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, 2001


[ ] 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, 2001


<TABLE>
<CAPTION>

Assets
<S>                                                       <C>             <C>
   Cash and cash equivalents                                              $    590
   Receivables and deposits                                                    215
   Restricted escrows                                                          135
   Other assets                                                                486
   Investment properties:
      Land                                                 $   1,281
      Buildings and related personal property                 27,075
                                                              28,356
      Less accumulated depreciation                          (17,416)       10,940
                                                                          $ 12,366

Liabilities and Partners' Deficit
Liabilities
   Accounts payable                                                       $     64
   Tenant security deposit liabilities                                         104
   Accrued property taxes                                                      103
   Other liabilities                                                           467
   Mortgage notes payable                                                   15,234

Partners' Deficit
   General partners                                        $   (103)
   Limited partners (55,000 units issued and
      outstanding)                                           (3,503)        (3,606)
                                                                          $ 12,366


            See Accompanying Notes to Consolidated Financial Statements
</TABLE>


<PAGE>




b)

                             SHELTER PROPERTIES III
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                          (in thousands, except unit data)

<TABLE>
<CAPTION>


                                                                     Three Months Ended
                                                                          March 31,
                                                                      2001        2000
Revenues:
<S>                                                                  <C>         <C>
   Rental income                                                     $1,314      $1,317
   Other income                                                         129         104
      Total revenues                                                  1,443       1,421

Expenses:
   Operating                                                            569         606
   General and administrative                                            76          60
   Depreciation                                                         272         260
   Interest                                                             286         156
   Property taxes                                                       108          83
      Total expenses                                                  1,311       1,165

Net income                                                           $  132       $ 256

Net income allocated to general partners (1%)                        $    1       $   3
Net income allocated to limited partners (99%)                          131         253

                                                                     $  132       $ 256

Net income per limited partnership unit                              $ 2.38       $4.60
Distributions per limited partnership unit                           $17.28       $  --


            See Accompanying Notes to Consolidated Financial Statements
</TABLE>


<PAGE>


c)

                               SHELTER PROPERTIES III
               CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
                                   (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 at
   December 31, 2000                    55,000       $   (94)    $(2,684)    $(2,778)

Distributions to partners                                (10)       (950)       (960)

Net income for the three months
   ended March 31, 2001                     --             1         131         132

Partners' deficit at
   March 31, 2001                       55,000       $ (103)     $(3,503)    $(3,606)

            See Accompanying Notes to Consolidated Financial Statements
</TABLE>


<PAGE>


d)

                             SHELTER PROPERTIES III
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                   (in thousands)
<TABLE>
<CAPTION>


                                                                 Three Months Ended
                                                                       March 31,
                                                                  2001        2000
Cash flows from operating activities:
<S>                                                             <C>          <C>
   Net income                                                   $   132      $   256
   Adjustments to reconcile net income to net
     cash provided by operating activities:
        Depreciation                                                272          260
        Amortization of discounts and loan costs                      8           26
        Change in accounts:
            Receivables and deposits                                263          296
            Other assets                                            (89)         (53)
            Accounts payable                                        (30)         (19)
            Tenant security deposit liabilities                      --           (1)
            Accrued property taxes                                 (167)         (59)
            Other liabilities                                        93          (57)

               Net cash provided by operating activities            482          649

Cash flows from investing activities:
   Property improvements and replacements                          (138)        (202)
   Net withdrawals from (deposits to) restricted escrows            599         (168)

               Net cash provided by (used in) investing
                    activities                                      461         (370)

Cash flows from financing activities:
   Distributions to partners                                       (960)          --
   Payments on mortgage notes payable                               (58)         (68)

               Net cash used in financing activities             (1,018)         (68)

Net (decrease) increase in cash and cash equivalents                (75)         211

Cash and cash equivalents at beginning of period                    665          655

Cash and cash equivalents at end of period                      $   590      $   866

Supplemental disclosure of cash flow information:
   Cash paid for interest                                       $   197      $   154

            See Accompanying Notes to Consolidated Financial Statements
</TABLE>


<PAGE>



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.  The general  partner  responsible  for management of the
Partnership's  business  is Shelter  Realty III  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. In the opinion of 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,  2001,  are not  necessarily
indicative  of the  results  that may be  expected  for the fiscal  year  ending
December 31, 2001. 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, 2000.

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.

Segment Reporting

Statement of Financial  Accounting Standards ("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 establishes  standards for related disclosures about products and services,
geographic  areas,  and  major  customers.  As  defined  in SFAS  No.  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.

Note B - 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.

<TABLE>
<CAPTION>

                                                        For the Three Months Ended
                                                                March 31,
                                                           2001             2000
                                                              (in thousands)
<S>                                                     <C>                <C>
Net cash provided by operating activities               $   482            $   649
   Payments on mortgage notes payable                       (58)               (68)
   Property improvements and replacements                  (138)              (202)
   Change in restricted escrows, net                        599               (168)
   Changes in reserves for net operating
      assets                                                (70)              (107)
   Additional reserves                                     (391)              (104)

      Net cash provided by operations                   $   424            $    --
</TABLE>

The Corporate  General Partner reserved  approximately  $391,000 and $104,000 at
March 31, 2001 and 2000, respectively,  to fund capital improvements and repairs
at the Partnership's four investment properties.

Note C - 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, 2001 and 2000.

                                                                 2001      2000
                                                                 (in thousands)

Property management fees (included in
  operating expenses)                                            $ 73      $ 72
Reimbursement for services of affiliates
  (included in operating and general and
   administrative expenses and investment properties)              46        27
Due to general partners (included in other liabilities)           185       185
Due from general partners (included in receivables and
   deposits)                                                       11        11

During  the three  months  ended  March 31,  2001 and  2000,  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  $73,000 and $72,000 for the
three months ended March 31, 2001 and 2000, respectively.

An  affiliate  of  the  Corporate  General  Partner  received  reimbursement  of
accountable  administrative  expenses  amounting  to  approximately  $46,000 and
$27,000 for the three months ended March 31, 2001 and 2000, respectively.

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, 2001, the level of return to the limited
partners has not been met.

In addition to its indirect  ownership of the combined general partner interests
in the  Partnership,  AIMCO and its  affiliates  currently  own  34,527  limited
partnership  units in the  Partnership  representing  62.78% 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, which would include without limitation, voting on certain amendments to
the Partnership Agreement and voting to remove the general partners. As a result
of its ownership of 62.78% 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 D - Distributions

During the three months ended March 31, 2001, the Partnership made distributions
of  approximately  $960,000  (approximately  $950,000 to the limited partners or
$17.28 per limited  partnership  unit) from operations.  Subsequent to March 31,
2001,  the   Partnership   made  a  distribution   of   approximately   $424,000
(approximately $420,000 to the limited partners or $7.63 per limited partnership
unit) from operations. There were no distributions during the three months ended
March 31, 2000.

Note E - 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,  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 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 Insignia  Merger.  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.  The demurrer is scheduled to be heard
on May 14,  2001.  The Court has also  scheduled a hearing on a motion for class
certification  for August 27, 2001.  Plaintiffs must file their motion for class
certification  no later than June 15, 2001. 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.


<PAGE>





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, 2001 and 2000:

                                                            Average
                                                           Occupancy
       Property                                        2001          2000

       Essex Park Apartments
          Columbia, South Carolina                     91%            91%

       Colony House Apartments
          Mufreesboro, Tennessee                       88%            94%

       North River Village Apartments
          Atlanta, Georgia                             88%            92%

       Willowick Apartments
          Greenville, South Carolina                   93%            95%

The Corporate  General  Partner  attributes  the decrease in occupancy at Colony
House Apartments and North River Village Apartments to the competitive market of
the apartment  industry in the  Mufreesboro  and Atlanta areas.  The decrease is
also  attributable to the purchase of new homes by tenants due to lower interest
rates.

Results of Operations

The  Registrant's  net  income for the three  months  ended  March 31,  2001 was
approximately  $132,000  as  compared to  approximately  $256,000  for the three
months ended March 31,  2000.  The decrease in net income was due to an increase
in total expenses which were partially  offset by an increase in total revenues.
The  increase in total  expenses  was  primarily  due to an increase in interest
expense,  property tax expense and general and administrative expenses which was
slightly offset by a decrease in operating expenses.  Interest expense increased
due to the refinancings of the mortgages  encumbering  Colony House  Apartments,
Essex Park Apartments,  and Willowick  Apartments during December 2000. Property
tax expense  increased due to an increase in the assessed  values and timing and
receipt of invoices from the taxing  authorities  at Essex Park  Apartments  and
Willowick Apartments which affected the recorded property tax accruals.  General
and  administrative  expenses  increased  due to an  increase  in audit fees and
management  reimbursements  to the Corporate  General  Partner allowed under the
Partnership  Agreement.  Operating  expense  decreased  due  to  a  decrease  in
maintenance  expenses  which was  partially  offset by an  increase  in property
expenses  at  the  Partnership's  investment  properties.   Maintenance  expense
decreased  largely because of the reduction in contract  service  providers that
were employed by the investment properties. Property expense increased due to an
increase in employee salaries and related benefits.

Included in general and administrative expenses for the three months ended March
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.

Total  revenues  increased  as a result of an  increase in other  income.  Other
income  increased  as a result of an increase in interest  income as a result of
higher average cash balances being maintained in interest bearing accounts.

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, 2001, the Registrant had cash and cash equivalents of approximately
$590,000 as compared to approximately  $866,000 at March 31, 2000. Cash and cash
equivalents decreased approximately $75,000 for the three months ended March 31,
2001 from the Registrant's year end,  primarily due to approximately  $1,018,000
of  cash  used  in  financing   activities,   which  was  partially   offset  by
approximately   $482,000  of  cash   provided  by   operating   activities   and
approximately  $461,000 of cash provided by investing activities.  Cash provided
by investing  activities  consisted of net withdrawals  from  restricted  escrow
accounts  maintained by the mortgage  lender which was partially  offset by cash
used for property improvements and replacements at all four of the Partnership's
properties. Cash used in financing activities consisted of payments of principal
made on the mortgages encumbering the Registrant's  properties and distributions
to partners.  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 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 completed  approximately  $28,000 in capital expenditures as
of March 31, 2001, consisting primarily of floor covering replacement, painting,
and appliance replacements and exterior painting. These improvements were funded
primarily from Partnership operations.  The Partnership has budgeted, but is not
limited to, approximately $151,000 for capital improvements during 2001 at Essex
Park   Apartments,   consisting   primarily  of  appliance  and  floor  covering
replacements and air conditioning replacements.

Colony House Apartments

The Partnership has completed  approximately  $36,000 in capital expenditures as
of March  31,  2001,  consisting  primarily  of  floor  covering  and  appliance
replacements,  structural improvements, and air conditioning replacements. These
improvements were funded primarily from Partnership operations.  The Partnership
has  budgeted,  but  is  not  limited  to,  approximately  $76,000  for  capital
improvements  during 2001 at Colony  House  Apartments  consisting  primarily of
appliance and floor covering replacements and other building improvements.

North River Village Apartments

The Partnership has completed  approximately  $63,000 in capital expenditures as
of March  31,  2001,  consisting  primarily  of  floor  covering  and  appliance
replacements  and  structural  improvements.   These  improvements  were  funded
primarily from Partnership operations.  The Partnership has budgeted, but is not
limited to, approximately  $37,000 for capital improvements during 2001 at North
River Village Apartments,  consisting  primarily of appliance and floor covering
replacements and structural improvements. The Partnership is currently reviewing
the proposed budget.

Willowick Apartments

The Partnership has completed  approximately  $11,000 in capital expenditures as
of March  31,  2001,  consisting  primarily  of  floor  covering  and  appliance
replacements.   These   improvements  were  funded  primarily  from  Partnership
operations.  The Partnership has budgeted,  but is not limited to, approximately
$66,000 for capital improvements during 2001 at Willowick Apartments, consisting
primarily  of  appliance  and  floor  covering  replacements,  air  conditioning
improvements, and landscaping.

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  $15,234,000,  net of discount,  is amortized over
varying periods with balloon payments due from October 2003 to January 2021. 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.

During the three months ended March 31, 2001, the Partnership made distributions
of  approximately  $960,000  (approximately  $950,000 to the limited partners or
$17.28 per limited  partnership  unit) from operations.  Subsequent to the three
months  ended  March  31,  2001,  the   Partnership   made  a  distribution   of
approximately $424,000  (approximately $420,000 to the limited partners or $7.63
per limited  partnership unit) from operations.  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 monthly 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 2001 or
subsequent periods.  In addition,  the Partnership may be restricted from making
distributions  if the amount in the  reserve  account  for North  River  Village
Apartments  maintained  by the mortgage  lender is less than $200 per  apartment
unit.  As  of  March  31,  2001  the  reserve  account  was  fully  funded  with
approximately $54,000 on deposit with the mortgage lender.

In addition to its indirect  ownership of the combined general partner interests
in the  Partnership,  AIMCO and its  affiliates  currently  own  34,527  limited
partnership  units in the  Partnership  representing  62.78% 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, which would include without limitation, voting on certain amendments to
the Partnership Agreement and voting to remove the general partners. As a result
of its ownership of 62.78% 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.


<PAGE>



                           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,  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 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 Insignia  Merger.  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.  The demurrer is scheduled to be heard
on May 14,  2001.  The Court has also  scheduled a hearing on a motion for class
certification  for August 27, 2001.  Plaintiffs must file their motion for class
certification  no later than June 15, 2001. The Corporate  General  Partner does
not  anticipate  that costs  associated  with this case will be  material to the
Partnership's overall operations.


<PAGE>



ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            a)    Exhibits:

                  None.

            b) Reports  on Form 8-K filed  during the  quarter  ended  March 31,
               2001:

                  None.


<PAGE>


                                   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 10, 2001