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, 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 unit data)

                                  June 30, 2001

<TABLE>
<CAPTION>


Assets
<S>                                                         <C>           <C>
   Cash and cash equivalents                                              $    370
   Receivables and deposits                                                    199
   Restricted escrows                                                          136
   Other assets                                                                483
   Investment properties:
      Land                                                 $   1,281
      Buildings and related personal property                 27,189
                                                              28,470
      Less accumulated depreciation                          (17,692)       10,778
                                                                          $ 11,966

Liabilities and Partners' Deficit
Liabilities
   Accounts payable                                                       $     66
   Tenant security deposit liabilities                                         103
   Accrued property taxes                                                      207
   Other liabilities                                                           504
   Mortgage notes payable                                                   15,149

Partners' Deficit
   General partners                                        $   (106)
   Limited partners (55,000 units issued and
      outstanding)                                           (3,957)        (4,063)
                                                                          $ 11,966



            See Accompanying Notes to Consolidated Financial Statements
</TABLE>


<PAGE>




b)

                             SHELTER PROPERTIES III
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                        (in thousands, except per unit data)
<TABLE>
<CAPTION>



                                     Three Months Ended            Six Months Ended
                                          June 30,                     June 30,
                                    2001           2000           2001           2000
Revenues:
<S>                                <C>           <C>            <C>             <C>
   Rental income                   $1,343        $1,359         $2,657          $2,676
   Other income                        85           106            214             210
       Total revenues               1,428         1,465          2,871           2,886

Expenses:
   Operating                          643           599          1,212           1,205
   General and administrative          91            87            167             147
   Depreciation                       276           267            548             527
   Interest                           285           181            571             337
   Property taxes                     103            96            211             179
       Total expenses               1,398         1,230          2,709           2,395

   Net income                      $   30        $  235         $  162          $  491

Net income allocated
   to general partners (1%)        $   --        $    2         $    2          $    5
Net income allocated
   to limited partners (99%)           30           233            160             486
                                   $   30        $  235         $  162          $  491
Net income per limited
   partnership unit                $  .55        $ 4.24         $ 2.91          $ 8.84

Distributions per limited
   partnership unit                $ 8.77        $10.44         $26.05          $10.44


            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                  --            (14)      (1,433)    (1,447)

Net income for the six months
   ended June 30, 2001                     --              2          160        162

Partners' deficit at
   June 30, 2001                       55,000         $ (106)     $(3,957)   $(4,063)


            See Accompanying Notes to Consolidated Financial Statements
</TABLE>

<PAGE>


d)

                             SHELTER PROPERTIES III
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                   (in thousands)

<TABLE>
<CAPTION>

                                                                  Six Months Ended
                                                                        June 30,
                                                                  2001        2000
Cash flows from operating activities:
<S>                                                             <C>          <C>
   Net income                                                   $   162      $   491
   Adjustments to reconcile net income to net
     cash provided by operating activities:
        Depreciation                                                548          527
        Amortization of discounts and loan costs                     14           53
        Change in accounts:
            Receivables and deposits                                279          276
            Other assets                                            (60)         (33)
            Accounts payable                                        (28)          58
            Tenant security deposit liabilities                      (1)           6
            Accrued property taxes                                  (63)          16
            Other liabilities                                       130          (24)

               Net cash provided by operating activities            981        1,370

Cash flows from investing activities:
   Property improvements and replacements                          (252)        (447)
   Net withdrawals from (deposits to) restricted escrows            598         (257)

               Net cash provided by (used in) investing
                    activities                                      346         (704)

Cash flows from financing activities:
   Payments on mortgage notes payable                              (143)        (136)
   Loan costs paid                                                  (32)          --
   Partners' distributions                                       (1,447)        (580)

               Net cash used in financing activities             (1,622)        (716)

Net decrease in cash and cash equivalents                          (295)         (50)

Cash and cash equivalents at beginning of period                    665          655

Cash and cash equivalents at end of period                      $   370      $   605

Supplemental disclosure of cash flow information:
   Cash paid for interest                                       $   474      $   307

            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 and six  month  periods  ended  June 30,  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 Six Months Ended
                                                                 June 30,
                                                           2001             2000
                                                              (in thousands)
<S>                                                     <C>                <C>
Net cash provided by operating activities               $   981            $ 1,370
   Payments on mortgage notes payable                      (143)              (136)
   Property improvements and replacements                  (252)              (447)
   Change in restricted escrows, net                        598               (257)
   Changes in reserves for net operating
      assets                                               (257)              (299)
   Additional reserves                                     (927)              (231)

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

The Corporate  General Partner reserved  approximately  $927,000 and $231,000 at
June 30, 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 six months
ended June 30, 2001 and 2000.

                                                                 2001      2000
                                                                 (in thousands)

Property management fees (included in
  operating expenses)                                            $147      $146
Reimbursement for services of affiliates
  (included in operating and general and
   administrative expenses and investment properties)              91        63
Due to general partners (included in other liabilities)           185       185
Due from general partners (included in receivables and
   deposits)                                                       11        11

During the six months ended June 30, 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  $147,000 and $146,000 for the
six months ended June 30, 2001 and 2000, respectively.

An  affiliate  of  the  Corporate  General  Partner  received  reimbursement  of
accountable  administrative  expenses  amounting  to  approximately  $91,000 and
$63,000 for the six months ended June 30, 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 June 30, 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  34,581  limited
partnership  units in the  Partnership  representing  62.87% 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 62.87% 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 its
affiliation with the Corporate General Partner.

Note D - Distributions

During the six months ended June 30, 2001, the Partnership made distributions of
approximately  $1,447,000  (approximately  $1,433,000 to the limited partners or
$26.05 per limited  partnership  unit) from operations.  Included in this amount
was approximately  $8,000 which consisted of withholding taxes paid to the state
of South Carolina on behalf of the limited partners. During the six months ended
June 30, 2000,  cash  distributions  of  approximately  $580,000  (approximately
$574,000 to the limited  partners or $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.

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 series of  transactions
which  closed on October 1, 1998 and  February  26, 1999  whereby  Insignia  and
Insignia Properties Trust, respectively,  were merged into AIMCO. The plaintiffs
seek monetary damages and equitable relief,  including  judicial  dissolution of
the Partnership.  On June 25, 1998, the Corporate General Partner filed a motion
seeking  dismissal  of the action.  In lieu of  responding  to the  motion,  the
plaintiffs  filed an amended  complaint.  The  Corporate  General  Partner filed
demurrers to the amended complaint which were heard February 1999.

Pending the ruling on such  demurrers,  settlement  negotiations  commenced.  On
November 2, 1999,  the parties  executed and filed a Stipulation  of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the  settlement  was obtained on November 3, 1999 from the Court,  at which time
the Court set a final  approval  hearing for  December  10,  1999.  Prior to the
December  10,  1999  hearing,  the  Court  received  various  objections  to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement.  On
December 14, 1999, the Corporate  General Partner and its affiliates  terminated
the  proposed  settlement.  In  February  2000,  counsel  for some of the  named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated  the  settlement.  On June  27,  2000,  the  Court  entered  an order
disqualifying  them  from the case and an  appeal  was  taken  from the order on
October 5, 2000. On December 4, 2000, the Court  appointed the law firm of Lieff
Cabraser  Heimann & Bernstein  LLP as new lead  counsel for  plaintiffs  and the
putative class.  Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001,  the  Corporate  General  Partner and its  affiliates  filed a
demurrer to the third amended  complaint.  On May 14, 2001,  the Court heard the
demurrer to the third amended  complaint.  On July 10, 2001, the Court issued an
order sustaining defendants' demurrer on certain grounds.  Plaintiffs have until
August  16,  2001 to file a fourth  amended  complaint.  The  Corporate  General
Partner does not anticipate that any costs,  whether legal or settlement  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 six months ended June 30, 2001 and 2000:

                                                            Average
                                                           Occupancy
       Property                                        2001          2000

       Essex Park Apartments
          Columbia, South Carolina                     91%            92%

       Colony House Apartments
          Mufreesboro, Tennessee                       88%            93%

       North River Village Apartments
          Atlanta, Georgia                             93%            94%

       Willowick Apartments
          Greenville, South Carolina                   94%            96%

The Corporate  General  Partner  attributes  the decrease in occupancy at Colony
House  Apartments to the  competitive  market of the  apartment  industry in the
Mufreesboro area. 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 and six months ended June 30, 2001 was
approximately $30,000 and $162,000,  respectively,  as compared to approximately
$235,000 and  $491,000  for the three and six months  ended June 30,  2000.  The
decrease in net income for the three and six months ended June 30, 2001,  is due
to an increase in total  expenses and, to a lesser  extent,  a decrease in total
revenues.  The increase in total  expenses for both periods was primarily due to
an increase in interest expense, property tax expense, depreciation expense, and
general  and  administrative  expense.  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.  Depreciation
expense increased as a result of property  improvements and replacements  placed
into service during the past twelve months.  Operating expense increased for the
three and six months  ended June 30,  2001 due to  expenses  incurred  for minor
repairs  performed  as a result  of damage  from an ice  storm at  Colony  House
Apartments in January 2001. 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.  Also included in general and
administrative  expenses  for the six months  ended June 30,  2001 and 2000 were
costs associated with the quarterly and annual communications with investors and
regulatory  agencies  and the  annual  appraisals  required  by the  Partnership
Agreement.

Total  revenues for the three and six months ended June 30, 2001,  decreased due
to a decrease in rental  income.  Rental  income  decreased due to a decrease in
occupancy at all of the  Partnership's  investment  properties which was largely
offset by an increase in average rental rates.

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, 2001, the Partnership had cash and cash equivalents of approximately
$370,000  compared to  approximately  $605,000 at June 30, 2000. The decrease in
cash and cash  equivalents  of  approximately  $295,000 for the six months ended
June 30, 2001, from the Partnership's calendar year end, is due to approximately
$1,622,000 of cash used in financing  activities  which was partially  offset by
approximately   $981,000  of  cash   provided  by   operating   activities   and
approximately  $346,000 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 were partially  offset by cash
used  for  property  improvements  and  replacements.  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 and
additional  loan costs related to the  refinancing of the mortgages for three of
the investment  properties in December 2000. 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 and local legal and regulatory requirements. Capital improvements
completed at each of the Registrant's properties are detailed below.

Colony House Apartments

The Partnership has completed  approximately  $58,000 in capital expenditures as
of  June  30,  2001,  consisting  primarily  of  floor  covering  and  appliance
replacements, air conditioning improvements, and structural improvements.  These
improvements  were  funded  primarily  from  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.

Essex Park Apartments

The Partnership has completed  approximately  $64,000 in capital expenditures as
of June 30, 2001,  consisting  primarily of air  conditioning  improvements  and
floor  covering  and  appliance  replacements.  These  improvements  were funded
primarily from 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.

Willowick Apartments

The Partnership has completed  approximately  $40,000 in capital expenditures as
of  June  30,  2001,  consisting  primarily  of  floor  covering  and  appliance
replacements and major  landscaping.  These  improvements  were funded primarily
from  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 major landscaping.

North River Village Apartments

The Partnership has completed  approximately  $90,000 in capital expenditures as
of  June  30,  2001,  consisting  primarily  of  floor  covering  and  appliance
replacements,   plumbing   improvements,   cabinet   improvements,    structural
improvements and other building  improvements.  These  improvements  were funded
primarily from operations.  The Partnership has budgeted, but is not limited to,
approximately  $48,000  for  capital  improvements  during  2001 at North  River
Apartments,  consisting  primarily of appliance and floor covering  replacements
and structural improvements. The Partnership is currently reviewing the proposed
budget.

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  $15,149,000,  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 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, 2001, the Partnership made distributions of
approximately  $1,447,000  (approximately  $1,433,000 to the limited partners or
$26.05 per limited  partnership  unit) from operations.  Included in this amount
was approximately  $8,000 which consisted of withholding taxes paid to the state
of South Carolina on behalf of the limited partners. During the six months ended
June 30, 2000,  cash  distributions  of  approximately  $580,000  (approximately
$574,000 to the limited  partners or $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. 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 June 30, 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  34,581  limited
partnership  units in the  Partnership  representing  62.87% 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 62.87% 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 its
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 series of  transactions
which  closed on October 1, 1998 and  February  26, 1999  whereby  Insignia  and
Insignia Properties Trust, respectively,  were merged into AIMCO. The plaintiffs
seek monetary damages and equitable relief,  including  judicial  dissolution of
the Partnership.  On June 25, 1998, the Corporate General Partner filed a motion
seeking  dismissal  of the action.  In lieu of  responding  to the  motion,  the
plaintiffs  filed an amended  complaint.  The  Corporate  General  Partner filed
demurrers to the amended complaint which were heard February 1999.

Pending the ruling on such  demurrers,  settlement  negotiations  commenced.  On
November 2, 1999,  the parties  executed and filed a Stipulation  of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the  settlement  was obtained on November 3, 1999 from the Court,  at which time
the Court set a final  approval  hearing for  December  10,  1999.  Prior to the
December  10,  1999  hearing,  the  Court  received  various  objections  to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement.  On
December 14, 1999, the Corporate  General Partner and its affiliates  terminated
the  proposed  settlement.  In  February  2000,  counsel  for some of the  named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated  the  settlement.  On June  27,  2000,  the  Court  entered  an order
disqualifying  them  from the case and an  appeal  was  taken  from the order on
October 5, 2000. On December 4, 2000, the Court  appointed the law firm of Lieff
Cabraser  Heimann & Bernstein  LLP as new lead  counsel for  plaintiffs  and the
putative class.  Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001,  the  Corporate  General  Partner and its  affiliates  filed a
demurrer to the third amended  complaint.  On May 14, 2001,  the Court heard the
demurrer to the third amended  complaint.  On July 10, 2001, the Court issued an
order sustaining defendants' demurrer on certain grounds.  Plaintiffs have until
August  16,  2001 to file a fourth  amended  complaint.  The  Corporate  General
Partner does not anticipate that any costs,  whether legal or settlement  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 June 30, 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:  August 1, 2001