SHELTER PROPERTIES II LTD PARTNERSHIP, 10KSB, 1999-03-26

SHELTER PROPERTIES II LTD PARTNERSHIP
10KSB, 1999-03-26
REAL ESTATE

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

FORM 10-KSB

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

For the fiscal year ended December 31, 1998

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

For the transition period from to

Commission file number 0-10256

SHELTER PROPERTIES II
(Name of small business issuer in its charter)

South Carolina 57-0709233
(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) (Zip Code)

Issuer's telephone number (864) 239-1000

Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:

Units of Limited Partnership Interest
(Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No

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

State issuer's revenues for its most recent fiscal year. $5,858,000

State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership's
interests were sold, or the average bid and asked prices of such partnership
interests, as of December 31, 1998. No market exists for the limited
partnership interests of the Registrant, and, therefore, no aggregate market
value can be determined.

DOCUMENTS INCORPORATED BY REFERENCE
NONE

PART I
ITEM 1. DESCRIPTION OF BUSINESS

Shelter Properties II (the "Registrant" or the "Partnership") was organized as a
limited partnership under the laws of the State of South Carolina on October 10,
1980. The general partner responsible for management of the Partnership's
business is Shelter Realty II Corporation, a South Carolina corporation (the
"Corporate General Partner"). The only other general partner of the Partnership
is N. Barton Tuck, Jr. Mr. Tuck is not an affiliate of the Corporate General
Partner and is effectively prohibited by the Partnership's partnership agreement
(the "Partnership Agreement") from participating in the management of the
Partnership. The Corporate General Partner is a subsidiary of Apartment
Investment and Management Company ("AIMCO"). The Partnership Agreement provides
that the Partnership is to terminate on December 31, 2020 unless terminated
prior to such date.

The Registrant is engaged in the business of operating and holding real
properties for investment. In 1981, during its acquisition phase, the
Registrant acquired five existing apartment properties. The Registrant
continues to own and operate three of these properties. See ("Item 2.
Description of Properties").

Commencing February 2, 1981, the Registrant offered, pursuant to a Registration
Statement filed with the Securities and Exchange commission, up to 27,400 Units
of Limited Partnership Interest (the "Units") at a purchase price of $1,000 per
Unit with a minimum purchase of 5 Units ($5,000), or 1.5 Units ($1,500) for an
Individual Retirement Account. An additional 100 Units were purchased by the
Corporate General Partner.

The offering terminated on April 30, 1981. Upon termination of the offering,
the Registrant had accepted subscriptions for 27,500 Units, including 100 Units
purchased by the Corporate General Partner, for an aggregate of $27,500,000.
The Registrant invested approximately $21,000,000 of such proceeds in five
existing apartment properties. Prior to December 31, 1998, the Partnership sold
one property and lost one property to the lender through foreclosure. The
Corporate General Partner intends to maximize the operating results and,
ultimately, the net realizable value of each of the Partnership's remaining
properties in order to achieve the best possible return for the investors. Such
results may be best achieved by holding and operating the properties or through
property sales or exchanges, refinancings, debt restructurings or relinquishment
of the assets. The Partnership intends to evaluate each of its holdings
periodically to determine the most appropriate strategy for each of the assets.
Since its initial offering, the Registrant has not received, nor are limited
partners required to make additional capital contributions.

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

The Registrant has no employees. Management and administrative services are
provided by the Corporate General Partner and by agents retained by the
Corporate General Partner. These services were provided by affiliates of the
Corporate General Partner for the years ended December 31, 1998 and 1997.

The real estate business in which the Partnership is engaged is highly
competitive. There are other residential properties within the market area of
the Partnership's properties. The number and quality of competitive properties,
including those which may be managed by an affiliate of the Corporate General
Partner, in such market area could have a material effect on the rental market
for the apartments at the Partnership's properties and the rents that may be
charged for such apartments. While the Corporate General Partner and its
affiliates are a significant factor in the United States in the apartment
industry, competition for apartments is local. In addition, various limited
partnerships have been formed by the Corporate General Partner and/or affiliates
to engage in business which may be competitive with the Partnership.

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

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

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

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, a publicly traded real
estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result, AIMCO ultimately acquired a 100% ownership
interest in Insignia Properties Trust ("IPT"), the entity which controls the
Corporate General Partner. The Corporate General Partner does not believe that
this transaction will have a material effect on the affairs and operations of
the Partnership.

ITEM 2. DESCRIPTION OF PROPERTIES:

The following table sets forth the Registrant's investments in properties:

Date of
Property Purchase Type of Ownership Use

Parktown Townhouses 03/01/81 Fee ownership, subject Apartment
Deer Park, Texas to first and second 309 units
mortgages.

Raintree Apartments 04/30/81 Fee ownership, subject Apartment
Anderson, South Carolina to first and second 176 units
mortgages.

Signal Pointe Apartments 06/30/81 Fee ownership, subject Apartment
Winter Park, Florida to first and second 368 units
mortgages.

SCHEDULE OF PROPERTIES:

Set forth below for each of the Registrant's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation and
Federal tax basis.

Gross

Carrying Accumulated Federal

Property Value Depreciation Rate Method Tax Basis

(in thousands) (in thousands)

Parktown Townhouses $ 9,682 $ 6,533 5-35 S/L $2,928

Raintree Apartments 4,129 2,812 5-38 S/L 559

Signal Pointe Apartments 11,507 7,661 5-37 S/L 1,900

Totals $25,318 $17,006 $5,387

</TABLE>

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

SCHEDULE OF PROPERTY INDEBTEDNESS:

The following table sets forth certain information relating to the loans
encumbering the Registrant's properties.

Principal Principal

Balance at Stated Balance

December 31, Interest Period Maturity Due at

Property 1998 Rate Amortized Date Maturity (2)

(in thousands) (in thousands)

Parktown Townhouses

1st mortgage $3,016 7.60% (1) 11/15/02 $2,552

2nd mortgage 109 7.60% (1) 11/15/02 109

Raintree Apartments

1st mortgage 1,338 7.60% (1) 11/15/02 1,133

2nd mortgage 48 7.60% (1) 11/15/02 48

Signal Pointe

Apartments

1st mortgage 3,998 7.60% (1) 11/15/02 3,383

2nd mortgage 145 7.60% (1) 11/15/02 145

8,654 $7,370

Less unamortized

mortgage discounts (313)

Total $8,341

(1)The principal balance is being amortized over 257 months with a balloon
payment due November 15, 2002.

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

The Partnership exercised interest rate buy-down options for the three
properties when the debt was refinanced in 1992, reducing the stated rate from
8.76% to 7.60%. The fee for the interest rate reduction amounted to
approximately $700,000 and is being amortized as a loan discount using the
effective interest method over the life of the loans. The discount is reflected
as a reduction of the mortgage notes payable and increases the effective rate of
the debt to 8.76%.

RENTAL RATES AND OCCUPANCY:

Average annual rental rates per unit and occupancy for 1998 and 1997 for each
property:

Average Annual Average

Rental Rates Occupancy

Property 1998 1997 1998 1997

Parktown Townhouses $8,163 $7,722 95% 95%

Raintree Apartments 5,751 5,734 94% 91%

Signal Pointe Apartments 6,518 6,200 96% 96%

The Corporate General Partner attributes the increase in occupancy at Raintree
Apartments to increased marketing efforts.

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

REAL ESTATE TAXES AND RATES:

Real estate taxes and rates in 1998 for each property were:

1998 1998

Billing Rate

(in thousands)

Parktown Townhouses $181 3.04%

Raintree Apartments 75 2.36%

Signal Pointe Apartments 154 1.77%

CAPITAL IMPROVEMENTS:

Parktown Townhomes

In 1998, the Partnership completed approximately $189,000 of capital
improvements at Parktown Townhouses, consisting primarily of carpet replacement,
cabinet and countertop replacement, sewer replacement, swimming pool repairs,
and appliances. These improvements were funded primarily from operating cash
flow. Based on a report received from an independent third party consultant
analyzing necessary exterior improvements and estimates made by the Corporate
General Partner on interior improvements, it is estimated that the property
requires approximately $638,000 of capital improvements over the near term.
Capital improvements budgeted for, but not limited to, approximately $674,000
are planned for 1999, including carpet and vinyl replacement, landscaping,
parking lot repairs, plumbing and electrical upgrades, pool repairs, roof
repairs and other structural repairs and improvements.

Raintree Apartments

The Partnership completed approximately $82,000 of capital improvements at
Raintree Apartments, consisting primarily of building improvements, swimming
pool repairs, and carpet and vinyl replacement. These improvements were funded
primarily from operating cash flow. Based on a report received from an
independent third party consultant analyzing necessary exterior improvements and
estimates made by the Corporate General Partner on interior improvements, it is
estimated that the property requires approximately $186,000 of capital
improvements over the near term. Capital improvements budgeted for, but not
limited to, approximately $262,000 are planned for 1999, including carpet and
vinyl replacement, landscaping, painting, pool repairs, roof repairs, and other
structural repairs and improvements.

Signal Pointe Apartments

The Partnership completed approximately $241,000 of capital improvements at
Signal Pointe Apartments, consisting primarily of building improvements,
swimming pool repairs, roof replacement, appliances, and carpet and vinyl
replacement. These improvements were funded primarily from operating cash flow.
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the Corporate General
Partner on interior improvements, it is estimated that the property requires
approximately $428,000 of capital improvements over the near term. Capital
improvements budgeted for, but not limited to, approximately $572,000 are
planned for 1999, including new air conditioning units, carpet and vinyl
replacement, parking lot and stairwell repairs, electrical upgrades, fence
replacement, landscaping, painting, pool repairs, roof repairs, and other
structural repairs and improvements.

The capital improvements planned for 1999 at the Partnership's properties will
be made only to the extent of cash available from operations and Partnership
reserves.

ITEM 3. LEGAL PROCEEDINGS

In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Corporate General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia and entities which were, at
the time, affiliates of Insignia ("Insignia Affiliates") of interests in certain
general partner entities, past tender offers by Insignia Affiliates as well as a
recently announced agreement between Insignia and AIMCO. The complaint seeks
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 has
filed demurrers to the amended complaint which were heard during February 1999.
No ruling on such demurrers has been received. The Corporate General Partner
does not anticipate that costs associated with this case, if any, to be material
to the Partnership's overall operations.

On July 30, 1998, certain entities claiming to own limited partnership interests
in certain limited partnerships whose general partners were, at the time,
affiliates of Insignia filed a complaint entitled Everest Properties, LLC, et.
al. v. Insignia Financial Group, Inc., et. al. in the Superior Court of the
State of California, County of Los Angeles. The action involves 44 real estate
limited partnerships (including the Partnership) in which the plaintiffs
allegedly own interests and which Insignia Affiliates allegedly manage or
control (the "Subject Partnerships"). This case was settled on March 3, 1999.
The Partnership is responsible for a portion of the settlement costs. The
expense will not have a material effect on the Partnership's net income.

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

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the quarter ended December 31, 1998, no matter was submitted to a vote of
Unit holders through the solicitation of proxies or otherwise.

PART II

ITEM 5. MARKET FOR PARTNERSHIP EQUITY AND RELATED PARTNER MATTERS

The Partnership, a publicly-held limited partnership, offered and sold 27,400
limited partnership units aggregating $27,400,000. An additional 100 units were
purchased by the Corporate General Partner. The Partnership currently has 1,549
holders of record owning an aggregate of 27,500 Units. Affiliates of the
Corporate General Partner owned 11,086.5 units or 40.315% at December 31, 1998.
No public trading market has developed for the Units, and it is not anticipated
that such a market will develop in the future.

Cash distributions of approximately $2,686,000 ($96.69 per limited partnership
unit) of which $356,000 ($12.81 per limited partnership unit) is attributable to
sale and refinancing proceeds and $2,330,000 ($83.88 per limited partnership
unit) is attributable to operations were declared and paid during the year ended
December 31, 1998. Cash distributions of approximately $1,005,000 ($36.18 per
limited partnership unit) attributable to operations were declared and paid
during the year ended December 31, 1997. Future cash distributions will depend
on the levels of net cash generated from operations, refinancings, property
sales and the availability of cash reserves. The Partnership's distribution
policy will be reviewed on a quarterly basis. There can be no assurance,
however, that the Partnership will generate sufficient funds from operations
after required capital expenditures to permit any distributions to its partners
in 1999 or subsequent periods. In addition, the Partnership is restricted from
making distributions if the amount in the reserve account for each property
maintained by the mortgage lender is less than $1,000 per apartment unit at such
property. The reserve accounts are currently fully funded.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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

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

The Registrant's net income for the year ended December 31, 1998 was
approximately $838,000 as compared to approximately $428,000 for the year ended
December 31, 1997. (See "Note D" of the financial statements for a
reconciliation of these amounts to the Registrant's federal taxable income).
The increase in net income was due to an increase in total revenues and a
decrease in total expenses. The increase in total revenues was primarily due to
an increase in rental income. The increase in rental income is primarily
attributable to the increase in average annual rental rates at all three of the
Registrant's investment properties as well as an increase in occupancy at
Raintree Apartments.

Expenses decreased primarily due to a reduction in operating expenses. Operating
expenses decreased primarily as a result of fewer major repair and maintenance
items associated with Parktown Townhouses, as the exterior rehabilitation
project was completed during 1997. Also contributing to the decrease in
expenses was the fact that the Registrant did not recognize any losses on
disposal of properties during 1998, as it did in 1997. The loss on disposal of
property recognized in 1997 resulted from a roof replacement at Parktown
Townhouses which resulted in the write off of the old roof that had not been
fully depreciated at the time of the replacement.

General and administrative expenses remained relatively constant for the
comparable periods. Included in general and administrative expenses at both
December 31, 1998 and 1997 are management reimbursements to the Corporate
General partner allowed under the Partnership Agreement. In addition, costs
associated with the quarterly and annual communications with investors and
regulatory agencies and the annual audit required by the Partnership Agreement
are also included.

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

Liquidity and Capital Resources

At December 31, 1998, the Registrant had cash and cash equivalents of
approximately $576,000 as compared to approximately $1,993,000 at December 31,
1997. The decrease in cash and cash equivalents is due primarily to
approximately $2,964,000 of cash used in financing activities and approximately
$555,000 of cash used in investing activities, which was partially offset by
approximately $2,102,000 of cash provided by operating activities. Cash used in
investing activities consisted of property improvements and replacements and net
deposits to escrow accounts maintained by the mortgage lender. Cash used in
financing activities consisted of payments of principal made on the mortgages
encumbering the Registrant's properties and partner distributions. The
Partnership 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 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. The Registrant has
budgeted, but is not limited to, approximately $1,508,000 in capital
improvements for all of the Registrant's properties in 1999. Budgeted capital
improvements at Parktown Townhouses include carpet and vinyl replacement,
landscaping, parking lot repairs, plumbing upgrades, pool repairs, roof repairs
and other structural repairs and improvements. Budgeted capital improvements at
Raintree Apartments include carpet and vinyl replacement, landscaping, painting,
pool repairs, roof repairs, and other structural repairs and improvements.
Budgeted capital improvements at Signal Pointe include new air conditioning
units, carpet and vinyl replacement, electrical system upgrades, fence
replacement, landscaping, painting, pool repairs, roof repairs, and other
structural repairs and improvements. The capital expenditures will be incurred
only if cash is available from operations or from 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 $8,341,000, net of discount, is amortized over 257
months with a balloon payment of approximately $7,370,000 due on November 15,
2002. The Corporate General Partner will attempt to refinance such indebtedness
and/or sell the properties prior to such maturity date. If the property cannot
be refinanced or sold for a sufficient amount, the Registrant will risk losing
such property through foreclosure.

Cash distributions of approximately $2,686,000 of which $356,000 was
attributable to sale and refinancing proceeds and $2,330,000 was attributable to
operations, were declared and paid during the year ended December 31, 1998.
Cash distributions of approximately $1,005,000 attributable to operations were
declared and paid during the year ended December 31, 1997. The Registrant's
distribution policy is reviewed on a quarterly basis. There can be no
assurance, however, that the Partnership will generate sufficient funds from
operations after required capital expenditures to permit any distributions to
its partners in 1999 or subsequent periods.

Year 2000 Compliance

General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems

The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the Corporate Genneral Partner and its affiliates for
management and administrative services ("Managing Agent"). Any of the computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.

Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.

The Managing Agent's plan to resolve Year 2000 issues involves four Phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.

Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase

Computer Hardware:

During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the mainframe system used by the Managing Agent became fully
functional. In addition to the mainframe, PC-based network servers and routers
and desktop PCs were analyzed for compliance. The Managing Agent has begun to
replace each of the non-compliant network connections and desktop PCs and, as of
December 31, 1998, had completed approximately 75% of this effort.

The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date. The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by March
31, 1999.

Computer software:

The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.

During 1998, the Managing Agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and the testing process is
expected to be completed by March 31, 1999.

The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded 80% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
March 31, 1999.

Operating Equipment:

The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).

The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally. The Managing Agent intends to have a third-party conduct an
audit of these systems and report their findings by March 31, 1999.

Any of the above operating equipment that has been found to be non-compliant to
date has been replaced or repaired. To date, these have consisted only of
security systems and phone systems. As of December 31, 1998 the Managing Agent
has evaluated approximately 86% of the operating equipment for the Year 2000
compliance.

The total cost incurred for all properties managed by the Managing Agent as of
December 31, 1998 to replace or repair the operating equipment was approximately
$400,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $325,000, which is expected to be
completed by April 30, 1999.

The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within our enterprise.

Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000

The Managing Agent continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness. The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before May 1999.
The Managing Agent has updated data transmission standards with two of the three
financial institutions. The Managing Agent's contingency plan in this regard is
to move accounts from any institution that cannot be certified Year 2000
compliant by June 1, 1999.

The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.

The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.

Costs to Address Year 2000

The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.8 million ($0.6 million expensed
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.

Risks Associated with the Year 2000

The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.

In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns of failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.

Contingency Plans Associated with the Year 2000

The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.

ITEM 7. FINANCIAL STATEMENTS

SHELTER PROPERTIES II

LIST OF FINANCIAL STATEMENTS

Report of Ernst & Young LLP, Independent Auditors

Balance Sheet - December 31, 1998

Statements of Operations--Years ended December 31, 1998 and 1997

Statements of Changes in Partners' Capital (Deficit) - Years ended December 31,
1998 and 1997

Statements of Cash Flows--Years ended December 31, 1998 and 1997

Notes to Financial Statements

Report of Ernst & Young LLP, Independent Auditors

The Partners
Shelter Properties II

We have audited the accompanying balance sheet of Shelter Properties II at
December 31, 1998, and the related statements of operations, changes in
partners' capital (deficit) and cash flows for each of the two years in the
period ended December 31, 1998. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Shelter Properties II at
December 31, 1998, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.

/s/ERNST & YOUNG LLP

Greenville, South Carolina
March 3, 1999

SHELTER PROPERTIES II

BALANCE SHEET
(in thousands, except unit data)

December 31, 1998

Assets

Cash and cash equivalents $ 576

Receivables and deposits 334

Restricted escrows 984

Other assets 171

Investment properties (Note C & F):

Land $ 1,814

Buildings and related personal property 23,504

25,318

Less accumulated depreciation (17,006) 8,312

$ 10,377

Liabilities and Partners' Capital (Deficit)

Liabilities

Accounts payable $ 104

Tenant security deposit liabilities 134

Accrued property taxes 236

Other liabilities 219

Mortgage notes payable (Note C) 8,341

Partners' Capital (Deficit)

General partners $ (135)

Limited partners (27,500 units

issued and outstanding) 1,478 1,343

$ 10,377

See Accompanying Notes to Financial Statements

SHELTER PROPERTIES II

STATEMENTS OF OPERATIONS

(in thousands, except unit data)

Years Ended December 31,

1998 1997

Revenues:

Rental income $5,545 $5,319

Other income 313 323

Total revenues 5,858 5,642

Expenses:

Operating 2,618 2,690

General and administrative 196 193

Depreciation 1,010 1,033

Interest 778 798

Property taxes 418 405

Loss on disposal of property -- 95

Total expenses 5,020 5,214

Net income $ 838 $ 428

Net income allocated to general partners (1%) $ 8 $ 4

Net income allocated to limited partners (99%) 830 424

$ 838 $ 428

Net income per limited partnership unit $30.18 $15.41

Distributions per limited partnership unit $96.69 $36.18

See Accompanying Notes to Financial Statements

SHELTER PROPERTIES II

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

Limited

Partnership General Limited

Units Partners Partners Total

Original capital contributions 27,500 $ 2 $27,500 $27,502

Partners' (deficit) capital at

December 31, 1996 27,500 $ (110) $ 3,878 $ 3,768

Partners' distributions paid -- (10) (995) (1,005)

Net income for the year ended

December 31, 1997 -- 4 424 428

Partners' (deficit) capital at

December 31, 1997 27,500 (116) 3,307 3,191

Partners' distributions paid -- (27) (2,659) (2,686)

Net income for the year ended

December 31, 1998 -- 8 830 838

Partners' (deficit) capital at

December 31, 1998 27,500 $ (135) $ 1,478 $ 1,343

See Accompanying Notes to Financial Statements

SHELTER PROPERTIES II

STATEMENTS OF CASH FLOWS
(in thousands)

Years Ended December 31,

1998 1997

Cash flows from operating activities:

Net income $ 838 $ 428

Adjustments to reconcile net income to

net cash provided by operating activities:

Depreciation 1,010 1,033

Amortization of discounts and loan costs 109 108

Loss on disposal of property -- 95

Change in accounts:

Receivables and deposits 24 45

Other assets 19 (25)

Accounts payable 54 (107)

Tenant security deposit liabilities 4 (19)

Accrued property taxes 57 (43)

Other liabilities (13) 42

Net cash provided by operating activities 2,102 1,557

Cash flows from investing activities:

Property improvements and replacements (512) (485)

Net deposits to restricted escrows (43) (39)

Net cash used in investing activities (555) (524)

Cash flows from financing activities:

Payments on mortgage notes payable (278) (257)

Distributions to partners (2,686) (1,005)

Net cash used in financing activities (2,964) (1,262)

Net decrease in cash and cash equivalents (1,417) (229)

Cash and cash equivalents at beginning of period 1,993 2,222

Cash and cash equivalents at end of period $ 576 $ 1,993

Supplemental disclosure of cash flow information:

Cash paid for interest $ 669 $ 690

See Accompanying Notes to Financial Statements

SHELTER PROPERTIES II

NOTES TO FINANCIAL STATEMENTS

December 31, 1998

NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization: Shelter Properties II (the "Partnership" or "Registrant") was
organized as a limited partnership under the laws of the State of South Carolina
on October 10, 1980. The general partner responsible for management of the
Partnership's business is Shelter Realty II Corporation, a South Carolina
corporation (the "Corporate General Partner"). The only other general partner
of the Partnership, N. Barton Tuck, Jr. (the "Individual General Partner"), is
effectively prohibited by the Partnership's partnership agreement (the
"Partnership Agreement") from participating in the management of the
Partnership. The Corporate General Partner is a subsidiary of Apartment
Investment and Management Company ("AIMCO") (See "Note B - Transfer of
Control".) The directors and officers of the Corporate General Partner also
serve as executive officers of AIMCO. The Partnership Agreement provides that
the Partnership is to terminate on December 31, 2020 unless terminated prior to
such date. The Partnership commenced operations on March 1, 1981, and completed
its acquisition of apartment properties on June 30, 1981. The Partnership
operates three apartment properties located in the South and Southwest. As of
December 31, 1998 affiliates of AIMCO owned 11,086.50 units of the Partnership
or 40.315%.

Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

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

Years Ended December 31,

1998 1997

(in thousands)

Net cash provided by operating activities $ 2,102 $ 1,557

Property improvements and replacements (512) (485)

Payments on mortgage notes payable (278) (257)

Changes in reserves for net operating

liabilities (145) 107

Change in restricted escrows, net (43) (39)

Additional reserves (1,124) (489)

Net cash from operations $ -- $ 394

In 1998 and 1997, the Corporate General Partner reserved an additional
$1,124,000 and $489,000, respectively, to fund capital improvements and repairs
at its properties.

Distributions made from reserves no longer considered necessary by the general
partners are considered to be additional net cash from operations for allocation
purposes. Cash distributions of $2,686,000 and $1,005,000 were made during the
years ended December 31, 1998 and 1997, respectively.

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

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

Distributions may be restricted by the requirement to deposit net operating
income (as defined in the mortgage note) into the reserve account until the
reserve account is funded in an amount equal to $1,000 per apartment unit for
each respective property for a total of $853,000. As of December 31, 1998, the
Partnership has deposits of approximately $962,000 in its reserve account.

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

Profits, not including gains from property dispositions are allocated as if they
were distributions or net cash from operations.

Any gain from property dispositions attributable to the excess, if any, of the
indebtedness relating to a property immediately prior to the disposition of such
property over the Partnership's adjusted basis in the property shall be
allocated to each partner having a negative capital account balance, to the
extent of such negative balance. The balance of any gain shall be treated on a
cumulative basis as if it constituted an equivalent amount of distributable net
proceeds and shall be allocated to the general partners to the extent that
general partners would have received distributable net proceeds in connection
therewith; the balance shall be allocated to the limited partners. However, the
interest of the general partners will be equal to at least 1% of each gain at
all times during the existence of the Partnership.

All losses, including losses attributable to property dispositions, are
allocated 99% to the limited partners and 1% to the general partners.
Accordingly, net income (losses) as shown in the statements of operations and
changes in partners' capital (deficit) for 1998 and 1997 were allocated 99% to
the limited partners and 1% to the general partners. Net income per limited
partnership unit for 1998 and 1997 was computed as 99% of net income divided by
27,500 units outstanding.

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

Other Reserves: The general partners may designate a portion of cash generated
from operations as "other reserves" in determining net cash from operations.
Per the Partnership Agreement, the general partners designated as other reserves
an amount equal to the net liabilities related to the operations of apartment
properties during the current fiscal year that are expected to require the use
of cash during the next fiscal year. The changes in other reserves during 1998
and 1997 were a decrease of approximately $145,000 and an increase of
approximately $107,000, respectively, which amounts were determined by
considering changes in the balances of receivables and deposits, other assets,
accounts payable, tenant security deposits, accrued taxes and other liabilities.
At this time, the Corporate General Partner expects to continue to adjust other
reserves based on the net change in the aforementioned account balances.

Cash and cash equivalents: Includes cash on hand and in banks, money market
funds and certificates of deposit with original maturities less than 90 days.
At certain time, the amount of cash deposited at a bank may exceed the limit on
insured deposits.

Restricted Escrow:

Reserve Account: A general reserve account was established in 1992 with
the refinancing proceeds for each mortgaged property. These funds were
established to cover necessary repairs and replacements of existing
improvements, debt service, out of pocket expenses incurred for ordinary and
necessary administrative tasks, and payment of real property taxes and insurance
premiums. The Partnership is required to deposit net operating income (as
defined in the mortgage note) from each refinanced property to the respective
reserve account until the accounts equal $1,000 per apartment unit or $853,000
in total. The balance at December 31, 1998, is approximately $962,000, which
includes interest.

Escrows for Taxes: These escrows, totaling $161,000 at December 31, 1998, and
included in receivables and deposits, are held by the Partnership and are
designated for the payment of real estate taxes.

Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the apartment properties and related personal property. For
Federal income tax purposes, the accelerated cost recovery method is used (1)
for real property over 15 years for additions prior to March 16, 1984, 18 years
for additions after March 15, 1984, and before May 9, 1985, and 19 years for
additions after May 8, 1985, and before January 1, 1987, and (2) for personal
property over 5 years for additions prior to January 1, 1987. As a result of
the Tax Reform Act of 1986, for additions after December 31, 1986, the modified
accelerated cost recovery method is used for depreciation of (1) real property
additions over 27 1/2 years and (2) personal property additions over 7 years.

Loan Costs: Loan costs of approximately $393,000, less accumulated amortization
of approximately $239,000, are included in other assets and are being amortized
on a straight-line basis over the life of the loans.

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

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

Investment Properties: Investment properties consist of three apartment
complexes and are stated at cost. Acquisition fees are capitalized as a cost of
real estate. In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", the Partnership
records impairment losses on long-lived assets used in operations when events
and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amounts of those assets. Costs of apartment properties that have
been permanently impaired have been written down to appraised value. No
adjustments for impairment of value were recorded in the years ended December
31, 1998 or 1997.

Segment Reporting: In June 1997, the Financial Accounting Standards Board
issued SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information" ("Statement 131"), which is effective for years beginning after
December 15, 1997. Statement 131 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 (See "Note G" for disclosure).

Advertising: The Partnership expenses the costs of advertising as incurred.
Advertising expense, included in operating expenses, was approximately $66,000
and $62,000 for the years ended December 31, 1998 and 1997, respectively.

Reclassifications: Certain reclassifications have been made to the 1997
information to conform to the 1998 presentation.

NOTE B - TRANSFER OF CONTROL

NOTE C - MORTGAGE NOTES PAYABLE

The principle terms of mortgage notes payables are as follows:

Principal Monthly Principal

Balance at Payment Stated Balance

December 31, Including Interest Maturity Due at

Property 1998 Interest Rate Date Maturity

(in thousands) (in thousands)

Parktown Townhouses

1st mortgage $3,016 $ 28 7.60% 11/15/02 $2,552

2nd mortgage 109 1 7.60% 11/15/02 109

Raintree Apartments

1st mortgage 1,338 12 7.60% 11/15/02 1,133

2nd mortgage 48 (a) 7.60% 11/15/02 48

Signal Pointe Apartments

1st mortgage 3,998 37 7.60% 11/15/02 3,383

2nd mortgage 145 1 7.60% 11/15/02 145

8,654 $ 79 $7,370

Less unamortized

present value discounts (313)

Total $8,341

(a) Monthly interest only payments are less than $1,000.

The mortgage notes payable are nonrecourse and are secured by pledge of the
respective apartment properties and by pledge of revenues from the respective
apartment properties. The notes could not be prepaid prior to November 15,
1997, thereafter, prepayment penalties are incurred if repaid prior to maturity.
Further, the properties may not be sold subject to existing indebtedness.

The estimated fair value of the Partnership's aggregate debt is approximately
$8,654,000. This estimate is not necessarily indicative of the amounts the
Partnership may pay in actual market transactions.

Scheduled principal payments of mortgage notes payable subsequent to December
31, 1998 are as follows (in thousands):

1999 $ 300

2000 323

2001 349

2002 7,682

Thereafter --

$8,654

NOTE D - INCOME TAXES

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

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

1998 1997

Net income as reported $ 838 $ 428

Add (deduct)

Amortization of present

value discounts -- (2)

Depreciation differences 622 671

Change in prepaid rental 33 37

Other 26 15

Loss on disposition of property -- 95

Federal taxable income $1,519 $1,244

Federal taxable income

per limited partnership unit $54.67 $44.78

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

Net assets as reported $1,343

Buildings and land 2,848

Accumulated depreciation (5,772)

Syndication fees 3,111

Other 178

Net assets - tax basis $1,708

NOTE E - 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 certain payments
to affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. Balances and other transactions with
affiliates of the Corporate General Partner in 1998 and 1997 are as follows:

1998 1997

(in thousands)

Property management fees (included in

operating expenses) $290 $278

Reimbursement for services of affiliates

(included in investment properties, and

general administrative and operating

expenses) (1) 120 137

Due to general partners 58 58

(1) Included in reimbursements for services of affiliates is approximately
$2,000 and $9,000 of reimbursements for construction oversight costs in
1998 and 1997, respectively.

During the years ended December 31, 1998 and 1997, affiliates of the Corporate
General Partner were entitled to receive 5% of gross receipts from all of the
Registrant's properties as compensation for providing property management
services. The Registrant paid to such affiliates $290,000 and $278,000 for the
years ended December 31, 1998 and 1997 respectively.

An affiliate of the Corporate General Partner received reimbursement of
accountable administrative expenses amounting to approximately $120,000 and
$137,000 for the years ended December 31, 1998 and 1997, respectively.

During 1983, a liability of approximately $58,000 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 December 31, 1998, the level of return to the
limited partners has not been met.

On July 21, 1998, an affiliate of the Corporate General (the "Purchaser")
commenced a tender offer for limited partnership interests in the Partnership.
The Purchaser offered to purchase up to 9,500 of the outstanding units of
limited partnership interest in the Partnership at $450 per Unit, net to the
seller in cash. The Purchaser acquired 1,958.5 units pursuant to this offer.
AIMCO currently owns, through its affiliates, a total of 11,086.5 limited
partnership units or 40.315%. Consequently, AIMCO could be in a position to
significantly influence all voting decisions with respect to the Registrant.
Under the Partnership Agreement, unitholders holding a majority of the Units
are entitled to take action with respect to a variety of matters. 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
affiliates with the Corporate General Partner.

On September 26 1997, an affiliate of the Corporate 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 Parktown Townhouses, Raintree Apartments, and Signal Pointe Apartments
owned by the Partnership.

For the period January 1, 1997 to August 31, 1997, the Partnership insured its
properties under a master policy through an agency affiliated with the Corporate
General Partner with an insurer unaffiliated with the Corporate General Partner.
An affiliate of the Corporate General Partner acquired, in the acquisition of a
business, certain financial obligations from an insurance agency which was later
acquired by the agent who placed the master policy. The agent assumed the
financial obligations to the affiliate of the Corporate General Partner which
receives payments on these obligations from the agent. The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of the
Corporate General Partner by virtue of the agent's obligations was not
significant.

NOTE F - REAL ESTATE AND ACCUMULATED DEPRECIATION

Initial Cost

To Partnership

(in thousands)

Buildings Net Costs

and Related Capitalized

Personal Subsequent to

Description Encumbrances Land Property Acquisition

(in thousands) (in thousands)

Parktown Townhouses $ 3,125 $ 1,095 $ 5,329 $ 3,258

Raintree Apartments 1,386 184 3,184 761

Signal Pointe Apartments 4,143 535 8,062 2,910

Totals $ 8,654 $ 1,814 $16,575 $ 6,929

Gross Amount At Which Carried

At December 31, 1998

(in thousands)

Buildings

And

Personal Accumulated Date of Date Depreciable

Description Land Property Total Depreciation Construction Acquired Life-Years

(in thousands)

Parktown Townhouses $ 1,095 $ 8,587 $ 9,682 $ 6,533 1969 03/01/81 5-35

Raintree Apartments 184 3,945 4,129 2,812 1972-1974 04/30/81 5-38

Signal Pointe Apartments 535 10,972 11,507 7,661 1970 06/30/81 5-37

Totals $ 1,814 $23,504 $25,318 $17,006

</TABLE>

Reconciliation of "Real Estate and Accumulated Depreciation":

Years Ended December 31,

1998 1997

(in thousands)

Investment Properties

Balance at beginning of year $24,806 $24,496

Property improvements 512 485

Disposals of property -- (175)

Balance at end of year $25,318 $24,806

Accumulated Depreciation

Balance at beginning of year $15,996 $15,043

Additions charged to expense 1,010 1,033

Disposals of property -- (80)

Balance at end of year $17,006 $15,996

The aggregate cost of the real estate for Federal income tax purposes is
approximately $28,166,000 and $27,653,000 at December 31, 1998 and 1997,
respectively. The accumulated depreciation taken for Federal income tax
purposes is approximately $22,779,000 and $22,390,000 at December 31, 1998 and
1997, respectively.

NOTE G - DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION

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

As defined by SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information", the Partnership has one reportable segment: residential
properties. The Partnership's residential property segment consists of three
apartment complexes in three states in the United States. The Partnership rents
apartment units to people for terms that are typically twelve months or less.

Measurement of segment profit or loss

The Partnership evaluates performance based on net income. The accounting
policies of the reportable segment is the same as those described in the summary
of significant accounting policies.

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
are managed separately, they have been aggregated into one segment as they
provide services with similar types of products and customers.

Segment information for the years 1998 and 1997 is shown in the tables below (in
thousands). The "Other" column includes partnership administration related
items and income and expense not allocated to the reportable segment.

1998
Residential Other Totals
Rental income $ 5,545 $ -- $ 5,545
Other income 242 71 313
Interest expense 778 -- 778
Depreciation 1,010 -- 1,010
General and administrative expense -- 196 196
Segment profit (loss) 963 (125) 838
Total assets 10,060 317 10,377
Capital expenditures for investment
properties 512 -- 512

1997
Residential Other Totals
Rental income $ 5,319 $ -- $ 5,319
Other income 233 90 323
Interest expense 798 -- 798
Depreciation 1,033 -- 1,033
General and administrative expense -- 193 193
Loss on disposal of assets (95) -- (95)
Segment profit (loss) 531 (103) 428
Total assets 10,383 1,948 12,331
Capital expenditures for investment
properties 485 -- 485

NOTE H - LEGAL PROCEEDINGS

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

ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT

Shelter Properties II (the "Partnership" or "Registrant") has no officers or
directors. The general partners are as follows:

Individual General Partner - N. Barton Tuck, Jr., age 60, is the Individual
General Partner of the Registrant. Mr. Tuck is Chairman of GolfSouth
Management, Inc. Until August 1990, he served as Chairman and Chief Executive
Officer of U.S. Shelter Corporation ("Shelter"), the former parent of AmReal
Corporation (former parent of the Corporate General Partner of the Partnership).
For six years prior to 1966, Mr. Tuck was employed in Greenville, South Carolina
by the certified public accounting firm of S.D. Leidesdorf & Company. From 1966
to 1970, he was a registered representative with the investment banking firm of
Harris Upham & Co., Inc. in Greenville, South Carolina. Since 1970, Mr. Tuck has
been engaged in arranging equity investments for individuals and partnerships.
Mr. Tuck is a graduate of the University of North Carolina. Mr. Tuck has
delegated to the corporate general partner all of his authority, as a general
partner of the Partnership, to manage and control the Partnership and its
business and affairs.

Corporate General Partner - The names and ages of, as well as the positions and
offices held by, the executive officers and directors of Shelter Realty II
Corporation (the "Corporate General Partner") are set forth below. There are no
family relationships between or among any officers or directors.

Name Age Position

Patrick J. Foye 42 Executive Vice President and Director

Timothy R. Garrick 42 Vice President - Accounting and Director

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

Timothy R. Garrick has served as Vice President-Accounting of AIMCO
and Vice President - Accounting and Director of the Corporate General Partner
since October 1, 1998. Prior to that date, Mr. Garrick served as Vice
President-Accounting Services of Insignia Financial Group since June of 1997.
From 1992 until June of 1997, Mr. Garrick served as Vice President of
Partnership Accounting and from 1990 to 1992 as an Asset Manager for Insignia
Financial Group. From 1984 to 1990, Mr. Garrick served in various capacities
with U.S. Shelter Corporation. From 1979 to 1984, Mr. Garrick worked on the
audit staff of Ernst & Whinney. Mr. Garrick received his B.S. Degree from the
University of South Carolina and is a Certified Public Accountant.

ITEM 10. EXECUTIVE COMPENSATION

Neither the Individual General Partner nor any of the directors and officers of
the Corporate General Partner received any remuneration from the Registrant.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Except as noted below, no person was known by the Registrant to be the
beneficial owner of more than 5% of the Limited Partnership Units of the
Registrant as of December 31, 1998.

Number

Entity of Units Percentage

Cooper River Properties, LLC 1,958.5 7.122%

(an affiliate of AIMCO)

Insignia Properties LP 9,128.0 33.193%

(an affiliate of AIMCO)

Cooper River Properties, L.L.C. and Insignia Properties L.P. are indirectly
ultimately owned by AIMCO. Their business address is 55 Beattie Place,
Greenville, South Carolina 29602.

No director or officer of the Corporate General Partner owns any units. The
Corporate General Partner owns 100 units as required by the terms of the
Partnership Agreement.

AIMCO currently owns, through its affiliates, a total of 11,086.5 limited
partnership units or 40.315%. Consequently, AIMCO could be in a position to
significantly influence all voting decisions with respect to the Registrant.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. 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
affiliates with the Corporate General Partner.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

1998 1997

(in thousands)

Property management fees (included in

operating expenses) $ 290 $278

Reimbursement for services of affiliates

(included in investment properties, and

general administrative and operating

expenses) (1) 120 137

Due to general partners 58 58

(1) Included in reimbursements for services of affiliates is approximately
$2,000 and $9,000 of reimbursements for construction oversight costs in
1998 and 1997, respectively.

ITEM 13. 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 in the fourth quarter of fiscal year 1998:

Current Report on Form 8-K, dated October 1, 1998 and filed on October 16,
1998, disclosing change in control of Registrant from Insignia Financial
Group, Inc. to AIMCO.

SIGNATURES

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

SHELTER PROPERTIES II LIMITED PARTNERSHIP

By: Shelter Realty II Corporation
Corporate General Partner

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

By: /s/ Timothy R. Garrick
Timothy R. Garrick
Vice President - Accounting

Date: March 26, 1999

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

/s/ Patrick J. Foye Executive Vice President Date: March 26, 1999
Patrick J. Foye and Director

/s/ Timothy R. Garrick Vice President - Accounting Date: March 26, 1999
Timothy R. Garrick and Director

EXHIBIT INDEX

Exhibit

2.1 Agreement and Plan of Merger, dated as of October 1, 1998, by and
between AIMCO and IPT incorporated by reference to Exhibit 2.1
filed with Registrant's Current Report on Form 8-K dated October 1,
1998.

3 See Exhibit 4(a)

4 (a) Amended and Restated Certificate and Agreement of Limited
Partnership [included as Exhibit A to the Prospectus of Registrant
dated February 2, 1981 contained in Amendment No. 1 to Registration
Statement No. 2-69507, of Registrant filed February 2, 1981 (the
"Prospectus") and incorporated herein by reference].

(b) Subscription Agreements and Signature Pages [Filed with
Amendment No. 1 of Registration Statement No. 2-69507, of
Registrant and incorporated herein by reference].

(c) Promissory Note and Deed of Trust between Joe A. McDermott,
Inc. and the Mischer Corporation and New York Life Insurance
Company. General Warranty Deed between Parktown Realty, N.V and
Shelter Properties II to acquire Parktown Apartments.*

(d) Mortgage Note and Mortgage Deed between Mutual Benefit Life
Insurance Company and Foxcroft Investors, Limited. Purchase Money
Note and Purchase Money Mortgage and Security Agreement between
Foxcroft Investors, Limited and Shelter Properties II to acquire
Squire One Apartments.*

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

(e) Mortgage Note between William C. Dailey and Fidelity Federal
Savings and Loan Association and Promissory Note between William C.
Dailey and The Prudential Insurance Company (filed as Exhibit 12(E)
to Amendment No. 1 to Registration Statement No. 2-69507 of
Registrant filed January, 1981 and incorporated herein by
reference). Modification and Assumption of Mortgage between
American Federal Savings and Loan Association and Shelter
Properties II to acquire Raintree Apartments (filed as Exhibit 4(e)
to Form 10-K of Registrant for year ended December 31, 1988 and
incorporated herein by reference).

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

(a) Purchase Agreement dated December 31, 1980, between Hubris,
Inc. and U.S. Shelter Corporation to purchase Parktown Townhouse.**

(b) Purchase Agreement dated January 5, 1981, between Twin City
Apartments, Inc. and U.S. Shelter Corporation to purchase The
Village Apartments.**

(c) Purchase Agreement dated January 2, 1981 between Carolina
Housing Partners and U.S. Shelter Corporation to purchase Raintree
Apartments.**

**Filed as Exhibits 12(b), 12(c) and 12(d), respectively, to
Amendment No. 1 of Registration Statement, No. 2-69507, of
Registrant filed February 2, 1981 and incorporated herein by
reference.

(d) Purchase Agreement dated May 28, 1981 between Foxcroft
Investors, Limited and Shelter Properties II to purchase Squire One
Apartments. [Filed with Form 8-K of Registrant dated June 8, 1981
and incorporated herein by reference.]

(e) Sales Agreement dated December 30, 1983 between Shelter
Properties II and Security Investors, Ltd.-II to sell Cambridge
Station Apartments. [Filed with Form 10-K of Registrant for year
ended December 31, 1983 and incorporated herein by reference.]

(ii) Form of Management Agreement with U.S. Shelter Corporation
subsequently assigned to Shelter Management Group, L.P. (now known as
Insignia Management Group, L.P.) [filed with Amendment No. 1 to
Registration Statement, No. 2-69507, of Registrant] and incorporated
herein by reference.

(iii) Contracts related to refinancing of debt:

(a) First Mortgage and Security Agreements dated October 28, 1992
between Shelter Properties II Limited Partnership and Joseph Philip
Forte (Trustee) and First Commonwealth Realty Credit Corporation, a
Virginia Corporation, securing the following properties: Raintree,
Parktown/Center Court, and Squire One. ***
(b) Second Mortgage and Security Agreements dated October 28, 1992
between Shelter Properties II Limited Partnership and Joseph Philip
Forte (Trustee) and First Commonwealth Realty Credit Corporation, a
Virginia Corporation, securing the following properties: Raintree,
Parktown/Center Court, and Squire One. ***
(c) First Assignments of Leases and Rents dated October 28, 1992
between Shelter Properties II Limited Partnership and Joseph Philip
Forte (Trustee) and First Commonwealth Realty Credit Corporation, a
Virginia Corporation, securing the following properties: Raintree,
Parktown/Center Court, and Squire One. ***

(d) Second Assignments of Leases and Rents dated October 28, 1992
between Shelter Properties II Limited Partnership and Joseph Philip
Forte (Trustee) and First Commonwealth Realty Credit Corporation, a
Virginia Corporation, securing the following properties: Raintree,
Parktown/Center Court, and Squire One. ***

(e) First Deeds of Trust Notes dated October 28, 1992 between
Shelter Properties II Limited Partnership and First Commonwealth
Realty Credit Corporation, relating to the following properties:
Raintree, Parktown/Center Court, and Squire One. ***

(f) Second Deeds of Trust Notes dated October 28, 1992 between
Shelter Properties II Limited Partnership and First Commonwealth
Realty Credit Corporation, relating to the following properties:
Raintree, Parktown/Center Court, and Squire One. ***

***Filed as Exhibits 10(iii) (a) through (f), respectively, of form
10KSB of Registrant for the year ended December 31, 1992 and
incorporated herein by reference.

27 Financial Data Schedule

99 Prospectus of Registrant dated February 2, 1981 [included in
Registration Statement No. 2-69507, of Registrant] and incorporated
herein by reference.

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Shelter
Properties II 1998 Year-End 10-KSB and is qualified in its entirety by reference
to such 10-KSB filing.
</LEGEND>
<CIK> 0000319723
<NAME> SHELTER PROPERTIES II
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 576
<SECURITIES> 0
<RECEIVABLES> 334
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 25,318
<DEPRECIATION> 17,006
<TOTAL-ASSETS> 10,377
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,341
0
0
<COMMON> 0
<OTHER-SE> 1,343
<TOTAL-LIABILITY-AND-EQUITY> 10,377
<SALES> 0
<TOTAL-REVENUES> 5,858
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,020
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 778
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 838
<EPS-PRIMARY> 30.18<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>

</TABLE>