UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(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, 2003

                                       OR

|_|   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 0-19244

                          Krupp Government Income Trust
             (Exact name of registrant as specified in its charter)

               Massachusetts                              04-3089272
    (State or other jurisdiction of            (IRS employer identification no.)
     incorporation or organization)

   One Beacon Street, Boston, Massachusetts                  02108
   (Address of principal executive offices)                (Zip Code)

                                 (617) 523-0066
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 |_|

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).

Yes |_| No |X|


                                      -1-
<PAGE>

                          Part I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. When used in this Form 10-Q, the words "believes," "anticipates,"
"expects," "plans," "intends," "estimates," "continue," "may" or "will" (or the
negative of such words) and similar expressions are intended to identify
forward-looking statements. Such statements are subject to a number of risks and
uncertainties, including but not limited to the following: federal, state or
local regulations; adverse changes in general economic or local conditions;
prepayments of mortgages; failure of borrowers to pay participation interests
due to poor operating results of properties underlying the mortgages; uninsured
losses and potential conflicts of interest between the Trust and its Affiliates,
including the Trustees. The Company's filings with the Securities and Exchange
Commission, including its Annual Report on Form 10-K for the year ended December
31, 2002, contain additional information concerning such risk factors. Actual
results in the future could differ materially from those described in any
forward-looking statements as a result of the risk factors set forth above, and
the risk factors described in the Annual Report.


                                      -2-
<PAGE>

                          KRUPP GOVERNMENT INCOME TRUST

                                 BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>
                                                                             June 30,       December 31,
                                                                               2003             2002
                                                                           -----------      ------------
<S>                                                                        <C>              <C>
Participating Insured Mortgage Investments
   ("PIMIs") (Note 2)
   Insured Mortgages                                                       $ 9,115,391      $32,255,154
   Additional Loans, net of impairment provision
    of $1,032,272                                                              367,728        4,537,719
Participating Insured Mortgages ("PIMs")(Note 2)                                    --       16,949,637
Mortgage-Backed Securities and insured mortgage loan ("MBS") (Note 3)        5,526,653        6,313,121
                                                                           -----------      -----------

           Total mortgage investments                                       15,009,772       60,055,631

Cash and cash equivalents (Note 2)                                          19,955,254        1,986,243
Interest receivable and other assets                                           105,961          370,542
Prepaid acquisition fees and expenses, net
  of accumulated amortization of $773,166
  and $738,546, respectively                                                    11,540           46,160
Prepaid participation servicing fees, net of
  accumulated amortization of $257,203 and
  $683,812, respectively                                                         4,359           62,497
                                                                           -----------      -----------

           Total assets                                                    $35,086,886      $62,521,073
                                                                           ===========      ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Deferred income on Additional Loans                                        $   367,383      $ 1,351,768
Other liabilities                                                               34,451           48,938
                                                                           -----------      -----------

           Total liabilities                                                   401,834        1,400,706
                                                                           -----------      -----------

Shareholders' equity (Note 4)
   Common stock, no par value; 17,510,000
   Shares authorized; 15,053,135 Shares issued and outstanding              34,459,920       60,668,605

   Accumulated comprehensive income                                            225,132          451,762
                                                                           -----------      -----------

           Total Shareholders' equity                                       34,685,052       61,120,367
                                                                           -----------      -----------

           Total liabilities and Shareholders' equity                      $35,086,886      $62,521,073
                                                                           ===========      ===========
</TABLE>

                     The accompanying notes are an integral
                        part of the financial statements.


                                      -3-
<PAGE>

                          KRUPP GOVERNMENT INCOME TRUST

                  STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                          For the Three Months                  For the Six Months
                                                             Ended June 30,                       Ended June 30,
                                                    -------------------------------       -----------------------------
                                                         2003              2002              2003               2002
                                                    ------------       ------------       -----------       -----------
<S>                                                 <C>                <C>                <C>               <C>
Revenues:
   Interest income - PIMs and PIMIs:
      Basic interest                                $  1,029,551       $  1,248,030       $ 1,786,104       $ 2,620,518
      Additional Loan interest (Note 2)                1,451,120             80,091         1,954,960           160,182
      Participation interest (Note 2)                    719,682          1,092,626         1,794,493         1,964,251
   Interest income - MBS                                 106,916            451,728           219,464           743,714
   Interest income - cash and cash equivalents            45,677             34,949            95,074            90,569
                                                    ------------       ------------       -----------       -----------

         Total revenues                                3,352,946          2,907,424         5,850,095         5,579,234
                                                    ------------       ------------       -----------       -----------

Expenses:
   Asset management fee to an affiliate                   48,060            157,141           138,963           327,625
   Expense reimbursements to affiliates                   57,999             55,377           155,676            92,188
   Amortization of prepaid fees and expenses              23,849            248,967            92,758           524,950
   General and administrative                             92,699            117,574           210,329           219,293
                                                    ------------       ------------       -----------       -----------

         Total expenses                                  222,607            579,059           597,726         1,164,056
                                                    ------------       ------------       -----------       -----------

Net income                                             3,130,339          2,328,365         5,252,369         4,415,178

Other comprehensive income:
   Net change in unrealized gain on MBS                 (256,683)          (199,669)         (226,630)         (182,230)
                                                    ------------       ------------       -----------       -----------

Total comprehensive income                          $  2,873,656       $  2,128,696       $ 5,025,739       $ 4,232,948
                                                    ============       ============       ===========       ===========

Basic earnings per Share                            $        .21       $        .15       $       .35       $       .29
                                                    ============       ============       ===========       ===========

Weighted average Shares outstanding                          15,053,135                            15,053,135
                                                             ==========                            ==========
</TABLE>

                     The accompanying notes are an integral
                       part of the financial statements.


                                      -4-
<PAGE>

                          KRUPP GOVERNMENT INCOME TRUST

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                      For the Six Months
                                                                        Ended June 30,
                                                               -------------------------------
                                                                   2003               2002
                                                               ------------       ------------
<S>                                                            <C>                <C>
Operating activities:
   Net income                                                  $  5,252,369       $  4,415,178
   Adjustments to reconcile net income to net
    cash provided by operating activities:
      Amortization of discounts                                        (788)          (150,057)
      Amortization of prepaid fees and expenses                      92,758            524,950
      Changes in assets and liabilities:
         Decrease in interest receivable and other assets           264,581            257,062
         Decrease in deferred income on Additional Loans           (984,385)          (160,182)
         Increase (decrease) in other liabilities                   (14,487)            96,793
                                                               ------------       ------------

   Net cash provided by operating activities                      4,610,048          4,983,744
                                                               ------------       ------------

Investing activities:
    Principal collections on MBS                                    560,626          3,210,055
    Principal collections on Additional Loans                     4,169,991                 --
    Principal collections on PIMs and Insured Mortgages          40,089,400         34,168,490
                                                               ------------       ------------

    Net cash provided by investing activities                    44,820,017         37,378,545
                                                               ------------       ------------

Financing activity:
   Dividends                                                    (31,461,054)       (49,825,877)
                                                               ------------       ------------

Net increase (decrease) in cash and cash equivalents             17,969,011         (7,463,588)

Cash and cash equivalents, beginning of period                    1,986,243         13,154,231
                                                               ------------       ------------

Cash and cash equivalents, end of period                       $ 19,955,254       $  5,690,643
                                                               ============       ============

Non cash activities:
   Decrease in unrealized gain on MBS                          $   (226,630)      $   (182,230)
                                                               ============       ============
</TABLE>

                     The accompanying notes are an integral
                       part of the financial statements.


                                      -5-
<PAGE>

                          KRUPP GOVERNMENT INCOME TRUST

                          NOTES TO FINANCIAL STATEMENTS

1.    Accounting Policies

      Certain information and footnote disclosures normally included in
      financial statements prepared in accordance with accounting principles
      generally accepted in the United States of America have been condensed or
      omitted in this report on Form 10-Q pursuant to the Rules and Regulations
      of the Securities and Exchange Commission. However, in the opinion of
      Berkshire Mortgage Advisors Limited Partnership (the "Advisor"), which is
      the advisor to Krupp Government Income Trust (the "Trust"), the
      disclosures contained in this report are adequate to make the information
      presented not misleading. See Notes to Financial Statements in the Trust's
      Form 10-K for the year ended December 31, 2002 for additional information
      relevant to significant accounting policies followed by the Trust.

      In the opinion of the Advisor of the Trust, the accompanying unaudited
      financial statements reflect all adjustments (consisting of only normal
      recurring accruals) necessary to present fairly the Trust's financial
      position as of June 30, 2003, its results of operations for the three and
      six months ended June 30, 2003 and 2002 and its cash flows for the six
      months ended June 30, 2003 and 2002.

      The results of operations for the three and six months ended June 30, 2003
      are not necessarily indicative of the results which may be expected for
      the full year. See Management's Discussion and Analysis of Financial
      Condition and Results of Operations included in this report.

2.    PIMs and PIMIs

      At June 30, 2003, the Trust's remaining PIMI had a fair value of
      $9,639,526 including a gross unrealized gain of $524,135. Fair value of
      the FHA insured first mortgage is based on MBS with similar interest rates
      or on expected payoff proceeds. Fair value includes the estimated
      collection value of the Additional Loan. Fair value does not include any
      value for the participation features. The remaining PIMI matures in 2034.
      At June 30, 2003, the remaining PIMI was not delinquent of principal or
      interest.

      Mountain View has been adversely affected by the competitive rental
      housing market. Based on the Advisor's analysis of market conditions and
      property operations and their effect on the property's value, the Trust
      maintains a valuation allowance of $1,032,272 for Mountain View.

      On May 30, 2003, the Trust received a prepayment of the Windward Lakes
      Apartments Subordinated Promissory Note and the Windward Lakes Apartments
      Additional Loan. The Trust received $2,471,294 of Additional Loan
      principal, $970,575 of Additional Loan interest, $719,682 of Shared
      Appreciation Interest and $684,291 of accrued interest from the workout
      agreement that expired in 2000. On June 16, 2003, the Trust received
      $13,301,440 in principal proceeds on the first mortgage note. In addition,
      the Trust recognized $373,757 of Additional Loan interest that had been
      previously received and recorded as deferred income on the Additional
      Loan. On July 24, 2003, the Trust paid a special dividend of $1.22 per
      share from the proceeds of the Windward Lakes prepayment.

      On March 27, 2003, the Trust received a prepayment of the Rivergreens
      Apartments Subordinated Promissory Note. The Trust received $547,978 of
      Shared Appreciation Interest and $383,297 of Minimum Additional Interest.
      On April 10, 2003, the Trust received $9,500,670 representing the
      principal proceeds on the first mortgage loan from the Rivergreens
      Apartments PIM. On May 9, 2003, the Trust paid a special dividend of $0.70
      per share from the proceeds of the Rivergreens Apartments PIM prepayment.

      On March 12, 2003, the Trust sold the Lifestyles Ginnie Mae MBS at par of
      $9,746,038 to the borrower of the Lifestyles PIMI. Concurrently, the
      borrower paid off the full amount due on the Additional Loan of
      $1,817,665. In addition, the Trust recognized $343,659 of Additional Loan
      interest previously recorded as deferred income on the Additional Loan. On
      May 7, 2003, the Trust paid a special dividend of $0.77 per share from the
      proceeds of the Lifestyles Apartments PIMI.

      On January 21, 2003, the Trust received a prepayment of the Mill Pond I
      PIM of $7,430,727 representing the principal proceeds on the first
      mortgage. The underlying property value did not increase sufficiently to
      meet the criteria for the Trust to earn any participating interest. On May
      5, 2003, the Trust paid a special dividend of $0.50 per share from the
      proceeds of the Mill Pond I PIM.

                                    Continued


                                      -6-
<PAGE>

                          KRUPP GOVERNMENT INCOME TRUST

                    NOTES TO FINANCIAL STATEMENTS, Continued


3.    MBS

      At June 30, 2003, the Trust's MBS portfolio had an amortized cost of
      $5,301,521 and unrealized gains of $225,132. The portfolio has maturities
      ranging from 2008 to 2032.

4.    Changes in Shareholders' Equity

      A summary of changes in shareholders' equity for six months ended June 30,
      2003 is as follows:

<TABLE>
<CAPTION>
                                         Total                            Accumulated
                                        Common            Retained       Comprehensive     Shareholders'
                                         Stock            Earnings          Income            Equity
                                      ------------       -----------       ---------      -------------
<S>                                   <C>                <C>               <C>             <C>
Balance at December 31, 2002          $ 60,668,605       $        --       $ 451,762       $ 61,120,367

Net income                                      --         5,252,369              --          5,252,369

Dividends                              (26,208,685)       (5,252,369)             --        (31,461,054)

Change in unrealized gain on MBS                --                --        (226,630)          (226,630)
                                      ------------       -----------       ---------       ------------

Balance at June 30, 2003              $ 34,459,920       $        --       $ 225,132       $ 34,685,052
                                      ============       ===========       =========       ============
</TABLE>

5.    Subsequent Event

      On July 15, 2003, the Trust received a prepayment of the Pointe East
      Apartments insured mortgage for $3,251,119. The Trust also received a
      prepayment premium of $130,045 from this payoff. On August 4, 2003, the
      Trust paid a special dividend of $0.23 per share from the proceeds of the
      Pointe East Apartments insured mortgage payoff.


                                      -7-
<PAGE>

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
financial statements and accompanying notes contained in the Trust's 2002 Annual
Report on Form 10-K and in this Form 10-Q.

Certain statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this quarterly report on
Form 10-Q constitute "forward-looking statements" within the meaning of the
Federal Private Securities Litigation Reform Act of 1995. These forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the Trust's actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by these forward-looking statements. These factors include,
among other things, federal, state or local regulations; adverse changes in
general economic or local conditions; the inability of the borrower to meet
financial obligations on additional loans; pre-payments of mortgages; failure of
borrowers to pay participation interests due to poor operating results at
properties underlying the mortgages; uninsured losses and potential conflicts of
interest between the Trust and its Affiliates, including the Advisor.

Liquidity and Capital Resources

At June 30, 2003, the Trust had liquidity consisting of cash and cash
equivalents of approximately $20.0 million as well as the cash inflows provided
by the remaining PIMI, MBS and cash and cash equivalents. The Trust may also
receive additional cash flow from the participation features of its remaining
PIMI. The Trust anticipates that these sources will be adequate to provide the
Trust with sufficient liquidity to meet its obligations, including providing
dividends to its investors. As described more fully below, the Advisor has
declared a special dividend related to the Windward Lakes payoff that will
result in the distribution of $18.4 million of this cash in the form of a
special dividend in the third quarter of 2003.

The most significant demands on the Trust's liquidity are quarterly dividends
paid to investors of approximately $300,000 and special dividends. Funds for
dividends come from interest income received on the remaining PIMI, MBS and cash
and cash equivalents net of operating expenses, and the principal collections
received on the remaining PIMI and MBS. The portion of dividends funded from
principal collections and cash reserves reduces the capital resources of the
Trust. As the capital resources of the Trust decrease, the total cash flows to
the Trust will also decrease which may result in periodic adjustments to the
dividends paid to the investors.

The Advisor periodically reviews the dividend rate to determine whether an
adjustment is necessary based on projected future cash flows. The current
dividend rate is $0.02 per share per quarter. The Trustees, based on the
Advisor's recommendations, generally set a dividend rate that provides for level
quarterly dividends. To the extent quarterly dividends do not fully utilize the
cash available for distribution and cash balances increase, the Advisor may
adjust the dividend rate or distribute such funds through a special dividend.

In addition to providing guaranteed or insured monthly principal and interest
payments from the insured first mortgage, the Trust's investment in the
remaining PIMI also may provide additional income through the interest on the
Additional Loan portion of the PIMI as well as participation interest based on
operating cash flow and an increase in the value realized upon the sale or
refinance of the underlying property. However, collection of the Additional Loan
principal and interest and interest from the participation feature are neither
guaranteed nor insured and depend upon the successful operations of the
underlying property.

On July 15, 2003, the Trust received a prepayment of the Pointe East Apartments
insured mortgage for $3,251,119. The Trust also received a prepayment premium of
$130,045 from this payoff. On August 4, 2003, the Trust paid a special dividend
of $0.23 per share from the proceeds of the Pointe East Apartments insured
mortgage payoff.

On May 30, 2003, the Trust received a prepayment of the Windward Lakes
Apartments Subordinated Promissory Note and the Windward Lakes Apartments
Additional Loan. The Trust received $2,471,294 of Additional Loan principal,
$970,575 of Additional Loan interest, $719,682 of Shared Appreciation Interest
and $684,291 of accrued interest from the workout agreement that expired in
2000. On June 16, 2003, the Trust received $13,301,440 in principal proceeds on
the first mortgage note. In addition, the Trust recognized $373,757 of
Additional Loan interest that had been previously received and recorded as
deferred income on the Additional Loan. On July 24, 2003, the Trust paid a
special dividend of $1.22 per share from the proceeds of the Windward Lakes
prepayment.

On March 27, 2003, the Trust received a prepayment of the Rivergreens Apartments
Subordinated Promissory Note. The Trust received $547,978 of Shared Appreciation
Interest and $383,297 of Minimum Additional Interest. On April 10,


                                      -8-
<PAGE>

2003, the Trust received $9,500,670 representing the principal proceeds on the
first mortgage loan from the Rivergreens Apartments PIM. On May 9, 2003, the
Trust paid a special dividend of $0.70 per share from the proceeds of the
Rivergreens Apartments PIM prepayment.

On March 12, 2003, the Trust sold the Lifestyles Ginnie Mae MBS at par of
$9,746,038 to the borrower of the Lifestyles PIMI. Concurrently, the borrower
paid off the full amount due on the Additional Loan of $1,817,665. In addition,
the Trust recognized $343,659 of Additional Loan interest previously recorded as
deferred income on the Additional Loan. On May 7, 2003, the Trust paid a special
dividend of $0.77 per share from the proceeds of the Lifestyles Apartments PIMI.

On January 21, 2003, the Trust received a prepayment of the Mill Pond I PIM of
$7,430,727 representing the principal proceeds on the first mortgage. The
underlying property value did not increase sufficiently to meet the criteria for
the Trust to earn any participating interest. On May 5, 2003, the Trust paid a
special dividend of $0.50 per share from the proceeds of the Mill Pond I PIM.

The remaining PIMI investment operates under a workout agreement with the Trust.
The Mountain View agreement modifies the borrower's obligation to make
Additional Loan interest payments, regardless of whether the property generates
sufficient revenues to do so, to an obligation to pay Additional Loan interest
only if the property generates Surplus Cash, as defined by HUD. The Trust did
not receive any Additional Loan interest or Surplus Cash payments from its
remaining PIMI during the first six months of 2003. For the underlying
property's fiscal year ending December 31, 2002, Mountain View did not generate
any Surplus Cash.

Mountain View has experienced problems due to competitive market conditions. In
June 1999, the Trust approved a second workout. Under its terms, the Trust
agreed to reduce the effective interest rate on the insured first mortgage by
1.25% retroactively for 1999 and each year thereafter until 2004, and to change
the loan's participation terms. The workout eliminated the preferred return
feature, forgave $288,580 of previous accruals of Additional Loan interest
related to the first workout, and changed the Trust's participation in Surplus
Cash generated by the property and its application towards Additional Loan
interest. The Trust will receive 75% of the first $130,667 of Surplus Cash and
50% of any remaining Surplus Cash on an annual basis to pay Additional Loan
interest. Unpaid Additional Loan interest related to the second workout will
accrue and be payable if there are sufficient proceeds from a sale or
refinancing of the property. In addition, the borrower repaid $153,600 of the
Additional Loan and funded approximately $54,000 to a reserve for property
improvements.

Under the restructuring described above, management determined that the new
interest rate level of the loan was at or above the then prevailing rate for
similar instruments and therefore did not meet the criteria for a troubled debt
restructuring. Accordingly, the restructuring and new rate was accounted for
prospectively and not as a troubled debt restructuring.

During 2002, operating results at Mountain View deteriorated. A building with 20
three-bedroom apartments was out of service for 18 months as a result of a fire
in 2001. Reconstruction work necessitated by the fire was completed in mid-2002,
with insurance proceeds covering the total cost of the restoration and a portion
of the rental income. Additionally, occupancy in the remaining units has been
affected by local economic conditions. These factors have made the rental market
much more competitive for apartment owners, and the use of concessions to
attract potential renters has increased throughout the market. Consequently,
rental income was down in 2002. At the same time, both insurance costs and real
estate taxes have increased dramatically, further deteriorating operating
results. As a result of the factors described above, the Trust maintains a
valuation allowance of $1,032,272.

Whether the operating performance of Mountain View provides sufficient cash flow
from operations to pay either the Additional Loan principal and interest or
participation income will depend on factors that the Trust has little or no
control over. Should the property be unable to generate sufficient cash flow to
pay the Additional Loan interest, it would reduce the Trust's distributable cash
flow and could affect the value of the Additional Loan collateral.

There are contractual restrictions on the repayment of the remaining PIMI.
During the first five years of the investment, the borrower is prohibited from
repayment. During the second five years, the borrower can prepay the insured
first mortgage and the Additional Loan by satisfying any contractual
obligations. The participation feature and Additional Loan are neither insured
nor guaranteed. If the prepayment of the PIMI results from the foreclosure on
the underlying property or an insurance claim, the Trust would probably not
receive any participation income or any amounts due under the Additional Loan.

The Trust has the option to call the remaining PIMI by accelerating the maturity
if the loan is not prepaid by the tenth year after permanent funding. If the
call feature is exercised then the insurance feature of the loan would be
canceled.


                                      -9-
<PAGE>

Therefore, the Advisor will determine the merits of exercising the call option
for the remaining PIMI as economic conditions warrant. Such factors as the
condition of the asset, local market conditions, the interest rate environment
and available financing will have an impact on these decisions.

Critical Accounting Policies

The Trust's critical accounting policies relate to revenue recognition related
to the Trust's remaining PIMI investment, impaired mortgage loan, amortization
of Prepaid Fees and Expenses and the carrying value of its MBS. The Trust's
policies are as follows:

The Trust accounts for its MBS portion of a PIM or PIMI investment in accordance
with the Financial Accounting Standards Board's Statement 115, "Accounting for
Certain Investments in Debt and Equity Securities" ("FAS 115"), under the
classification of held to maturity as these investments have a participation
feature. As a result, the Trust would not sell or otherwise dispose of the MBS.
Accordingly, the Trust has both the intention and ability to hold these
investments to expected maturity. The Trust carries these MBS at amortized cost.
The insured mortgage portion of the FHA PIM or FHA PIMI is carried at amortized
cost. The Trust holds these mortgages at amortized cost since they are fully
insured by FHA. The Additional Loans are carried at amortized cost unless the
Advisor of the Trust believes there is an impairment in value, in which case a
valuation allowance is established in accordance with FAS 114 "Accounting by
Creditors for Impairment of a Loan" and FAS 118 "Accounting by Creditors for
Impairment of a Loan- Income Recognition and Disclosures". The Trust, in
accordance with FAS 115, classifies its MBS portfolio as available-for-sale. The
Trust classifies its MBS portfolio as available-for-sale as a portion of the MBS
portfolio may remain after all of the PIMs and PIMIs payoff and that it will be
necessary to then sell the remaining MBS portfolio at that time in order to
close out the Trust. In addition, other situations such as liquidity needs could
arise which would necessitate the sale of a portion of the MBS portfolio. As
such, the Trust carries its MBS at fair market value and reflects any unrealized
gains (losses) as a separate component of Shareholders' Equity. The Trust
amortizes purchase premiums or discounts over the life of the underlying
mortgages using the effective interest method.

Basic interest is recognized based on the stated rate of the Department of
Housing and Urban Development ("HUD") Insured Mortgage loan (less the servicer's
fee) or the coupon rate of the Government National Mortgage Association ("GNMA")
MBS. The Trust recognizes interest related to the participation features when
the amount becomes fixed and the transaction that gives rise to such amount is
finalized, cash is received and all contingencies are resolved. This could be
the sale or refinancing of the underlying real estate, which results in a cash
payment to the Trust or a cash payment made to the Trust from surplus cash
relative to the participation feature. The Trust defers the recognition of
Additional Loan interest payments as income to the extent these interest
payments were from escrows established with the proceeds of the Additional Loan.
When the properties underlying the PIMI's generate sufficient cash flow to make
the required Additional Loan interest payments and the Additional Loan value is
deemed collectible, the Trust recognizes income as earned and commences
amortization of the deferred interest amounts into income over the remaining
estimated term of the Additional Loan. During periods where mortgage loans are
impaired the Trust suspends amortizing deferred interest.

The Trust also fully reserves the portion of any Additional Loan interest
payment satisfied through the issuance of an operating loan and any associated
interest due on such operating loan. The Trust will recognize the income related
to the operating loan when the borrower repays amounts due under the operating
loan.

Impaired loans are those Additional Loans which the Advisor believes that the
collection of all amounts due in accordance with the contractual terms of the
loan agreement are not likely. Impaired loans are measured based on the fair
value of the underlying collateral net of estimated selling costs. The Trust
measures impairment on these loans quarterly using the most current operating
information available. Interest received on the impaired loans is applied
against the loan principal.

Prepaid fees and expenses represent prepaid acquisition fees and expenses and
prepaid participation servicing fees paid for the acquisition and servicing of
PIMs and PIMIs. The Trust amortizes prepaid acquisition fees and expenses using
a method that approximates the effective interest method over a period of ten to
twelve years, which represents the estimated life of the underlying mortgage.
The Trust amortizes prepaid participation servicing fees using a method that
approximates the effective interest method over a ten year period beginning at
final endorsement of the loan if a HUD-insured mortgage loan or a GNMA MBS. Upon
the repayment of a PIM or PIMI any unamortized acquisition fees and expenses and
unamortized participation servicing fees related to such loan are expensed.

Results of Operations

Net income of the Trust increased for the three months ending June 30, 2003 as
compared to the same period ending June 30, 2002 primarily due to an increase in
additional loan interest and a decrease in amortization expense. This is
partially


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<PAGE>

offset by decreases in basic interest on PIMS, participation interest and
interest income on MBS. Additional loan interest increased due to the collection
of base interest and the recognition of deferred revenue from the payoff of the
Windward Lakes PIMI in May of 2003. Amortization expense decreased due primarily
to the Rivergreen Apartments PIM payoff in March of 2003, the River View and
Lincoln Green PIM payoffs in 2002 and the full recognition of prepaid fees and
expenses for the Lifestyles and Windward Lakes PIMIs in 2002 and Mill Pond I
Apartments PIM in January of 2003. Basic interest on PIMs decreased primarily
due to the River View and Lincoln Green PIM payoffs in 2002 and the 2003 payoffs
of Mill Pond I and the Rivergreen Apartments PIMs and the Lifestyles PIMI. The
decrease was partially offset by the accrued workout interest received from the
Windward Lakes PIMI payoff. Participation interest decreased due to the
collections of participation interest from the River View and Lincoln Green
payoffs in 2002 being greater than the participation interest collected from the
Windward Lakes payoff in 2003. Interest income on MBS decreased primarily due to
the payoffs of the Rosemont Apartments MBS in August of 2002 and the Parkwest
Apartments MBS in May of 2002.

Net income of the Trust increased for the six months ending June 30, 2003 as
compared to the same period ending June 30, 2002 primarily due to an increase in
additional loan interest and a decrease in amortization expense. This is
partially offset by an increase in expense reimbursement to affiliates and
decreases in basic interest income on PIMs and PIMIs and interest income on MBS.
Additional loan interest increased due to the collection of base interest and
the recognition of deferred revenue from the payoff of the Windward Lakes PIMI
in May of 2003. The Trust also recognized deferred revenue from the Lifestyles
PIMI payoff in March of 2003. Asset management fees decreased due to principal
collections and prepayments. Amortization expense decreased due primarily to the
River View, Waterford and Lincoln Green PIM payoffs in 2002 and the full
recognition of prepaid fees and expenses for the Mill Pond I PIM in January of
2003 and the Lifestyles and Windward Lakes PIMIs in 2002.

Expense reimbursement to affiliates increased due to a change in the estimated
cost of services provided to the Trust in 2002. Basic interest income on PIMs
and PIMIs decreased due primarily to the payoffs of the Rivergreens Apartments
PIM in April of 2003, the Mill Ponds I PIM in January of 2003, the payoffs of
the River View and Lincoln Green PIMs in 2002 and the Lifestyles PIMI payoff in
March of 2003. The decrease in basic interest income on PIMs and PIMIs was
partially offset by accrued interest received from the Windward Lakes payoff in
relation to the workout agreement. Interest income on MBS decreased due to the
payoffs of the Rosemont Apartments MBS in August of 2002 and the Parkwest
Apartments MBS in May of 2002.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Assessment of Credit Risk

The Trust's investments in insured mortgages and MBS are guaranteed and/or
insured by Fannie Mae, the Federal Home Loan Mortgage Corporation ("FHLMC"),
GNMA and HUD and therefore the certainty of their cash flows and the risk of
material loss of the amounts invested depends on the creditworthiness of these
entities.

Fannie Mae is a federally chartered private corporation that guarantees
obligations originated under its programs. FHLMC is a federally chartered
corporation that guarantees obligations originated under its programs. These
obligations are not guaranteed by the U.S. Government or the Federal Home Loan
Bank Board. However, Fannie Mae and FHLMC are two of the largest corporations in
the United States, and both have significant experience in mortgage
securitizations. In addition, their MBS carry the highest credit rating given to
financial instruments. GNMA guarantees the full and timely payment of principal
and basic interest on the securities it issues, which represents interest in
pooled mortgages insured by HUD. Obligations insured by HUD, an agency of the
U.S. Government, are backed by the full faith and credit of the U.S. Government.

Collection of the principal and interest of the Additional Loan and interest on
the participation features have risks similar to those associated with higher
risk debt instruments, including: reliance on the owner's operating skills,
ability to maintain occupancy levels, control operating expenses, ability to
maintain the properties and obtain adequate insurance coverage. Operations also
may be affected by adverse changes in general economic conditions, local
conditions, and changes in governmental regulations, real estate zoning laws, or
tax laws; and other circumstances over which the Trust may have little or no
control.

The Trust's investments also include cash and cash equivalents of approximately
$19.6 million of Agency paper, which is issued by Government Sponsored
Enterprises with a credit rating equal to the top rating category of a
nationally recognized statistical rating organization.


                                      -11-
<PAGE>

Interest Rate Risk

The Trust's primary market risk exposure is to interest rate risk, which can be
defined as the exposure of the Trust's net income, comprehensive income or
financial condition to adverse movements in interest rates. At June 30, 2003,
the Trust's remaining PIMI and MBS comprise the majority of the Trust's assets.
Decreases in interest rates may accelerate the prepayment of the Trust's
investments. The Trust does not utilize any derivatives or other instruments to
manage this risk as the Trust plans to hold its remaining PIMI investment to
expected maturity while it is expected that substantially all of the MBS will
prepay over the same time period thereby mitigating any potential interest rate
risk to the disposition value for any remaining MBS.

The Trust monitors prepayments and considers prepayment trends, as well as
dividend requirements of the Trust, when setting regular dividend policy. For
MBS, the fund forecasts prepayments based on trends in similar securities as
reported by statistical reporting entities such as Bloomberg. For its remaining
PIMI investment, the Trust continues to monitor the borrower for any indication
of a prepayment.

Item 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Within the 90 days prior to the date of this Quarterly Report on Form 10-Q, the
Chief Executive Officer and Chief Accounting Officer carried out an evaluation
of the effectiveness of the design and operation of the Trust's disclosure
controls and procedures. Based upon that evaluation, the Chief Executive Officer
and the Chief Accounting Officer concluded that the Trust's disclosure controls
and procedures were effective as of the date of their evaluation in timely
alerting them to material information relating to the Trust required to be
included in this Quarterly Report on Form 10-Q.

(b) Changes in Internal Controls

There were no significant changes in the Trust's internal controls or in other
factors that could significantly affect such internal controls subsequent to the
date of the evaluation described in paragraph (a) above.


                                      -12-
<PAGE>

                          KRUPP GOVERNMENT INCOME TRUST

                          PART II - OTHER INFORMATION

Item 1.     Legal Proceedings

            None

Item 2.     Changes in Securities and Use of Proceeds

            None

Item 3.     Defaults upon Senior Securities

            None

Item 4.     Submission of Matters to a Vote of Security Holders

            None

Item 5.     Other Information

            None

Item 6.     Exhibits and Reports on Form 8-K

            (a)   Exhibits

                  (31.1)      Chief Executive Officer Certification pursuant to
                              18 U.S.C. Section 1350, as adopted pursuant to
                              Section 302 of the Sarbanes-Oxley Act of 2002.

                  (31.2)      Chief Accounting Officer Certification pursuant to
                              18 U.S.C. Section 1350, as adopted pursuant to
                              Section 302 of the Sarbanes-Oxley Act of 2002.

                  (32.1)      Chief Executive Officer Certification pursuant to
                              18 U.S.C. Section 1350, as adopted pursuant to
                              Section 906 of the Sarbanes-Oxley Act of 2002.

                  (32.2)      Chief Accounting Officer Certification pursuant to
                              18 U.S.C. Section 1350, as adopted pursuant to
                              Section 906 of the Sarbanes-Oxley Act of 2002.

            (b)   Reports on Form 8-K

                   None


                                      -13-
<PAGE>

                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                 Krupp Government Income Trust
                                    (Registrant)


                                 BY: /s/ Alan Reese
                                     ------------------------------------------
                                     Alan Reese
                                     Treasurer and Chief Accounting Officer
                                     of Krupp Government Income Trust

DATE: August 6, 2003


                                      -14-