shall be payable  with  respect to (A) any  prepayment  made during the
period from one hundred eighty (180) days before the scheduled  Maturity Date to
the scheduled Maturity Date, or (B) any prepayment  occurring as a result of the
application of any insurance  proceeds or condemnation  award under the Security
Instrument.

      (c) Any  prepayment  premium  payable under this Note shall be computed as
follows:

            (1) If the  prepayment is made between the date of this Note and the
date that is one hundred  eighty  (180)  months after the first day of the first
calendar month following the date of this Note (the "Yield Maintenance Period"),
the prepayment  premium shall be whichever is the greater of  subparagraphs  (i)
and (ii) below:

            (i)   1.0% of the unpaid principal balance of this Note; or

            (ii)  the product obtained by multiplying:

                  (A)   the amount of principal being prepaid,
                  by
                  (B)   the excess (if any) of the Monthly Note Rate over the
                        Assumed Reinvestment Rate,
                  by
                  (C)   the Present Value Factor.

            For purposes of subparagraph  (ii), the following  definitions shall
apply:

            Monthly Note Rate: one-twelfth (1/12) of the annual interest rate of
            this Note, expressed as a decimal calculated to five digits.

            Prepayment Date: in the case of a voluntary prepayment,  the date on
            which the  prepayment  is made;  in the case of the  application  by
            Lender of  collateral  or  security  to a portion  of the  principal
            balance,  the date of such  application;  and in any other case, the
            date on which Lender  accelerates  the unpaid  principal  balance of
            this Note.

            Assumed  Reinvestment Rate:  one-twelfth (1/12) of the yield rate as
            of the date 5 Business Days before the Prepayment Date, on the 7.50%
            U.S. Treasury Security due November 1, 2016, as reported in The Wall
            Street Journal, expressed as a decimal calculated to five digits. In
            the event that no yield is published on the applicable  date for the
            Treasury Security used to determine the Assumed  Reinvestment  Rate,
            Lender,  in its discretion,  shall select the non-callable  Treasury
            Security  maturing  in  the  same  year  as  the  Treasury  Security
            specified  above with the lowest yield  published in The Wall Street
            Journal as of the applicable  date. If the publication of such yield
            rates in The Wall  Street  Journal is  discontinued  for any reason,
            Lender  shall select a security  with a comparable  rate and term to
            the Treasury  Security  used to determine  the Assumed  Reinvestment
            Rate.  The  selection  of an  alternate  security  pursuant  to this
            Paragraph shall be made in Lender's discretion.

            Present Value Factor: the factor that discounts to present value the
            costs  resulting  to Lender from the  difference  in interest  rates
            during the months remaining in the Yield Maintenance  Period,  using
            the Assumed  Reinvestment  Rate as the discount  rate,  with monthly
            compounding, expressed numerically as follows:

                                        [OBJECT OMITTED]

            n = number of months remaining in Yield Maintenance Period

            ARR = Assumed Reinvestment Rate

            (2) If the  prepayment  is made  after the  expiration  of the Yield
Maintenance  Period but before the period set forth in Paragraph 10(b)(A) above,
the  prepayment  premium shall be 1.0% of the unpaid  principal  balance of this
Note.

      (d) Any permitted or required prepayment of less than the unpaid principal
balance of this Note shall not extend or postpone the due date of any subsequent
monthly  installments or change the amount of such  installments,  unless Lender
agrees otherwise in writing.

      (e)  Borrower  recognizes  that any  prepayment  of the  unpaid  principal
balance of this Note,  whether  voluntary or  involuntary  or  resulting  from a
default  by  Borrower,   will  result  in  Lender's  incurring  loss,  including
reinvestment loss,  additional expense and frustration or impairment of Lender's
ability to meet its  commitments  to third  parties.  Borrower  agrees to pay to
Lender  upon demand  damages for the  detriment  caused by any  prepayment,  and
agrees that it is extremely difficult and impractical to ascertain the extent of
such damages.  Borrower  therefore  acknowledges and agrees that the formula for
calculating  prepayment  premiums set forth in this Note represents a reasonable
estimate of the damages Lender will incur because of a prepayment.

      (f) Borrower further  acknowledges that the prepayment  premium provisions
of this  Note  are a  material  part of the  consideration  for  the  Loan,  and
acknowledges that the terms of this Note are in other respects more favorable to
Borrower as a result of the  Borrower's  voluntary  agreement to the  prepayment
premium provisions.

      11. Costs and Expenses.  To the fullest extent allowed by applicable  law,
Borrower  shall pay all expenses  and costs,  including  fees and  out-of-pocket
expenses  of  attorneys  (including  Lender's  in-house  attorneys)  and  expert
witnesses  and  costs of  investigation,  incurred  by Lender as a result of any
default under this Note or in connection  with efforts to collect any amount due
under  this  Note,  or to  enforce  the  provisions  of any of  the  other  Loan
Documents,  including those incurred in post-judgment  collection efforts and in
any  bankruptcy  proceeding  (including any action for relief from the automatic
stay of any  bankruptcy  proceeding)  or  judicial or  non-judicial  foreclosure
proceeding.

      12.  Forbearance.  Any  forbearance  by Lender in exercising  any right or
remedy under this Note, the Security  Instrument,  or any other Loan Document or
otherwise  afforded by applicable  law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy.  The  acceptance by Lender of any
payment after the due date of such  payment,  or in an amount which is less than
the required payment,  shall not be a waiver of Lender's right to require prompt
payment  when due of all other  payments or to exercise any right or remedy with
respect to any  failure to make  prompt  payment.  Enforcement  by Lender of any
security for  Borrower's  obligations  under this Note shall not  constitute  an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.

      13. Waivers.  Presentment,  demand, notice of dishonor, protest, notice of
acceleration,  notice of intent to demand or  accelerate  payment  or  maturity,
presentment  for  payment,  notice  of  nonpayment,   grace,  and  diligence  in
collecting  the  Indebtedness  are  waived by  Borrower  and all  endorsers  and
guarantors of this Note and all other third party obligors.

      14. Loan  Charges.  Neither this Note nor any of the other Loan  Documents
shall be construed to create a contract for the use, forbearance or detention of
money requiring  payment of interest at a rate greater than the maximum interest
rate  permitted  to be charged  under  applicable  law.  If any  applicable  law
limiting the amount of interest or other charges  permitted to be collected from
Borrower in  connection  with the Loan is  interpreted  so that any  interest or
other charge provided for in any Loan Document, whether considered separately or
together with other charges  provided for in any other Loan  Document,  violates
that law, and Borrower is entitled to the benefit of that law,  that interest or
charge is hereby reduced to the extent  necessary to eliminate  that  violation.
The  amounts,  if any,  previously  paid to Lender  in  excess of the  permitted
amounts  shall be applied by Lender to reduce  the unpaid  principal  balance of
this Note.  For the purpose of  determining  whether any applicable law limiting
the amount of interest or other charges  permitted to be collected from Borrower
has been violated,  all Indebtedness that constitutes  interest,  as well as all
other charges made in connection with the Indebtedness that constitute interest,
shall be deemed to be allocated  and spread  ratably over the stated term of the
Note. Unless otherwise required by applicable law, such allocation and spreading
shall be  effected  in such a manner  that the rate of  interest  so computed is
uniform throughout the stated term of the Note.

     15. Commercial Purpose.  Borrower represents that the Indebtedness is being
incurred  by  Borrower  solely for the  purpose  of  carrying  on a business  or
commercial enterprise,  and not for personal, family, household, or agricultural
purposes.

     16. Counting of Days.  Except where otherwise  specifically  provided,  any
reference in this Note to a period of "days" means  calendar  days, not Business
Days.

     17.  Governing  Law.  This  Note  shall  be  governed  by  the  law  of the
jurisdiction in which the Land is located.

     18.  Captions.  The  captions  of the  paragraphs  of  this  Note  are  for
convenience only and shall be disregarded in construing this Note.

      19.  Notices;  Written  Modifications.  All  notices,  demands  and  other
communications  required or permitted to be given by Lender to Borrower pursuant
to this  Note  shall be given in  accordance  with  Section  31 of the  Security
Instrument.  Any  modification  or amendment  to this Note shall be  ineffective
unless  in  writing  signed  by  the  party  sought  to  be  charged  with  such
modification or amendment;  provided,  however,  that in the event of a Transfer
under  the  terms  of  the  Security  Instrument,  any  or  some  or  all of the
Modifications  to Multifamily Note may be modified or rendered void by Lender at
Lender's option by notice to Borrower/transferee.

      20.  Consent  to  Jurisdiction   and  Venue.   Borrower  agrees  that  any
controversy  arising  under or in  relation  to this  Note  shall  be  litigated
exclusively  in the  jurisdiction  in which the Land is located  (the  "Property
Jurisdiction").  The state and federal courts and authorities with  jurisdiction
in  the  Property  Jurisdiction  shall  have  exclusive  jurisdiction  over  all
controversies  which shall  arise  under or in  relation to this Note.  Borrower
irrevocably consents to service,  jurisdiction, and venue of such courts for any
such  litigation  and waives any other  venue to which it might be  entitled  by
virtue of domicile, habitual residence or otherwise.

      21.  WAIVER OF TRIAL BY JURY.  BORROWER  AND LENDER EACH (A) AGREES NOT TO
ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE  ARISING OUT OF THIS NOTE OR THE
RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT
BY A JURY AND (B) WAIVES  ANY RIGHT TO TRIAL BY JURY WITH  RESPECT TO SUCH ISSUE
TO THE EXTENT THAT ANY SUCH RIGHT  EXISTS NOW OR IN THE  FUTURE.  THIS WAIVER OF
RIGHT  TO  TRIAL  BY JURY IS  SEPARATELY  GIVEN  BY EACH  PARTY,  KNOWINGLY  AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.


      ATTACHED EXHIBIT.  The following Exhibit is attached to this Note:

      |X|     Exhibit A       Modifications to Multifamily Note



                  [Remainder of Page Intentionally Left Blank]

<PAGE>




      IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal
or has  caused  this  Note to be signed  and  delivered  under  seal by its duly
authorized representative. Borrower intends that this Note shall be deemed to be
signed and delivered as a sealed instrument.

                            BORROWER:

                            GOVERNORS PARK APARTMENTS VII LIMITED PARTNERSHIP, a
                            South Carolina limited partnership

                             By:   Shelter VII GP Limited Partnership, a South
                                   Carolina limited partnership, its general
                                   partner

                             By:   Shelter Realty VII Corporation, a
                                   South Carolina corporation, its
                                   general partner


                                                By:
                                                      Patti K. Fielding
                                                      Senior Vice President




                                   Borrower's Social Security/Employer ID Number



                     [Endorsement Appears on Following Page]


<PAGE>



                              PAY TO THE ORDER OF __________________
                              WITHOUT RECOURSE, AS OF THE _____ DAY OF FEBRUARY,
                              2002.


                              ARCS COMMERCIAL MORTGAGE CO., L.P., a California
                              limited partnership

                              By:   ACMC Realty, Inc., a California corporation,
                                    its general partner


                                          By:
                                             Shelly Eisenberg
                                             Vice President

<PAGE>


                                    EXHIBIT A

                        MODIFICATIONS TO MULTIFAMILY NOTE

The following  modifications  are made to the text of the Multifamily  Note that
precedes this Exhibit A:

1. The first  sentence  of  Paragraph 8 of the Note  ("Default  Rate") is hereby
deleted and replaced with the following:

      So long as (a) any monthly  installment  under this Note  remains past due
      for more  than  thirty  (30) days or (b) any other  Event of  Default  has
      occurred and is  continuing,  interest under this Note shall accrue on the
      unpaid  principal  balance  from the  earlier of the due date of the first
      unpaid  monthly  installment  or the  occurrence  of such  other  Event of
      Default, as applicable, at a rate (the "Default Rate") equal to the lesser
      of (1) the maximum  interest  rate which may be  collected  from  Borrower
      under  applicable  law or (2) the greater of (i) three  percent (3%) above
      the Interest  Rate or (ii) four percent  (4.0%) above the  then-prevailing
      Prime Rate.  As used herein,  the term "Prime Rate" shall mean the rate of
      interest  announced  by The Wall Street  Journal  from time to time as the
      "Prime Rate".

2. Paragraph 9(c) of the Note is amended to add the following subparagraph (4):

(4)            failure  by  Borrower  to pay the  amount  of the water and sewer
               charges, taxes, fire, hazard or other insurance premiums,  ground
               rents,  assessments or other charges in accordance with the terms
               of the Security Instrument.

3. Paragraph 19 is modified by deleting: "; provided, however, that in the event
of a Transfer under the terms of the Security Instrument,  any or some or all of
the Modifications to Multifamily Note may be modified or rendered void by Lender
at Lender's option by notice to Borrower/transferee" in the last sentence of the
Paragraph; and by adding the following new sentence:

      The Modifications to Multifamily Note set forth in this Exhibit A shall be
null and void  unless  title to the  Mortgaged  Property  is vested in an entity
whose  Controlling  Interest(s) are directly or indirectly held by AIMCO REIT or
AIMCO OP.  The  capitalized  terms  used in this  paragraph  are  defined in the
Security Instrument.