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                0-20164
                                   -----------------------------------------

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


         Massachusetts                                04-3073045
(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 II (the "Trust") is a Massachusetts business trust
which was formed on February 8, 1991 and is  authorized to sell up to 25,000,000
shares of beneficial interest (the "Shares").  Berkshire Realty Advisors Limited
Partnership acquired 10,000 of such Shares and 18,315,158 Shares were sold under
the Trust's public offering for $365,686,058 net of purchase volume discounts of
$617,102.  On December 29, 1994, Berkshire Mortgage Advisors Limited Partnership
acquired  Berkshire  Realty  Advisors  Limited  Partnership's  10,000 shares and
assumed the role of the Advisor to the Trust.  Under the  Dividend  Reinvestment
Plan  ("DRP"),  46,319 Shares were sold for $880,061  (the  remaining  6,628,523
Shares are available for general Trust purposes). The Trust has utilized the net
proceeds from the public  offering 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, 2030,  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 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 the 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 Fannie Mae 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 Fannie Mae 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 under or
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"),  but are neither insured
nor guaranteed.  Additional Loans  associated with Fannie Mae insured  mortgages
are collateralized by a subordinated mortgage on the underlying property but are
neither insured nor guaranteed.  In addition, the participation features related
to the  participating  mortgage are neither  insured nor  guaranteed.  Under the
Additional  Loans,  the  Trust  receives  semi-annual  interest  payments  and a
Preferred  Return  representing  a  non-compounded   cumulative  return  on  the
outstanding  indebtedness,  usually the aggregate amount of the insured mortgage
and Additional Loan. 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  mortgage  loans
issued or originated by Fannie Mae or the Federal Home Loan Mortgage Corporation
("FHLMC").  Fannie Mae and FHLMC  guarantee  the  principal  and interest of the
Fannie Mae and FHLMC MBS, respectively.

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, 2030, the value of
the PIMIs and PIMs 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, 2030.

<PAGE>

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.

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
of its  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
------

Currently there is no established public trading market for the Shares.

The number of investors holding Shares as of December 31, 2000 was approximately
13,720.

The  Trust has and  intends  to  continue  to  declare  and pay  dividends  on a
quarterly basis. The Trustees  established a dividend rate per Share per quarter
of $.3125 for 1999 and $.24 per Share per quarter for 2000 and 2001.

<PAGE>


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.

<TABLE>
<CAPTION>

                                   (Amounts in thousands, except for per Share amounts)

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

<S>                               <C>            <C>            <C>          <C>             <C>
Total revenues                    $    16,978    $    19,613    $     21,630 $     21,291    $    19,877

Net income                        $    13,625    $    14,974    $     13,183 $     16,263    $    14,999

Net income per Share              $       .74    $       .82    $        .72 $        .89    $       .82

Weighted average Shares
 outstanding                           18,371         18,371          18,371       18,371         18,371

Total assets at December 31       $    215,521   $   231,209    $    267,410 $    293,158    $   298,297

Average dividends per Share       $       1.62   $      2.73    $       2.12 $       1.25    $      1.25
</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 $7.1 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  $4.4  million,  and special  distributions.
Funds for dividends come from interest income received on PIMs,  PIMIs,  MBS and
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 $.24  per  Share  per  quarter.  The  Trustees,  based  on the
Advisor's recommendations, generally set a dividend rate that provides for level
quarterly distributions.  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
distribution.

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

The Trust received  Additional Loan interest from seven of the PIMI  investments
during the twelve  months ended  December 31,  2000.  The Trust also  received a
payment  from the  borrower on the  Windmill  Lakes PIMI,  which was recorded as
deferred income on Additional  Loans.  During 1999, the Advisor  determined that
the borrower on the Norumbega PIMI had paid  Additional Loan interest from funds
other than surplus  cash,  which  resulted in  overpayments  during the previous
three  years;  consequently,  the Trust will not  receive  any  Additional  Loan
interest until the overpayment has been absorbed.

<PAGE>

The Trust received  participation interest totaling $1,915,557 during the twelve
months ended December 31, 2000. The Trust collected  $156,557 for Mequon Trails,
$346,514 for Martins  Landing,  $686,165 for The Lakes at Vinings,  $175,489 for
Falls at Hunters  Pointe,  $446,574  for The  Seasons,  $50,000  from  Crossings
Village  and  $54,258  from  The   Fountains.   The  Trust  expects  to  collect
participation  interest from Sunset Summit early in 2001. During 2000,  property
operations  at Oasis  improved  enough  that the Trust was able to  reverse  its
allowance for loan loss of $994,000 on this property.

The Advisor is closely  monitoring two  properties  due to market  conditions or
payment issues relating to the Additional Loans.  Competitive  market conditions
in the south  Florida  market have  adversely  affected  the ability of Windmill
Lakes to generate  sufficient  cash flow from operations to service the interest
payments due on the Additional Loan. The Borrower on the Falls at Hunters Pointe
PIMI was declared in default under the terms of the participation and Additional
Loan documents for  non-payment of  participation  interest due relating to 1998
and 1999 along with late payment penalties and legal fees.

The strength of the South Florida  economy,  bolstered by an expanding  business
environment  and  in-migration  coupled  with low interest  rates and  available
building sites, has fostered aggressive  development of both single family homes
and new apartments. Windmill Lakes is located in the Pembroke Pines submarket, a
market  that had  vast  tracts  of  vacant  land  three  years  ago and has seen
explosive  construction  activity since then in single family,  multifamily  and
retail sectors. Windmill Lakes is a ten-year old, basic apartment community that
has not been able to compete  against  the influx of new  apartment  communities
that have extensive amenity packages. Builders use deep marketing concessions to
fill the new properties, lowering the cost of renting a new apartment and making
it more difficult for older properties like Windmill Lakes to attract residents.
During  the  fourth  quarter  of  2000,  occupancy  was in the  70%  range.  The
property's curb appeal, a critical element in a competitive market, has suffered
as well because  there has not been enough cash flow for  adequate  maintenance.
Consequently,  the  borrower  has  been  delinquent  in  its  obligation  to pay
Additional  Loan interest  since March 1998.  Although the borrower has tried to
sell the property,  the borrower has been unable to secure a purchase price that
will cover the  property's  outstanding  liabilities.  The Advisor has agreed to
defer the delinquent Additional Loan payments pending a sale of the property. In
the mean time, the borrower paid $25,000 towards the delinquent  Additional Loan
interest during the first quarter of 2000. If it becomes apparent that a sale of
the property at a mutually  acceptable  price to both the Trust and the borrower
will not be possible,  the Advisor will  reassess the  feasibility  of extending
long-term debt service relief rather than risk the consequences of a default. As
a result  of the  factors  described  above,  the  Advisor  determined  that the
Additional Loan collateralized by the Windmill Lakes asset was impaired, and the
Trust recorded a valuation allowance of $2,000,000 in the fourth quarter of 1998
and continues to maintain that allowance.

In November 1999, the Trust notified the borrower on the Falls at Hunters Pointe
PIMI that he was in default for non payment of participating interest due to the
Trust based on 1997 and 1998 operating results.  The borrower has failed to cure
the default.  Consequently, the Trust elected to use a portion of the borrower's
funds  held in escrow to cure the 1997  portion  of the  default.  The  borrower
remained in default for 1998 operating  results and for 1999 operating  results.
The Trust filed a  complaint  against the  partners of the  borrowing  entity to
collect  the  delinquent   participation  interest  related  to  1998  and  1999
operations along with late payment penalties and legal fees. In response to this
action,  the  borrower  on the  PIMI  put the  property  up for  sale.  The sale
transaction  closed  during the first  quarter of 2001. As a result of the sale,
the Trust  received  all  delinquent  participation  interest due as well as its
share of the increase in the property's value.

Whether the  operating  performance  of 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.

On  December  16,  1999,  the  Trust  received  $2,832,907  from  Windsor  Lake;
consisting  of $2,000,000  from the payoff of the  Additional  Loan,  $40,000 of
Additional Loan interest, and $792,907 of participation  interest. The payoff of
the  balance on the insured  mortgage,  $9,172,642  was  received on January 26,
2000.  The Trust paid a special  dividend of $.66 per Share from the  prepayment
proceeds.

On October 18, 1999, the Trust received a payoff of $12,399,164 from the Estates
MBS consisting of an insured mortgage of $11,375,380 and a prepayment premium of
$1,023,784.  During October 1999, the Trust paid a special  dividend of $.68 per
Share from the proceeds received from the Estates MBS payoff.

<PAGE>

During  1998,  the  Trust  received  the  prepayment  of the  St.  Germain  PIMI
investment when the property was refinanced. The prepayment occurred four months
prior to the expiration of the five year prepayment  prohibition.  However,  the
Advisor agreed to allow the transaction to be completed while market  conditions
were  favorable.  The Trust received the prepayment of the principal  balance of
the insured mortgage, $11,006,015, the principal balance of the Additional Loan,
$2,860,000,  and  Additional  Loan  interest  $83,417.  In  addition,  the Trust
received participation interest comprised of the outstanding preferred return on
the Trust's  investment of $89,975,  the Trust's share of operating cash flow of
$94,258,  and the Trust's  share in the increase in the value of the  underlying
property of $1,874,032.  The Trust paid a special dividend on September 28, 1998
of $.87 per Share from the prepayment proceeds.

There are  contractual  restrictions  on the  prepayment  of the PIMs and PIMIs.
During  the  first  five  years  of  the  investment,  borrowers  are  generally
prohibited from repayment.  During the second five years,  the PIM borrowers can
prepay the insured mortgage by paying the greater of a prepayment premium or the
participation  interest due at the time of the prepayment.  Similarly,  the PIMI
borrowers can prepay the insured  mortgage and the Additional Loan by satisfying
the Preferred Return obligation.  The participation  features and the 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  generally would not receive any  participation  income or any amounts
due under the Additional Loan.

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, the Government  National Mortgage  Association (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.  However,  obligations of Fannie Mae
are not  guaranteed  by the U.S.  Government.  Fannie Mae is one of the  largest
corporations  in the United  States and the  Secretary  of the  Treasury  of the
United States has discretionary  authority to lend up to $2.25 billion to Fannie
Mae at any time.  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  represent  interests  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. Goverment.

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  affected  by  adverse  changes  in general  economic  conditions,  local
conditions, and changes in governmental regulations, real estate zoning laws, or
tax laws;  and other  circumstances  over which the Trust may have  little or no
control.

The Trust's  investments also include cash and cash equivalents of approximately
$6.2  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.

<PAGE>

The table below 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              $    3,139  $   2,479   $  1,962  $  1,558  $   1,242    $    8,368   $   18,748  $     19,124
WAIR                   7.63%      7.63%     7.63%     7.63%       7.63%         7.63%        7.63%

PIMS                    390        418        447       479         513       35,435       37,682        36,568
WAIR                   7.04%      7.05%     7.05%     7.05%       7.06%         7.06%        7.04%

PIMIS
Insured Mortgages    16,706      1,579     1,692      1,814       1,944       97,473       121,208      118,389
WAIR                   7.02%      7.03%     7.03%     7.03%       7.03%         7.03%        7.02%

Additional Loans        650          -          -         -          -        23,642       24,292        22,292
WAIR                   7.45%      7.45%     7.45%     7.45%       7.45%         7.45%        7.45%
                 ----------  ---------   -------   -------     -------    ----------   ----------    ----------

Total Interest-
Sensitive Assets   $ 20,885 $  4,476  $  4,101    $  3,851   $    3,699   $  164,918    $  201,930  $   196,373
                   ======== ========  ========    ========   ==========   ==========    ==========  ===========
</TABLE>


Operations

   The following  relates to the  operations of the Trust during the years ended
December 31, 2000, 1999, and 1998.
<TABLE>
<CAPTION>

                (amounts in thousands, except per Share amounts)
                            Years Ended December 31,
                            -------------------------
                                                             2000                    1999                      1998
                                                             ----                    ----                      ----
                                                                   Per             Per                        Per
                                                     Amount        Share          Amount       Share         Amount      Share
                                                     ------        -----          ------       -----         ------      -----
Interest on PIMs and PIMIs:
<S>                                               <C>             <C>          <C>          <C>             <C>         <C>
     Basic interest                               $    11,260     $  .61       $11,998      $  .66          $12,450     $  .68
     Additional Loan interest                           1,784        .10         1,712         .09           1,581         .09
     Participation interest                             1,915        .11         1,592         .08           3,252         .18
Interest income on MBS                                  1,455        .08         3,251         .18           3,265         .18
Interest income - cash and cash equivalents               564        .03         1,060         .06           1,082         .06
Trust expenses                                         (2,215)      (.12)       (2,274)       (.12)         (2,553)       (.15)
Amortization of prepaid fees and
   expenses                                            (2,132)      (.12)       (2,365)       (.13)         (2,900)       (.16)
(Reduction of) provision for impaired mortgage
   loans                                                  994        .05           -            -           (2,994)       (.16)
                                                      -------    --------      -------      ------         -------
  Net Income                                      $    13,625    $   .74       $14,974      $  .82         $13,183      $  .72
                                                      =======    ========      =======      ======         =======      ======

Weight Average Shares Outstanding                           18,371,477             18,371,477                   18,371,477
                                                           ===========             ==========                   ==========
</TABLE>

<PAGE>

The Trust's net income decreased $1.3 million for 2000 when compared to 1999 due
primarily to lower interest  income.  Basic interest on PIMs and PIMIs decreased
due to the payoff of the  Windsor  Lake PIMI in January  of 2000.  MBS  interest
decreased due to the payoff of the Estates MBS in 1999 and the receipt of a $1.0
million  prepayment  premium at payoff.  Amortization  expense in 2000 decreased
because the Trust fully amortized the remaining  prepaid  acquisition  costs and
participating  servicing fees related to the Windsor Lake PIMI payoff. The Trust
reversed its provision for impaired  mortgage  loans,  associated with the Oasis
additional loan, by $994,000 as a result of improved property operations.

The Trust's total interest income decreased by approximately $2 million for 1999
when compared to 1998 due primarily to decreases in  participation  interest and
basic interest on PIM and PIMI's.  The decrease in  participation  interest from
1999 as compared  to 1998 was a result of the  participation  interest  received
when the payoff of the St.  Germain PIMI  occurred in 1998  exceeding  the total
participation  interest  received  when the  Windsor  Lake PIMI  prepaid.  Basic
interest on the PIMs and PIMIs also decreased due to the St. Germain payoff.

Expenses decreased by approximately $3.8 million for 1999 when compared to 1998,
due to decreases in the provision for impaired  mortgage loan,  asset management
fees,  and  amortization  expense.  The Trust  recorded a provision for impaired
mortgage loans of $2,994,000  related to Windmill and Oasis  Additional Loans in
1998. The decrease in asset management fees resulted from the Trust's asset base
declining.  Amortization  expense  in 1998  decreased  because  the Trust  fully
amortized the remaining prepaid  acquisition  costs and participating  servicing
fees relating to the St. Germain PIMI when it paid off.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
------

See Appendix A to this report.

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 II is as follows:


                                      Position with Krupp
   Name and Age                       Government Income Trust II

   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   acquisitions,   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.

<PAGE>

Charles N.  Goldberg  is  currently a partner of Oppel,  Goldberg & Saenz,  LLC.
Prior  to that he was of  counsel  to the law  firm of  Broocks,  Baker & Lange,
L.L.P.,  a position he held from December of 1997 to May, 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 from  Bentley  College.  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.

Robert A. Barrows is the Treasurer of the Trust and is 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 and is 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
acquisitions,  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.


<PAGE>


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 a $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 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.

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.


<PAGE>


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 18,371,477  outstanding Shares. The
only Shares held by the Advisor or any of its affiliates consist of the original
10,000 Shares held by the Advisor.
<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, Ma. 02108                10,000 Shares**                       ***

Shares of
Beneficial
Interest               All Directors and 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.


<PAGE>



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  and
            Supplementary Data included under Item 8, Appendix A, on page F-2 of
            this report.

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

(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)          Fourth Amended and Restated  Declaration of Trust filed
                        with The Massachusetts  Secretary of State on September
                        25, 1991 [Included as Exhibit 4.8 to Post-effective
                        Amendment No. 1 to Registrant's  Registration Statement
                        on Form S-11 dated September 26, 1991
                        (File No. 33-39033)].*

         (4.2)          Subscription  Agreement Specimen [Included as Exhibit C
                        to Prospectus included in Post-effective  Amendment No.
                        1 to Registrant's Registration Statement on Form S-11
                        dated September 26, 1991 (File No. 33-39033)].*

     (10)               Material Contracts

         (10.1)         Advisory  Services  Agreement  dated  September 11, 1991
                        between Krupp  Government  Income Trust II and Berkshire
                        Realty Advisors Limited  Partnership  (formerly known as
                        Krupp Realty Advisors Limited  Partnership)[Exhibit 10.1
                        to  Registrant's  report on Form 10-K for the year ended
                        December 31, 1994 (File No. 0-20164)].*

         (10.2)         Assignment and Assumption  Agreement  between  Berkshire
                        Realty  Advisors   Limited   Partnership  and  Berkshire
                        Mortgage Advisors Limited  Partnership  [Exhibit 10.2 to
                        Registrant's  report  on Form  10-K for the  year  ended
                        December 31, 1994 (File No. 0-20164)].*

                        Mequon Trails

         (10.3)         Supplement to Prospectus dated January 1, 1993 for
                        Federal National Mortgage  Association pool number
                        MX-073025 [Exhibit  19.1. to Registrant's Report on
                        Form 10-Q for the quarter ended
                        March 31, 1993 (File No. 0-20164)].*

         (10.4)         Subordinated  promissory note dated December 21, 1992 by
                        and between Mequon Trails Townhomes Limited  Partnership
                        and Krupp  Government  Income Trust II [Exhibit  19.2 to
                        Registrant's  Report on Form 10-Q for the quarter  ended
                        March 31, 1993 (File No. 0-20164)].*

         (10.5)         Subordinate Multifamily Mortgage dated December 21, 1992
                        between Mequon Trails Townhomes Limited  Partnership and
                        Krupp  Government   Income  Trust  II.[Exhibit  10.5  to
                        Registrant's  report  on Form  10-K for the  year  ended
                        December 31, 1995 (File No. 0-20164)].*


<PAGE>



         (10.6)         Subordination  Agreement dated December 21, 1992 between
                        Krupp Mortgage  Company L.P.,  Krupp  Government  Income
                        Trust   II   and   Mequon   Trails   Townhomes   Limited
                        Partnership.[Exhibit 10.6 to Registrant's report on Form
                        10-K for the year  ended  December  31,  1995  (File No.
                        0-20164)].*

                        The Seasons

         (10.7)         Subordinated  Promissory Note, dated September 16, 1993,
                        between  Maryland  Associates  Limited  Partnership  and
                        Krupp   Government   Income  Trust   [Exhibit   10.1  to
                        Registrant's  Report on Form 10-Q for the quarter  ended
                        September 30, 1993 (File No. 0-20164)].*

         (10.8)         Additional  Loan  Agreement  dated  September  16,  1993
                        between the Krupp  Company  Limited  Partnership-IV  and
                        Krupp  Government  Income  Trust  II  [Exhibit  10.2  to
                        Registrant's  Report on Form 10-Q for the quarter  ended
                        September 30, 1993 (file No. 0-20164)].*

         (10.9)         Additional Loan Note dated  September 16, 1993,  between
                        the  Krupp  Company  Limited  Partnership-IV  and  Krupp
                        Government Income Trust II [Exhibit 10.3 to Registrant's
                        Report on form 10-Q for the quarter ended  September 30,
                        1993 (File No. 0-20164)].*

         (10.10)        Participation  and Servicing  Agreement  dated September
                        16, 1993 by and between Krupp Mortgage  Corporation  and
                        Krupp  Government   Income  Trust-II  [Exhibit  10.4  to
                        Registrant's  Report on Form 10-Q for the quarter  ended
                        September 30, 1993 (File No.0-20164)].*

         (10.11)        Deed of Trust Note dated September 16, 1993 for Maryland
                        Associates   Limited   Partnership  and  Krupp  Mortgage
                        Corporation  [Exhibit  10.11 to  Registrant's  report on
                        Form 10-K for the year ended December 31, 1994 (File No.
                        0-20164)].*

         (10.12)        Assignment and Assumption  Agreement dated September 16,
                        1993 between Krupp Government  Income Trust II and Krupp
                        Government  Income Trust [Exhibit 10.12 to  Registrant's
                        report on Form 10-K for the year ended December 31, 1994
                        (File No. 0-20164)].*

         (10.13)        Agreement re Subordinated  Note dated September 16, 1993
                        between Krupp Mortgage  Corporation and Krupp Government
                        Income Trust II [Exhibit 10.13 to Registrant's report on
                        Form 10-K for the year ended December 31, 1994 (File No.
                        0-20164)].*

                        Martin's Landing

         (10.14)        Subordinated  Loan  Agreement,  dated  November 9, 1993,
                        between  TRC  Realty  Incorporated  - ML, ML  Associates
                        Limited  Partnership  ("Borrower")  and Krupp Government
                        Income Trust II ("Holder") [Exhibit 10.9 to Registrant's
                        annual  report  on  Form  10-K  for  fiscal  year  ended
                        December 31, 1993 (File No. 0-20164)].*

         (10.15)        Subordination  Agreement  dated November 9, 1993 between
                        ML Associates,  L.P., and Krupp Government  Income Trust
                        II.[Exhibit  10.22 to  Registrant's  report on Form 10-K
                        for the year ended December 31, 1995 (File No.
                        0-20164)].*

         (10.16)        Assignment of Subordination  Agreement dated November 9,
                        1993 from Berkshire Mortgage Finance Limited Partnership
                        to the  Federal  National  Mortgage  Association  by and
                        between ML Associates,  L.P., Berkshire Mortgage Finance
                        Limited  Partnership and Krupp  Government  Income Trust
                        II.[Exhibit  10.23 to  Registrant's  report on Form 10-K
                        for  the  year  ended   December   31,  1995  (File  No.
                        0-20164)].*

         (10.17)        Supplement  to  Prospectus  dated  December  1, 1993 for
                        Federal National  Mortgage  Association pool number MX -
                        073029.[Exhibit  10.24 to  Registrant's  report  on Form
                        10-K for the year ended December 31, 1995 (File No.
                        0-20164)].*


<PAGE>


                        Crossings Village

         (10.18)        Subordinated  Loan  Agreement,  dated September 28, 1993
                        between    Crossings    Village   Westlake    Associates
                        ("Borrower")  and  Krupp  Government   Income  Trust  II
                        ("Holder")[Exhibit  10.10 to Registrant's  annual report
                        on Form 10-K for fiscal  year ended  December  31,  1993
                        (File No. 0-20164)].*

         (10.19)        Subordinated  Note  dated  September  28,  1993  between
                        Crossings   Village   Westlake   Associates   and  Krupp
                        Government   Income   Trust   II   [Exhibit   10.16   to
                        Registrant's  report  on Form  10-K for the  year  ended
                        December 31, 1994 (File No. 0-20164)].*

         (10.20)        Subordination Agreement dated September 28, 1993 between
                        Washington Capital DUS Inc.,  Crossings Village Westlake
                        Associates and Krupp Government Income Trust II.[Exhibit
                        10.27 to  Registrant's  report on Form 10-K for the year
                        ended December 31, 1995 (File No. 0-20164)].*

                        Norumbega Point

         (10.21)        Subordinated  Promissory  Note,  dated December 14, 1993
                        between Longa Vita  Corporation  ("Maker or  Mortgagor")
                        and Krupp Government Income Trust II  ("Holder")[Exhibit
                        10.11 to  Registrant's  annual  report  on Form 10-K for
                        fiscal   year  ended   December   31,   1993  (File  No.
                        0-20164)].*

         (10.22)        Additional  Loan Note dated  December  14, 1993  between
                        Evelyn Insoft, Sidney Insoft, Richard Slifka, and Alfred
                        A.  Slifka  ("Borrowers")  and Krupp  Government  Income
                        Trust  II  ("Holder")  [Exhibit  10.12  to  Registrant's
                        annual  report  on  Form  10-K  for  fiscal  year  ended
                        December 31, 1993 (File No. 0-20164)].*

         (10.23)        Participation  and Servicing  Agreement dated
                        December 14, 1993 by and between  Cambridge  Healthcare
                        Funding, Inc. and Krupp  Government  Income Trust  II.
                        [Exhibit  10.30 to  Registrant's  report on Form 10-K
                        for the year ended December 31, 1995
                        (File No. 0-20164)].*

         (10.24)        Subordinated Multifamily Mortgage Assignment of Rents
                        and Security Agreement dated December 14, 1993 between
                        Longa Vita Corp. and Krupp Government Income Trust  II.
                        [Exhibit 10.31 to Registrant's report on Form 10-K for
                        the year ended  December 31, 1995 (File No. 0-20164)].*

         (10.25)        Additional Loan Agreement dated December 14, 1993
                        between the Evelyn Insoft, Sidney Insoft,
                        Richard Slifka and Alfred A. Silfka,  Longa Vita Corp.
                        and Krupp Government Income Trust II.[Exhibit 10.32
                        to Registrant's  report on Form 10-K for the year ended
                        December 31, 1995 (File No. 0-20164)].*

         (10.26)        Mortgage Note dated December 14, 1993 between
                        Longa Vita Corp. and Cambridge  Healthcare Funding, Inc.
                        [Exhibit 10.33 to Registrant's report on Form 10-K for
                        the year ended December 31, 1995 (File No. 0-20164)].*

         (10.27)        Agreement re Subordinated Note dated December 14, 1993
                        between  Cambridge  Healthcare  Funding,  Inc. and Krupp
                        Government Income Trust  II.[Exhibit 10.34 to
                        Registrant's report on Form 10-K for the year ended
                        December 31, 1995 (File No. 0-20164)].*

                        Sunset Summit

         (10.28)        Subordinated  Loan  Agreement  dated  November  24, 1993
                        between  Sunset  Summit  Limited  Partnership  and Krupp
                        Government   Income   Trust   II   [Exhibit   10.21   to
                        Registrant's  report  on Form  10-K for the  year  ended
                        December 31, 1994 (File No. 0-20164)].*

         (10.29)        Subordinated Note dated November 24, 1993 between Sunset
                        Summit Limited  Partnership and Krupp Government  Income
                        Trust II [Exhibit 10.22 to  Registrant's  report on Form
                        10-K for the year  ended  December  31,  1994  (File No.
                        0-20164)].*

         (10.30)        Subordination  Agreement dated November 24, 1993 between
                        BMFLP,  Sunset  Summit  Limited  Partnership  and  Krupp
                        Government   Income   Trust   II   [Exhibit   10.23   to
                        Registrant's  report  on Form  10-K for the  year  ended
                        December 31, 1994 (File No. 0-20164)].*

<PAGE>


         (10.31)        Assignment of Subordination Agreement dated November 24,
                        1993 from Berkshire Mortgage Finance Limited Partnership
                        to the  Federal  National  Mortgage  Association  by and
                        between  Sunset Summit  Limited  Partnership,  Berkshire
                        Mortgage   Finance   Limited   Partnership   and   Krupp
                        Government   Income   Trust   II   [Exhibit   10.24   to
                        Registrant's  report  on Form  10-K for the  year  ended
                        December 31, 1994 (File No. 0-20164)].*

         (10.32)        Subordinate   Multifamily   Mortgage   Agreement   dated
                        November  24,  1993  between   Sunset   Summit   Limited
                        Partnership  and  Krupp   Government   Income  Trust  II
                        [Exhibit 10.25 to  Registrant's  report on Form 10-K for
                        the year ended December 31, 1994 (File No. 0-20164)].*

         (10.33)        Supplement  to  Prospectus  dated  January  1,  1994 for
                        Federal National  Mortgage  Association pool number MX -
                        073030  [Exhibit  10.26 to  Registrant's  report on Form
                        10-K for the year ended December 31, 1994 (File No.
                        0-20164)].*

                        Oasis at Springtree

         (10.34)        Subordinate  Note dated June 16, 1994 between Oasis at
                        Springtree,  Inc. and Krupp  Government  Income Trust II
                        [Exhibit 10.33 to Registrant's report on Form 10-K
                        for the year ended December 31, 1994
                        (File No. 0-20164)].*

         (10.35)        Subordinated Loan Agreement dated August 11, 1994
                        between Joseph Kodsi and Albert Kodsi,
                        Oasis at Springtree, Inc., and Krupp Government Income
                        Trust  II.[Exhibit  10.48 to Registrant's report on Form
                        10-K for the year ended December 31, 1995
                        (File No. 0-20164)].*

         (10.36)        Subordination  Agreement  dated  August 11, 1994 between
                        Berkshire Mortgage Finance Limited Partnership, Oasis at
                        Springtree,  Inc.  and  Krupp  Government  Income  Trust
                        II.[Exhibit  10.49 to  Registrant's  report on Form 10-K
                        for  the  year  ended   December  31,  1995  (File.   No
                        0-20164)].*

         (10.37)        Assignment of  Subordination  Agreement dated August 11,
                        1994 for Berkshire Mortgage Finance Limited  Partnership
                        with  Federal  National  Mortgage   Association  by  and
                        between Oasis at Springtree,  Inc.,  Berkshire  Mortgage
                        Finance Limited  Partnership and Krupp Government Income
                        Trust II.[Exhibit  10.50 to Registrant's  report on Form
                        10-K for the year  ended  December  31,  1995  (File No.
                        0-20164)].*

         (10.38)        Subordinated Multifamily Mortgage Assignment of Rents
                        and Security  Agreement  dated August 11, 1994 between
                        Oasis at Springtree,  Inc. and Krupp Government
                        Income Trust  II.[Exhibit 10.51 to Registrant's
                        report on Form 10-K for the year ended
                        December 31, 1995 (File No. 0-20164)].*

         (10.39)        Supplement  to  Prospectus  dated  January  1,  1994 for
                        Federal National  Mortgage  Association pool number MX -
                        073043.[Exhibit  10.52 to  Registrant's  report  on Form
                        10-K for the year ended December 31, 1995 (File No.
                        0-20164)].*

                        The Willows

         (10.40)        Supplement  to  Prospectus  dated  January  1,  1994 for
                        Federal National  Mortgage  Association pool number MX -
                        073057  [Exhibit  10.42 to  Registrant's  report on Form
                        10-K for the year ended December 31, 1994 (File No.
                        0-20164)].*

                        Windmill Lakes
         (10.41)        Subordinated  Loan Agreement  dated February 3, 1995
                        between Robert B. Kramer and Rose Berger,  Windmill
                        Lakes, Inc., and Krupp  Government  Income Trust II
                        [Exhibit 10.1 to Registrant's  report on Form 10-Q
                        for the quarter ended September 30, 1995
                       (File No. 0-20164)].*

         (10.42)        Subordinate Note dated February 3, 1995 between Windmill
                        Lakes,  Inc.,  and  Krupp  Government  Income  Trust  II
                        [Exhibit  10.2 to  Registrant's  report on Form 10-Q for
                        the quarter ended September 30, 1995 (File No.
                        0-20164)].*

<PAGE>


         (10.43)        Subordinate Multifamily Mortgage Agreementdated
                        February 3, 1995 between Windmill Lakes, Inc., and Krupp
                        Government Income Trust II [Exhibit 10.3 to Registrant's
                        report on Form 10-Q for the quarter ended September
                        30, 1995 (File No. 0-20164)].*

         (10.44)        Subordination  Agreement  dated  February 3, 1995 by and
                        among Green Park Financial  Limited  Partnership,  Krupp
                        Government  Income  Trust II and  Windmill  Lakes,  Inc.
                        [Exhibit  10.4 to  Registrant's  report on Form 10-Q for
                        the  quarter   ended   September   30,  1995  (File  No.
                        0-20164)].*

                        The Lakes

         (10.45)        Subordinated  Loan Agreement dated June 29, 1995,
                        between Lake Associates,  L. P. and Krupp Government
                        Income Trust II [Exhibit 10.5 to Registrant's report on
                        Form 10-Q for the quarter ended September 30, 1995
                         (File No. 0-20164)].*

         (10.46)        Subordinate  Note dated June 29, 1995,  between Lake
                        Associates,  L. P. and Krupp Government Income Trust II
                        [Exhibit  10.6 to  Registrant's  report  on Form  10-Q
                        for the  quarter  ended  September  30,  1995
                        (File No. 0-20164)].*

         (10.47)        Subordinate Multifamily Mortgage to Secure Debt
                        Agreement dated June 29, 1995, between Lake Associates,
                        L. P. and Krupp  Government Income Trust II
                        [Exhibit 10.7 to Registrant's  report on Form 10-Q for
                        the quarter ended
                        September 30, 1995 (File No. 0-20164)].*

         (10.48)        Subordination  Agreement dated June 29, 1995,  between
                        Berkshire Mortgage Finance Limited  Partnership,  Lake
                        Associates,  L. P. and Krupp Government Income Trust II
                        [Exhibit 10.8 to Registrant's  report on Form 10-Q for
                        the quarter ended September 30, 1995
                        (File No. 0-20164)].*

         (10.49)        Assignment  of  Subordination  Agreement  dated June 29,
                        1995,   from   Berkshire    Mortgage   Finance   Limited
                        Partnership to the Federal National Mortgage Association
                        by and between,  Lake  Associates,  L.P.  and  Berkshire
                        Mortgage   Finance   Limited   Partnership   and   Krupp
                        Government Income Trust II [Exhibit 10.9 to Registrant's
                        report on Form 10-Q for the quarter ended  September 30,
                        1995 (File No. 0-20164)].*

         (10.50)        Supplement  to  Prospectus  dated  November  1, 1994 for
                        Federal National  Mortgage  Association pool number MX -
                        073149  [Exhibit  10.10 to  Registrant's  report on Form
                        10-Q for the quarter ended  September 30, 1995 (File No.
                        0-20164)].*

                        The Fountains

         (10.51)        Subordinated   Promissory  Note  dated  April  24,  1995
                        between  CSM  Fountains  Limited  Partnership  and Krupp
                        Government   Income   Trust   II   [Exhibit   10.11   to
                        Registrant's  report on Form 10-Q for the quarter  ended
                        September 30, 1995 (File No. 0-20164)].*

         (10.52)        Agreement Re:  Subordinated Note dated April 24, 1995
                        between Berkshire Mortgage Finance Corporation and Krupp
                        Government Income Trust II [Exhibit 10.12 to
                        Registrant's  report on Form 10-Q for the quarter ended
                        September 30, 1995 (File No. 0-20164)].*

         (10.53)        Subordinated  Multifamily  Mortgage  Assignment of Rents
                        and Security  Agreement dated April 24, 1995 between CSM
                        Fountains  Limited   Partnership  and  Krupp  Government
                        Income Trust II [Exhibit 10.13 to Registrant's report on
                        Form 10-Q for the quarter ended September 30, 1995 (File
                        No. 0-20164)].*

                        Falls at Hunter Pointe

         (10.54)        Additional  Loan  Note  dated  August  5,  1993  between
                        Goulding L. Stoddard  ("Borrower")  and Krupp Government
                        Income Trust  ("Holder").[Exhibit  10.92 to Registrant's
                        report on Form 10-K for the year ended December 31, 1995
                        (File No. 0-20164)].*

         (10.55)        Additional  Loan Agreement  dated August 5, 1993 between
                        Goulding L. Stoddard  ("Borrower")  and Krupp Government
                        Income Trust  ("Holder").[Exhibit  10.93 to Registrant's
                        report on Form 10-K for the year ended December 31, 1995
                        (File No. 0-20164)].*

<PAGE>


         (10.56)        Subordinated  Promissory  Note,  dated  August  4,  1993
                        between  Hunters  Pointe  Associates,  Ltd.  ("Maker" or
                        "Mortgagor")   and   Krupp   Government   Income   Trust
                        ("Holder").[Exhibit 10.94 to Registrant's report on Form
                        10-K for the year  ended  December  31,  1995  (File No.
                        0-20164)].*

         (10.57)        Agreement  re  Subordinated  Note  dated  August 5, 1993
                        between TRI  Capital  Corporation  and Krupp  Government
                        Income  Trust.[Exhibit  10.95 to Registrant's  report on
                        Form 10-K for the year ended December 31, 1995 (File No.
                        0-20164)].*

         (10.58)        Subordinated  Multifamily  Deed of Trust,  Assignment
                        of Rents and  Security  Agreement  dated August 5, 1993
                        between  Hunters Pointe  Associates,  Ltd. and Krupp
                        Government  Income  Trust.[Exhibit 10.96 to Registrant's
                        report on Form 10-K for the year ended
                        December 31, 1995 (File No. 0-20164)].*

         (10.59)        Participation  and Servicing  Agreement  dated August 5,
                        1993 by and between TRI  Capital  Corporation  and Krupp
                        Government Income  Trust.[Exhibit  10.97 to Registrant's
                        report on Form 10-K for the year ended December 31, 1995
                        (File No.
                        0-20164)].*

         (10.60)        Assignment  and  Assumption  Agreement,  dated August 5,
                        1993, between Krupp Government Income Trust ("Assignor")
                        and  Krupp  Government  Income  Trust  II  ("Assignee").
                        [Exhibit  10.1 to  Registrant's  report on Form 10-Q for
                        the quarter ended June 30, 2000 (File No. 0-20164)].*

         (10.61)        Assignment of Additional Loan Agreement, dated August 5,
                        1993, between Krupp Government Income Trust ("Assignor")
                        and  Krupp  Government  Income  Trust  II  ("Assignee").
                        [Exhibit  10.2 to  Registrant's  report on Form 10-Q for
                        the quarter ended June 30, 2000 (File No. 0-20164)].*

         (10.62)        Assignment of Subordinated  Deed of Trust,  dated August
                        6, 1993, between Krupp Government Income Trust and Krupp
                        Government   Income   Trust   II.   [Exhibit   10.3   to
                        Registrant's  report on Form 10-Q for the quarter  ended
                        June 30, 2000 (File No. 0-20164)].*

                        Rivergreens Apartments

         (10.63)        Mortgage Note dated August 19, 1993 between  Rivergreens
                        Associates  II Limited  Partnership  and Krupp  Mortgage
                        Company    Limited    Partnership.[Exhibit    10.98   to
                        Registrant's  report  on Form  10-K for the  year  ended
                        December 31, 1995 (File No. 0-20164)].*

         (10.64)        Subordinated  Promissory  Note,  dated  August 19, 1993,
                        between  Rivergreens  Associates II Limited  Partnership
                        and  Krupp  Government  Income  Trust.[Exhibit  10.99 to
                        Registrant's  report  on Form  10-K for the  year  ended
                        December 31, 1995 (File No. 0-20164)].*

         (10.65)        Subordinated  Multifamily  Deed of Trust,  Assignment of
                        Rents and  Security  Agreement  dated  August  19,  1993
                        between  Rivergreens  Associates II Limited  Partnership
                        and Krupp Government Income Trust II.[Exhibit  10.100 to
                        Registrant's  report  on Form  10-K for the  year  ended
                        December 31, 1995 (File No. 0-20164)].*

                        Mill Pond II Apartments

         (10.66)        Mortgage  Note  dated  July 26,  1994  for Mill  Pond II
                        Limited  Partnership and Krupp Mortgage  Company Limited
                        Partnership.[Exhibit  10.101 to  Registrant's  report on
                        Form 10-K for the year ended December 31, 1995 (File No.
                        0-20164)].*

         (10.67)        Multifamily  Subordinated Mortgage,  Assignment of Rents
                        and Security  Agreement dated July 26, 1994 between Mill
                        Pond II Limited  Partnership and Krupp Government Income
                        Trust II.[Exhibit 10.102 to Registrant's  report on Form
                        10-K for the year  ended  December  31,  1995  (File No.
                        0-20164)].*

         (10.68)        Subordinated  Promissory  Note,  dated  July  26,  1994,
                        between  Mill  Pond II  Limited  Partnership  and  Krupp
                        Government Income  Trust.[Exhibit 10.103 to Registrant's
                        report on Form 10-K for the year ended December 31, 1995
                        (File No. 0-20164)].*

         (10.69)        Agreement  re  Subordinated  Note dated  July 26,  1994,
                        between Berkshire Mortgage Finance Corporation and Krupp
                        Government Income  Trust.[Exhibit 10.104 to Registrant's
                        report on Form 10-K for the year ended December 31, 1995
                        (File No. 0-20164)].*

         * Incorporated by reference


(c)  Reports on Form 8-K

         The Trust did not file any reports on Form 8-K during the quarter ended
          December 31, 2000.


<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 II




By: / s / Douglas Krupp
-----------------------------------------
Douglas Krupp, Chairman of Board of Trustees and a Trustee of Krupp Government
Income Trust II


     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 II
Douglas Krupp


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


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


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


<PAGE>



                                   APPENDIX A

                        KRUPP GOVERNMENT INCOME TRUST II











                   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 II

              INDEX TO FINANCIAL STATEMENTS 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-21

Schedule II - Valuation and Qualifying Accounts                                     F-22

Supplementary Data - Selected Quarterly Financial Data (Unaudited)                  F-23

</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 Shareholders of
Krupp Government Income Trust II:

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 II (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  present
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>



                                          KRUPP GOVERNMENT INCOME TRUST II

                                                   BALANCE SHEETS

                                             December 31, 2000 and 1999


                                                       ASSETS

<TABLE>
<CAPTION>


                                                                           2000                   1999
                                                                           ----                   ----

Participating Insured Mortgage Investments
 ("PIMIs")(Notes B, C, I and J)
<S>                                                                    <C>                    <C>
    Insured mortgages                                                  $ 121,208,064          $ 131,750,452
    Additional loans, net of impairment provision of $2,000,000
     and $2,994,000, respectively                                         22,292,351              21,298,351
Participating Insured Mortgages ("PIMs")
    (Notes B, D and I)                                                    37,631,330              37,994,412
Mortgage-Backed Securities ("MBS")
    (Notes B, E and I)                                                    19,124,031              21,127,474
                                                                       -------------          ---------------

           Total mortgage investments                                    200,255,776             212,170,689

Cash and cash equivalents (Notes B and I)                                  7,089,453               8,653,673
Prepaid acquisition fees and expenses, net of
 accumulated amortization of $8,957,065 and
 $8,093,170, respectively (Note B)                                         4,838,771               6,522,092
Prepaid participation servicing fees, net of
 accumulated amortization of $2,711,086 and
 $2,262,659, respectively (Note B)                                         1,784,633               2,233,060
Interest receivable and other assets                                       1,552,568               1,629,549
                                                                       -------------          --------------

           Total assets                                                $ 215,521,201          $  231,209,063
                                                                       =============          ==============

                                        LIABILITIES AND SHAREHOLDERS' EQUITY

Deferred income on Additional Loans                                    $   2,503,604          $    2,692,976
Other liabilities                                                            153,273                 150,025
                                                                       -------------          --------------

           Total liabilities                                               2,656,877               2,843,001
                                                                       -------------          --------------

Shareholders' equity (Notes A, F and J)
    Common stock, no par value; 25,000,000
      Shares authorized; 18,371,477 Shares
      issued and outstanding                                             212,783,023            228,920,012

    Accumulated comprehensive income (loss)
      (Notes B and E)                                                         81,301               (553,950)
                                                                       -------------          -------------

                   Total Shareholders' equity                            212,864,324            228,366,062
                                                                       -------------          -------------

             Total liabilities and Shareholders' equity                $ 215,521,201          $ 231,209,063
                                                                       =============          =============
</TABLE>


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


<PAGE>


                        KRUPP GOVERNMENT INCOME TRUST II

                  STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

              For the Years Ended December 31, 2000, 1999 and 1998
<TABLE>
<CAPTION>


                                                                 2000                 1999              1998
                                                           ----------------     ----------------  -----------------
Revenues:
    Interest income - PIMs and PIMIs:
<S>                                                        <C>                  <C>               <C>
      Basic interest                                       $ 11,259,617         $ 11,998,012      $ 12,449,922
      Additional Loan interest                                1,783,933            1,712,260         1,580,517
      Participation interest                                  1,915,557            1,591,932         3,252,020
    Interest income - MBS                                     1,455,367            3,251,078         3,264,905
    Interest income - cash and cash equivalents                 563,723            1,059,900          1,082,305
                                                           ------------         ------------      -------------

         Total revenues                                      16,978,197           19,613,182        21,629,669
                                                           ------------         ------------      ------------

Expenses:
    Asset management fee to an
     affiliate (Note G)                                       1,529,418            1,718,942         1,889,509
    Expense reimbursements to
     affiliates (Note G)                                        300,348              276,901           227,556
    Amortization of prepaid fees and expenses                 2,131,748            2,365,254         2,900,106
    General and administrative                                  385,879              277,747           435,387
    (Reduction of) provision for impaired mortgage
      loans (Notes B and C)                                    (994,000)               -             2,994,000
                                                           ------------         ------------      ------------

         Total expenses                                       3,353,393            4,638,844         8,446,558
                                                           ------------         ------------      ------------

Net income (Notes B and H)                                   13,624,804           14,974,338        13,183,111

Other comprehensive income:

    Net change in unrealized (loss)
       gain on MBS                                              635,251           (1,101,186)           40,493
                                                           ------------         ------------      ------------

Total comprehensive income                                 $ 14,260,055         $ 13,873,152      $ 13,223,604
                                                           ============         ============      ============

Basic earnings per Share                                   $       . 74         $        .82      $        .72
                                                           ============         ============      ============

Weighted average Shares
    outstanding                                              18,371,477           18,371,477        18,371,477
                                                           ============         ============      ============

</TABLE>

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


<PAGE>


                        KRUPP GOVERNMENT INCOME TRUST II

                  STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

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

<TABLE>
<CAPTION>


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

<S>                 <C> <C>             <C>                   <C>             <C>                  <C>
Balance at December 31, 1997            $  289,864,327        $       -       $        506,743     $   290,371,070

Dividends                                  (25,764,471)         (13,183,111)           -               (38,947,582)

Net income                                     -                 13,183,111            -                13,183,111

Change in unrealized gain on MBS               -                   -                    40,493              40,493
                                        --------------        -------------   ----------------     ---------------

Balance at December 31, 1998               264,099,856             -                   547,236         264,647,092

Dividends                                  (35,179,844)         (14,974,338)           -               (50,154,182)

Net income                                    -                  14,974,338            -                14,974,338

Change in unrealized loss on MBS              -                     -               (1,101,186)         (1,101,186)
                                        --------------        -------------   -----------------    ----------------

Balance at December 31, 1999               228,920,012               -                (553,950)        228,366,062

Dividends                                  (16,136,989)         (13,624,804)           -               (29,761,793)

Net income                                     -                 13,624,804            -                13,624,804

Change in unrealized loss on MBS               -                    -                  635,251             635,251
                                        --------------        -------------   ----------------     ---------------

Balance at December 31, 2000            $  212,783,023        $     -         $         81,301     $   212,864,324
                                        ==============        =============   ================     ===============
</TABLE>

Shares  issued and  outstanding  for each of the three years in the period ended
December 31, are 18,371,477.




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


<PAGE>


                        KRUPP GOVERNMENT INCOME TRUST II

                            STATEMENTS OF CASH FLOWS

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

<TABLE>
<CAPTION>

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

Operating activities:
<S>                                                             <C>                    <C>                    <C>
  Net income                                                    $   13,624,804         $   14,974,338         $    13,183,111
  Adjustments to reconcile net income
    to net cash provided by operating
    activities:
      Amortization of net premium                                       58,017                173,055                 185,276
      Amortization of prepaid fees and expenses                      2,131,748              2,365,254               2,900,106
      (Reduction of) provision for impaired mortgage loans            (994,000)                 -                   2,994,000
      Changes in assets and liabilities:
          Decrease in interest receivable
           and other assets                                             76,981                 53,333                 428,271
         Increase (decrease) in deferred income
           on Additional Loans                                        (189,372)               (26,367)                (36,362)
         Increase in other liabilities                                   3,248                106,462                  12,614
                                                                --------------         --------------         ---------------

   Net cash provided by operating activities                        14,711,426             17,646,075              19,667,016
                                                                --------------         --------------         ---------------

Investing activities:
  Investment in PIMs                                                     -                      -                  (1,003,676)
  Prepayment on Additional Loan                                          -                  2,000,000               2,860,000
  Principal collections on MBS                                       2,580,441            19,432,484              9,192,319
  Principal collections on PIMs and Insured Mortgages               10,905,706              1,718,718              12,722,410
                                                                --------------         --------------         ---------------

   Net cash provided by investing activities                        13,486,147             23,151,202              23,771,053
                                                                --------------         --------------         ---------------

Financing activity:
  Dividends                                                        (29,761,793)           (50,154,182)            (38,947,582)
                                                                --------------         --------------         ---------------

Net (decrease) increase in cash and
 cash equivalents                                                   (1,564,220)            (9,356,905)              4,490,487
Cash and cash equivalents, beginning
 of period                                                           8,653,673             18,010,578              13,520,091
                                                                --------------         --------------         ---------------
Cash and cash equivalents, end of
  period                                                        $    7,089,453         $    8,653,673         $    18,010,578
                                                                ==============         ==============         ===============

Non cash activities:
 Increase (decrease) in Fair Value of MBS                       $      635,251         $    (1,101,186)       $        40,493
                                                                ==============         ===============        ===============

</TABLE>



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


<PAGE>



                        KRUPP GOVERNMENT INCOME TRUST II

                          NOTES TO FINANCIAL STATEMENTS


A.      Organization

        Krupp Government Income Trust II (the "Trust") was formed on February 8,
        1991  by  filing  a  Declaration  of  Trust  in  The   Commonwealth   of
        Massachusetts.  The Trust is  authorized to sell and issue not more than
        25,000,000 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 (the "Advisor")  acquired 10,000 of such Shares for
        $200,000  and  18,315,158  Shares  were  sold  for  $365,686,058  net of
        purchase  volume  discounts of $617,102  under a public  offering  which
        commenced on September  11, 1991 and was completed on February 12, 1993.
        Under the Dividend  Reinvestment  Plan ("DRP"),  46,319 Shares were sold
        for  $880,061.  The Trust shall  terminate on December 31, 2030,  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  No.  115,  "Accounting  for Certain  Investments  in Debt and
        Equity   Securities"   ("FAS   115"),   under  the   classification   of
        available-for-sale.  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.

        PIMs and PIMIs

        The Trust  accounts for its MBS portion of a PIM or PIMI  investment  in
        accordance with FAS 115, under the  classification  of held to maturity.
        The Trust carries these MBS at amortized cost.

        The  insured  mortgage  portion of the  Federal  Housing  Administration
        ("FHA") PIM or 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
        believes  there is an  impairment  in value,  in which case a  valuation
        allowance is established in accordance with FAS 114 and FAS 118.



                                    Continued


<PAGE>



                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued



B.      Significant Accounting Policies, Continued

        PIMs and PIMIs, continued

        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  Fannie  Mae MBS.  The Trust
        recognizes  interest  related to the  participation  features when these
        amounts are collectible and estimable.  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 PIMIs  generate
        sufficient  cash  flow to make the  required  Additional  Loan  interest
        payments with operating funds, the Trust recognizes income as earned and
        commences  amortizing  deferred  interest  amounts  into income over the
        remaining  estimated term of the Additional  Loan.  During periods where
        mortgage  loans are  impaired  the Trust  suspends  amortizing  deferred
        interest.

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

        Impaired 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  payoff  date  of the
        underlying  mortgage.  The  prepaid  participation  servicing  fees  are
        amortized 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 loan and at closing if a Fannie Mae loan.

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


                                    Continued


<PAGE>



                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued


B.      Significant Accounting Policies, Continued

        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.

C.      PIMIs

        The Trust had  investments in nine PIMIs at December 31, 2000 and ten at
        December 31, 1999 that provide the permanent  financing for multi-family
        housing.  Each  PIMI  consists  of  either  a  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 an  "Additional  Loan"  made to the  borrower  or the  owners of the
        borrower to provide  additional  funds for the construction or permanent
        financing of the  property.  The FHA first  mortgage  loan and the first
        mortgage underlying the Fannie Mae MBS provide the borrower with a below
        market  interest  rate  loan,  and  in  return,  the  Trust  receives  a
        percentage  of  the  cash   generated   from  the  property   operations
        ("Participating  Income  Interest") and a percentage of any appreciation
        thereafter  ("Participating  Appreciation  Interest")  (collectively the
        "participation interest").

        The borrower conveys the  participation  features to the Trust through a
        subordinated   promissory  note  and  mortgage  or  a  subordinate  loan
        agreement   (collectively  the   "Agreements").   The  Trust  makes  the
        Additional  Loan under the Fannie Mae PIMIs  directly to the borrower of
        the first mortgage loan  underlying the Fannie Mae MBS, and the borrower
        collateralizes  the Additional Loan with a subordinated  mortgage on the
        property.  The  owners  of the  borrower  also  pledge  their  ownership
        interests in the borrower as additional collateral.

        The Trust  made the  Additional  Loans on the FHA PIMIs to the owners of
        the  entity  having  the  FHA  first   mortgage  loan,  and  the  owners
        collateralize the Additional Loan by pledging their ownership  interests
        in the borrowing entity, their share of any distributions  received, and
        the proceeds realized upon the refinancing of the property,  sale of the
        property  or sale  of the  partnership  interests.  Unlike  the  insured
        mortgages, the Additional Loans are neither guaranteed nor insured.

        The Trust  receives  level  monthly  payments of principal  and interest
        payments, amortizing over thirty to forty years on the insured mortgages
        and is also entitled to receive  participation  interest and semi-annual
        interest payments  ("Additional  Loan interest") and preferred  interest
        under the Additional Loans and Agreements.  While principal and interest
        payments on the insured  mortgages are insured or guaranteed,  there are
        limitations  to the  amount and  obligation  to pay  interest  under the
        Additional Loan and Agreements.


                                    Continued

<PAGE>


                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued

C.      PIMIs, Continued

        The  Agreements  for Fannie Mae PIMIs  entitles the Trust to receive (i)
        semi-annual interest payments on the Additional Loan, (ii) Participating
        Income  Interest,  (iii)  Participating  Appreciation  Interest and (iv)
        Preferred  Interest.  Additional  Loan  interest  accrues  at the stated
        interest rate of the Additional Loan and  Participating  Income Interest
        represents  the  Trust's  share  of the  net  revenue  generated  by the
        property  at a  stated  percentage  generally  ranging  from 25% to 35%.
        Additional Loan interest and  Participating  Income Interest are payable
        only to the extent there is net revenue  available to pay these amounts.
        However,  should the borrower be unable to make the full Additional Loan
        interest  payment,  the borrower  must notify the Trust of the amount of
        the shortfall.

        The Trust can  require the  partners  of the  borrower to make a capital
        call contribution to the borrower to fund 50% of this shortfall, and the
        Trust will fund the remainder with an Operating Loan. Also, the Trust is
        generally  limited to  receiving  no more than 50% of net revenue on any
        semi-annual payment date.  Participating  Appreciation Interest provides
        the Trust  with a stated  percentage,  ranging  from 25% to 30%,  of the
        excess value of the property over amounts due under the first  mortgage,
        Additional Loan and any Operating  Loans,  the repayment of capital call
        contributions,  and a return of original  equity to the  partners of the
        borrower.

        Participating  Appreciation Interest is due upon the sale,  refinancing,
        maturity or accelerated maturity, or permitted prepayment of all amounts
        due under the insured mortgage and Additional Loan. Generally, the Trust
        will  not  receive  more  than  50% of the  excess  of  value  over  the
        outstanding  indebtedness,  the payment of Preferred  Interest,  and the
        return of equity and capital call  contributions  to the partners of the
        borrower.

        Preferred Interest refers to a non-compounded cumulative return from the
        closing  date  of the  loan  to the  date of  calculation,  at a  stated
        interest  rate  generally  on the  original  outstanding  balance of the
        insured  mortgage plus the Additional  Loan and any other funds advanced
        to the  borrower  (reduced by principal  payments  received)  less:  (i)
        interest  payments  on  the  insured  mortgage,   (ii)  Additional  Loan
        interest,  (iii) Participating  Income Interest,  and (iv) Participating
        Appreciation Interest.  Generally, the amount of Preferred Interest owed
        cannot  exceed the excess of value  over the  outstanding  indebtedness.
        Amounts due under the Additional Loan and Agreements are neither insured
        nor guaranteed.

        The   Agreements  for  FHA  PIMIs  entitle  the  Trust  to  receive  (i)
        Participating  Income  Interest at a stated  percentage  usually ranging
        from 25% to 50% of (a) all  distributable  Surplus Cash generated by the
        property as defined in the regulatory agreement of the HUD-insured first
        mortgage loan, (b) unrestricted  cash generated by property  operations,
        and  (c)  unexpended  reserves  and  escrows;   and  (ii)  Participating
        Appreciation Interest at a stated percentage usually ranging from 20% to
        50% of the  proceeds  or value  of the  property  less  the  outstanding
        indebtedness  upon  the  sale,  refinancing,   maturity  or  accelerated
        maturity,  or permitted  prepayment of all amounts due under the insured
        mortgage and Additional Loan.  Amounts received by the Trust pursuant to
        this  Agreement  reduce  amounts  payable as Base Interest and Preferred
        Interest under the FHA PIMI Additional Loan.

        The FHA PIMI  Additional  Loan  interest is payable  from the  following
        sources: (i) any Surplus Cash received as Participating Income Interest,
        (ii)  amounts  conveyed  to the  Trust  by the  owners  of the  borrower
        representing distributions of Surplus Cash, and (iii) amounts in reserve
        accounts  established with Additional Loan proceeds,  if available,  and
        any interest earned on these amounts.  As with the Fannie Mae PIMIs, the
        borrower  must  notify  the Trust of the amount of any  Additional  Loan
        interest  shortfall.  At its option the Trust can  require the owners of
        the  borrower to make a capital  call for 50% of the  shortfall  and the
        Trust in certain  situations  could  convert the  remaining  50% into an
        operating loan or would forego the remainder.




                                    Continued


<PAGE>

                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued



C.         PIMIs, Continued


        The FHA PIMIs also require the payment of Preferred Interest at a stated
        interest  rate  from  the  date  of  final  endorsement  to the  date of
        calculation on the original  outstanding balance of the insured mortgage
        plus the  Additional  Loan and any other funds  advanced by the Trust to
        the  borrower or owners of the  borrowing  entity  (reduced by principal
        payments  received) less: (i) interest  payments paid to the Trust under
        the insured  mortgage,  (ii)  Participating  Income Interest,  and (iii)
        interest  payments  made under the  Additional  Loan  including  amounts
        foregone by the Trust.

        The insured  mortgage and Agreements  generally have maturities of 15 to
        40 years,  however,  under the  Agreements  the Trust can accelerate the
        maturity dates at any time after the ninth or tenth anniversary of final
        endorsement  for the FHA PIMIs or the  closing  date of the  Fannie  Mae
        PIMIs, upon giving twelve months written notice for the payment.

        If the Trust  accelerates  the  maturity  date,  the  Trust can  require
        payment of all  amounts  due under the  Additional  Loan and  Agreements
        through  the  accelerated  maturity  date for the payment of amounts due
        under the Agreement and the  HUD-insured  first mortgage loan (providing
        the contract of insurance with the Secretary of HUD is canceled prior to
        the accelerated  maturity date) or prepayment of the first mortgage loan
        underlying the Fannie Mae MBS.

        FHA PIMIs generally  cannot be prepaid for a term of five years from the
        construction  completion  date or final  endorsement.  After  the  fifth
        anniversary of  construction  completion or final  endorsement,  the FHA
        PIMI may be prepaid without penalty providing that all amounts due under
        the  Agreements,  Additional  Loan and FHA  insured  mortgage  are paid.
        Fannie  Mae PIMIs  generally  cannot be  prepaid  during  the five years
        following  the  closing  date of the  underlying  first  mortgage  loan.
        Thereafter, the Fannie Mae first mortgage loan may be prepaid subject to
        a  prepayment  penalty that  declines  each year for the next five years
        with no  prepayment  penalty after the tenth year.  Any  prepayment of a
        Fannie Mae PIMI generally requires prepayment of the first mortgage loan
        underlying  the  Fannie Mae MBS and  payment  of  amounts  due under the
        Agreements and Additional Loan. The Fannie Mae first mortgage loan would
        not need to be prepaid if there is a permitted  assumption  of the first
        mortgage loan,  however,  amounts due under the Agreement and Additional
        Loan would need to be prepaid.  Any prepayment usually requires not less
        than 90 nor more than 180 days prior written notice.

        In March 2000, the Trust  received  $175,489 of  participation  interest
        based on 1997  operating  results  for  Falls  at  Hunters  Pointe  from
        borrower escrows controlled by the Trust. On July 11, 2000, the Advisor,
        on behalf of the Trust,  filed a complaint  against the  partners of the
        borrowing  entity.  The  Trust  was  seeking  collection  of  delinquent
        participation interest relating to 1998 and 1999 along with late payment
        penalties and legal fees.  During the first  quarter of 2001,  the Trust
        received a payoff of the Falls at Hunters  Pointe PIMI and collected all
        of the  delinquent  participation  interest.  See Note J for  additional
        information.

        On December 16, 1999,  the Trust received  $2,832,907  from Windsor Lake
        consisting of $2,000,000 from the payoff of the Additional Loan, $40,000
        of Additional Loan interest and $792,907 of participation  interest. The
        payoff of the balance on the insured  mortgage,  $9,172,642 was received
        on January 26, 2000. The Trust paid a special dividend of $.66 per Share
        from the prepayment proceeds on February 18, 2000.





                                    Continued


<PAGE>



                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued


C.      PIMIs, Continued

        On July 31,  1998  and on  August  25,  1998,  the  Trust  received  the
        prepayments  of the St.  Germain  Additional  Loan of $2,860,000 and the
        related   Fannie  Mae  MBS  with  a  remaining   principal   balance  of
        $11,006,015.  In addition,  the Trust received participation interest as
        follows:  (i) Additional Loan interest  payable through the date of sale
        of $83,417,  (ii) Preferred Interest payable through the date of sale of
        $89,975,  (iii) Participating  Appreciation  Interest of $1,874,032.  On
        October  9,  1998,  the Trust  received  Participating  Income  Interest
        payable  through  the  date  of  sale   attributable  to  1998  property
        operations  of $94,258.  On  September  28,  1998,  the Trust used these
        proceeds  to  fund  a  special   dividend  of  $.87  per  Share  to  its
        Shareholders.

        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.

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

<TABLE>
<CAPTION>

                                              Approximate
   Insured                      Loan            Monthly      Interest    Maturity     Balance Outstanding at December 31,
  Mortgages                    Amount          Payments        Rate        Date             2000            1999
  ---------                    ------      ----------------    ----        ----             ----            ----
FHA
<S>                      <C>                   <C>            <C>         <C>   <C>   <C>               <C>
The Seasons (a)          $    23,224,649       $162,700       7.875%      10/01/28    $ 22,054,045      $ 22,260,149

Hunters Pointe (g)            12,789,100         78,200       6.875%      01/01/35      12,362,037        12,447,138

Norumbega Point               15,598,500        101,100       7.375%      02/01/36      15,231,817        15,317,692

FNMA (b)
----
Crossings Village             12,907,334         82,300        6.75%      10/01/08      11,913,997        12,090,416

Martin's Landing              11,200,000         69,500        6.50%      12/01/08      10,322,038        10,478,301

Sunset Summit                 10,192,801         63,300        6.50%      10/01/08       9,400,427         9,542,738

Oasis                         12,401,673         79,000        6.75%      07/01/09      11,603,141        11,760,701

Windsor Lake                   9,680,344            -          6.75%      07/01/09         -               9,172,642

Windmill Lakes                11,600,000         74,400       6.825%      03/01/10      10,920,913        11,062,433

The Lakes                     18,387,653        118,000       6.825%      07/01/10      17,399,649        17,618,242
                         ---------------       --------                              -------------      ------------

                         $   137,982,054       $828,500                              $ 121,208,064      $131,750,452
                         ===============       ========                              =============      ============
                                                                                            (f)

</TABLE>

                                    Continued

<PAGE>




                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued



C.      PIMIs, Continued

<TABLE>
<CAPTION>

                                                                                             Base       Preferred
                                                                              Maturity      Interest     Interest
        Additional Loans                         2000              1999          Date        Rate         Rate
        ----------------                         ----              ----          ----        ----         ----
<S>                                        <C>                <C>               <C>   <C>     <C>          <C>
        The Seasons (a)                    $   4,925,351      $   4,925,351     10/01/28      9%(c)        10%
        Hunters Pointe (g)                       650,000            650,000     01/01/35      7%            9%
        Norumbega Pointe                       3,063,000          3,063,000     07/02/06      7%           10%
        Crossings Village                      2,584,000          2,584,000     10/01/08      7%            9%
        Martin's Landing                       2,280,000          2,280,000     12/01/08      7%           12%
        Sunset Summit                          1,900,000          1,900,000     12/01/08      7%            9%(d)
        Oasis                                  2,290,000          2,290,000     09/01/09      7%         9.25%
        Windmill Lakes (e)                     2,000,000          2,000,000     03/01/10     7.5%         9.5%
        The Lakes                              4,600,000          4,600,000     07/01/10      7%            9%
                                            ------------       ------------

                                            $ 24,292,351       $ 24,292,351
                                            ============       ============
</TABLE>

(a)    The  total  PIMI  and  Additional   Loan  on  this  property  are
        $32,300,000, and $6,850,000 respectively, of which 28% is held by
         Krupp Government Income Trust, an affiliate of the Advisor of the
          Trust.

(b)    Monthly principal and interest payments are based on a 30-year
        amortization.  The unpaid principal balances due at maturity
         are as follows:

                    Crossings Village                            $    9,917,000
                    Martin's Landing                             $    8,524,000
                    Sunset Summit                                $    7,763,000
                    Oasis                                        $    9,550,000
                    Windmill Lakes                               $    8,907,000
                    The Lakes                                    $   14,118,000

(c)     The base interest rate was 6% per annum for the first three years
        and beginning  September 1, 1996 increased to 9% per annum.
(d)     The Trust will receive its  Additional  Loan Interest and its GIT
        Contingent  Interest on Investment (as defined in the Subordinate
        Loan Agreement) from net revenue up to the 9% Preferred  Interest
        Rate and, thereafter is entitled to 25% of net revenue.
(e)     As of December 31, 1997,  Windmill Lakes is in technical  default
        on its  Additional  Loan for not  making the full  required  base
        interest  payment  due  on  the  Additional  Loan.  The  borrower
        continues to try and sell the  property.  If it becomes  apparent
        that a sale  mutually  acceptable  to  both  the  Trust  and  the
        borrower  will not be possible,  the Advisor will  re-assess  the
        feasibility of extending long term debt service relief.
(f)     The aggregate cost for federal income tax purposes is $121,208,064.



                                    Continued


<PAGE>


                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued


C.     PIMIs, Continued

(g)            As of November 12, 1999,  Falls at Hunters  Pointe was in default
               for not making the  participation  income  payment  due the Trust
               based on 1997 and 1998  operations.  In  March  2000,  the  Trust
               received  $175,489  of  participation   interest  based  on  1997
               operating  results  for Falls at  Hunters  Pointe  from  borrower
               escrows  controlled by the Trust.  On July 11, 2000, the Advisor,
               on behalf of the Trust, filed a complaint against the partners of
               the  borrowing  entity.  The  Trust  was  seeking  collection  of
               delinquent participation interest relating to 1998 and 1999 along
               with late payment  penalties  and legal fees.  Subsequent to year
               end the  PIMI was paid  off and the  Trust  collected  all of the
               delinquent participation interest (see note J).


        Impaired Mortgage Loans

        On December 31, 1998, as a result of continued deterioration in property
        operations,  the Advisor of the Trust determined that the Windmill Lakes
        Additional  Loan was  impaired.  As a result,  a valuation  allowance of
        $2,000,000 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 did not  recognize  interest  income on the Windmill
        Lakes Additional Loan during 2000, 1999, or 1998.

        On December 31, 1998, as a result of continued deterioration in property
        operations,   the  Advisor  of  the  Trust  determined  that  the  Oasis
        Additional  Loan was  impaired.  As a result,  a valuation  allowance of
        $994,000 was  established  to adjust the carrying  amount of the loan to
        the estimated fair market value of the collateral less anticipated costs
        of sale. During the fourth quarter of 2000, the Advisor  determined that
        the  Oasis  Additional  Loan  was no  longer  impaired.  Therefore,  the
        valuation  allowance was reversed.  During 2000,  the Trust received and
        recognized  $160,300 of  interest  income on the Oasis Loan while it was
        impaired.  The  Trust  did not  recognize  interest  income on the Oasis
        Additional Loan during 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>
        Windmill Lakes                  $2,000,000              $2,000,000             $       -


        Balance at
        December 31, 2000               $2,000,000              $2,000,000             $       -
                                        ==========              ==========             ===========
</TABLE>

        The  recorded  value  of the  impaired  mortgage  loans  did not  differ
        materially  from the  balances  reported at the end of each quarter with
        exception for the impairment  recorded in the fourth quarter of 1998 for
        the Windmill Lakes and Oasis  additional loans and the Oasis reversal in
        the fourth quarter of 2000. The Trust has also deferred  additional loan
        interest related to Windmill Lakes of $25,000.







                                    Continued


<PAGE>



                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued


C.     PIMIs, Continued


       Reconciliations of activity for 2000, 1999 and 1998 are as follows:

<TABLE>

Insured Mortgages

<CAPTION>

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

<S>                                          <C>                <C>                 <C>
Balance at beginning of period               $   131,750,452    $  133,132,325      $145,537,234

Principal collections                            (10,542,388)       (1,381,873)       (12,404,909)
                                             ---------------    --------------      -------------

Balance at end of period                     $   121,208,064    $  131,750,452      $ 133,132,325
                                             ===============    ==============      =============
</TABLE>

<TABLE>

Additional Loans

<CAPTION>

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

<S>                                          <C>                <C>                 <C>
Balance at beginning of period               $    21,298,351    $   23,298,351      $  29,152,351

Additional loan prepayments                         -               (2,000,000)        (2,860,000)

Valuation allowance                                  994,000            -              (2,994,000)
                                             ---------------    --------------      -------------

Balance at end of period                     $    22,292,351    $   21,298,351      $  23,298,351
                                             ===============    ==============      =============
</TABLE>

Property Descriptions:
---------------------

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

The Falls at Hunter's  Pointe  ("Hunters  Pointe") is a 276-unit  apartment
complex located in Sandy City, Utah, a suburb of Salt Lake City.

Norumbega   Point  is  a  93-unit   assisted   living   facility  in  Weston,
Massachusetts.

Crossings Village  Apartments  ("Crossings  Village") is a 286-unit  apartment
complex  located in Westlake,  Ohio.

Martin's  Landing  Apartments  ("Martin's Landing") is a 300-unit  apartment
complex in Roswell,  Georgia.

Sunset Summit Apartments ("Sunset  Summit")  is  a  261-unit  apartment
complex  located  in Portland,  Oregon.

Oasis at  Springtree  ("Oasis")  is a  276-unit  apartment
complex  located in Sunrise,  Florida.

Windmill Lakes  Apartments  ("Windmill
Lakes") is a 264-unit garden style apartment complex in Pembroke Pines,
Broward County, Florida.

The Lakes at  Vinings  Apartments  ("The  Lakes")  is a  464-unit
garden and townhouse style apartment complex in Vinings, Georgia.







                                    Continued


<PAGE>


                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued



D.     PIMs

       The Trust has  investments  in four PIMs.  The  Trust's  PIMs  consist of
       either a 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 property above specified  levels.
       The borrower conveys these participation  features to the Trust generally
       through a subordinated  promissory  note and mortgage (the  "Agreement").
       The  Trust  receives  level  monthly  principal  and  interest  payments,
       amortized over thirty to forty years. The Fannie Mae MBS is guaranteed by
       Fannie Mae, and HUD insures  payment of principal and interest on the FHA
       first mortgage loan.

       The borrower  generally  cannot  prepay the insured  mortgage  during the
       first five years but may prepay it thereafter  subject to a 9% prepayment
       premium in years six through  nine, a 1%  prepayment  premium in year ten
       and no  prepayment  premium  thereafter.  The Trust may receive  interest
       related  to  its  participation  interests  in the  underlying  property,
       however, these amounts are neither insured nor guaranteed.

       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 first 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,  (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.  The  total  amount  of  participation
       interest  payable  by the  borrower  generally  cannot  exceed 50% of any
       increase in value of the 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 of the Agreement, or (3) prepayment of the Agreement.

       Under the Agreement, the Trust, upon giving twelve months written notice,
       can accelerate the maturity date of the Agreement and insured mortgage 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.

       During the second  quarter of 1998,  the Trust  completed  funding of its
       commitment on the Fountains PIM.



                                    Continued

<PAGE>


                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued


D.       PIMs, Continued

<TABLE>

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

<CAPTION>

                                        Approximate
                          Original        Monthly    Interest    Maturity
     PIM                  Amount         Payments     Rate         Date      Balance Outstanding at December 31,
     ---                  ------        ---------     ----         ----     ------------------------------------
                                                                                    2000                1999
                                                                                    ----                ----
FNMA
<S>                      <C>            <C>           <C>       <C>   <C>    <C>                 <C>
Mequon Trails            $14,937,726    $   93,300    6.50%     01/01/08     $    13,525,695     $   13,756,994
                                                                  (a)
FHA
Rivergreens II             6,137,199        39,800    7.375%    01/01/35           5,956,517          5,992,928

Mill Ponds II              8,245,300        51,900    7.125%    12/01/35           8,034,349          8,082,848

The Fountains             10,336,000        70,800    7.50%     11/01/36          10,114,769         10,161,642
                        ------------    ----------                           ---------------    ---------------
                                                        (b)
   Total                $ 39,656,225    $  255,800                           $    37,631,330    $    37,994,412
                        ============    ==========                           ===============    ===============
                                                                                    (c)
</TABLE>

(a)    Principal and interest payments are based on a 30-year amortization.
       Unpaid principal of approximately $11,267,000 is due at maturity.
(b)    Construction-phase interest rate was 7.875%.  Received Final Endorsement
       in April 1998.
(c)    The aggregate cost for federal income tax purposes is $37,631,330.

<TABLE>

Reconciliations of activity for 2000, 1999 and 1998 are as follows:
<CAPTION>

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

<S>                                                    <C>                  <C>                   <C>
Balance at beginning of period                         $ 37,994,412         $ 38,331,257          $ 37,645,082

       Acquisitions                                                                -                 1,003,676

       Discount amortization                                    236                  217                 -

       Principal collections                               (363,318)            (337,062)             (317,501)
                                                       ------------         ------------          ------------

Balance at end of period                               $ 37,631,330         $ 37,994,412          $ 38,331,257
                                                       ============         ============          ============

</TABLE>

Property descriptions:

Mequon Trails  Townhomes  ("Mequon  Trails") is a 246-unit  apartment  complex
located in Mequon,  Wisconsin.

Rivergreens II Apartments ("Rivergreens II") is a 126-unit  apartment  complex
in Gladstone,  Oregon.

Mill Ponds II Apartments ("Mill  Ponds II") is a 150-unit apartment complex in
Bellbrook,  Ohio.

The Fountains Apartments ("The Fountains") is a 204-unit apartment complex in
West Des Moines, Iowa.


                                    Continued

<PAGE>



                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued


E.     Mortgage Backed Securities

       The Trust  received a payoff from The Estates MBS  consisting  of a first
       mortgage of  $11,375,380  on October 18,  1999.  In  addition,  the Trust
       received a  prepayment  premium of  $1,023,784.  The Trust paid a special
       dividend of $.68 per Unit from the proceeds on October 27, 1999.

       At December 31, 2000,  the Trust's MBS portfolio has an amortized cost of
       $19,042,730  and  gross  unrealized  gains and  losses  of  approximately
       $134,943 and $53,642, respectively. At December 31, 1999, the Trust's MBS
       portfolio had an amortized cost of $21,681,424 and gross unrealized gains
       and losses of approximately $29,115 and $583,065,  respectively.  The MBS
       have maturities ranging from 2009 to 2031.
<TABLE>
<CAPTION>


            Maturity Date                                     Fair Value                     Unrealized Gain

<S>         <C>                                             <C>                              <C>
            2001 - 2005                                     $       -                        $         -
            2006 - 2010                                         3,632,459                             27,104
            2011 - 2031                                        15,491,572                             54,197
                                                            -------------                    ---------------

               Total                                        $  19,124,031                    $        81,301
                                                            =============                    ===============
</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
       9.80% 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.

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 expenses
       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  general  and  administration  expenses  are legal  fees and
       expenses paid by the Trust to an affiliate.  During the three years ended
       December 31, 2000,  1999,  and 1998 these fees totaled  $1,533,  $778 and
       $3,664 respectively.

       The Trust earned or received $443,282,  of base interest from The Seasons
       in 2000, 1999 and 1998, respectively (see Note C). In addition, the Trust
       received $446,574 in 2000,  $392,816 in 1999 and $239,107 in 1998 related
       to participating interest income.

                                    Continued


<PAGE>


                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued



H.   Federal Income Taxes
<TABLE>
     The reconciliation of the income reported in the accompanying  statement of
     income  with the income  reported in the Trust's  2000  federal  income tax
     return follows:
<CAPTION>

<S>                                                                                             <C>
     Net income per statement of income                                                         $  13,624,804

     Add: Book to tax difference for amortization of prepaid fees and expenses                        681,145

     Add: Book to tax difference for Additional Loan interest income                                  200,527

     Less:Book to tax difference for participation interest                                          (175,489)

     Less:Reduction of provision for impaired mortgage loans                                         (994,000)
                                                                                                -------------

     Net income for federal income tax purposes                                                 $  13,336,987
                                                                                                ==============
</TABLE>

     The Trust paid  dividends of $1.62 per share  during 2000 which represents
     approximately  $.73 from ordinary  income and $.89 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  $9,423,000 and $10,156,000 at December
     31, 2000 and 1999,  respectively.  The basis of the Trust's liabilities for
     financial  reporting  purposes  exceeded  its tax  basis  by  approximately
     $2,504,000 and $2,693,000 at December 31, 2000 and 1999, respectively.

 I.     Fair Value Disclosures of Financial Instruments

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

     Cash and Cash Equivalents

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

     MBS

     The Trust  estimates the fair value of MBS based on quoted  market  prices.
     Based on the  estimated  fair value  determined  using  these  methods  and
     assumptions,  the Trust's investments in MBS has gross unrealized gains and
     losses of  approximately  $135,000  and  $54,000 at  December  31, 2000 and
     $29,000 and $583,000 at December 31, 1999.



                                    Continued

<PAGE>


                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued



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

     PIMs and PIMIs

     There is no established  trading market for these  investments.  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 $170,000 and $4,052,000,  respectively at
     December 31, 2000 and gross  unrealized  gains and losses of  approximately
     $71,000 and $5,944,000, respectively at December 31, 1999.

<TABLE>


     At December  31, 2000 and 1999,  the  estimated  fair values of the Trust's
financial instruments are as follows:
<CAPTION>

                                                                   (rounded to thousands)
                                                             2000                         1999
                                                    ---------------------------  ---------------------------
                                                       Fair        Carrying         Fair       Carrying
                                                       Value         Value          Value        Value
                                                    ------------  -------------  ---------------------------

<S>                                                 <C>           <C>            <C>          <C>
         Cash and cash equivalents                  $    7,089    $    7,089     $   8,654    $    8,654

         MBS                                            19,124        19,124        21,127        21,127

         PIMs and PIMIs:
             PIMs                                       36,568        37,631        36,763        37,994
             Insured mortgages                         118,389       121,208       127,108       131,750
             Additional loans                           22,292        22,292        21,298        21,298
                                                    ----------    ----------     ---------    ----------

                                                    $  203,462    $  207,344     $ 214,950    $  220,823
                                                    ==========    ==========     =========    ==========

</TABLE>

J.   Subsequent Event

     During  the  first  quarter  of 2001,  the Trust  received  a payoff of the
     Hunters  Pointe PIMI.  The Trust  received the  outstanding  balance on the
     insured mortgage of $12,347,267,  the outstanding balance on the Additional
     Loan of $650,000,  Participating  Income Interest on the Additional Loan of
     $496,207 (including all of the delinquent  amounts),  Preferred Interest on
     the Additional Loan of $492,543, Participating Appreciation Interest on the
     subordinate  loan  agreement of $1,070,304  and late fees on the delinquent
     Participating Income Interest of $11,021.





<PAGE>

<TABLE>


                        KRUPP GOVERNMENT INCOME TRUST II

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS


<CAPTION>


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

<S>                         <C>                  <C>                 <C>                 <C>
Valuation
Allowance                   $  2,994,000         $     -             $  (994,000)        $  2,000,000
                            =============        ============        ===========         ============

</TABLE>


<PAGE>








                        KRUPP GOVERNMENT INCOME TRUST II

                               SUPPLEMENTARY DATA
                        SELECTED QUARTERLY FINANCIAL DATA
                                   (Unaudited)

<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               $  4,908,065         $  3,954,856         $  4,031,680          $  4,083,596
                             ============         ============         ============          ============

Net income                   $  3,585,243         $  2,894,895         $  3,003,591          $  4,141,075
                             ============         ============         ============          ============

Earnings per Share           $        .20         $        .15         $        .17          $        .22
                             ============         ============         ============          ============

</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               $  4,410,220         $  4,552,556         $  4,484,788          $  6,165,618
                             ============         ============         ============          ============

Net income                   $  3,381,041         $  3,400,890         $  3,397,863          $  4,794,544
                             ============         ============         ============          ============

Earnings per Share           $        .18         $        .19         $        .18          $        .27
                             ============         ============         ============          ============

</TABLE>


<PAGE>




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


                                                                      Year                   Inception
                                                                      Ended                   Through
                                                                      12/31/00                 12/31/00
                                                                     ---------               -------------
Distributable Cash Flow (a):
---------------------------

<S>                                                                    <C>                       <C>
Net income                                                             13,625                    125,450
Items providing or not requiring (not providing)
    the use of operating funds:

   (Reduction of) provision for impaired mortgage loans                  (994)                     2,000
    Loss on sale of MBS                                                 -                          1,379
    Amortization of prepaid fees and
     expenses and organization costs                                    2,131                     15,404
    Additional Loan interest received
     and deferred, net                                                   (189)                     2,504
                                                                     ---------               ------------

    Total Distributable Cash Flow ("DCF")                            $ 14,573                $   146,737
                                                                     ========                ===========

DCF per Share based on Shares
 outstanding at December 31, 2000                                    $   0.79                $     7.98(d)
                                                                     ========                ==========

Dividends:

 Total dividends to Shareholders                                     $ 29,763(b)             $  258,883(c)
                                                                     ========                ==========

 Average dividend per Share based
  on Shares outstanding at
  December 31, 2000                                                  $  1.62 (b)             $     14.09(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 interest  collections on Additional Loans which have not
     been   recognized  as  income  for  book   purposes.   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  special and  quarterly
     February 2000 dividends and includes an estimate of the quarterly  dividend
     to be paid in February 2001.

(c)  Includes an estimate of the quarterly dividend to be paid in February 2001.

(d)  Shareholders  average  per Share  return of  capital  on a cash basis as of
     February 2001 is $6.11 [$14.09- $7.98].  Return of capital  represents that
     portion of dividends  which is not funded from DCF,  such as proceeds  from
     the sale of  assets  and  substantially  all of the  principal  collections
     received from MBS, PIMs and PIMIs.