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


                                  FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended           December 31, 2000

                                            OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]

For the transition period from                    to

    Commission file number                     0-19244


                                   Krupp Government Income Trust

                     (Exact name of registrant as specified in its charter)

        Massachusetts                                 04-3089272
(State or other jurisdiction               (IRS Employer Identification No.)
of 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)

Securities registered pursuant to Section 12(b) of the Act:

          Title                        Name of Exchange on which Registered
Shares of Beneficial Interest                          None

Securities registered pursuant to Section 12(g) of the Act:   None

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 if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not 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-K or any amendment to this
Form 10-K. [ ].

Aggregate  market  value  of  voting  securities  held  by  non-affiliates:  Not
applicable.

Documents incorporated by reference: see Part IV, Item 14

The exhibit index is located on pages 12-18


<PAGE>


                                    PART I

This Form 10-K 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.  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.

ITEM 1.  BUSINESS
------

Krupp  Government  Income Trust (the  "Trust") was formed on November 1, 1989 by
filing a Declaration of Trust in the Commonwealth of Massachusetts. The Trust is
authorized  to sell and  issue  not more than  17,510,000  shares of  beneficial
interest ("the Shares").  The Trust raised  approximately $300 million through a
public offering of Shares of beneficial interest and used the proceeds available
for investment  primarily to acquire  participating  insured mortgages ("PIMs"),
participating   insured  mortgage  investments   ("PIMIs")  and  mortgage-backed
securities  ("MBS").  The  Trust  considers  itself  to be  engaged  in only one
industry segment, investment in mortgages.

The Trust has elected to be treated as a real estate  investment trust ("REIT"),
under the Internal  Revenue Code of 1986, as amended.  The Trust shall terminate
on December  31, 2029  unless  earlier  terminated  by the  affirmative  vote of
holders of a majority of the outstanding  Shares  entitled to vote thereon.  See
Note A of Notes to  Financial  Statements  included in Appendix A of this report
for additional information.

The Trust's investments in PIMs on multi-family  residential  properties consist
of (1) a MBS or an insured mortgage loan (collectively,  the "insured mortgage")
guaranteed  or  insured  as  to  principal  and  basic   interest,   and  (2)  a
participating mortgage. The insured mortgages were issued or originated under or
in connection with the housing  programs of Fannie Mae, the Government  National
Mortgage Association  ("GNMA"),  or the Federal Housing  Administration  ("FHA")
under the authority of the Department of Housing and Urban Development  ("HUD").
PIMs provide the Trust with monthly payments of principal and basic interest and
may also provide for Trust  participation  in the current  revenue stream and in
residual  value,  if any,  from a sale or other  realization  of the  underlying
property.  The borrower conveys the participation  rights to the Trust through a
subordinated  promissory  note and  mortgage.  The  participation  features  are
neither insured nor guaranteed.

The PIMIs consist of (1) an insured  mortgage issued by GNMA or originated under
the lending  program of the FHA, (2) an additional loan  ("Additional  Loan") to
the borrower or owners of the borrower in excess of mortgage  amounts insured or
guaranteed under GNMA or FHA programs that increases the Trust's total financing
with respect to that property and (3) a participating mortgage. Additional Loans
associated  with insured  mortgages  issued or originated in connection with HUD
insured programs cannot,  under government  regulations,  be collateralized by a
mortgage  on the  underlying  property.  These  Additional  Loans are  typically
collateralized  by  a  security  interest  satisfactory  to  Berkshire  Mortgage
Advisors Limited  Partnership ("the Advisor").  The Additional Loans are neither
insured nor guaranteed.  In addition,  the participation features related to the
participating  mortgage are neither  insured nor  guaranteed.  Additional  Loans
provide the Trust with semi-annual  interest payments and may provide additional
interest  in the future  while the  participating  mortgage  provides  for Trust
participation  in the net income and residual  value,  if any, of the underlying
property.

The Trust also acquired MBS  collateralized  by  single-family  and multi-family
mortgage  loans issued or originated by GNMA,  Fannie Mae, the Federal Home Loan
Mortgage Corporation ("FHLMC"). Fannie Mae and FHLMC guarantee the principal and
basic interest of the Fannie Mae and FHLMC MBS,  respectively.  GNMA  guarantees
the timely  payment of  principal  and  interest on its MBS, and HUD insures the
pooled mortgage loans underlying the GNMA MBS and FHA mortgage loans.

The Trust will distribute all proceeds from prepayments or other realizations of
mortgage  assets to  investors  either  through  quarterly  dividends or special
dividends.

Although the Trust will  terminate no later than December 31, 2029, the value of
the PIMs and PIMIs may be realized  by the Trust  through  repayment  or sale as
early as ten years from the dates of the closings of the  permanent  loans,  and
the Trust may realize the value of all of its other investments within that time
frame thereby  resulting in a dissolution  of the Trust  significantly  prior to
December 31, 2029.

The Trust's investments are not expected to be subject to seasonal fluctuations,
although net income may vary  somewhat  from  quarter to quarter  based upon the
participation features of its investments.  The requirements for compliance with
federal,  state and local  regulations  to date have not adversely  affected the
Trust's operations, and the Trust anticipates no adverse effect in the future.


<PAGE>



To qualify as a REIT for  federal  income tax  purposes,  the Trust made a valid
election  to be so  treated  and must  continue  to  satisfy a range of  complex
requirements  including criteria related to its ownership structure,  the nature
of its  assets,  the  sources of its income and the amount of its  dividends  to
shareholders.  The Trust intends to qualify as a REIT in each year of operation,
however,  certain factors may have an adverse effect on the Trust's REIT status.
If for any taxable year, the Trustees and the Advisor  determine that any of the
asset,  income, or dividend tests are not likely to be satisfied,  the Trust may
be required to borrow money,  dispose of mortgages or take other action to avoid
loss of REIT status.

Additionally,  if the Trust does not qualify as a REIT for any taxable  year, it
will be  subject  to  federal  income  tax as if it were a  corporation  and the
shareholders  will be taxed as shareholders of a corporation.  If the Trust were
taxed as a corporation, the payment of such tax by the Trust would substantially
reduce the funds  available  for dividends to  shareholders.  To the extent that
dividends had been made in anticipation of the Trust's  qualification as a REIT,
the Trust might be required to borrow  additional funds or to liquidate  certain
investments in order to pay the  applicable  tax.  Moreover,  should the Trust's
election to be taxed as a REIT be terminated or voluntarily  revoked,  the Trust
may not be able to elect to be  treated  as a REIT for the  following  five-year
period.

As of December 31, 2000, there were no personnel directly employed by the Trust.

ITEM 2.  PROPERTIES
------

None.

ITEM 3.  LEGAL PROCEEDINGS
------

There are no material pending legal proceedings to which the Trust is a party or
to which any of its investments are subject to.

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

None.


                                  PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
------

There currently is no established public trading market for the Shares.

The number of investors  holding Shares as of December 31, 2000 is approximately
11,600.

The Trust has and  intends  to  continue  declaring  and paying  dividends  on a
quarterly basis. The Trustees  established a dividend rate per Share per quarter
of $.325 for 1999 and $.17 per Share per quarter for 2000 and 2001.


ITEM 6.  SELECTED FINANCIAL DATA
------

The following  table sets forth  selected  financial  information  regarding the
Trust's financial  position and operating  results.  This information  should be
read in  conjunction  with  Management's  Discussion  and  Analysis of Financial
Condition  and  Results  of  Operations   and  the  Financial   Statements   and
Supplementary Data, which are included in Item 7 and Item 8 (Appendix A) of this
report, respectively.

<PAGE>

<TABLE>
<CAPTION>
                                                       (Amounts in thousands, except for per Share amounts)

                                             2000           1999          1998            1997             1996
                                             ----           ----          ----            ----             ----

<S>                                      <C>              <C>            <C>             <C>              <C>
Total revenues                           $   11,076       $ 15,632       $ 21,922        $ 17,618         $ 16,358

Net income                               $    8,429       $ 12,317       $ 14,836        $ 12,899         $ 12,481

Net income per Share                     $      .56       $    .82       $    .99        $    .86         $    .83

Weighted average Shares
 outstanding                                 15,053         15,053         15,053          15,053           15,053
Total assets at
 December 31                             $  140,131       $142,096       $171,422        $221,779         $241,634

Average dividends
 per Share                               $      .68      $    2.60       $   4.16        $   2.22         $   1.30

</TABLE>


ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS


Liquidity and Capital Resources

At  December  31,  2000 the  Trust  had  liquidity  consisting  of cash and cash
equivalents,  of approximately $5.4 million as well as the cash inflows provided
by PIMs,  PIMIs,  MBS,  cash and cash  equivalents.  The Trust may also  receive
additional cash flow from the participation  features of its PIMs and PIMIs. 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.

The most  significant  demand on the Trust's  liquidity is quarterly  dividends,
paid to investors of approximately $2.6 million,  and special  dividends.  Funds
for dividends come from interest income received on PIMs,  PIMIs,  MBS, cash and
cash  equivalents  net of  operating  expenses  and  the  principal  collections
received on PIMs,  PIMIs and MBS. The portion of dividends funded from principal
collections 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 $.17  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 Trustees may
adjust the dividend rate or distribute such funds through a special dividend.

The Trust's  PIMIs funded the  construction  or  significant  rehabilitation  of
multifamily  housing,  which  requires  time to  achieve  stabilized  operations
following the  completion  of the work.  With this in mind,  the Trust  required
those  borrowers to escrow a portion of the Additional Loan proceeds in reserves
so funds would be available for the PIMI  Additional  Loan  payments  during the
construction  and lease-up  periods.  As these reserves  become  depleted,  full
payment of the Additional Loan interest becomes  primarily  dependent on whether
the underlying  property generates  sufficient  operating cash flow to make such
payments.

In addition to providing  guaranteed or insured  monthly  principal and interest
payments,  the Trust's investments in PIMs and PIMIs also may provide additional
income through the interest on the Additional  Loan portion of the PIMIs as well
as  participation  income  based on  operating  cash flow and an increase in the
value realized upon the sale or refinance of the underlying properties. However,
these payments are neither guaranteed nor insured and depend upon the successful
operations of the underlying properties.

<PAGE>

The Trust received both installments of Additional Loan interest from two of its
PIMI  investments,  Red Run and The Seasons during 2000. The Trust's three other
PIMI  investments,  Lifestyles,  Mountain View and Windward  Lakes operate under
workout agreements with the Trust that require Additional Loan interest payments
only  if  Surplus  Cash,  as  defined  by HUD,  is  generated  through  property
operations.  None of these three properties  generated Surplus Cash for the year
ended December 31, 1999 or the six months ended June 30, 2000; consequently, the
Trust did not receive any Additional Loan interest.

The Trust received  participation  interest from five of its investments  during
the  twelve  months  ended  December  31,  2000.  Waterford  Townhomes,   a  PIM
investment,  paid $42,731 of participation interest. Red Run, a PIMI investment,
paid $39,673 of participation  interest.  The Seasons,  a PIMI investment,  paid
$174,505 of  participation  interest.  Lincoln  Green,  a PIM  investment,  paid
$188,726  and  Rivergreens  I,  a  PIM  investment,   paid  $58,370.  Two  other
properties,  Mill Pond I and  Riverview,  are  occupied in the low 90% range and
generate  sufficient  revenue to meet all cash  requirements  for operations and
maintenance, but do not generate Surplus Cash under HUD's definition for payment
of participation interest to the Trust.

As mentioned above,  three properties  operate under workout agreements with the
Trust.  Windward Lakes' operating results deteriorated during 1995 and 1996, and
in early 1997 the independent  Trustees  approved a workout with the borrower of
the  Windward  Lakes PIMI,  an  affiliate  of the  Advisor of the Trust.  In the
workout,  the Trust agreed to reduce the  effective  basic  interest rate on the
insured first mortgage by 2% per annum for 1997 and 1% per annum for 1998,  1999
and 2000. The borrower made an equity  contribution  of $133,036 to the property
and  agreed  to cap the  annual  management  fee paid to an  affiliate  at 3% of
revenues.  The Trust's participation in current operations is 50% of any Surplus
Cash as determined  under HUD  guidelines,  and the Additional  Loan interest is
payable out of its share of Surplus Cash.  Any unpaid  Additional  Loan interest
accrues at 7.5% per annum.  When the property is sold or  refinanced,  the Trust
will receive 50% of any net proceeds  remaining  after  repayment of the insured
mortgage,  the  Additional  Loan,  the interest rate relief,  accrued and unpaid
Additional  Loan  interest  and the  Borrower's  equity up to the point that the
Trust has received a  cumulative,  non-compounded  10%  preferred  return on its
investment in the PIMI.

Lifestyles  operating results deteriorated during 1995, and the Trust approved a
two-year  workout  that  effectively  reduced the  interest  rate on the insured
mortgage by 1%. When that  workout  ended in 1997,  the property was not able to
generate  sufficient  revenues to maintain the property and service the original
interest rate.  Consequently,  the borrower on the Lifestyles  PIMI defaulted on
its May 1, 1998 debt service  payment on the insured first  mortgage.  The Trust
agreed to a new  workout  that runs  through  2007.  Under its terms,  the Trust
agreed to reduce the effective  interest  rate on the insured first  mortgage by
1.75%  retroactively  for 1998 to clear the default,  by 1.75% for 1999,  and by
1.5% each year thereafter until the property is sold or refinanced. An affiliate
of the Advisor refunds  approximately .25% per annum to the Trust related to the
interest reduction. The borrower made a $550,000 equity contribution,  which has
been escrowed,  for the exclusive purpose of correcting deferred maintenance and
making capital improvements to the property.  Any Surplus Cash that is generated
by property  operations will be split evenly between the Trust and the borrower.
When the property is sold or  refinanced,  the first  $1,100,000 of any proceeds
remaining  after the insured  mortgage is paid off will be split 50% / 50%;  the
next  $1,690,220  of  proceeds  will be split  75% to the  Trust  and 25% to the
borrower; and any remaining proceeds will be split 50% / 50%. The borrower's new
equity and the  reduction in the  effective  interest  rate on the insured first
mortgage  will  provide  funds for  repairs  and  improvements  that should help
reposition  Lifestyles so it can compete more  effectively for new residents and
rental rates. As a result of the factors  described  above, the Trust determined
that the Additional Loan  collateralized  by the Lifestyles  asset was impaired,
and recorded a valuation  allowance of $1,130,346 in the fourth  quarter of 1998
and continues to maintain that allowance.

Mountain  View is similar to  Lifestyles  with  respect  to  competitive  market
conditions.  In June 1999, the Trust approved a second workout that runs through
2004. 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  the  property  is  sold  or  refinanced,  and to  change  the
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.  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. As a result of the factors described above, the Advisor determined
that the Additional Loan  collateralized by the Mountain View asset was impaired
and has recorded a valuation  allowance of $1,032,272  and continues to maintain
that allowance.

<PAGE>

Whether the  operating  performance  at any of the  properties  mentioned  above
provide  sufficient  cash flow from operations to pay either the Additional Loan
interest  or  participation  income  will  depend on factors  that the Trust has
little  or no  control  over.  Should  the  properties  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 PIMs and  PIMIs.
During the first five years of the  investment,  borrowers are  prohibited  from
repayment.  During the  second  five  years,  the PIM  borrowers  can prepay the
insured  first  mortgage  by paying the greater of a  prepayment  premium or the
participation due at the time of the prepayment.  Similarly,  the PIMI borrowers
can prepay the insured first mortgage and the Additional  Loan by satisfying the
Preferred Return obligation. The participation features and Additional Loans are
neither  insured nor  guaranteed.  If the  prepayment of the PIM or 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.

During the third quarter of 1999, the Trust received a prepayment of the Audubon
Villas PIMI when the property was refinanced.  The Trust received the prepayment
of the principal  balance of the insured mortgage of $14,861,957,  the principal
balance  of the  Additional  Loan of  $2,691,000,  and  participation  income of
$1,966,901.  Also,  $1,962,261 was recognized as Additional Loan interest income
which was  previously  recorded  as deferred  income.  On August 18,  1999,  the
Advisor  declared  a  special  dividend  of  $1.30  per  share  that was paid on
September 17, 1999 from the payoff of the Audubon Villas PIMI.

During the third  quarter  1998,  the Trust  received a  prepayment  of the Park
Highlands PIMI when the property was sold. This prepayment occurred prior to the
expiration of the five-year  prohibition.  However,  the Advisor agreed to allow
the transaction to be completed while market conditions were favorable in return
for an additional  prepayment penalty.  The Trust received the prepayment of the
principal  balance of the insured first mortgage of  $16,752,295,  the principal
balance of the Additional  Loan of $3,000,000,  the Additional Loan interest due
at the time of the  prepayment  of $57,945  and the  prepayment  penalty for the
early payoff of $479,476. In addition, the Trust received participation interest
comprised  of the  outstanding  Preferred  Return  on the  Trust  investment  of
$1,481,865  and the Trust's share in the increase in the value of the underlying
property of $1,206,719.

Also during the third  quarter of 1998,  the Trust  received a prepayment of the
Coconut  Palm  Club  PIMI.  This  transaction  was the  result  of a sale of the
underlying  property as well,  although  the Trust  received  less than its full
Preferred  Return.  The  Advisor  agreed to allow the  transaction  because  the
purchase  price was judged to be  favorable  in light of the highly  competitive
rental market in Broward County,  Florida. In addition,  without the sale it was
likely  that the  Advisor  would  have  agreed  to a loan  restructure  with the
borrower rather than expose the Trust to the uncertainty of a probable  default.
The Trust received the prepayment of the principal  balance of the insured first
mortgage  of  $15,851,211,  the  principal  balance  of the  Additional  Loan of
$2,850,900 and the Additional  Loan interest due at the time of the repayment of
$89,090. In addition,  the Trust received  participation  interest of $1,419,116
towards the Preferred Return.

The Trust paid a special  dividend on  September 9, 1998 of $2.86 per Share from
the prepayment proceeds of the Park Highlands and Coconut Palm Club PIMIs.

The Trust has the option to call certain PIMs and all the PIMIs by  accelerating
their  maturity if the loans are not  prepaid by the tenth year after  permanent
funding. The Advisor will determine the merits of exercising the call option for
each PIM and 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.

Assessment of Credit Risk

The Trust's  investments in insured  mortgages and MBS are guaranteed or insured
by Fannie Mae,  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 and is
wholly-owned  by the twelve Federal Home Loan Banks.  These  obligations are not
guaranteed  by the U.S.  Government  or the Federal  Home Loan Bank Board.  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.

<PAGE>

The Trust's  Additional Loans have similar risks as 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 effected by adverse changes in general economic conditions, adverse 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
$4.7  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.

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 December 31,
2000,  the Trust's  PIMs,  PIMIs and MBS  comprise  the  majority of the Trust's
assets.  As such,  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  all of its
investments to expected maturity.

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 PIMs and
PIMIs, the Trust incorporates prepayment assumptions into planning as individual
properties notify the Trust of the intent to prepay or as they mature.

The table on the following page provides information about the Trust's financial
instruments  that are  sensitive  to changes in  interest  rates.  For  mortgage
investments,  the table  presents  principal  cash  flows and  related  weighted
average  interest  rates  ("WAIR")  by expected  maturity  dates.  The  expected
maturity date is contractual maturity adjusted for expectations of prepayments.
<TABLE>
<CAPTION>


                                    Expected maturity dates ($ in thousands)


                     2001       2002       2003       2004       2005     Thereafter      Total      Fair Value
                                                                                        Face Value


Interest-sensitive assets:

<S>               <C>        <C>        <C>        <C>      <C>       <C>              <C>          <C>
MBS               $  1,537   $  1,332   $ 1,156    $ 1,005  $   877   $    10,383      $   16,290   $    16,737
WAIR                 8.27%       8.27%     8.27%      8.27%    8.27%         8.27%           8.27%

PIMS                   471     14,053       257        278      301        31,532          46,892        46,594
WAIR                 7.67%       8.06 %    8.06%      8.06%    8.06%         8.06%           7.67%

PIMIS                  409        444       482        522      567        57,328           59,752       58,655
WAIR                  7.74%      7.74%     7.74%      7.74%    7.93%         7.93%            7.47%

Additional Loans       -        2,471     1,400      2,900       -          3,743          10,514         8,351
WAIR                 6.27%       5.90%     5.60%      4.63%    4.63%         4.63%           6.27%
                  --------    -------- ---------  --------- ---------   ----------     -----------   ----------

Total Interest-
Sensitive Assets  $  2,417   $ 18,300  $   3,295  $   4,705 $   1,745   $   102,986    $   133,448   $  130,337
                  ========   ========  =========  ========= =========   ===========    ===========   ==========


</TABLE>

<PAGE>



Operations

The following discussion relates to the operations of the Trust during the years
ended December 31, 2000, 1999 and 1998. Dollars are stated in thousands,  except
for per Share amounts.
<TABLE>
<CAPTION>

                                                               Years   Ended    December   31,

                                             2000                      1999                       1998

                                                        Per                        Per                       Per
                                         Amount        Share       Amount         Share          Amount     Share

Interest income on PIMs
  and PIMIs:
<S>                                      <C>           <C>           <C>        <C>             <C>           <C>
    Basic interest                       $  8,087      $  .54        $8,789     $ .58           $10,636       $ .71
    Additional Loan interest                  744         .05         2,535       .18             3,081         .20
    Participation interest                    505         .03         2,269       .15             5,094         .34
Interest income on MBS                      1,376         .09         1,531       .10             1,930         .13
Interest income on cash
 and cash equivalents                         365         .02           508       .03             1,181         .08
Trust expenses                             (1,618)       (.10)       (1,595)     (.11)           (1,973)       (.13)
Amortization of prepaid
 fees and expenses                         (1,030)       (.07)       (1,672)     (.11)           (2,999)       (.20)
Provision for impaired
  mortgage loans                           -                -           (48)       -             (2,114)        (.14)
                                         -------       ------      --------     -----           -------        -----       -

Net income                               $  8,429      $  .56      $ 12,317     $ .82           $14,836        $ .99
                                         ========      ======      ========     =====           =======        =====

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


The Trust's net income  decreased  by  approximately  $3.9 million for 2000 when
compared to 1999 due primarily to decreases in interest  income net of decreases
in amortization  expense and asset  management  fees due to an affiliate.  Basic
interest on PIMs and PIMIs, Additional Loan Interest, and participation interest
decreased  by $4.3  million in 2000  primarily  due to the payoff of the Audubon
Villas PIMI in the third quarter of 1999.  Interest  income on MBS will continue
to decline as principal collections reduce the MBS investment balance.  Interest
income  on cash  and  cash  equivalents  decreased  due to  lower  average  cash
balances. Amortization expense decreased due to the payoff of the Audubon Villas
PIMI.  The decrease in asset  management  fees is due to the Trust's  asset base
declining.

The Trust's net income  decreased  by  approximately  $2.5 million for 1999 when
compared to 1998 due primarily to decreases in interest  income net of decreases
in asset  management  fees  due to an  affiliate,  the  provision  for  impaired
mortgage  loans and  amortization  expense.  The prepayment of Park Highland and
Coconut  Palm in 1998,  and  Audubon  Villas in 1999  caused a decrease in basic
interest  income on PIM and  PIMIs.  Participation  income was higher in 1998 by
$2.8  million  as  compared  to 1999  resulting  from the  participation  income
received when the Park Highlands and Coconut Palm PIMIs  prepaid,  exceeding the
income received when the Audubon Villas PIMI prepaid in 1999. Interest income on
MBS will continue to decline as principal  collections reduce the MBS investment
balance.  Interest  income on cash and cash  equivalents  decreased due to lower
average cash balances.  Amortization expense decreased due to the payoffs of the
Audubon  Villas,  Park  Highland and Coconut  Palm PIMIs.  The decrease in asset
management  fees is due to the Trust's asset base  declining.  The provision for
impaired mortgage loans decreased from 1998 to 1999. In 1998, the Trust recorded
a provision for impaired  mortgage  loans in connection  with the Lifestyles and
Mountain  View  Additional  Loans.  In 1999,  the trust  recorded an  additional
$48,000 to adjust the carrying value of the Mountain View Additional Loan to the
estimated fair value of the collateral.


ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


    See Appendix A to this report.

<PAGE>



ITEM 9.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
               FINANCIAL DISCLOSURE


               None.
                                                        PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-------

  Information  as to the Trustees  and  Executive  Officers of Krupp  Government
Income Trust is as follows:

                                                        Position with Krupp
                   Name and Age                         Government Income Trust

                   Douglas Krupp (54)                   Chairman of Board of
                                                        Trustees and Trustee
          *        Charles N. Goldberg (59)             Trustee
          *        J. Paul Finnegan (76)                Trustee
          *        Stephen Puleo (66)                   Trustee
                   Robert A. Barrows (43)               Treasurer
                   Scott D. Spelfogel (40)              Clerk
                   MaryBeth Bloom (27)                  Assistant Clerk

          * Independent Trustee

Douglas Krupp  co-founded and serves as Co-Chairman and Chief Executive  Officer
of The  Berkshire  Group,  an  integrated  real estate  financial  services firm
engaged  in  real  estate  acquisition  and  property   management,   investment
sponsorship,  venture capital investing, mortgage banking, financial management,
and ownership of three operating  companies through private equity  investments.
Mr. Krupp has held the position of  Co-Chairman  since The  Berkshire  Group was
established  as The  Krupp  Companies  in 1969 and he has  served  as the  Chief
Executive  Officer  since  1992.  He is a graduate  of Bryant  College  where he
received an honorary Doctor of Science in Business Administration in 1989 .

Charles N.  Goldberg is currently a partner of Oppel,  Goldberg and Saenz,  LLC.
Prior to that,  he was of  counsel  to the law firm of  Broocks,  Baker & Lange,
L.L.P.,  which  position he held from December of 1997 to May of 2000.  Prior to
joining Broocks,  Baker & Lange,  L.L.P.,  Mr. Goldberg was a partner in the law
firm of Hirsch &  Westheimer  from March of 1996 to December  of 1997.  Prior to
Hirsch & Westheimer, he was the Managing Partner of Goldberg Brown, Attorneys at
Law from 1980 to March of 1996.  He received a B.B.A.  degree and a J.D.  degree
from the  University  of Texas.  He is a member of the State Bar of Texas and is
admitted to practice  before the U.S.  Court of Appeals,  Fifth Circuit and U.S.
District Court,  Southern District of Texas. He currently serves as a Trustee of
Krupp Government Income Trust and Krupp Government Income Trust II.

J. Paul Finnegan  retired as a partner of Coopers & Lybrand in 1987. Since then,
he has been engaged in business as a consultant,  director, and arbitrator.  Mr.
Finnegan holds a B.A.  degree from Harvard  College,  a J.D.  degree from Boston
College Law School and an ASA degree from  Bentley  College.  Mr.  Finnegan is a
Certified Public Accountant and an attorney.  Mr. Finnegan currently serves as a
Trustee of Krupp Government  Income Trust and Krupp  Government  Income Trust II
and a director at Scituate Federal Savings Bank.

Stephen Puleo is currently engaged in business as a consultant and director.  He
retired as a director  of Coopers & Lybrand,  an  international  accounting  and
consulting  firm  where he worked  from 1995 to 1997  primarily  servicing  real
estate  industry  clients.  From 1993 to 1994,  Mr. Puleo was a tax director for
Deloitte & Touche.  From 1984 to 1993, Mr. Puleo held the positions of Executive
Vice  President and Chief  Financial  Officer of a predecessor  to The Berkshire
Group.  Prior to that,  Mr. Puleo was the  Chairman of the National  Real Estate
Industry  Group of  Coopers & Lybrand  where he  provided  various  real  estate
services and was a senior tax partner in charge of the Northeast Region. He is a
graduate of McNeese  State  University  and attended the  Executive  Development
Program at the Tuck School of Business at Dartmouth  College.  He is a Certified
Public  Accountant and currently  serves as director of Simpson  Housing Limited
Partnership  of  Denver,  Colorado.  He  currently  serves as a Trustee of Krupp
Government Income Trust and Krupp Government Income Trust II.


<PAGE>



Robert A. Barrows is the Treasurer of the Trust, Senior Vice President and Chief
Financial Officer of Berkshire  Mortgage  Finance.  Mr. Barrows has held several
positions  within The  Berkshire  Group since joining the company in 1983 and is
currently  responsible  for  accounting,   financial  reporting,   treasury  and
management  information systems for Berkshire Mortgage Finance. Prior to joining
The Berkshire  Group, he was an audit supervisor for Coopers & Lybrand L.L.P. in
Boston.  He received a B.S. degree from Boston College and is a Certified Public
Accountant.

Scott D. Spelfogel is the Clerk of the Trust,  Senior Vice President and General
Counsel to The Berkshire  Group.  Prior to 1997, he served as Vice President and
Assistant  General  Counsel.  Before joining the firm in November 1988, he was a
litigator  in private  practice  in Boston.  He  received a Bachelor  of Science
degree in Business Administration from Boston University,  a Juris Doctor Degree
from  Syracuse  University's  College  of Law,  and a Master  of Laws  degree in
Taxation from Boston  University  Law School.  He is admitted to practice law in
Massachusetts and New York, is a member of the American,  Boston,  Massachusetts
and New York State bar  associations  and is a licensed  real  estate  broker in
Massachusetts.

MaryBeth  Bloom is the  Assistant  Clerk of the Trust and is  Assistant  General
Counsel to The Berkshire  Group.  Prior to joining the company in August,  2000,
she was an attorney with John Hancock  Financial  Services.  She received a B.A.
degree  from the  College of the Holy Cross in 1995 and a J.D.  degree  from New
England School of Law in 1998. She is admitted to practice law in  Massachusetts
and New York and is a member of the American Bar Association.

      In addition,  the  following  are deemed to be  Executive  Officers of the
      registrant:

George Krupp (age 56) is the Co-Founder and Co-Chairman of The Berkshire  Group,
an  integrated  real  estate  financial  services  firm  engaged in real  estate
acquisition and property  management,  investment  sponsorship,  venture capital
investing,  mortgage  banking,  financial  management,  and  ownership  of three
operating companies through private equity  investments.  Mr. Krupp has held the
position of Co-Chairman  since The Berkshire  Group was established as The Krupp
Companies in 1969. Mr. Krupp has been an instructor of history at the New Jewish
High  School in  Waltham,  Massachusetts  since  September  of 1997.  Mr.  Krupp
attended the  University  of  Pennsylvania  and Harvard  University  and holds a
Master's Degree in History from Brown  University.  Douglas and George Krupp are
brothers.

Peter F.  Donovan  (age 47) is Chief  Executive  Officer of  Berkshire  Mortgage
Finance which  position he has held since January of 1998 and in this  capacity,
he oversees the strategic growth plans of this mortgage banking firm.  Berkshire
Mortgage Finance is the 11th largest in the United States based on servicing and
asset  management  of an $11.5 billion loan  portfolio.  Previously he served as
President of Berkshire  Mortgage Finance from January of 1993 to January of 1998
and in that  capacity he directed the  production,  underwriting,  servicing and
asset  management  activities  of the firm.  Prior to that,  he was Senior  Vice
President  of  Berkshire   Mortgage   Finance  and  was   responsible   for  all
participating  mortgage  originations.  Before  joining the firm in 1984, he was
Second Vice  President,  Real Estate Finance for Continental  Illinois  National
Bank & Trust,  where he managed a $300 million  construction  loan  portfolio of
commercial  properties.  Mr. Donovan received a B.A. from Trinity College and an
M.B.A. degree from Northwestern University. Mr. Donovan is currently a member of
the Advisory Council for Fannie Mae.

Ronald  Halpern (age 59) is President and Chief  Operating  Officer of Berkshire
Mortgage Finance.  He has served in these positions since January of 1998 and in
this  capacity,  he is  responsible  for the overall  operations of the Company.
Prior  to  January  of 1998,  he was  Executive  Vice  President,  managing  the
underwriting,  closing,  portfolio  management  and  servicing  departments  for
Berkshire  Mortgage  Finance.  Before  joining the firm in 1987,  he held senior
management  positions  with the  Department of Housing and Urban  Development in
Washington D.C. and several HUD regional offices.  Mr. Halpern has over 30 years
of experience  in real estate  finance  which  includes his  experience as prior
Chairman of the MBA Multifamily  Housing Committee.  He holds a B.A. degree from
the  University  of the City of New York and a J.D.  degree  from  Brooklyn  Law
School.

Carol J.C.  Mills  (age 51) is Senior  Vice  President  for Loan  Management  of
Berkshire Mortgage Finance and in this capacity, she is responsible for the Loan
Servicing and Asset  Management  functions of Berkshire  Mortgage  Finance.  She
manages the  estimated  $11.5  billion  portfolio  of loans.  Ms.  Mills  joined
Berkshire  in December  1997 as Vice  President  and was promoted to Senior Vice
President in January 1999.  From January 1989 through  November  1997, Ms. Mills
was  Vice  President  of  First  Winthrop  Corporation  and  Winthrop  Financial
Associates,  in Cambridge, MA. Ms. Mills earned a B.A. degree from Mount Holyoke
College and a Master of Architecture degree from Harvard  University.  Ms. Mills
is a member of the Real Estate  Finance  Association,  New England Women in Real
Estate and the Mortgage Bankers Association.

<PAGE>


ITEM 11.  EXECUTIVE COMPENSATION
-------

Except for the  Independent  Trustees  as  described  below,  the  Trustees  and
Officers of the Trust have not been and will not be compensated by the Trust for
their services.  However,  the Officers will be compensated by the Advisor or an
affiliate of the Advisor.

Compensation of Trustees
The Trust paid each of the Independent  Trustees  (Charles N. Goldberg,  J. Paul
Finnegan and E. Robert Roskind) a fee of $25,000 in 2000.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-------

As of February 5, 2001, no person owned of record or was known by the Advisor to
own beneficially more than 5% of the Trust's 15,053,135  outstanding Shares. The
only shares held by the Advisor or any of its affiliates consist of the original
10,000 Shares.
<TABLE>
<CAPTION>


<S>                    <C>                              <C>                                  <C>
Class of               Name of Beneficial               Amount and Nature of                 Percent
 Stock                        Owner                     Beneficial Interest                  of Class
Shares of              Douglas Krupp
Beneficial             One Beacon Street
Interest               Boston, Mass. 02108              10,000 Shares**                       ***

Shares of
Beneficial             All Directors and
Interest                Officers                        10,000 Shares                         ***

</TABLE>


        ** Mr.  Krupp  is a  beneficial  owner  of the  10,000  shares  held  by
Berkshire Mortgage Advisors Limited Partnership,  the Advisor to the Company, by
virtue of being a director of Berkshire Funding Corporation, the general partner
of Berkshire Mortgage Advisors Limited Partnership. In each case where Mr. Krupp
is a beneficial owner of shares he has shared voting and investment powers.

        *** The  amount  owned  does not  exceed  one  percent  of the shares of
beneficial interest of the Trust outstanding as of February 5, 2001.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------

        See  Note G to  Financial  Statements  included  in  Appendix  A of this
report.


                                                         PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------

(a)            1.  Financial  Statements  - see Index to  Financial  Statements,
               Schedule and  Supplementary  Data included under Item 8, Appendix
               A, on page F-2 of this report.

        2.     Financial Statement Schedule - see Index to Financial Statements,
               Schedule and  Supplementary  Data included under Item 8, Appendix
               A, on page F-2 of this report. All other schedules are omitted as
               they are not  applicable,  not  required  or the  information  is
               provided in the Financial Statements or the Notes thereto.


<PAGE>



(b)     Exhibits:

        Number and Description
        Under Regulation S-K

        The following  reflects all applicable  Exhibits required under Item 601
of Regulation S-K:

(4)  Instruments defining the rights of security holders including indentures:

(4.1)Second   Amended  and  Restated   Declaration   of  Trust  filed  with  The
     Massachusetts Secretary of State on April 12, 1990 [Included as Exhibit 4.4
     to Prospectus  included in  Pre-effective  Amendment No. 3 to  Registrant's
     Registration  Statement  on Form  S-11  dated  April  16,  1990  (File  No.
     33-31942)].*

(4.2)Subscription  Agreement  Specimen  [Included  as  Exhibit  C to  Prospectus
     included in  Pre-effective  Amendment  No. 2 to  Registrant's  Registration
     Statement on Form S-11 dated March 23, 1990 (File No. 33-31942)].*

        (10)  Material Contracts:

(10.1) Advisory  Services  Agreement  dated October 22, 1990 between the Trustee
     and  Krupp  Mortgage  Advisors  Limited   Partnership.   [Exhibit  10.1  to
     Registrant's report on Form 10-K for the year ended December 31, 1994 (File
     No. 0-19244)].*

(10.2)  Assignment  and  Assumption  Agreement  dated  December  29, 1994 by and
     between  Berkshire Realty Advisors Limited  Partnership  (formerly known as
     Krupp  Realty  Advisors  Limited  Partnership  ("Assignor")  and  Berkshire
     Mortgage  Advisors  Limited  Partnership   ("Assignee")  [Exhibit  10.2  to
     Registrant's report on Form 10-K for the year ended December 31, 1994 (File
     No. 0-19244)].*

               Lifestyles Apartments

               (10.3)        Subordinated  Promissory  Note dated  December  11,
                             1990   between   Lifestyles   At  Boot  Ranch  (the
                             "Mortgagor") and Krupp Government Income Trust (the
                             "Holder")  [Exhibit  10.1  to  Registrant's  Annual
                             Report  on Form  10-K  for the  fiscal  year  ended
                             December 31, 1990 (File No. 33-31942)].*

               (10.4)        Agreement RE  Subordinated  Note dated December 11,
                             1990  between  Krupp  Government  Income  Trust and
                             Krupp   Mortgage   Corporation   [Exhibit  10.2  to
                             Registrant's  Annual  Report  on Form  10-K for the
                             fiscal  year  ended  December  31,  1990  (File No.
                             33-31942)].*

               (10.5)        Subordinated  Multifamily  Mortgage  dated December
                             11,  1990  between  Lifestyles  at Boot  Ranch (the
                             "Mortgagor") and Krupp Government Income Trust (the
                             "Mortgagee")  [Exhibit 10.3 to Registrant's  Annual
                             Report  on Form  10-K  for the  fiscal  year  ended
                             December 31, 1990 (File No. 33-31942)].*

               (10.6)        Additional  Loan Agreement  dated December 11, 1990
                             between FL-Tampa,  Inc. and M & D Palm Harbor,  Inc
                             (collectively,    the    "Borrowers")   and   Krupp
                             Government  Income  Trust (the  "Holder")  [Exhibit
                             10.4 to Registrant's Annual Report on Form 10-K for
                             the fiscal year ended  December  31, 1990 (File No.
                             33-31942)].*

               (10.7)        Additional   Loan  Note  dated  December  11,  1990
                             between FL-Tampa,  Inc and M & D Palm Harbor,  Inc.
                             (collectively,    the    "Borrowers")   and   Krupp
                             Government  Income  Trust (the  "Holder")  [Exhibit
                             10.5 to Registrant's Annual Report on Form 10-K for
                             the fiscal year ended  December  31, 1990 (File No.
                             33-31942)].*

<PAGE>




               (10.8)        Mortgage  Note  dated  December  11,  1991  between
                             Lifestyles at Boot Ranch (the "Borrower") and Krupp
                             Mortgage Corporation (the "Holder").  [Exhibit 10.6
                             to Registrant's  Annual Report on Form 10-K for the
                             fiscal  year  ended  December  31,  1991  (File No.
                             0-19244)].*

               (10.9)        GNMA  Purchase  Agreement  dated  December 11, 1991
                             between  Krupp  Government  Income  Trust and Krupp
                             Mortgage Corporation. [Exhibit 10.7 to Registrant's
                             Annual  Report  on Form  10-K for the  fiscal  year
                             ended December 31, 1991 (File No. 0-19244)].*

               (10.10)       Modification  Agreement by and between Krupp
                             Government  Income Trust and Lifestyles at Boot
                             Ranch and M&D Palm Harbor,  and FL-Tampa Inc.
                             [Exhibit 10.1 to  Registrant's  report on Form 10-Q
                             for the quarter ended
                             September 30, 1996 (File No. 0-19244)].*

               (10.11)       Escrow Deposit  Agreement by and between Krupp
                             Government  Income Trust and M&D Palm Harbor,  and
                             FL-Tampa Inc. the general  partners of Lifestyles
                             at Boot Ranch.  [Exhibit 10.2 to  Registrant's
                             report on Form 10-Q for the quarter ended
                             September 30, 1996 (File No. 0-19244)].*

               (10.12)       Second Modification  Agreement by and between Krupp
                             Government  Income  Trust  and  Lifestyles  at Boot
                             Ranch and M&D Palm Harbor Partnership and FL-Tampa,
                             Inc.  [Exhibit 10.1 to Registrant's  report on Form
                             10-K for the fiscal  year ended  December  31, 1999
                             (File No. 0-19244)].*

               Windward Lakes Apartments

               (10.13)       Subordinated  Promissory  Note dated  December  28,
                             1990  between the  McNab-K C 3 Limited  Partnership
                             (the "Mortgagor") and Krupp Government Income Trust
                             (the "Holder") [Exhibit 10.6 to Registrant's Annual
                             Report  on Form  10-K  for the  fiscal  year  ended
                             December 31, 1990 (File No. 33-31942)].*

               (10.14)       Additional  Loan Agreement  dated December 28, 1990
                             between  George Krupp,  Douglas Krupp and Krupp GP,
                             Inc.  (collectively,  the  "Borrowers")  and  Krupp
                             Government  Income  Trust (the  "Holder")  [Exhibit
                             10.7 to Registrant's Annual Report on Form 10-K for
                             the fiscal year ended  December  31, 1990 (File No.
                             33-31942)].*

               (10.15)       Additional   Loan  Note  dated  December  28,  1990
                             between  Krupp GP,  Inc.,  George Krupp and Douglas
                             Krupp  (collectively,  the  "Borrowers")  and Krupp
                             Government  Income  Trust (the  "Holder")  [Exhibit
                             10.8 to Registrant's Annual Report on Form 10-K for
                             the fiscal year ended  December  31, 1990 (File No.
                             33-31942)].*

               (10.16)       Agreement RE  Subordinated  Note dated December 28,
                             1990 between Krupp Government Income Trust and Love
                             Funding Corporation. [Exhibit 10.11 to Registrant's
                             Annual  Report  on Form  10-K for the  fiscal  year
                             ended December 31, 1991 (File No. 0-19244)].*

               (10.17)       Subordinated  Multi-family  Mortgage dated December
                             28, 1991 between McNab-KC3 Limited Partnership (the
                             "Borrower") and Krupp Government  Income Trust (the
                             "Lender").  [Exhibit 10.12 to  Registrant's  Annual
                             Report  on Form  10-K  for the  fiscal  year  ended
                             December 31, 1991 (File No. 0-19244)].*

               (10.18)       GNMA  Purchase  Agreement  dated  December 28, 1991
                             between  Krupp  Government  Income  Trust  and Love
                             Funding Corporation. [Exhibit 10.13 to Registrant's
                             Annual  Report  on Form  10-K for the  fiscal  year
                             ended December 31, 1991 (File No.
                             0-19244)].*

               (10.19)       Modification Agreement between Krupp Government
                             Income Trust, Love Funding Corporation,  McNab-KC3
                             Limited Partnership,  and Krupp GP, Inc.
                             [Exhibit 10.19 to  Registrant's  report on Form
                             10-K for the fiscal year ended December 31, 1999
                             (File No. 0-19244)].*
<PAGE>



               River View Apartments

               (10.20)       Subordinated  Promissory  Note dated  April 2, 1991
                             between Sterling  Partners III Limited  Partnership
                             (the "Mortgagor") and Krupp Government Income Trust
                             (the "Holder") [Exhibit 19.1 to Registrant's report
                             on Form 10-Q for the  quarter  ended June 30,  1991
                             (File No. 0-19244)].*

               (10.21)       Agreement  RE  Subordinated  Promissory  Note dated
                             April 2, 1991 between Krupp Government Income Trust
                             and  Love  Funding  Corporation  [Exhibit  19.2  to
                             Registrant's  report on Form  10-Q for the  quarter
                             ended June 30, 1991 (File No. 0-19244)].*

               (10.22)       Subordinated  Multifamily  Mortgage  dated April 2,
                             1991   between   Sterling   Partners   III  Limited
                             Partnership (the  "Mortgagor") and Krupp Government
                             Income  Trust (the  "Mortgagee")  [Exhibit  19.3 to
                             Registrant's  report on Form  10-Q for the  quarter
                             ended June 30, 1991 (File No. 0-19244)].*

               (10.23)       Supplement  to  Prospectus  dated  May 1,  1991 for
                             Government   National  Mortgage   Association  Pool
                             Number 280840 [Exhibit 19.4 to Registrant's  report
                             on Form 10-Q for the  quarter  ended June 30,  1991
                             (File No.
                             0-19244)].*

               Mill Pond Apartments

               (10.24)       Subordinated  Promissory  Note  dated May 28,  1991
                             between   Mill  Pond   Limited   Partnership   (the
                             "Mortgagor") and Krupp Government Income Trust (the
                             "Holder")  [Exhibit 19.5 to Registrant's  report on
                             Form 10-Q for the quarter ended June 30, 1991 (File
                             No. 0-19244)].*

               (10.25)       Agreement RE Subordinated Promissory Note dated May
                             28, 1991 between Krupp Government  Income Trust and
                             Krupp   Mortgage   Corporation   [Exhibit  19.6  to
                             Registrant's  report on Form  10-Q for the  quarter
                             ended June 30, 1991 (File No. 0-19244)].*

               (10.26)       Subordinated  Multifamily  Mortgage  dated  May 28,
                             1991  between Mill Pond  Limited  Partnership  (the
                             "Mortgagor") and Krupp Government Income Trust (the
                             "Mortgagee")  [Exhibit 19.7 to Registrant's  report
                             on Form 10-Q for the  quarter  ended June 30,  1991
                             (File No. 0-19244)].*

               (10.27)       Mortgage  Note  dated May 28,  1991  between  Krupp
                             Mortgage  Corporation  (the "Holder") and Mill Pond
                             Apartments  (the   "Borrower")   [Exhibit  19.8  to
                             Registrant's  report on Form  10-Q for the  quarter
                             ended June 30, 1991 (File No. 0-19244)].*

               (10.28)       Participation  Agreement dated May 28, 1991 between
                             Krupp Mortgage  Corporation  (the  "Mortgagee") and
                             Krupp  Government  Income  Trust  [Exhibit  19.9 to
                             Registrant's  report on Form  10-Q for the  quarter
                             ended June 30, 1991 (File No. 0-19244)].*

               (10.29)       Assignment  of Open End Mortgage  Deed and Security
                             Agreement dated May 28, 1991 between Krupp Mortgage
                             Corporation  (the  "Assignor") and Krupp Government
                             Income  Trust  (the  "Assignee")  [Exhibit  19.1 to
                             Registrants  report  on Form  10-Q for the  quarter
                             ended September 30, 1991 (File No. 0-19244)].*

               Waterford Townhome Apartments

               (10.30)       Subordinated  Promissory Note dated June 12, 1991
                             between Waterford  Apartment Corp.
                             (the "Mortgagor") and Krupp Government Income Trust
                             (the "Holder")  [Exhibit 19.10 to Registrant's
                             report on Form 10-Q for the quarter ended
                             June 30, 1991 (File No. 0-19244)].*

               (10.31)       Agreement  RE  Subordinated  Promissory  Note dated
                             June 12, 1991 between Krupp Government Income Trust
                             and Nichols/Conlan Financial Company [Exhibit 19.11
                             to Registrant's report on Form 10-Q for the quarter
                             ended June 30, 1991 (File No. 0-19244)].*

<PAGE>


               (10.32)       Subordinated   Multifamily   Mortgage  dated
                             June  12,  1991  between  Waterford  Apartments
                             Corp. (the "Mortgagor") and Krupp Government Income
                             Trust (the "Mortgagee")  [Exhibit 19.12 to
                             Registrant's report on Form 10-Q for the quarter
                             ended June 30, 1991 (File No. 0-19244)].*

               (10.33)       Mortgage Note dated June 12, 1991 between
                             Nichols/Conlan  Financial  Company (the "Holder")
                             and Waterford Apartment Corp. (the "Borrower")
                             [Exhibit 19.13 to Registrant's report on Form 10-Q
                             for the quarter ended June 30, 1991
                             (File No. 0-19244)].*

               (10.34)       Assignment of Loan Documents dated June 12, 1991 by
                             Nichols/Conlan  Financial Company to Krupp Mortgage
                             Corp [Exhibit 19.14 to Registrant's  report on Form
                             10-Q for the quarter ended June 30, 1991 (File No.
                             0-19244)].*

               (10.35)       Participation Agreement dated June 12, 1991 between
                             Nichols/Conlan  Financial Company (the "Mortgagee")
                             and Krupp Government Income Trust [Exhibit 19.15 to
                             Registrant's  report on Form  10-Q for the  quarter
                             ended June 30, 1991 (File No. 0-19244)].*

               Rivergreens Apartments

               (10.36)       Subordinated  Promissory  Note dated  November  14,
                             1991   between   Rivergreens   Associates   Limited
                             Partnership (the  "Mortgagor") and Krupp Government
                             Income  Trust  (the  "Holder").  [Exhibit  10.33 to
                             Registrant's  Annual  Report  on Form  10-K for the
                             fiscal  year  ended  December  31,  1991  (File No.
                             0-19244)].*

               (10.37)       Agreement  Re-Subordinated  Promissory  Note  dated
                             November 14, 1991 between Krupp  Government  Income
                             Trust  and  Krupp  Mortgage  Corporation.  [Exhibit
                             10.34 to  Registrant's  Annual  Report on Form 10-K
                             for the fiscal year ended  December  31, 1991 (File
                             No. 0-19244)].*

               (10.38)       Subordinated   Multifamily   Deed  of  Trust  dated
                             November  14, 1991 between  Rivergreens  Associates
                             Limited Partnership (the "Borrower"),  Oregon Title
                             Insurance   Company  (the   "Trustee")   and  Krupp
                             Government  Income Trust (the  "Lender").  [Exhibit
                             10.35 to  Registrant's  Annual  Report on Form 10-K
                             for the fiscal year ended  December  31, 1991 (File
                             No. 0-19244)].*

               (10.39)       Mortgage Note dated  November 14, 1991 between
                             Krupp Mortgage Corporation and Rivergreens
                             Associates Limited  Partnership.  [Exhibit 10.36
                             to Registrant's Annual Report on Form 10-K for the
                             fiscal year ended December 31, 1991
                             (File No. 0-19244)].*

               (10.40)       Participation Agreement dated November 14, 1991
                             between Krupp Mortgage Corporation and Krupp
                             Government Income  Trust.  [Exhibit  10.37 to
                             Registrant's  Annual  Report on Form 10-K for the
                             fiscal year ended December 31, 1991
                             (File No. 0-19244)].*

               Mountain View Apartments

               (10.41)       Subordinated  Promissory Note dated April 21, 1992
                             between Mountain View Ltd. (the  "Mortgagor") and
                             Krupp Government Income Trust (the "Holder").
                             [Exhibit 19.1 to Registrant's report on Form 10-Q
                             for the quarter ended June 30, 1992
                             (File No. 0-19244)].*

               (10.42)       Agreement RE Subordinated Promissory Note dated
                             April 21, 1992 between Krupp Government Income
                             Trust and Krupp Mortgage  Corporation.
                             [Exhibit 19.2 to Registrant's report on Form 10-Q
                             for the quarter ended June 30, 1992
                             of (File No. 0-19244)].*

               (10.43)       Subordinated  Multifamily  Mortgage dated
                             April 21, 1992 between Mountain View Ltd.
                             (the "Mortgagor") and Krupp Government Income Trust
                             (the  "Mortgagee").  [Exhibit 19.3 to Registrant's
                             report on Form 10-Q for the quarter ended
                             June 30, 1992 (File No. 0-19244)].*

<PAGE>



               (10.44)       Additional  Loan Agreement  dated April 21, 1992
                             between  Philip P. Mulkey,  Henry V. Bragg and
                             Gregory V. Bragg (collectively, the "Borrowers")
                             and Krupp Government Income Trust (the "Holder").
                             [Exhibit 19.4 to Registrant's report on Form 10-Q
                             for the quarter ended June 30, 1992
                             (File No. 0-19244)].*

               (10.45)       Additional  Loan Note dated April 21, 1992 between
                             Philip P. Mulkey,  Henry V. Bragg and Gregory V.
                             Bragg (collectively,  the  "Borrowers")  and Krupp
                             Government Income Trust (the  "Holder").
                             [Exhibit 19.5 to Registrant's report on Form 10-Q
                             for the quarter ended June 30, 1992
                             (File No. 0-19244)].*

               (10.46)       Mortgage Note dated April 21, 1992  between
                             Mountain  View Ltd. (the "Borrower") and Krupp
                             Mortgage Corporation (the "Holder").
                             [Exhibit 19.6 to Registrant's  report on Form 10-Q
                             for the quarter ended June 30, 1992
                             (File No. 0-19244)].*

               (10.47)       Modification Agreement by and between Krupp
                             Government  Income Trust and Mountain View Ltd.
                             [Exhibit 10.1 to Registrant's report Form 10-Q
                             for the quarter ended September 30, 1995
                             (File No. 0-19244)].*

               (10.48)       Second Modification  Agreement by and between Krupp
                             Government  Trust and Mountain  View LTD.  [Exhibit
                             10.1  to  Registrant's  report  Form  10-Q  for the
                             quarter ended June 30, 1999 (File No. 0-19244)]*

               Red Run Apartments

               (10.49)       Subordinated  Promissory  Note  dated  May 5,  1992
                             between   Red   Run   Limited    Partnership   (the
                             "Mortgagor") and Krupp Government Income Trust (the
                             "Holder").  [Exhibit 19.7 to Registrant's report on
                             Form 10-Q for the quarter ended June 30, 1992 (File
                             No. 0-19244)].*

               (10.50)       Agreement RE Subordinated Promissory Note dated May
                             5, 1992 between Krupp  Government  Income Trust and
                             Maryland     National     Mortgage      Corporation
                             (the"Mortgagee").  [Exhibit  19.8  to  Registrant's
                             report on Form 10-Q for the quarter  ended June 30,
                             1992 (File No. 0-19244)].*

               (10.51)       Subordinated Multifamily Mortgage dated May 5, 1992
                             between Red Run Limited Partnership (the "Trustor")
                             and Krupp  Government  Income Trust (the "Lender").
                             [Exhibit 19.9 to  Registrant's  report on Form 10-Q
                             for the  quarter  ended  June 30,  1992  (File  No.
                             0-19244)].*

               (10.52)       Additional Loan Agreement dated May 5, 1992 between
                             Red  Run  Corporation  and  Summit  Towers  Company
                             (collectively,    the    "Borrowers")   and   Krupp
                             Government  Income Trust (the  "Holder").  [Exhibit
                             19.10 to  Registrant's  report on Form 10-Q for the
                             quarter ended June 30, 1992 (File No. 0-19244)].*

               (10.53)       Additional  Loan Note dated May 5, 1992 between Red
                             Run   Corporation   and   Summit   Towers   Company
                             (collectively,    the    "Borrowers")   and   Krupp
                             Government  Income Trust (the  "Holder").  [Exhibit
                             19.11 to  Registrant's  report on Form 10-Q for the
                             quarter ended June 30, 1992 (File No. 0-19244)].*

               (10.54)       Deed of Trust Note dated May 5, 1992 between Red
                             Run Limited Partnership and Maryland National
                             Mortgage Corporation. [Exhibit 19.3 to Registrant's
                             report on Form 10-Q for the quarter ended
                             September 30, 1992 (File No. 0-19244)].*

               (10.55)       Participation and Servicing Agreement by and
                             between Maryland National Mortgage Corporation and
                             Krupp Government  Income  Trust. [Exhibit  19.4 to
                             Registrant's report on Form 10-Q for the quarter
                             ended September 30, 1992 (File No. 0-19244)].*


<PAGE>



               Lincoln Green Apartments

               (10.56)       Supplement to  prospectus  dated August 1, 1992 for
                             Federal National  Mortgage  Association pool number
                             MX-073023.  [Exhibit 19.8 to Registrant's report on
                             Form 10-Q for the quarter ended  September 30, 1992
                             (File No. 0-19244)].*

               (10.57)       Subordinated  promissory  note dated  September 15,
                             1992  by  and  between  Lincoln  Green   Associates
                             Limited  Partnership  (the  "Mortgagor")  and Krupp
                             Government  Income Trust (the  "Holder").  [Exhibit
                             19.9 to  Registrant's  report  on Form 10-Q for the
                             quarter   ended   September   30,  1992  (File  No.
                             0-19244)].*

               (10.58)       Subordinated   Multi-family  Deed  of  Trust  dated
                             September  16,  1992 by and between  Lincoln  Green
                             Associates Limited Partnership (the "Borrower") and
                             Krupp  Government   Income  Trust  (the  "Lender").
                             [Exhibit 19.10 to Registrant's  report on Form 10-Q
                             for the quarter ended  September 30, 1992 (File No.
                             0-19244)].*

               The Seasons

               (10.59)       Additional  Loan Agreement dated September 16, 1993
                             between The Krupp  Company  Limited  Partnership-IV
                             (the "Borrower") and Krupp Government  Income Trust
                             II (the "Holder")  [Exhibit  10.80 to  Registrant's
                             report on Form 10-K for the year ended December 31,
                             1994 (File No. 0-19244)].*

               (10.60)       Additional  Loan  Note  dated  September  16,  1993
                             between The Krupp  Company  Limited  Partnership-IV
                             (the "Borrower") and Krupp Government  Income Trust
                             II (the "Holder")  [Exhibit  10.81 to  Registrant's
                             report on Form 10-K for the year ended December 31,
                             1994 (File No. 0-19244)].*

               (10.61)       Subordinated  Promissory  Note dated  September 16,
                             1993   between    Maryland    Associates    Limited
                             Partnership  (the  "Maker")  and  Krupp  Government
                             Income Trust II (the  "Holder")  [Exhibit  10.82 to
                             Registrant's report on Form 10-K for the year ended
                             December 31, 1994 (File No. 0-19244)].*

               (10.62)       Pledge and Security  Agreement  dated September 16,
                             1993  by and  between  The  Krupp  Company  Limited
                             Partnership-IV  (the "Debtor") and Krupp Government
                             Income  Trust  II (the  "Secured  Party")  [Exhibit
                             10.83 to  Registrant's  report on Form 10-K for the
                             year ended December 31, 1994 (File No. 0-19244)].*

               (10.63)       The Deed of Trust dated  September  16, 1993 by and
                             between Maryland Associates Limited Partnership and
                             Krupp  Mortgage   Corporation   [Exhibit  10.84  to
                             Registrant's report on Form 10-K for the year ended
                             December 31, 1994 (File No. 0-19244)].*

               (10.64)       Participation  and Servicing  Agreement  made as of
                             September  16, 1993 by and between  Krupp  Mortgage
                             Corporation  (the  "Servicer") and Krupp Government
                             Income Trust II (the "Participant")  [Exhibit 10.85
                             to  Registrant's  report  on Form 10-K for the year
                             ended December 31, 1994 (File No. 0-19244)].*

               (10.65)       Assignment and Assumption Agreement dated September
                             16, 1993 between Krupp  Government  Income Trust II
                             (the "Assignor") and Krupp Government  Income Trust
                             (the  "Assignee")  [Exhibit  10.86 to  Registrant's
                             report on Form 10-K for the year ended December 31,
                             1994 (File No. 0-19244)].*


<PAGE>



               Rosemont Apartments

               (10.66)       Participation  and Servicing  Agreement  dated July
                             14,  1994,   by  and  between   Rockport   Mortgage
                             Corporation  (the  "Servicer") and Krupp Government
                             Income Trust (the "Participant")  [Exhibit 10.87 to
                             Registrant's report on Form 10-K for the year ended
                             December 31, 1994 (File No. 0-19244)].*

               (10.67)       Deed of Trust Note dated July 1, 1994 between
                             Rosemont Ltd. and Rockport  Mortgage  Corporation.
                             [Exhibit 10.88 to Registrant's report on Form 10-K
                             for the year ended December 31, 1994
                             (File No. 0-19244)].*

               (10.68)       Allonge  to Deed of Trust  Note  dated July 1, 1994
                             between   Rosemont   Ltd.  and  Rockport   Mortgage
                             Corporation  [Exhibit 10.89 to Registrant's  report
                             on Form 10-K for the year ended  December  31, 1994
                             (File No.
                             0-19244)].*

               (10.69)       Participation Certificate with Krupp Government
                             Income Trust as registered owner.  [Exhibit 10.96
                             to Registrant's report on Form 10-K for the year
                             ended December 31, 1995 (File No. 0-19244)].*

        * Incorporated by reference


        (c)    Reports on Form 8-K

               During the last quarter of the year ended  December 31, 2000, the
Trust did not file any reports on Form 8-K.


<PAGE>


                                                       SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) 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,  on the 9th day of March,
2001.

                          KRUPP GOVERNMENT INCOME TRUST




By:    /s/ Douglas Krupp

Douglas  Krupp,  Chairman of Board of Trustees and a Trustee of
                 Krupp Government Income Trust

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities indicated, on the 9th day of March 2001.

            Signatures  Title(s)


 /s/ Douglas Krupp                    Chairman of Board of Trustees and a
----------------------------          Trustee of Krupp Government Income Trust
Douglas Krupp


 /s/ Robert A. Barrows                Treasurer of Krupp Government Income Trust
----------------------------
Robert A. Barrows


 /s/ Charles N. Goldberg              Trustee of Krupp Government Income Trust
----------------------------
Charles N. Goldberg


 /s/ J. Paul Finnegan                 Trustee of Krupp Government Income Trust
----------------------------
J. Paul Finnegan


<PAGE>

















                                   APPENDIX A

                          KRUPP GOVERNMENT INCOME TRUST










                   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                               ITEM 8 of FORM 10-K

             ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
                      For the Year Ended December 31, 2000





<PAGE>

<TABLE>
<CAPTION>

                          KRUPP GOVERNMENT INCOME TRUST

         INDEX TO FINANCIAL STATEMENTS, SCHEDULE AND SUPPLEMENTARY DATA




<S>                                                                                                                 <C>
Report of Independent Accountants                                                                                   F-3

Balance Sheets at December 31, 2000 and 1999                                                                        F-4

Statements of Income and Comprehensive Income for the Years Ended
 December 31, 2000, 1999 and 1998                                                                                   F-5

Statements of Changes in Shareholders' Equity for the Years Ended
 December 31, 2000, 1999 and 1998                                                                                   F-6

Statements of Cash Flows for the Years Ended December 31, 2000, 1999
and 1998                                                                                                            F-7

Notes to Financial Statements                                                                                F-8 - F-19

Schedule II - Valuation and Qualifying Accounts                                                                    F-20

Supplementary Data - Selected Quarterly Financial Data (Unaudited)                                                 F-21


</TABLE>



All other  schedules are omitted as they are not applicable or not required, or
the information is provided in the financial statements or the notes thereto.




<PAGE>





                        REPORT OF INDEPENDENT ACCOUNTANTS







To the Board of Trustees and the Shareholders of
Krupp Government Income Trust:

In our  opinion,  the  financial  statements  listed in the  accompanying  index
present  fairly,  in all  material  respects,  the  financial  position of Krupp
Government  Income Trust (the  "Trust") at December  31, 2000 and 1999,  and the
results of its  operations and its cash flows for each of the three years in the
period  ended  December  31,  2000  in  conformity  with  accounting  principles
generally accepted in the United States of America. In addition, in our opinion,
the financial  statement  schedule  listed in the  accompanying  index  presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related financial  statements.  These financial  statements
and  financial   statement  schedule  are  the  responsibility  of  the  Trust's
management;  our  responsibility  is to express  an  opinion on these  financial
statements and financial  statement  schedule based on our audits.  We conducted
our audits of these statements in accordance with auditing  standards  generally
accepted in the United  States of America which 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,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe that our audits provide a reasonable basis for our opinion.









PricewaterhouseCoopers LLP
Boston, Massachusetts
March 9, 2001



<PAGE>
<TABLE>
<CAPTION>


                                              KRUPP GOVERNMENT INCOME TRUST

                                                     BALANCE SHEETS

                                               December 31, 2000 and 1999


                                                         ASSETS
                                                                                    2000                1999
                                                                                    ----                ----

Participating Insured Mortgage Investments ("PIMIs") (Notes B, C and J):
<S>                                                                             <C>                  <C>
 Insured Mortgages                                                              $  59,752,085        $60,129,492
 Additional Loans, net of impairment provision of $2,162,618                        8,350,990          8,350,990
Participating Insured Mortgages ("PIMs")
 (Notes B, D and J)                                                                46,892,234         47,331,673
Mortgage-Backed Securities and insured
 mortgage loan ("MBS") (Notes B, E and J)                                          16,536,498         17,495,423
                                                                                -------------       ------------

              Total mortgage investments                                          131,531,807        133,307,578

Cash and cash equivalents (Notes B and J)                                           5,359,041          4,627,499
Interest receivable and other assets                                                1,082,412            973,491
Prepaid acquisition fees and expenses, net
 of accumulated amortization of $6,841,714
   and $6,089,755, respectively (Note B)                                            1,491,747          2,243,706
Prepaid participation servicing fees, net of
 accumulated amortization of $2,112,209
   and $1,834,434, respectively (Note B)                                              665,540            943,315
                                                                                -------------      -------------

              Total assets                                                      $ 140,130,547       $142,095,589
                                                                                =============       ============

                                         LIABILITIES AND SHAREHOLDERS' EQUITY

Deferred income on Additional Loans (Note B)                                    $   3,550,485      $   3,918,021
Other liabilities                                                                      20,980             25,025
                                                                                -------------      -------------

              Total liabilities                                                     3,571,465          3,943,046
                                                                                -------------      -------------

Commitments (Note H)

Shareholders' equity (Notes A, F, H and I):
        Common stock, no par value; 17,510,000
        Shares authorized; 15,053,135 Shares
        issued and outstanding                                                    136,114,206       137,921,227

        Accumulated comprehensive income (Note B)                                     444,876            231,316
                                                                                -------------      -------------

              Total Shareholders' equity                                          136,559,082        138,152,543
                                                                                -------------      -------------

              Total liabilities and Shareholders'
                equity                                                          $140,130,547      $  142,095,589
                                                                                =============     ==============


</TABLE>

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


<PAGE>

<TABLE>
<CAPTION>

                                             KRUPP GOVERNMENT INCOME TRUST

                                     STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

                                 For the Years Ended December 31, 2000, 1999 and 1998


                                                                 2000                  1999                1998
                                                                 ----                  ----                ----

Revenues:
    Interest income - PIMs and PIMIs:
<S>                                                         <C>                   <C>                    <C>
      Basic interest                                        $    8,086,930        $   8,789,439          $10,635,959
      Additional Loan Interest                                     744,080            2,534,790            3,080,944
      Participation interest                                       504,612            2,268,505            5,094,353
    Interest income - MBS                                        1,375,643            1,531,351            1,930,383
    Interest income - cash and cash
       equivalents                                                 364,803              508,144            1,180,647
                                                            --------------        -------------         -------------

             Total revenues                                     11,076,068           15,632,229           21,922,286
                                                            --------------        -------------         ------------

Expenses:
    Asset management fee
     to an affiliate (Note G)                                    1,007,651            1,104,431            1,331,745
    Expense reimbursements
     to affiliates (Note G)                                        256,564              220,657              207,165
    Amortization of prepaid fees
     and expenses                                                1,029,734            1,672,143            2,998,705
    General and administrative (Note G)                            353,007              269,345              433,860
    Provision for impaired mortgage
     loans (Notes B and C)                                        -                      48,272            2,114,346
                                                            --------------        -------------         ------------

             Total expenses                                      2,646,956            3,314,848            7,085,821
                                                            --------------        -------------         ------------

Net income (Note I)                                              8,429,112           12,317,381           14,836,465

Other comprehensive income:
    Net change in unrealized gain
      on MBS                                                       213,560             (641,460)            (512,826)
                                                            --------------        -------------         ------------

Total comprehensive income                                  $    8,642,672        $  11,675,921          $14,323,639
                                                            ==============        =============         ============

Basic earnings per Share                                    $          .56        $         .82         $       .99
                                                            ==============        =============         ===========

Weighted average Shares outstanding                             15,053,135           15,053,135           15,053,135
                                                            ==============        =============         ============



</TABLE>




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


<PAGE>
<TABLE>
<CAPTION>

                                                 KRUPP GOVERNMENT INCOME TRUST

                                         STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                                     For the Years Ended December 31, 2000, 1999 and 1998


                                                                                         Accumulated              Total
                                                     Common              Retained       Comprehensive         Shareholders'
                                                      Stock              Earnings           Income                Equity
                                                ------------------   ----------------   --------------       ------------------


<S>                                             <C>                  <C>                <C>                  <C>
Balance at December 31, 1997                    $ 212,496,510        $       -          $  1,385,602         $  213,882,112

Dividends                                         (47,754,496)         (14,836,465)             -               (62,590,961)

Net income                                               -              14,836,465              -                14,836,465

Change in unrealized gain
       on MBS                                          -                    -               (512,826)              (512,826)
                                                -------------        -------------      ------------         --------------

Balance at December 31, 1998                      164,742,014               -                872,776            165,614,790

Dividends                                         (26,820,787)         (12,317,381)          -                  (39,138,168)

Net income                                             -                12,317,381           -                   12,317,381

Change in unrealized gain
     on MBS                                            -                    -               (641,460)              (641,460)
                                                -------------        -------------      ------------         --------------

Balance at December 31, 1999                      137,921,227               -                231,316            138,152,543

Dividends                                          (1,807,021)          (8,429,112)             -               (10,236,133)

Net income                                               -               8,429,112              -                 8,429,112

Change in unrealized gain
       on MBS                                         -                     -                213,560                213,560
                                                -------------        -------------      ------------         --------------

Balance at December 31, 2000                    $ 136,114,206        $     -            $    444,876         $  136,559,082
                                                =============        =============      ============         ==============


Shares issued and outstanding for each of the three years ended
  December 31, are 15,053,135



</TABLE>


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

<PAGE>

<TABLE>
<CAPTION>



                          KRUPP GOVERNMENT INCOME TRUST

                            STATEMENTS OF CASH FLOWS

                                      For the Years Ended December 31, 2000, 1999 and 1998


                                                                       2000                 1999                  1998
                                                                       ----                 ----                  ----
Operating activities:
<S>                                                               <C>                  <C>                   <C>
   Net income                                                     $    8,429,112       $  12,317,381         $ 14,836,465
   Adjustments to reconcile net income
    to net cash provided by operating
    activities:
      Amortization of premiums and (discounts)                            (2,202)              3,044                (7,646)
      Provision for impaired mortgage loans                                -                  48,272             2,114,346
   Amortization of prepaid fees and expenses                           1,029,734           1,672,143             2,998,705
      Changes in assets and liabilities:
         Decrease (increase) in interest receivable
           and other assets                                             (108,921)             83,874               236,875
         Decrease in deferred income
           on Additional Loans                                          (367,536)         (1,855,648)             (2,097,937)
         (Decrease) increase in other
           liabilities                                                    (4,045)             (8,205)                7,816
                                                                  --------------       -------------         -------------

Net cash provided by operating activities                              8,976,142          12,260,861            18,088,624
                                                                  --------------       -------------         -------------

Investing activities:
    Principal collections on PIMs and Insured Mortgages                  816,846             800,921               855,221
    Principal collections on MBS                                       1,174,687           3,992,931             4,447,303
    Insured Mortgage prepayments                                         -                14,861,957            32,603,506
    Additional Loan prepayments                                          -                 2,844,600             5,850,900
                                                                  --------------       -------------         -------------

Net cash provided by investing activities                              1,991,533          22,500,409            43,756,930
                                                                  --------------       -------------         -------------

Financing activity:
    Dividends                                                        (10,236,133)        (39,138,168)          (62,590,961)
                                                                  --------------       -------------         -------------

Net increase (decrease) in cash and cash equivalents                     731,542          (4,376,898)             (745,407)

Cash and cash equivalents, beginning
 of year                                                               4,627,499           9,004,397             9,749,804
                                                                  --------------       -------------         -------------

Cash and cash equivalents, end of year                            $    5,359,041       $   4,627,499         $   9,004,397
                                                                  ==============       =============         =============

Non cash activities:
    Decrease in Fair Value of MBS                                 $      213,560       $     (641,460)       $    (512,826)
                                                                  ==============       ==============        =============


</TABLE>


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



<PAGE>


                          KRUPP GOVERNMENT INCOME TRUST

                          NOTES TO FINANCIAL STATEMENTS

A.    Organization

      Krupp Government Income Trust (the "Trust") was formed on November 1, 1989
      by filing a Declaration of Trust in The Commonwealth of Massachusetts. The
      Trust is authorized to sell and issue not more than  17,510,000  shares of
      beneficial  interest  (the  "Shares").  The  Trust was  organized  for the
      purpose of investing in  commercial  and  multi-family  loans and mortgage
      backed  securities.   Berkshire  Mortgage  Advisors  Limited   Partnership
      ("BMALP")(the "Advisor"),  acquired 10,000 of such Shares for $200,000 and
      14,999,999  Shares  were  sold for  $299,480,263  net of  purchase  volume
      discounts of $519,717 under a public offering which commenced on April 19,
      1990 and ended on July 15,  1991.  Under the  Dividend  Reinvestment  Plan
      ("DRP"),  43,136 Shares were sold for $819,356 during its public offering.
      The Trust shall terminate on December 31, 2029, unless earlier  terminated
      by the affirmative vote of holders of a majority of the outstanding Shares
      entitled to vote thereon.

B.    Significant Accounting Policies

      The Trust uses the following  accounting  policies for financial reporting
      purposes:

      Basis of Presentation

      The  accompanying  financial  statements have been prepared on the accrual
      basis of accounting  in  accordance  with  generally  accepted  accounting
      principles.

      MBS

      The Trust, in accordance with the Financial  Accounting  Standards Board's
      Statement  115,  "Accounting  for Certain  Investments  in Debt and Equity
      Securities"    ("FAS   115"),    classifies    its   MBS    portfolio   as
      available-for-sale.  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.

      The Federal Housing  Administration ("FHA") insured mortgage is carried at
      amortized  cost.  The Trust holds this loan at amortized  cost since it is
      fully insured by FHA.

      PIMs and PIMIs

      The Trust accounts for its MBS portion of a PIM or PIMI in accordance with
      FAS 115 under the  classification  of held to maturity.  The Trust carries
      those 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 and FAS 118.

      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")  or Fannie Mae MBS.  The Trust  recognizes  interest
      related  to  the  participation  features  when  it  deems  these  amounts
      estimable and collectible.  The Trust defers the recognition of Additional
      Loan interest payments as income to the extent these interest payments are
      from escrows  established  with the proceeds of the Additional  Loan. When
      the properties  underlying the PIMI's generate  sufficient  operating cash
      flow to make the required  Additional  Loan interest  payments,  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.


                                    Continued

<PAGE>

                          KRUPP GOVERNMENT INCOME TRUST

                    NOTES TO FINANCIAL STATEMENTS, Continued

B.    Significant Accounting Policies, continued

      PIMs and PIMIs, continued

      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 Mortgage Loans

      Impaired  loans  are  those  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.  Interest  received  on the
      impaired  loans is  generally  applied  against the loan  principal  or as
      interest income if deemed collectable by the Advisor.

      Cash Equivalents

      The Trust includes all  short-term  investments  with  maturities of three
      months or less from the date of acquisition in cash and cash  equivalents.
      The Trust  invests its cash  primarily  in agency  paper and money  market
      funds with a commercial  bank and has not  experienced any loss to date on
      its invested cash.

      Prepaid Fees and Expenses

      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 actual
      maturity or anticipated call payoff 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 and at closing if a Fannie Mae MBS.

      Upon the repayment of a PIM or PIMI any unamortized  acquisition  fees and
      and expenses and unamortized  participation servicing fees related to such
      loan are expensed.

      Income Taxes

      The Trust has  elected  to be taxed as a REIT under the  Internal  Revenue
      Code of 1986,  as amended,  and believes it will continue to meet all such
      qualifications.  Accordingly,  the Trust  will not be  subject  to federal
      income  taxes  on  amounts   distributed  to   shareholders   provided  it
      distributes  annually  at least 95% of its REIT  taxable  income and meets
      certain  other  requirements  for  qualifying  as a  REIT.  Therefore,  no
      provision  for federal  income  taxes has been  recorded in the  financial
      statements.

      Estimates and Assumptions

      The  preparation  of financial  statements  in accordance  with  generally
      accepted  accounting  principles requires management to make estimates and
      assumptions  that affect the  reported  amount of assets and  liabilities,
      contingent  assets and  liabilities  and revenues and expenses  during the
      period. Significant estimates include the net carrying value of Additional
      Loans and the  unrealized  gain on MBS  investments.  Actual results could
      differ from those estimates.


                                    Continued


<PAGE>


                          KRUPP GOVERNMENT INCOME TRUST

                    NOTES TO FINANCIAL STATEMENTS, Continued

C.    PIMIs

      The  Trust had  investments  in five  PIMIs on  December  31,  2000 and on
      December 31, 1999 that  provide the  permanent  financing of  multi-family
      housing. One component of a PIMI is either a securitized HUD-insured first
      mortgage  loan  issued  and  guaranteed  by GNMA  or a sole  participation
      interest in a first  mortgage loan  originated  under the Federal  Housing
      Administration  ("FHA") lending  program and insured by HUD  (collectively
      the "Insured  Mortgages").  The FHA first  mortgage or the first  mortgage
      underlying  the GNMA security  provided the borrower  (generally a limited
      partnership)  with a below  market  interest  rate  loan in  exchange  for
      providing  the  Trust  with  participation  in a  percentage  of the  cash
      generated from property operations and in a percentage of any appreciation
      of the underlying property to a preferred return, then a percentage of any
      appreciation  thereafter.  The borrower  conveys these rights to the Trust
      through a  subordinated  promissory  note and mortgage.  In addition,  the
      Trust made an  Additional  Loan to the owners of the  borrower  to provide
      additional  funds for the  construction  and  permanent  financing  of the
      property. The owners generally collateralize the Additional Loan through a
      pledge and security  agreement that pledges their  ownership  interests in
      the borrower,  and their share of any distributions made from surplus cash
      generated by the property and the proceeds  realized upon the  refinancing
      of the  property,  sale  of  the  property  or  sale  of  the  partnership
      interests.   Amounts   payable  under  the  Additional  Loan  are  neither
      guaranteed nor insured.

      The Trust receives level monthly principal and interest ("Basic Interest")
      payments  amortizing over thirty to forty years,  on the Insured  Mortgage
      and is entitled to receive  participation  income  under the  subordinated
      promissory   note  and  mortgage,   and  semi-annual   interest   payments
      ("Additional  Loan Interest") and preferred  interest under the Additional
      Loan  ("Preferred  Interest").  The Trust receives  principal and interest
      payments on the Insured  Mortgages  currently,  because these payments are
      insured or guaranteed;  however,  there are  limitations to the amount and
      obligation  to pay  participation  income,  Additional  Loan  Interest and
      Preferred Interest.

      The  subordinated  promissory  note and  mortgage  entitles  the  Trust to
      receive (i)  Participating  Income Interest  generally equal to 50% of (a)
      all distributable  Surplus Cash (as defined in the regulatory agreement of
      the  HUD-insured  first  mortgage)  generated  by  the  property  (b)  any
      unrestricted cash generated from property operations and (c) to the extent
      available   unexpended  reserves  and  escrows,   and  (ii)  Participating
      Appreciation  Interest generally equal to 50% of the net proceeds or value
      of the  property  upon the  sale,  refinancing,  maturity  or  accelerated
      maturity,  or  permitted  prepayment  of all amounts due under the Insured
      Mortgage  and  Additional  Loan  less  the  Outstanding  Indebtedness,  as
      defined.  Amounts  received  by the  Trust  pursuant  to the  subordinated
      promissory note as Participating Income Interest reduce amounts payable as
      Preferred  Interest and may reduce amounts  payable as Base Interest under
      the Additional Loan.

      The Insured  Mortgage and  subordinated  promissory  note  generally  have
      maturities of 30 to 40 years, however,  under the subordinated  promissory
      note the Trust can generally  accelerate  these maturity dates at any time
      after  the tenth  anniversary  of final  endorsement  for  coinsurance  or
      insurance,  but in certain cases for construction loans after the eleventh
      or  twelfth   anniversary   of  initial   endorsement   (commencement   of
      construction)  for  coinsurance  or  insurance,  upon giving twelve months
      written  notice for the  payment  of all  accrued  participation  interest
      through  the  accelerated  maturity  date.  The Trust can  accelerate  the
      maturity date for payment of amounts due under the subordinated promissory
      note and the insured  mortgage  providing  the  contract of  insurance  or
      coinsurance  with the Secretary of HUD on the insured mortgage is canceled
      prior to the accelerated maturity date.

      Additional  Loan Interest is payable from the following  sources:  (i) any
      Surplus Cash  received  pursuant to the  subordinated  promissory  note as
      Participating  Income Interest,  (ii) amounts conveyed to the Trust by the
      owners of the borrowing entity representing  distributions of Surplus Cash
      and (iii) amounts in reserve accounts established with the Additional Loan
      proceeds, if available, and any interest earned on these amounts. If these
      sources are not sufficient to make Additional  Loan Interest  payments the
      owners of the borrowing  entity must notify the Trust of the amount of the
      shortfall  and at its option the Trust could  require a capital  call from
      the owners of the borrowing entity. The capital call would be equal to 50%
      of the  Additional  Loan  Interest  shortfall  and the  Trust  in  certain
      situations could convert the remaining 50% into an operating loan.


                                    Continued


<PAGE>



                          KRUPP GOVERNMENT INCOME TRUST

                    NOTES TO FINANCIAL STATEMENTS, Continued

C.    PIMIs, Continued

      In addition to the Additional Loan Interest payments,  the Additional Loan
      requires  the payment of Preferred  Interest  representing  a  cumulative,
      non-compounded  preferred return from the date of final endorsement to the
      date of  calculation  at interest rates ranging from 9.5% to 11% per annum
      on the  outstanding  balance of the Insured  Mortgage plus the  Additional
      Loan and any other funds advanced by the Trust to the borrowing  entity or
      the owners of the borrowing entity less: (i) interest payments paid to the
      Trust under the Insured Mortgage,  (ii) Participating  Income Interest and
      (iii) Additional Loan Interest payments made under the Additional Loan.

      The Insured Mortgage and subordinated  promissory note generally cannot be
      prepaid for a term of five years from the construction  completion date or
      final  endorsement  and thereafter may be prepaid in whole without penalty
      provided all participation interest and amounts under the Insured Mortgage
      are paid. Any  prepayment  requires not less than ninety nor more than 180
      days prior written notice.

      The  Additional  Loan  generally  may  not be  prepaid  before  the  fifth
      anniversary  of the  Agreement  or the  construction  completion  date and
      thereafter  may be  prepaid in full  without  penalty  provided  Preferred
      Interest and any amounts due under the Insured  Mortgage and  subordinated
      promissory note are paid in full.

      During the third quarter of 1999,  the Trust  received a prepayment of the
      Audubon  Villas  PIMI  including  the  Insured  Mortgage  with a remaining
      principal  balance of  $14,861,957,  the Additional Loan of $2,691,000 and
      participation  interest of $1,966,901.  Also, $1,962,261 was recognized as
      Additional Loan interest income which was previously  recorded as deferred
      income.  On August 18, 1999,  the Advisor  declared a special  dividend of
      $1.30 per share that was paid on September 17, 1999 from the payoff of the
      mortgage on the Audubon Villas PIMI.

      In June 1999, the Trust entered into a second modification  agreement (the
      "Agreement")  with the  borrowers of the  Mountain  View  Apartments  PIMI
      reducing  the  interest  rate on the  Insured  Mortgage by 1.25% per annum
      beginning  January 1, 1999 and  continuing  through  December 31, 2004 and
      changing the participation feature. The Agreement eliminated the Preferred
      Interest  required  under the  Additional  Loan and  changed  the  Trust's
      participation  in the Surplus Cash  generated by the  property.  Under the
      Agreement,  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 the
      Additional Loan Interest.  Unpaid Additional Loan Interest will accrue and
      be payable if there are sufficient  proceeds from a sale or refinancing of
      the  property  except that  $288,580 of existing  accruals  related to the
      Additional  Loan had been  forgiven.  In  addition,  the  borrower  repaid
      $153,600  of the  Additional  Loan and funded  approximately  $54,000 to a
      reserve for property improvements.

      On July 15, 1998, the Trust received a prepayment of the Coconut Palm Club
      PIMI.  This  transaction  was  the  result  of a sale  of  the  underlying
      property,  although  the  Trust  received  less  than its  full  Preferred
      Interest. The Advisor agreed to allow the transaction because the purchase
      price was judged to be favorable in light of the highly competitive rental
      market in Broward County,  Florida.  In addition,  without the sale it was
      likely that the Advisor would have agreed to a loan  restructure  with the
      borrower  rather  than expose the Trust to the  uncertainty  of a probable
      default. The Trust received the prepayment of the principal balance of the
      Insured  Mortgage,  $15,851,211,  the principal  balance of the Additional
      Loan,  $2,850,900,  and the  Additional  Loan  interest due at the time of
      repayment, $89,091. In addition, the Trust received participation interest
      of $1,419,116 towards the Preferred Interest.

      During June of 1998, the Trust received a prepayment of the Park Highlands
      PIMI when the property was sold.  This  prepayment  occurred  prior to the
      expiration of the five-year  prohibition.  However,  the Advisor agreed to
      allow  the  transaction  to be  completed  while  market  conditions  were
      favorable  in  return  for an  additional  prepayment  penalty.  The Trust
      received the prepayment of the principal  balance of the Insured Mortgage,
      $16,752,295, the principal balance of the Additional Loan, $3,000,000, the
      Additional Loan Interest due at the time of the prepayment,  $57,945,  and
      the prepayment premium for the early payoff,  $479,476.  In addition,  the
      Trust  received   participation  interest  comprised  of  the  outstanding
      Preferred  Interest on the Trust  investment  of  $1,481,865,  the Trust's
      share  in  the  increase  in  the  value  of the  underlying  property  of
      $1,206,719 and Participating Income Interest of $211,316.


                                    Continued
<PAGE>


                          KRUPP GOVERNMENT INCOME TRUST

                    NOTES TO FINANCIAL STATEMENTS, Continued

C.    PIMIs, continued

      Due to the  prepayments  of the  Park  Highlands  and  Coconut  Palm  Club
      Additional  Loans,  the Trust also recognized  Additional Loan interest of
      $1,290,000  and  $1,295,354   respectively,   that  had  been   previously
      classified as deferred income on these Additional Loans.

      On August 6, 1998, the Advisor of the Trust declared a special dividend of
      $2.86  per  Share  that was paid on  September  9,  1998  from  prepayment
      proceeds of the Park Highlands and Coconut Palm Club PIMIs.

      On May 1, 1998, the borrowers on the Lifestyles  PIMI defaulted on its May
      1998 debt  service  payment.  The Trust  continued  to receive its monthly
      principal and interest payments  guaranteed by GNMA. In December 1998, the
      Trust entered into a second  modification  agreement with the borrowers of
      the  Lifestyles  PIMI  reducing the  interest  paid monthly on the Insured
      Mortgage  by 1.75% per annum for 1998 and 1999 and 1.5% per annum for 2000
      through 2007. An affiliate of the Advisor refunds  approximately  .25% per
      annum to the Trust  related to the interest  reduction.  In addition,  the
      borrowers made a $550,000  equity  contribution,  which has been escrowed,
      for the exclusive purpose of correcting  deferred  maintenance.  Under the
      Modification any future Surplus Cash generated by property operations will
      be split  evenly  between  the Trust and the  borrowers  as  Participating
      Income  Interest.  When the  property  is sold or  refinanced,  the  first
      $1,100,000 of any proceeds  remaining  after the Insured  Mortgage is paid
      off will be split 50% / 50%; the next $1,690,220 of proceeds will be split
      75% to the Trust and 25% to the borrower (the  repayment of the Additional
      Loan);  and any  remaining  proceeds  will be split 50% / 50%  between the
      Trust and the borrower.  The Trust will not earn any Preferred Interest or
      Additional Loan Interest.

      At December 31, 2000 and 1999 there are no Insured  Mortgage  loans within
      the Trust's portfolio that are delinquent as to principal or interest.


                                    Continued
<PAGE>



                          KRUPP GOVERNMENT INCOME TRUST

                    NOTES TO FINANCIAL STATEMENTS, Continued


C.       PIMIs, Continued

<TABLE>
<CAPTION>


          The Trust's  investments in PIMIs consist of the following at
           December 31, 2000 and 1999:

                              Original      Approximate
                                Loan           Monthly       Interest     Maturity          Balance Outstanding
    Insured Mortgage            Amount          Payments       Rate         Date              at December 31,
    ----------------        -------------   --------------     ----         ----      -----------------------------------------
                                                                                            2000                  1999
                                                                                      ----------------     -------------------
<S>                         <C>             <C>               <C>         <C>         <C>                    <C>
Lifestyles (GNMA)           $  10,292,394   $       63,000    7.000%(a)   05/01/2032  $  9,904,652           $ 9,966,008

Windward (GNMA)                14,000,778           91,000    8.500%(b)   06/01/2032    13,518,840            13,596,232

Mountain View (FHA)             9,547,700           58,000    6.875%(c)   01/01/2034     9,264,428             9,315,978

Red Run (FHA) 19,019,600                    130,000      7.875%           05/01/2034    18,446,243            18,552,815

The Seasons (FHA) (d)           9,075,351           64,000    7.875%      10/01/2028     8,617,922             8,698,459
                            -------------   --------------                            ------------         -------------

                            $  61,935,823   $      406,000                            $ 59,752,085         $  60,129,492
                            =============   ==============                            ============         =============
                                                                                             (f)

</TABLE>
<TABLE>
<CAPTION>

                                                                                               Base          Preferred
                                         Outstanding Balance                 Maturity         Interest        Interest
      Additional Loan                    2000                1999            Date               Rate            Rate
      ---------------              ----------------    ----------------    ------------       --------        ---------
<S>                                <C>                 <C>                  <C>                 <C>              <C>
      Lifestyles (a)               $  1,817,665        $  1,817,665         05/14/2007           -                -

      Windward (b)                    2,471,294           2,471,294         07/07/2002          7.5%             10%

      Mountain View (c)               1,400,000           1,400,000         09/16/2003          7.0%              -

      Red Run                         2,900,000           2,900,000         06/23/2004          7.0%             10%

      The Seasons (d)(e)              1,924,649           1,924,649         10/01/2028          9.0%             10%
                                  -------------        ------------

                                   $ 10,513,608        $ 10,513,608
                                   ============        ===========
</TABLE>

(a)           The Trust  entered  into an Agreement  which  reduced the interest
              rate on the Insured Mortgage by 1.75% per annum effective  January
              1, 1998 for a period of  twenty-four  months and by 1.5% per annum
              for  2000  though  2007.  An  affiliate  of  the  Advisor  refunds
              approximately  .25% per annum to the Trust related to the interest
              reduction. The Trust will not receive any Additional Loan interest
              or Preferred Return due to the workout.
(b)           The Trust  entered  into an agreement  which  reduced the interest
              rate on the  Insured  Mortgage  by 2.0% per  annum for 1997 and by
              1.0% for 1998 through  2000. In addition,  the Preferred  Interest
              was reduced by 1% and  Additional  Loan  Interest is payable  from
              surplus cash.




                                    Continued
<PAGE>




                          KRUPP GOVERNMENT INCOME TRUST

                    NOTES TO FINANCIAL STATEMENTS, Continued


C.       PIMIs, Continued

      (c)     The  Trust  entered  into a second  modification  agreement  which
              reduced the  interest  rate on the  Insured  Mortgage by 1.25% per
              annum effective  January 1, 1999 and continuing  through  December
              31, 2004. The Agreement eliminated the Preferred Interest required
              under the Additional Loan and changed the Trust's participation in
              the surplus cash  generated  by the  property.  Furthermore,  debt
              service relief provided by the first modification was forgiven.
      (d)     The  total  PIM  and   Additional   Loan  on  this  property  were
              $32,300,000 and $6,850,000,  respectively, of which 72% is held by
              Krupp  Government  Income Trust II, an affiliate of the Trust. The
              Seasons is affiliated with the Advisor of the Trust.
      (e)     The  Additional  Loan interest rate was 6% per annum for the first
              three years and beginning in September  1996 increased
              to 9% per annum.
      (f)     The aggregate cost for federal income tax purposes is $59,752,085.

Impaired Mortgage Loans

The Advisor of the Trust has determined  that the Lifestyles  Additional Loan is
impaired.  As a result,  during 1998, a valuation  allowance of $1.1 million was
established  to adjust the  carrying  amount of the loan to the  estimated  fair
market value of the collateral  less  anticipated  costs of sale. The Trust will
recognize  interest  income to the extent  cash is  received  and  supported  by
operating  cash flow  generated by the  collateral.  The Trust did not recognize
interest income on the Lifestyles Additional Loan during 2000, 1999 or 1998.

The Advisor of the Trust has determined  that the Mountain View  Additional Loan
is impaired.  As a result,  during  1998, a valuation  allowance of $984,000 was
established to adjust the carrying amount of the loan to the then estimated fair
market value of the collateral less anticipated  costs of sale. During 1999, the
Trust increased the valuation  allowance of Mountain View by $48,000.  The Trust
will recognize  interest  income to the extent cash is received and supported by
operating  cash flow  generated by the  collateral.  The Trust did not recognize
interest income on the Mountain View Additional Loan during 2000, 1999 or 1998.

The activity in the valuation  allowance  together with the related recorded and
carrying value of the mortgage loans is as follows:

<TABLE>
<CAPTION>


                                           Recorded               Valuation            Carrying
                                              Value               Allowance              Value
                                          --------------          ---------           -----------

<S>                                        <C>                     <C>                <C>
Lifestyles                                 $1,817,665              $1,130,346         $   687,319

Mountain View                               1,400,000               1,032,272             367,728
                                          -----------             -----------         -----------

Balance at
  December 31, 2000                        $3,217,665              $2,162,618          $1,055,047
                                           ==========              ==========          ==========
</TABLE>

The recorded value of the impaired mortgage loans did not differ materially from
the  balances  reported at the end of each  quarter  with the  exception  of the
impairment  recorded  in the  fourth  quarter  of 1998  for the  Lifestyles  and
Mountain View  Additional  Loans.  The Trust has also deferred income related to
Lifestyles and Mountain View of $687,319 and $367,383, respectively.



                                    Continued

<PAGE>



                          KRUPP GOVERNMENT INCOME TRUST

                    NOTES TO FINANCIAL STATEMENTS, Continued


      C.  PIMIs, Continued

               A  reconciliation  of activity for each of the three years in the
period ended December 31, is as follows:
<TABLE>
<CAPTION>


Insured Mortgages
                                                          2000                      1999                    1998
                                                          ----                      ----                    ----

<S>                                                  <C>                        <C>                     <C>
Balance at beginning of period                       $   60,129,492             $   75,386,460          $  108,470,247

     Insured Mortgage prepayments                         -                        (14,861,957)            (32,603,506)

     Principal collections                                 (377,407)                  (395,011)               (480,281)
                                                     --------------             --------------           -------------


Balance at end of period                             $   59,752,085             $   60,129,492          $   75,386,460
                                                     ==============             ==============          ==============


Additional Loans

Balance at beginning of period                       $    8,350,990             $   11,243,862          $   19,209,108

     Additional Loan prepayments                          -                         (2,844,600)             (5,850,900)

     Valuation allowance                                  -                            (48,272)             (2,114,346)
                                                     --------------             --------------          --------------

Balance at end of period                             $    8,350,990             $    8,350,990          $   11,243,862
                                                     ==============             ==============          ==============
</TABLE>



Property descriptions:
---------------------
Lifestyles  Apartments  ("Lifestyles")  is a 236-unit  garden style  apartment
complex  located  in  Palm  Harbor,   Florida.

Windward  Lakes   Apartments ("Windward")  is a 276-unit garden style apartment
complex located in Pompano Beach,  Florida.

Mountain  View  Apartments  ("Mountain  View") is a 256-unit apartment complex
located in Madison,  Alabama.

Red Run Apartments ("Red Run") is a 304-unit apartment complex located in
Owings Mills, Maryland.

The Seasons is a 1,088-unit apartment complex located in Laurel, Maryland.

D.    PIMs

      The Trust had  investments in five PIMs at December 31, 2000 and 1999. The
      Trust's PIMs  consist of a GNMA or Fannie Mae MBS or a sole  participation
      interest in a HUD-insured  first  mortgage loan  originated  under the FHA
      lending program (collectively the "Insured Mortgages"),  and participation
      interests  in the  revenue  stream  and  appreciation  of  the  underlying
      property  above  specified  base  levels.   The  borrower   conveys  these
      participation  features  to the Trust  generally  through  a  subordinated
      promissory note and mortgage (the "Agreement").

      The Trust  receives  guaranteed  level  monthly  payments of principal and
      interest,  amortized  over thirty to forty years.  The GNMA and Fannie Mae
      MBS are  guaranteed  by GNMA and Fannie Mae and HUD insures  the  mortgage
      loan  underlying  the GNMA MBS and the FHA  mortgage  loan.  The  borrower
      usually cannot prepay the insured mortgage during the first five years but
      may prepay it thereafter  subject to a 9% prepayment  penalty in years six
      through  nine,  a 1%  prepayment  penalty  in year  ten and no  prepayment
      penalty   thereafter.   The  Trust  may  receive  income  related  to  its
      participation interests in the underlying property, however, these amounts
      are neither insured nor guaranteed.



                                    Continued

<PAGE>



                          KRUPP GOVERNMENT INCOME TRUST

                    NOTES TO FINANCIAL STATEMENTS, Continued


D.    PIMs, continued

      Generally,  the  participation  features  consist  of the  following:  (i)
      "Minimum Additional  Interest" at rates ranging from .5% to .75% per annum
      calculated on the unpaid principal  balance of the Insured Mortgage on the
      underlying property, (ii) "Shared Income Interest" ranging from 25% to 30%
      of the monthly gross rental income generated by the underlying property in
      excess of a  specified  base,  but only to the extent  that it exceeds the
      amount of Minimum  Additional  Interest  received  during such month,  and
      (iii)  "Shared  Appreciation  Interest"  ranging  from  25%  to 30% of any
      increase  in value of the  underlying  property  in excess of a  specified
      threshold.

      Payment of  participation  interest from the operations of the property is
      limited to 50% of net revenue or Surplus  Cash as defined by Fannie Mae or
      HUD,  respectively.  Payment of participation  interest at the time of the
      prepayment of the PIM or upon its maturity  generally cannot exceed 50% of
      any increase in value of the underlying property.

      Shared Appreciation  interest is payable when one of the following occurs:
      (1) the sale of the underlying  property to an unrelated  third party on a
      date which is later than five  years from the date of the  Agreement,  (2)
      the maturity date or accelerated  maturity date of the  Agreement,  or (3)
      prepayment of amounts due under the Agreement and the Insured Mortgage.

      Under the Agreement,  the Trust, upon giving twelve months written notice,
      can  accelerate  the maturity  date of the Agreement to a date not earlier
      than ten years from the date of the  Agreement  for (a) the payment of all
      participation  interest  due under  the  Agreement  as of the  accelerated
      maturity date, or (b) the payment of all participation  interest due under
      the  Agreement  plus all  amounts  due on the first  mortgage  note on the
      property.

      At December 31, 2000 and 1999 there are no Insured  Mortgage  loans within
      the Trust's portfolio that are delinquent of principal or interest.

<TABLE>
<CAPTION>

      The Trust's PIMs consisted of the following at December 31, 2000 and 1999:

                              Original         Approximate
                                Loan            Monthly       Interest     Maturity
PIM                              Amount         Payments         Rate         Date      Balance Outstanding at December 31,
---                         ---------------- --------------   ----------   ----------- --------------------------------------
                                                                                                2000               1999
                                                                                          ----------------   ----------------
<S>                         <C>              <C>               <C>         <C>            <C>               <C>
River View (GNMA)           $   9,284,877    $       64,500    8.000%      01/15/2033     $  8,964,717      $  9,019,623

Mill Pond (FHA)                 7,812,100            55,200    8.150%      01/01/2033        7,534,451         7,580,257

Waterford (FHA)                 6,935,900            48,800    8.125%      08/01/2032        6,671,434         6,713,520

Rivergreens (FHA)              10,003,000            69,500    8.005%      04/01/2033        9,652,263         9,711,260

Lincoln Green (FNMA)           15,565,000            99,800    6.750%      10/01/2002       14,069,369        14,307,013
                            -------------    --------------                               -----------------  --------------
                                                                               (a)
   Total                    $  49,600,877    $      337,800                              $ 46,892,234       $ 47,331,673
                            =============    ==============                              ============       ============
                                                                                             (b)
</TABLE>



(a)      Normal monthly benefit is based on a 30-year amortization.
          All unpaid principal of approximately $13,583,000 and accrued interest
           is due at the maturity date.

(b)  The aggregate cost for federal income tax purposes is $46,892,234.


                                    Continued

<PAGE>



                          KRUPP GOVERNMENT INCOME TRUST

                    NOTES TO FINANCIAL STATEMENTS, Continued



D.       PIMs, continued

<TABLE>
<CAPTION>

     A  reconciliation  of  activity  for each of the three  years in the period
ended December 31, is as follows:
                                                           2000                1999                  1998
                                                    ------------------  ------------------     --------------

<S>                                                 <C>                 <C>                    <C>
Balance at beginning of period                      $  47,331,673       $  47,737,583          $  48,112,523

   Principal collections                                 (439,439)           (405,910)              (374,940)
                                                    -------------       -------------          -------------

Balance at end of period                            $  46,892,234       $  47,331,673          $  47,737,583

</TABLE>


Property descriptions:
---------------------

River View Apartments  ("River View") is a 220-unit  apartment complex located
in Columbia,  South Carolina.

Mill Pond Apartments ("Mill Pond") is a 146-unit
apartment  complex  in  Bellbrook,  Ohio.

Waterford  Townhomes  Apartments ("Waterford") is a 122-unit apartment complex
in Eagen, Minnesota.

Rivergreens Apartments ("Rivergreens") is a 208-unit apartment complex in
Gladstone, Oregon.

Lincoln Green Apartments ("Lincoln Green") is a 616-unit apartment complex in
Greensboro, North Carolina.

E.   MBS
     ---

     At December 31, 2000,  the Trust's MBS portfolio  had an amortized  cost of
     $11,224,277  and gross  unrealized  gains and losses of $445,617  and $741,
     respectively.  At December 31, 2000,  the Trust had a FHA insured  mortgage
     loan with an amortized  cost of $4,867,345  and gross  unrealized  gains of
     $200,271.  At December 31, 1999, the Trust's MBS portfolio had an amortized
     cost of $12,377,145 and gross  unrealized  gains and losses of $258,056 and
     $26,740,  respectively.  At  December  31,  1999,  the  Trust's FHA insured
     mortgage  loan had an amortized  cost of  $4,886,962  and gross  unrealized
     losses of $424. The Trust's MBS have maturities ranging from 2008 to 2035.

<TABLE>
<CAPTION>

                                                                                                Unrealized
                         Maturity Date                         Fair Value                        Gain/(Loss)
                         -------------                      ----------------                   --------------

<S>                       <C>                               <C>                                <C>
                          2001 - 2005                       $       -                          $       -
                          2006 - 2010                             135,592                               (204)
                          2011 - 2035                          16,601,177                            645,350
                                                            -------------                       -------------

                              Total                         $  16,736,769                      $     645,146
                                                            =============                      ==============
</TABLE>


F.   Shareholders' Equity

     Under the  Declaration of Trust and commencing  with the initial closing of
     the public offering of shares, the Trust has declared and paid dividends on
     a  quarterly  basis.  During the period in which the Trust  qualifies  as a
     REIT, the Trust has and will pay quarterly  dividends  aggregating at least
     95%  of  taxable  income  on  an  annual  basis  to  be  allocated  to  the
     shareholders in proportion to their respective number of shares.

     In order for the Trust to  maintain  its REIT  status  with  respect to the
     requirements  of Share  ownership,  the  Declaration of Trust prohibits any
     investor  from  owning,  directly  or  indirectly,  more  than  9.8% of the
     outstanding  Shares  and  empowers  the  Trustees  to refuse to permit  any
     transfer of Shares which, in their opinion,  would jeopardize the status of
     the Trust as a REIT.

                                    Continued

<PAGE>



                          KRUPP GOVERNMENT INCOME TRUST

                    NOTES TO FINANCIAL STATEMENTS, Continued

G. Related Party Transactions

     Under the terms of the Advisory Service Agreement,  the Advisor receives an
     Asset  Management  Fee equal to .75% per annum of the value of the  Trust's
     actual and committed invested assets payable quarterly.

     The Trust also  reimburses  affiliates  of the Advisor  for  certain  costs
     incurred in connection with maintaining the books and records of the Trust,
     the preparation and mailing of financial reports, tax information and other
     communications  to investors and legal fees and  expenses.  Included in the
     general and administrative expenses are legal fees and expenses paid by the
     Trust to an  affiliate  of $3,305,  $1,285 and $4,416,  for the years ended
     December 31, 2000, 1999 and 1998, respectively.

     During the three years ended  December 31, 2000,  1999 and 1998,  the Trust
     received  interest  collections on Additional  Loans with affiliates of the
     Advisor of the Trust of $173,544, $225,156 and $218,841,  respectively.  In
     addition, the Trust received $174,505 in 2000, $153,499 in 1999 and $93,457
     in 1998 related to Participating Interest Income.

H.   Original Shares

     Upon  termination of the Trust, an affiliate of the Advisor is committed to
     pay to  holders  of  Original  Shares  the amount (if any) by which (a) the
     Shareholders'  Original Investments exceed (b) all Dividends (as defined in
     the  prospectus)  paid by the Trust with respect to such  Original  Shares.
     Original  Shares are those  Shares  purchased  during the  Trust's  initial
     public   offering   either   through   purchase  or  through  the  dividend
     reinvestment  program and held until the last mortgage held by the Trust is
     repaid or disposed of.

I.       Federal Income Taxes
<TABLE>
<CAPTION>

<S>                                                                                       <C>
     Net income per statement of income                                                   $    8,429,112

     Less:    Book to tax difference for Additional Loan
                interest income                                                                 (492,942)

     Plus:    Book to tax difference for amortization
                of prepaid fees and expenses                                                     626,804
                                                                                          --------------

     Net income for federal income tax purposes                                           $    8,562,974
                                                                                          ==============

</TABLE>

     The Trust paid  dividends  of $.68 per share  during 2000 which  represents
     approximately  $.56 from ordinary  income and $.12 represents a non-taxable
     distribution for federal income tax purposes.

     The basis of the Trust's  assets for financial  reporting  purposes is less
     than its tax basis by  approximately  $8,209,000 and $7,921,000 at December
     31, 2000 and 1999,  respectively.  The basis of the Trust's liabilities for
     financial  reporting  purposes  exceeded  its tax  basis  by  approximately
     $3,550,000 and $3,918,000 at December 31, 2000 and 1999, respectively.

J.   Fair Value Disclosures of Financial Instruments

     The Trust uses the following  methods and  assumptions to estimate the fair
value of each class of financial instruments:

     Cash and Cash Equivalents

     The carrying amount  approximates  fair value because of the short maturity
of those instruments.


                                    Continued

<PAGE>




                          KRUPP GOVERNMENT INCOME TRUST

                    NOTES TO FINANCIAL STATEMENTS, Continued


J.    Fair Value Disclosures of Financial Instruments, continued
      -----------------------------------------------

      MBS

      The Trust  estimates  the fair value of MBS based on quoted  market prices
      while it  estimates  the fair value of insured  mortgages  based on quoted
      prices of MBS with similar  interest  rates.  Based on the estimated  fair
      value   determined   using  these  methods  and  assumptions  the  Trust's
      investments in MBS had gross  unrealized gains and losses of approximately
      $646,000  and $1,000 at  December  31,  2000 and  $258,000  and $27,000 at
      December 31, 1999.

      PIMs and PIMIs

      There is no active  trading  market  for these  investments.  Accordingly,
      management  estimates the fair value of the PIMs and the insured  mortgage
      portion of the PIMIs  using  quoted  market  prices of MBS having the same
      stated coupon rate as the Insured Mortgages. Additional Loans are based on
      the estimated  fair value of the  underlying  properties as an estimate of
      the fair value of the loan is not practicable. Management does not include
      any  participation  income  in  the  Trust's  estimated  fair  values,  as
      Management  does not believe it can predict the time of realization of the
      feature with any certainty.  Based on the estimated fair value  determined
      using these methods and assumptions,  the Trust's  investments in PIMs and
      PIMIs had gross unrealized gains and losses of approximately  $343,000 and
      $1,738,000,  respectively at December 31, 2000 and gross  unrealized gains
      and losses of  approximately  $419,000  and  $1,804,000,  respectively  at
      December 31, 1999.


<TABLE>


      At December 31, 2000 and 1999,  the Trust  estimated the fair value of its
      financial instruments as follows:
<CAPTION>
                                                                       (amounts in thousands)
                                                                 2000                         1999
                                                      ---------------------------   --------------------------
                                                          Fair        Carrying        Fair        Carrying
                                                         Value          Value         Value          Value
                                                       -----------    -----------   -----------   ------------

<S>                                                   <C>            <C>           <C>           <C>
         Cash and cash equivalents                    $    5,359     $   5,359     $    4,627    $    4,627

         MBS                                              16,737        16,536         17,495        17,495

         PIMs and PIMIs:
           PIMs                                           46,594        46,892         46,995        47,332
           Insured mortgages                              58,655        59,752         59,081        60,129
           Additional Loans                                8,351         8,351          8,351         8,351
                                                      ----------     ---------     ----------    ----------

                                                      $  135,696     $ 136,890     $  136,549    $  137,934
                                                      ==========     =========     ==========    ==========

</TABLE>



<PAGE>

<TABLE>
<CAPTION>



                          KRUPP GOVERNMENT INCOME TRUST

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS


                                Balance at        Charged to                                Balance at
                                 beginning        costs and                                   end of
Description                      of period         expenses              Revenues               period
-----------                     -------------     ----------            ---------           ----------------

<S>                             <C>               <C>                   <C>                 <C>
Additional Loan
impairment provision            $2,162,618        $     -               $    -              $ 2,162,618
                                ==========        ===========           ==========          ===========
                                                                                               (1)
</TABLE>


(1)  The Trust recognized a valuation allowance related to the Lifestyles and
      Mountain View Additional Loans.

<PAGE>








                          KRUPP GOVERNMENT INCOME TRUST

                               SUPPLEMENTARY DATA
                        SELECTED QUARTERLY FINANCIAL DATA


<TABLE>
<CAPTION>


                                                                    For    the     Quarter    Ended
                                        --------------------------------------------------------------------------------------

                                               March 31,            June 30,           September 30,          December 31,
                                                2000                  2000                  2000                  2000
                                        --------------------    -----------------   -----------------  -----------------------

<S>                                         <C>                 <C>                 <C>                <C>
     Total revenues                         $        2,657,314  $      2,660,457    $       2,697,284  $             3,061,013
                                            ==================  ================    =================  =======================

     Net income                             $        2,027,459  $      1,964,868    $       1,986,007  $             2,450,778
                                            ==================  ================    =================  =======================

     Earnings per Share                     $              .13  $            .14    $             .13  $                   .16
                                            ==================  ================    =================  =======================


</TABLE>
<TABLE>
<CAPTION>

                                                                     For    the    Quarter    Ended
                                        ----------------------------------------------------------------------------------------

                                               March 31,             June 30,           September 30,         December 31,
                                                1999                   1999                1999                   1999
                                        --------------------    ------------------   -------------------   ---------------------

<S>                                     <C>                     <C>                  <C>                   <C>
     Total revenues                     $          2,972,169    $        2,930,082   $         7,000,373   $           2,729,605
                                        ====================    ==================   ===================   =====================

     Net income                         $          2,305,965    $        2,128,720   $         5,800,454   $           2,082,242
                                        ====================    ==================   ===================   =====================

     Earnings per Share                 $                .15    $              .14   $               .39   $                 .14
                                        ====================    ==================   ===================   =====================



</TABLE>


<PAGE>
<TABLE>
<CAPTION>


                                   (Unaudited)
                 (Amounts in thousands, except per Share amounts)

                                                                               Year                  Inception
                                                                              Ended                   Through
                                                                            12/31/00                   12/31/00
                                                                           -----------              ---------------
      Distributable Cash Flow (a):
      ---------------------------
<S>                                                                        <C>                      <C>
      Net income                                                           $      8,429             $    133,217
      Items not requiring or providing the
       use of operating funds:

        Provision for impaired mortgage loan                                 -                             2,163
        Amortization of prepaid fees and
         expenses and organization costs                                          1,030                   15,858
        Additional Loan Interest Deferred                                         (367)                    3,551
                                                                           -----------              ------------

        Total Distributable Cash Flow ("DCF")                                     9,092                  154,789
                                                                           ------------             ------------

      DCF per Share based on Shares
       outstanding at December 31, 2000                                    $       0.60             $     10.28   (d)
                                                                           ============             ===========

      Dividends:

       Total dividends to Shareholders                                     $     10,236 (b)         $    279,730  (c)
                                                                           ============             ============
       Average dividend per Share based
        on Shares outstanding at
        December 31, 2000                                                  $       0.68 (b)         $      18.58  (c)(d)
                                                                           ============             ============
</TABLE>


         (a)    Distributable  Cash Flow consists of income before provision for
                impaired  mortgage  loans,  amortization  of  prepaid  fees  and
                expenses and organization  costs and includes  deferred interest
                on Additional Loans. The Trust believes  Distributable Cash Flow
                is an appropriate supplemental measure of operating performance,
                however,  it should not be  considered  as a substitute  for net
                income as an indication of operating  performance  or cash flows
                as a measure of liquidity.

         (b)    Represents all dividends paid in 2000 except the February 2000
                dividend and includes an estimate of the February 2001 dividend.

         (c)    Includes an estimate of the February 2001 dividend.

         (d)    Shareholders average per Share return of capital on a cash basis
                as of  February  2001 is $8.30  [$18.58  -  $10.28].  Return  of
                capital  represents  that portion of the dividends  which is not
                funded from DCF such as principal  collections received from MBS
                and PIMs.