FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                        Quarterly or Transitional Report

                      U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934


                   For the quarterly period ended March 31, 2000


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


                For the transition period from _________to _________

                         Commission file number 0-10260

                             SHELTER PROPERTIES III

         (Exact name of small business issuer as specified in its charter)



         South Carolina                                          57-0718508
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                          55 Beattie Place, P.O. Box 1089
                        Greenville, South Carolina 29602

                      (Address of principal executive offices)

                                 (864) 239-1000

                           (Issuer's telephone number)

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____


                         PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

a)

                             SHELTER PROPERTIES III

                           CONSOLIDATED BALANCE SHEET

                                   (Unaudited)

                        (in thousands, except per unit data)

                                 March 31, 2000

Assets

   Cash and cash equivalents                                         $    866
   Receivables and deposits                                               141
   Restricted escrows                                                     738
   Other assets                                                           224
   Investment properties:
      Land                                            $   1,281
      Buildings and related personal property            26,258
                                                         27,539

      Less accumulated depreciation                     (16,352)       11,187
                                                                     $ 13,156

Liabilities and Partners' (Deficit) Capital
Liabilities

   Accounts payable                                                  $     95
   Tenant security deposit liabilities                                    105
   Accrued property taxes                                                  98
   Other liabilities                                                      399
   Mortgage notes payable                                               7,843

Partners' (Deficit) Capital

   General partners                                   $    (86)
   Limited partners (55,000 units issued and
      outstanding)                                       4,702          4,616
                                                                     $ 13,156

            See Accompanying Notes to Consolidated Financial Statements

b)

                             SHELTER PROPERTIES III

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)

                          (in thousands, except unit data)



                                                     Three Months Ended
                                                         March 31,
                                                      2000       1999

Revenues:
   Rental income                                     $1,317     $1,279
   Other income                                         104         85
      Total revenues                                  1,421      1,364

Expenses:
   Operating                                            606        561
   General and administrative                            60         55
   Depreciation                                         260        230
   Interest                                             156        185
   Property taxes                                        83         95
      Total expenses                                  1,165      1,126

Net income                                           $  256      $ 238


Net income allocated to general partners (1%)        $    3      $   2
Net income allocated to limited partners (99%)          253        236

                                                     $  256      $ 238

Net income per limited partnership unit              $ 4.60     $ 4.29


            See Accompanying Notes to Consolidated Financial Statements


<PAGE>


c)

                             SHELTER PROPERTIES III

          CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
                                   (Unaudited)

                          (in thousands, except unit data)


<TABLE>
<CAPTION>

                                       Limited
                                     Partnership     General     Limited
                                        Units        Partners    Partners     Total

<S>                                     <C>          <C>         <C>         <C>
Original capital contributions          55,000       $     2     $27,500     $27,502

Partners' (deficit) capital at
   December 31, 1999                    55,000       $   (89)    $ 4,449     $ 4,360

Net income for the three months
   ended March 31, 2000                     --             3         253         256

Partners' (deficit) capital at
   March 31, 2000                       55,000       $   (86)    $ 4,702     $ 4,616


            See Accompanying Notes to Consolidated Financial Statements
</TABLE>

d)

                             SHELTER PROPERTIES III

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (Unaudited)

                                   (in thousands)

<TABLE>
<CAPTION>

                                                                 Three Months Ended
                                                                       March 31,

                                                                  2000        1999

Cash flows from operating activities:

<S>                                                             <C>         <C>
   Net income                                                   $   256     $   238
   Adjustments to reconcile net income to net
     cash provided by operating activities:
        Depreciation                                                260         230
        Amortization of discounts and loan costs                     26          25
        Change in accounts:
            Receivables and deposits                                296         166
            Other assets                                            (53)        (47)
            Accounts payable                                        (19)         12
            Tenant security deposit liabilities                      (1)         (7)
            Accrued property taxes                                  (59)       (159)
            Other liabilities                                       (57)         20

               Net cash provided by operating activities            649         478

Cash flows from investing activities:

   Property improvements and replacements                          (202)        (67)
   Net (deposits to) withdrawals from restricted escrows           (168)         86

               Net cash (used in) provided by investing
                    activities                                     (370)         19
 Cash flows from financing activities:

   Payments on mortgage notes payable                               (68)        (62)

               Net cash used in financing activities                (68)        (62)

Net increase in cash and cash equivalents                           211         435

Cash and cash equivalents at beginning of period                    655         630

Cash and cash equivalents at end of period                      $   866     $ 1,065

Supplemental disclosure of cash flow information:

   Cash paid for interest                                       $   154     $   160

            See Accompanying Notes to Consolidated Financial Statements
</TABLE>


e)

                             SHELTER PROPERTIES III

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note A - Basis of Presentation

The  accompanying   unaudited   consolidated  financial  statements  of  Shelter
Properties  III (the  "Partnership"  or  "Registrant")  have  been  prepared  in
accordance with generally accepted  accounting  principles for interim financial
information  and  with  the  instructions  to Form  10-QSB  and  Item 310 (b) of
Regulation  S-B.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial  statements.  In the opinion of Shelter  Realty III  Corporation  (the
"Corporate  General Partner"),  all adjustments  (consisting of normal recurring
accruals)  considered  necessary  for a fair  presentation  have been  included.
Operating  results for the three month  period  ended  March 31,  2000,  are not
necessarily  indicative  of the results that may be expected for the fiscal year
ending  December 31, 2000. For further  information,  refer to the  consolidated
financial  statements and footnotes thereto included in the Partnership's Annual
Report on Form 10-KSB for the year ended December 31, 1999.

Principles of Consolidation

The financial  statements include all of the accounts of the Partnership and its
99.99% owned  partnership.  The Corporate  General  Partner of the  consolidated
partnership is Shelter Realty III  Corporation.  Shelter Realty III  Corporation
may be removed as the general  partner of the  consolidated  partnership  by the
Registrant;   therefore,   the   consolidated   partnership  is  controlled  and
consolidated by the Registrant.  All significant  interpartnership balances have
been eliminated.

Note B - Transfer of Control

Pursuant  to a series  of  transactions  which  closed  on  October  1, 1998 and
February 26, 1999,  Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment  Investment and Management Company  ("AIMCO"),  a publicly
traded real estate investment trust, with AIMCO being the surviving  corporation
(the "Insignia Merger").  As a result, AIMCO acquired 100% ownership interest in
the Corporate  General Partner.  The Corporate  General Partner does not believe
that this  transaction has had or will have a material effect on the affairs and
operations of the Partnership.

Note C - Reconciliation of Cash Flows

The  following  is  a  reconciliation   of  the  subtotal  on  the  accompanying
consolidated  statements of cash flows captioned "net cash provided by operating
activities"  to "net cash used in  operations",  as defined  in the  Partnership
Agreement.  However,  "net cash used in 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.

                                                      For the Three Months Ended
                                                              March 31,
                                                         2000             1999
                                                            (in thousands)
Net cash provided by operating activities             $   649          $   478
   Payments on mortgage notes payable                     (68)             (62)
   Property improvements and replacements                (202)             (67)
   Change in restricted escrows, net                     (168)              86
   Changes in reserves for net operating
      liabilities                                        (107)              15
   Additional reserves                                   (104)            (450)

      Net cash provided by operations                 $    --          $    --

The Corporate  General Partner reserved  approximately  $104,000 and $450,000 at
March 31, 2000 and 1999,  respectively to fund capital  improvements and repairs
at the Partnership's four investment properties.

Note D - 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) payments to
affiliates for services and (ii)  reimbursement of certain expenses  incurred by
affiliates  on behalf of the  Partnership.  The  following  amounts were paid or
accrued to the Corporate  General Partner and affiliates during the three months
ended March 31, 2000 and 1999.

                                                           2000      1999
                                                           (in thousands)

Property management fees (included in
  operating expenses)                                      $ 72      $ 70
Reimbursement for services of affiliates
  (included in operating and general and
   administrative expenses and investment properties)        27        27
Due to general partners                                     185       185
Due from general partners                                    11        11

During  the three  months  ended  March 31,  2000 and  1999,  affiliates  of the
Corporate General Partner were entitled to receive 5% of gross receipts from all
of the Registrant's  properties for providing property management services.  The
Registrant  paid to such  affiliates  approximately  $72,000 and $70,000 for the
three months ended March 31, 2000 and 1999, respectively.

An  affiliate  of  the  Corporate  General  Partner  received  reimbursement  of
accountable  administrative expenses amounting to approximately $27,000 for both
the three months ended March 31, 2000 and 1999.

During 1986 a liability  of  approximately  $185,000 was incurred to the general
partners for sales commissions  earned.  Pursuant to the Partnership  Agreement,
this  liability  cannot be paid until certain  levels of returns are received by
the limited  partners.  As of March 31, 2000, the level of return to the limited
partners has not been met.

On September  26, 1997,  an affiliate of the General  Partner  purchased  Lehman
Brothers Class "D" subordinated bonds of SASCO, 1992-M1. These bonds are secured
by 55 multi-family  apartment mortgage loan pairs held in Trust, including Essex
Park Apartments,  Colony House Apartments, and Willowick Apartments owned by the
Partnership.

AIMCO and its affiliates  currently own 30,244 limited  partnership units in the
Partnership  representing  54.989% of the  outstanding  units. 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. As a result of its
ownership  of  54.989%  of the  outstanding  units,  AIMCO is in a  position  to
influence 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 their
affiliation with the Corporate General Partner.

Note E - Segment Reporting

Description  of the types of products  and  services  from which the  reportable
segment derives its revenue:

The  Partnership  has  one  reportable  segment:   residential  properties.  The
Partnership's  residential property segment consists of four apartment complexes
located in Georgia,  South Carolina (2), and Tennessee.  The  Partnership  rents
apartment units to tenants for terms that are typically twelve months or less.

Measurement of segment profit or loss:

The  Partnership  evaluates  performance  based on segment  profit (loss) before
depreciation.  The accounting policies of the reportable segment are the same as
those described in the  Partnership's  Annual Report on Form 10-KSB for the year
ended December 31, 1999.

Factors management used to identify the enterprise's reportable segment:

The  Partnership's  reportable  segment  consists of investment  properties that
offer similar products and services.  Although each of the investment properties
is  managed  separately,  they have been  aggregated  into one  segment  as they
provide similar types of products and customers.

Segment  information for the three months ended March 31, 2000 and 1999 is shown
in the tables below.  The "Other"  column  includes  partnership  administration
related items and income and expense not allocated to the reportable segment.

                 2000                   Residential      Other       Totals
                                                    (in thousands)
Rental income                             $ 1,317         $ --      $ 1,317
Other income                                  102             2         104
Interest expense                              156            --         156
Depreciation                                  260            --         260
General and administrative expense             --            60          60
Segment profit (loss)                         314           (58)        256
Total assets                               12,979           177      13,156
Capital expenditures for investment
  properties                                  202            --         202

                 1999                   Residential      Other       Totals
                                                   (in thousands)
Rental income                             $ 1,279         $ --      $ 1,279
Other income                                   81             4          85
Interest expense                              185            --         185
Depreciation                                  230            --         230
General and administrative expense             --            55          55
Segment profit (loss)                         289           (51)        238
Total assets                               12,785           537      13,322
Capital expenditures for investment
  properties                                   67            --          67

Note F - 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. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs  named as defendants,  among others,
the Partnership,  the 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  the  acquisition  by Insignia  Financial  Group,  Inc.
("Insignia")  and  entities  which  were,  at one time,  affiliates  of Insignia
("Insignia  Affiliates") of interests in certain general partner entities,  past
tender offers by Insignia  Affiliates to acquire limited  partnership units, the
management of partnerships  by Insignia  Affiliates and the Insignia Merger (see
"Note B - Transfer  of  Control").  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  have 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 final  court
approval, on behalf of the Partnership and all limited partners who own units as
of November 3, 1999.  Preliminary  approval of the  settlement  was  obtained on
November 3, 1999 from the Superior Court of the State of  California,  County of
San Mateo, 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 class  plaintiffs'  counsel
to enter the settlement. On December 14, 1999, the Corporate General Partner and
its affiliates terminated the proposed settlement. Certain plaintiffs have filed
a motion to  disqualify  some of the  plaintiffs'  counsel  in the  action.  The
Corporate  General Partner does not anticipate  that costs  associated with this
case 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 2.     Management's Discussion and Analysis or Plan of Operation

The  matters  discussed  in this Form  10-QSB  contain  certain  forward-looking
statements  and  involve  risks and  uncertainties  (including  changing  market
conditions,   competitive  and  regulatory   matters,   etc.)  detailed  in  the
disclosures  contained  in this  Form  10-QSB  and the  other  filings  with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussions 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
operations.  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.

The Partnership's investment properties consist of four apartment complexes. The
following  table sets forth the average  occupancy of the properties for each of
the three months ended March 31, 2000 and 1999

                                                            Average
                                                           Occupancy

       Property                                        2000          1999

       Essex Park Apartments
          Columbia, South Carolina                     91%            93%

       Colony House Apartments
          Mufreesboro, Tennessee                       94%            85%

       North River Village Apartments
          Atlanta, Georgia                             92%            94%

       Willowick Apartments
          Greenville, South Carolina                   95%            94%

The Corporate  General  Partner  attributes  the increase in occupancy at Colony
House  Apartments  to  the  management's  intensified  marketing  and  promotion
efforts.

Results of Operations

The  Registrant's  net  income for the three  months  ended  March 31,  2000 was
approximately  $256,000  as  compared to  approximately  $238,000  for the three
months ended March 31,  1999.  The increase in net income was due to an increase
in total revenues which were partially  offset by an increase in total expenses.
The increase in total revenues was primarily due to an increase in rental income
and, to a lesser extent,  an increase in other income.  Rental income  increased
due  to an  increase  in  average  annual  rental  rates  at  all  four  of  the
Registrant's  investment  properties.  Rental  income also  increased  due to an
increase in occupancy at two of the Registrant's investment properties which was
slightly  offset by a decrease in occupancy at the  Registrant's  two  remaining
investment   properties.   Other  income   increased   due  to  an  increase  in
miscellaneous income at North River Village Apartments.

Total expenses  increased as a result of increases in operating and depreciation
expense,  which was  slightly  offset by a  decrease  in  interest  expense  and
property tax expense. The increase in operating expenses was due to increases in
administrative and maintenance expenses. Administrative expense increased due to
small increases in business licenses and permits, tax service and office expense
at all four investment properties. Maintenance expense increased due to interior
painting  projects  at  Colony  House  Apartments  and  Essex  Park  Apartments.
Depreciation  expense  increased  due to  increased  property  improvements  and
replacements  at all four investment  properties.  These increases were slightly
offset by a decrease  in  interest  expense due to the  reduction  in  principal
balances on the properties mortgages.  Property tax expense decreased due to the
timing of the receipt of property tax billings.

General and administrative  expense remained  relatively  constant for the three
months ended March 31, 2000. Included in general and administrative expenses for
the three months ended March 31, 2000 and 1999 are management  reimbursements to
the Corporate  General  Partner allowed under the  Partnership  Agreement.  Also
included in general and  administrative  expenses were costs associated with the
quarterly and annual  communications  with investors and regulatory agencies and
the annual audit and appraisals required by the Partnership Agreement.

As part of the ongoing  business plan of the Registrant,  the Corporate  General
Partner monitors the rental market environments of its investment  properties to
assess the feasibility of increasing rents,  maintaining or increasing occupancy
levels and protecting  the  Partnership  from increases in expenses.  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 March 31, 2000, the Registrant had cash and cash equivalents of approximately
$866,000 as compared to  approximately  $1,065,000  at March 31, 1999.  Cash and
cash  equivalents  increased  approximately  $211,000 for the three months ended
March 31, 2000 from the  Registrant's  year end,  primarily due to approximately
$649,000 of cash provided by operating activities, which was partially offset by
approximately  $370,000 of cash used in investing  activities and  approximately
$68,000 of cash used in financing activities.  Cash used in investing activities
consisted  of  property  improvements  and  replacements  at  all  four  of  the
Partnership's  investment  properties and net deposits to the restricted  escrow
accounts  maintained by the mortgage lender.  Cash used in financing  activities
consisted  of  payments  of  principal  made on the  mortgages  encumbering  the
Registrant's properties.  The Registrant invests its working capital reserves in
money market 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 investment  properties to adequately  maintain the
physical  assets and other  operating needs of the Registrant and to comply with
Federal, state, local, legal, and regulatory requirements.  Capital improvements
completed at each of the Registrant's properties are detailed below.

Essex Park Apartments

The Partnership  has budgeted  approximately  $223,000 for capital  improvements
during 2000 at Essex Park Apartments,  consisting primarily of appliances, floor
coverings,   plumbing  improvements,   and  other  building  improvements.   The
Partnership has completed  approximately  $29,000 in capital  expenditures as of
March  31,  2000,   consisting   primarily  of  floor   covering  and  appliance
replacements.   These   improvements  were  funded  primarily  from  replacement
reserves.

Colony House Apartments

The Partnership  has budgeted  approximately  $117,000 for capital  improvements
during 2000 at Colony House Apartments consisting primarily of appliances, floor
coverings,  swimming pool improvements,  and air conditioning improvements.  The
Partnership has completed  approximately  $71,000 in capital  expenditures as of
March 31, 2000, consisting primarily of floor covering,  appliance  replacement,
and major sewer  replacements.  These  improvements  were funded  primarily from
replacement reserves and operations.

North River Village Apartments

The Partnership  has budgeted  approximately  $164,000 for capital  improvements
during  2000  at  North  River  Village  Apartments,   consisting  primarily  of
appliances,  floor  coverings and plumbing  improvements.  The  Partnership  has
completed  approximately  $67,000 in capital  expenditures as of March 31, 2000,
consisting  primarily of floor covering,  appliances,  and HVAC replacements and
parking  lot  improvements.   These  improvements  were  funded  primarily  from
operations.

Willowick Apartments

The  Partnership  has budgeted  approximately  $70,000 for capital  improvements
during 2000 at Willowick Apartments,  consisting primarily of appliances,  floor
coverings,  major  landscaping  and clubhouse  renovations.  The Partnership has
completed  approximately  $35,000 in capital  expenditures as of March 31, 2000,
consisting  primarily of floor  covering,  lighting and appliance  replacements.
These improvements were funded primarily from replacement reserves.

The additional  capital  expenditures 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  Registrant.  The  mortgage
indebtedness of  approximately  $7,843,000,  net of discount,  is amortized over
varying periods with balloon  payments due from November 15, 2002 to October 15,
2003. The Corporate  General Partner will attempt to refinance such indebtedness
and/or sell the properties prior to such maturity date. If the properties cannot
be refinanced or sold for a sufficient  amount,  the Registrant will risk losing
such properties through foreclosure.

There were no cash distributions made for either of the three months ended March
31,  2000 or 1999.  Future cash  distributions  will depend on the levels of net
cash generated  from  operations,  the  availability  of cash reserves,  and the
timing  of  debt   maturities,   refinancings,   and/or  property   sales.   The
Partnership's  distribution policy is reviewed on a semi-annual basis. There can
be no assurance,  however,  that the Partnership will generate  sufficient funds
from operations,  after planned capital improvement expenditures,  to permit any
additional  distributions  to its  partners in 2000 or  subsequent  periods.  In
addition,  the Partnership may be restricted  from making  distributions  if the
amount in the  reserve  account for each  property  maintained  by the  mortgage
lender is less than $400 per apartment  unit at Colony House  Apartments,  Essex
Park Apartments,  and Willowick  Apartments and $200 per apartment unit at North
River  Village  Apartments.  As of March 31, 2000 the reserve  account was fully
funded with approximately $661,000 on deposit with the mortgage lender.


                           PART II - OTHER INFORMATION

ITEM 1.     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. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs  named as defendants,  among others,
the Partnership,  the 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  the  acquisition  by Insignia  Financial  Group,  Inc.
("Insignia")  and  entities  which  were,  at one time,  affiliates  of Insignia
("Insignia  Affiliates") of interests in certain general partner entities,  past
tender offers by Insignia  Affiliates to acquire limited  partnership units, the
management of partnerships  by Insignia  Affiliates and the Insignia Merger (see
"Part 1 - Financial Information, Item 1. Financial Statements, Note B - Transfer
of  Control").  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  have  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 final court
approval, on behalf of the Partnership and all limited partners who own units as
of November 3, 1999.  Preliminary  approval of the  settlement  was  obtained on
November 3, 1999 from the Superior Court of the State of  California,  County of
San Mateo, 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 class  plaintiffs'  counsel
to enter the settlement. On December 14, 1999, the Corporate General Partner and
its affiliates terminated the proposed settlement. Certain plaintiffs have filed
a motion to  disqualify  some of the  plaintiffs'  counsel  in the  action.  The
Corporate  General Partner does not anticipate  that costs  associated with this
case will be material to the Partnership's overall operations.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            a)    Exhibits:

                  Exhibit 27, Financial Data Schedule, is filed as an exhibit to
                  this report.

            b)    Reports on Form 8-K filed during the quarter  ended  March 31,
                  2000:

                  None.

                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                             SHELTER PROPERTIES III

                                 By:     Shelter Realty III 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:   May 4, 2000