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 June 30, 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)

                                  June 30, 2000

Assets

   Cash and cash equivalents                                            $    605
   Receivables and deposits                                                  161
   Restricted escrows                                                        827
   Other assets                                                              194
   Investment properties:
      Land                                                 $   1,281
      Buildings and related personal property                 26,503
                                                              27,784
      Less accumulated depreciation                          (16,619)     11,165
                                                                        $ 12,952

Liabilities and Partners' (Deficit) Capital
Liabilities

   Accounts payable                                                     $    172
   Tenant security deposit liabilities                                       112
   Accrued property taxes                                                    173
   Other liabilities                                                         432
   Mortgage notes payable                                                  7,792

Partners' (Deficit) Capital

   General partners                                        $    (90)
   Limited partners (55,000 units issued and
      outstanding)                                            4,361        4,271
                                                                        $ 12,952

            See Accompanying Notes to Consolidated Financial Statements

b)

                             SHELTER PROPERTIES III

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)

                          (in thousands, except unit data)


<TABLE>
<CAPTION>


                                   Three Months Ended           Six Months Ended
                                        June 30,                    June 30,
                                    2000         1999          2000           1999
Revenues:
<S>                                <C>           <C>         <C>             <C>
   Rental income                   $1,359        $1,289      $2,676          $2,568
   Other income                       106            76         210             161
       Total revenues               1,465         1,365       2,886           2,729

Expenses:
   Operating                          599           638       1,205           1,199
   General and administrative          87            62         147             117
   Depreciation                       267           212         527             442
   Interest                           181           183         337             368
   Property taxes                      96            99         179             194
       Total expenses               1,230         1,194       2,395           2,320

   Net income                      $  235        $  171      $  491          $  409

Net income allocated

   to general partners (1%)        $    2        $    2      $    5          $    4
Net income allocated

   to limited partners (99%)          233           169         486             405
                                   $  235        $  171      $  491          $  409
Net income per limited
   partnership unit                $ 4.24        $ 3.07      $ 8.84          $ 7.36

Distributions per limited

   partnership unit                $10.44        $   --      $10.44          $   --


            See Accompanying Notes to Consolidated Financial Statements
</TABLE>


<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

Distributions to partners                                (6)         (574)      (580)

Net income for the six months
   ended June 30, 2000                     --             5           486        491

Partners' (deficit) capital at
   June 30, 2000                       55,000         $ (90)      $ 4,361    $ 4,271

            See Accompanying Notes to Consolidated Financial Statements
</TABLE>


d)

                             SHELTER PROPERTIES III

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (Unaudited)

                                   (in thousands)

<TABLE>
<CAPTION>

                                                                  Six Months Ended
                                                                      June 30,

                                                                  2000        1999
Cash flows from operating activities:

<S>                                                             <C>         <C>
   Net income                                                   $   491     $   409
   Adjustments to reconcile net income to net
     cash provided by operating activities:
        Depreciation                                                527         442
        Amortization of discounts and loan costs                     53          49
        Change in accounts:
            Receivables and deposits                                276          66
            Other assets                                            (33)        (59)
            Accounts payable                                         58          45
            Tenant security deposit liabilities                       6         (12)
            Accrued property taxes                                   16         (70)
            Other liabilities                                       (24)          1

               Net cash provided by operating activities          1,370         871

Cash flows from investing activities:

   Property improvements and replacements                          (447)       (199)
   Net (deposits to) withdrawals from restricted escrows           (257)        331

               Net cash (used in) provided by investing
                    activities                                     (704)        132

Cash flows from financing activities:

   Payments on mortgage notes payable                              (136)       (125)
   Partners' distributions                                         (580)         --

               Net cash used in financing activities               (716)       (125)

Net (decrease) increase in cash and cash equivalents                (50)        878

Cash and cash equivalents at beginning of period                    655         630

Cash and cash equivalents at end of period                      $   605     $ 1,508

Supplemental disclosure of cash flow information:

   Cash paid for interest                                       $   307     $   318

            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 and six month  periods  ended June 30, 2000 are
not  necessarily  indicative  of the results  that may be expected  for the 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 Six Months Ended
                                                              June 30,
                                                        2000             1999
                                                           (in thousands)
Net cash provided by operating activities            $ 1,370          $   871
   Payments on mortgage notes payable                   (136)            (125)
   Property improvements and replacements               (447)            (199)
   Change in restricted escrows, net                    (257)             331
   Changes in reserves for net operating
      liabilities                                       (299)              29
   Additional reserves                                  (231)            (707)

      Net cash provided by operations                $    --          $   200

The Corporate  General Partner reserved  approximately  $231,000 and $707,000 at
June 30, 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 six months
ended June 30, 2000 and 1999.

                                                           2000      1999
                                                           (in thousands)

Property management fees (included in
  operating expenses)                                      $146      $140
Reimbursement for services of affiliates
  (included in operating and general and
   administrative expenses and investment properties)        63        58
Due to general partners                                     185       185
Due from general partners                                    11        11

During the six months ended June 30, 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  $146,000 and $140,000 for the
six months ended June 30, 2000 and 1999, respectively.

An  affiliate  of  the  Corporate  General  Partner  received  reimbursement  of
accountable  administrative  expenses  amounting  to  approximately  $63,000 and
$58,000 for the six months ended June 30, 2000 and 1999, 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 June 30, 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 30,424 limited  partnership units in the
Partnership  representing  55.32% 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  55.32%  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 services with similar types of products and customers.

Segment information for the three and six months ended June 30, 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.

   Three Months Ended June 30, 2000     Residential      Other       Totals
                                                   (in thousands)
Rental income                             $ 1,359         $  --     $ 1,359
Other income                                  104             2         106
Interest expense                              181            --         181
Depreciation                                  267            --         267
General and administrative expense             --            87          87
Segment profit (loss)                         320           (85)        235

    Six Months Ended June 30, 2000      Residential      Other       Totals
                                                   (in thousands)
Rental income                             $ 2,676         $  --     $ 2,676
Other income                                  206             4         210
Interest expense                              337            --         337
Depreciation                                  527            --         527
General and administrative expense             --           147         147
Segment profit (loss)                         634          (143)        491
Total assets                               12,688           264      12,952
Capital expenditures for investment
  properties                                  447            --         447

   Three Months Ended June 30, 1999     Residential      Other       Totals
                                                   (in thousands)
Rental income                             $ 1,289         $  --     $ 1,289
Other income                                   70             6          76
Interest expense                              183            --         183
Depreciation                                  212            --         212
General and administrative expense             --            62          62
Segment profit (loss)                         227           (56)        171

    Six Months Ended June 30, 1999      Residential      Other       Totals
                                                   (in thousands)
Rental income                             $ 2,568         $  --     $ 2,568
Other income                                  151            10         161
Interest expense                              368            --         368
Depreciation                                  442            --         442
General and administrative expense             --           117         117
Segment profit (loss)                         516          (107)        409
Total assets                               13,069           473      13,542
Capital expenditures for investment
  properties                                  199            --         199

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,  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 the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited  partnership  units;  the  management  of  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  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 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. The Court will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on  August  21,  2000 to  address  the issue of  appointing  lead  counsel.  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
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.

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 six months ended June 30, 2000 and 1999:

                                                            Average
                                                           Occupancy

       Property                                        2000          1999

       Essex Park Apartments
          Columbia, South Carolina                     92%            92%

       Colony House Apartments
          Mufreesboro, Tennessee                       93%            88%

       North River Village Apartments
          Atlanta, Georgia                             94%            96%

       Willowick Apartments
          Greenville, South Carolina                   96%            95%

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

Results of Operations

The Registrant's net income for the three and six months ended June 30, 2000 was
approximately $235,000 and $491,000,  respectively, as compared to approximately
$171,000 and  $409,000  for the three and six months  ended June 30,  1999.  The
increase in net income for both periods is due to an increase in total revenues,
which was  partially  offset by an increase in total  expenses.  Total  revenues
increased 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 the
average rental rates at all four of the Registrant's  investment  properties and
to an increase in occupancy at Colony House Apartments and Willowick Apartments.
The increase in rental income was partially offset by a decrease in occupancy at
North River  Village  Apartments.  Other income  increased  primarily  due to an
increase in miscellaneous  income at North River Village  Apartments,  and, to a
lesser extent, an increase in interest income.

The increase in total revenues  for the three and six months ended June 30, 2000
was partially offset by an increase in total expenses.  Total expenses increased
due to an increase in  depreciation  and  general and  administrative  expenses,
which were partially  offset by decreases in interest and property tax expenses.
Depreciation  expense  increased  due to  increased  property  improvements  and
replacements  at all four  investment  properties.  Interest  expense  decreased
primarily  due  to the  reduction  of  principal  balances  on  the  properties'
mortgages.  Property tax expense  decreased  due to the timing of the receipt of
property tax billings.  Operating expense remained  relatively  constant for the
six months ended June 30, 2000. Operating expense decreased for the three months
ended June 30, 2000 due to a decrease in  advertising  expense and a decrease in
maintenance materials and supplies.

General and  administrative  expense  increased  for three and six month periods
ended  June 30,  2000 as a  result  of an  increase  in  costs  associated  with
communications  with  investors  and the annual  audit.  Included in general and
administrative  expenses  for the six months  ended  June 30,  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 June 30, 2000, the Partnership had cash and cash equivalents of approximately
$605,000 compared to approximately  $1,508,000 at June 30, 1999. The decrease in
cash and cash equivalents of approximately $50,000 for the six months ended June
30, 2000,  from the  Partnership's  calendar  year end, is due to  approximately
$716,000 of cash used in financing activities and approximately $704,000 of cash
used in  investing  activities,  which was  partially  offset  by  approximately
$1,370,000  of cash  provided by  operating  activities.  Cash used in investing
activities consisted of property  improvements and replacements and, to a lesser
extent, net deposits to escrow accounts  maintained by the mortgage lender. Cash
used in financing activities consisted of partner distributions and, to a lesser
extent, 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  $62,000 in capital  expenditures as of
June 30, 2000,  consisting  primarily of fencing improvements and floor covering
and  appliance  replacements.  These  improvements  were funded  primarily  from
operations.

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  $228,000 in capital expenditures as of
June  30,  2000,   consisting   primarily  of  floor   covering  and   appliance
replacements,  air conditioning  improvements,  and swimming pool  improvements.
These improvements were funded primarily from 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  $107,000 in capital  expenditures as of June 30, 2000,
consisting   primarily  of  floor  covering  and  HVAC  replacements,   plumbing
improvements,  parking lot improvements, and other building 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  $50,000 in capital  expenditures  as of June 30, 2000,
consisting primarily of floor covering,  lighting and appliance replacements and
other  building  improvements.  These  improvements  were funded  primarily from
operations.

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  $7,792,000,  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  dates.  If the  properties
cannot be refinanced or sold for a sufficient  amount,  the Registrant will risk
losing such properties through foreclosure.

During the six months ended June 30, 2000, cash  distributions  of approximately
$580,000 ($574,000 of which was paid to the limited partners, $10.44 per limited
partnership  unit)  were paid  from  operations.  Included  in this  amount  was
approximately  $15,000 which consisted of withholding taxes paid to the state of
South  Carolina  on  behalf  of  the  limited  partners.   There  were  no  cash
distributions  made  for the  six  months  ended  June  30,  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 June 30,
2000 the reserve account was fully funded with approximately $750,000 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,  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 the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited  partnership  units;  the  management  of  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  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 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. The Court will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on  August  21,  2000 to  address  the issue of  appointing  lead  counsel.  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 June 30, 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:   August 2, 2000