<Page>

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

                                   FORM 10-K/A

(MARK ONE)

/X/     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

        For the fiscal year ended December 31, 2001

                                       OR

/ /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

        For the transition period from____________to____________

        Commission file number 0-20164

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

          Massachusetts                                 04-3073045
--------------------------------------------------------------------------------
(State or other jurisdiction of              (IRS Employer Identification No.)
 incorporation or organization)

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

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

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

<Table>
<Caption>
Title                                      Name of Exchange on which Registered
-----                                      ------------------------------------
<S>                                               <C>
SHARES OF BENEFICIAL INTEREST                     NONE
</Table>

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. / /.

Indicate by check mark whether the registrant is an accelerated filer (as
defined by Rule 12b-2 of the Exchange Act).
Yes / /  No /X/

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

Documents incorporated by reference: see Item 15

The exhibit index is located on pages 13-17.

                                       -1-
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                                     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 may
provide additional interest in the future while the participating mortgage
provides the Trust participation in the net income and residual value, if any,
of the underlying property.

The Trust also has investments in MBS collateralized by single-family and
multi-family mortgage loans issued or originated by Fannie Mae, the Government
National Mortgage Association ("GNMA") or the Federal Home Loan Mortgage
Corporation ("FHLMC"). Fannie Mae, GNMA and FHLMC guarantee the principal and
interest of the Fannie Mae, GNMA 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.

The Trust anticipates that there will be sufficient cash flow from the mortgages
to meet cash requirements. To the extent that the Trust's cash flow should be
insufficient to meet the Trust's operating expenses and liabilities, it will be
necessary

                                       -2-
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for the Trust to obtain additional funds by liquidating its investment in one or
more mortgages or by borrowing. The Trust may pledge mortgages as security for
any permitted borrowing.

The Trust may not borrow funds in connection with the acquisition or origination
of mortgages. However, it may borrow funds in order to meet working capital
requirements of the Trust. In this event, the Trust may borrow funds from third
parties on a short-term basis. The declaration of trust limits the amount that
may be borrowed by the Trust. Borrowing agreements between the Trust and a
lender may also restrict the amount of indebtedness that the Trust may incur.
The declaration of trust prohibits the Trust from issuing debt securities to
institutional lenders and banks, and the Trust may not issue debt securities to
the public except in some circumstances. The Trust, under some circumstances,
may borrow funds from the advisor, a trustee or an affiliate of the Trust or any
trustee. However, a majority of the independent trustees, not otherwise
interested in such transaction, must approve the transaction as being fair,
competitive and commercially reasonable and no less favorable to the Trust than
loans between unaffiliated lenders and borrowers under the same circumstances.
The Trust has not borrowed any funds during the past and does not intend to do
so in the future.

The FHA coinsurance loan program under Section 221(d)(4) of the National Housing
Act provides for loans with 40-year terms. However, this program allows for a
call option at any time after ten years, upon one year's notice. The Fannie Mae
Delegated Underwriting and Servicing program provides for loans with seven, ten
or 15 year terms and an amortization period of 35 years. The subordinated
promissory notes and subordinated mortgages that secure the participation
feature of the insured mortgages and PIMs and the notes that evidence the
additional loans provide for acceleration of maturity at the earlier of the sale
of the underlying property or the call date.

From time to time, the Trust expects that it may realize the principal and
participation in residual value, if any, of its mortgages before maturity. It is
expected that the mortgages will be repaid after a period of ownership of
approximately ten years from the dates of the closings of the permanent loans.
Realization of the value of mortgages may, however, be made at an earlier or
later date.

The Trust will not underwrite securities of other issuers, offer securities in
exchange for property or invest in securities of other issuers for the purpose
of exercising control and has not engaged in any of these activities during the
past. The declaration of trust does not permit the Trust to issue senior
securities. The Trust has not repurchased or reacquired any of its shares from
shareholders in the past. The Trust may not make loans to the advisor, any
trustee, any affiliate of the advisor or any trustee or any other person, other
than mortgage investments of the type described above. The Trust has not made
any loans during the past.

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, 2001, there were no personnel directly employed by the Trust.

ITEM 2.  PROPERTIES

None.

                                       -3-
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ITEM 3.  LEGAL PROCEEDINGS

There are no material pending legal proceedings to which the Trust, any
director, officer or affiliate of the Trust is a party or to which would have a
material effect on the Trust and there are no material pending legal proceedings
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, 2001 was approximately
13,200.

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 $.24 for 2000 and 2001. The Trustees expect to maintain that rate through May
2002.

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.

              (Amounts in thousands, except for per Share amounts)

<Table>
<Caption>
                                              2001         2000         1999         1998         1997
                                           ----------   ----------   ----------   ----------   ----------
<S>                                        <C>          <C>          <C>          <C>          <C>
Total revenues                             $   25,330   $   16,978   $   19,613   $   21,630   $   21,291

Net income                                 $   22,141   $   13,625   $   14,974   $   13,183   $   16,263

Net income per Share                       $     1.21   $      .74   $      .82   $      .72   $      .89

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

Total assets at December 31                $  167,764   $  215,521   $  231,209   $  267,410   $  293,158

Average dividends per Share                $     3.74   $     1.62   $     2.73   $     2.12   $     1.25
</Table>

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

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

                                       -4-
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LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2001 the Trust had liquidity consisting of cash and cash
equivalents, of approximately $6.5 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 dividends. 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 dividend.

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 participation interest based on cash flow generated by
property operations from four of its investments during the twelve months ended
December 31, 2001. Sunset Summit paid $113,253, Martin's Landing paid $217,585,
the Lakes paid $380,431 and the Seasons paid $129,872. In addition, the Trust
received and recognized participation interest related to the payoffs of the
Seasons and Hunters Pointe PIMIs. 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.

Windmill Lakes is a twelve-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. The borrower on
the Windmill Lakes PIMI has been unable to secure a purchaser for the property
at a price high enough to cover all of the ownership entity's outstanding
liabilities and has decided to sell the apartments off as condominiums.
Converting a multifamily property to condominium ownership is often a long
process that requires resources and expertise in marketing, financing, legal
matters and construction. Local and state agencies regulate the conversion of
existing housing into condominium ownership, and there are various compliance
regulations governing the process as well. On July 25, 2001, the borrower
finalized an agreement with the Trust which will allow for the release of the
participation features on the PIMI in the event that the first mortgage, the
additional loan and any accrued but unpaid base interest on the Additional Loan
are paid in full by September 1, 2002. In addition, the Trust required the owner
to pay current and outstanding Additional Loan base interest as of March 1, 2001
of $512,500. In the event that the required payments are not received, the
participation features will remain in force. As a result of the performance of
the property, the Trust had initially established a valuation allowance of
$2,000,000 on the Additional Loan in 1998. The Trust has reflected the $512,500
received plus $50,000 previously received as a reduction in the principal
balance of the Additional Loan and related impairment provision. Additionally,
based upon improved market conditions and property operations, the Trust has
further reduced the impairment provision by $937,500 to $500,000 in the fourth
quarter of 2001.

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
minimal control over. Should the properties be unable to generate sufficient
cash flow to pay the Additional Loan interest, it would reduce the Trust's
distributable cash flow and could affect the value of the Additional Loan
collateral.

There are contractual restrictions on the 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

                                       -5-
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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.

On February 13, 2002, the Trust received a prepayment of the Norumbega
Subordinated Promissory Note and the Norumbega Pointe Additional Loan note. The
Trust received $3,063,000 of Additional Loan principal, $302,877 of Shared
Appreciation Interest and $2,280,362 of preferred interest. The Trust received
$15,123,167 representing the principal proceeds on the first mortgage note on
February 25, 2002. The Trust intends to pay a special dividend of $1.14 per
share from the proceeds of the Norumbega Pointe prepayment in the first quarter
of 2002.

On July 23, 2001, the Trust received a prepayment of the Seasons Subordinated
Promissory Note and the Seasons Additional Loan. The Trust received $4,925,351
of the Additional Loan principal, $462,983 of surplus cash, $2,168,701 of
preferred interest, $2,693,326 of contingent interest, $176,908 of unpaid Base
Interest on Additional Loan and $3,325,696 which represents the Trust's portion
of the residual split. The Trust received $21,926,006 representing the principal
proceeds on the first mortgage note on July 26, 2001. In addition, the Trust
recognized $624,023 of Additional Loan interest that had been previously
received and recorded in deferred income on additional loans. The Advisor paid a
special dividend of $1.95 per share on August 17, 2001 from the proceeds of the
Seasons PIMI prepayment.

The payoff of the Seasons PIMI was a result of the sale of the underlying
property by the borrower, Maryland Associates Limited Partnership ("MALP"),
which is an affiliate of the Adviser, to an affiliate of MALP's general partner.
Because the sale of the underlying property was to an affiliate, the Independent
Trustees of the Trust were required to approve the transaction, which they did
based upon a number of factors, including an appraisal of the underlying
property prepared by an independent third party MAI appraiser. The purchase
price paid by the affiliate for the underlying property was $1.6 million greater
than the value indicated by such appraisal. Both the Trustees and the Advisor
believed that the market capitalization rate utilized in the appraisal was too
high based on their knowledge of recent sales in the market and agreed that the
true fair value was the ultimate purchase price paid by the affiliate.

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 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 and 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. During the first quarter of 2001, the
Trust received a payoff of the Falls at Hunters Pointe PIMI as a result of the
sale of the property. 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 under the subordinate loan
agreement of $1,070,304 and late fees on the delinquent Participating Income
Interest of $11,021. In addition, the Trust recognized $196,710 of additional
loan interest and $311,132 of Participating Income Interest that had been
previously received and recorded in deferred income on additional loans. On
March 20, 2001, the Trust paid a special dividend of $.83 per share from the
proceeds of the Falls at Hunters Pointe PIMI payoff.

In addition to the amounts received from the payoffs of the Seasons and Hunters
Pointe PIMIs, the Trust received both installments of Additional Loan interest
due in 2001 from five of the PIMI investments. 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. The overpayment was credited to the borrower
when the loan was prepaid.

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.

The Trust has the option to call certain PIMs and all the PIMIs by accelerating
their maturity. If the call feature is exercised for the whole PIM or PIMI then
the insurance feature of the loan would be cancelled. Therefore, the Advisor
will determine the merits of exercising the call option for each PIM and PIMI as
economic conditions warrant. Such

                                       -6-
<Page>

factors as the condition of the asset, local market conditions, the interest
rate environment and available financing will have an impact on these decisions.

CRITICAL ACCOUNTING POLICIES

The Trust's critical accounting policies relate primarily to revenue recognition
related to the participation features of the Trust's PIM and PIMI investments as
well as the recognition of deferred interest income on the Additional Loans. The
Trust's policies are as follows:

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 the amount
becomes fixed and the transaction that gives rise to such amount is
finalized, cash is received and all contingencies are resolved. This could be
the sale or refinancing of the underlying real estate, which results in a
cash payment to the Trust or a cash payment made to the Trust from surplus
cash relative to the participation feature. The Trust defers the recognition
of Additional Loan interest payments as income to the extent these interest
payments 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 and the Additional
Loan value is deemed collectible, 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.

ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ASSESSMENT OF CREDIT RISK

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

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

Collection of the principal and interest of the Additional Loans and interest on
the participation features 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,
2001, the Trust's PIMs, PIMIs and MBS comprise the majority of the Trust's
assets. Decreases in interest rates may accelerate the prepayment of the Trust's
investments. The Trust does not utilize any derivatives or other instruments to
manage this risk as the Trust plans to hold its PIM and PIMI investments to
expected maturity while it's expected that substantially all of the MBS will
prepay over the same time period, thereby mitigating any potential interest rate
risk to the disposition value of any remaining MBS.

                                       -7-
<Page>

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 are scheduled to
mature.

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)
                             ------------------------------------------------------------------------
                               2002        2003        2004         2005         2006      Thereafter    Total      Fair Value(1)
                                                                                                         Face
                                                                                                         Value
                             ----------------------------------------------------------------------------------------------------
<S>                          <C>         <C>         <C>          <C>          <C>         <C>          <C>            <C>
Interest-sensitive assets:

MBS                          $  1,821    $  1,557    $   1,334    $   1,146    $     989   $    8,254   $  15,101      $   15,601
 WAIR                            7.60%       7.60%        7.60%        7.60%        7.60%        7.60%       7.60%

PIMS                              422         455          491          529          570       34,823      37,290          37,978
 WAIR                            7.05%       7.05%        7.05%        7.06%        7.06%        7.06%       7.06%

PIMIS
 Insured Mortgages             16,301       1,257        1,361        1,472        1,593       63,641      85,625          86,664
 WAIR                            6.71%       6.71%        6.71%        6.71%        6.71%        6.71%       6.83%

Additional Loans                6,963       4,864        2,290        4,600            -            -      18,717          17,655
 WAIR                            7.00%       7.00%        7.00%        7.00%        0.00%        0.00%       7.04%
                             --------    --------    ---------    ---------    ---------   ----------   ---------      ----------

Total Interest-
 Sensitive Assets            $ 25,507    $  8,133    $   5,476    $   7,747    $   3,152   $  106,718   $ 156,733      $  157,898
                             ========    ========    =========    =========    =========   ==========   =========      ==========
</Table>

(1) The methodology used by the Trust to estimate the fair value of each class
    of financial instrument is described in Note I to the Trust's financial
    statements presented in Appendix A to this report. As described in that
    note, the Trust does not include an estimate of value for the participation
    interest associated with its PIM and PIMI investments.

                                       -8-
<Page>

OPERATIONS

The following relates to the operations of the Trust during the years ended
December 31, 2001, 2000, and 1999.

<Table>
<Caption>
                                                            (amounts in thousands, except per Share amounts)
                                                                         Years Ended December 31,
                                                                         ------------------------
                                                           2001                       2000                    1999
                                                           ----                       ----                    ----
                                                                  Per                       Per                     Per
                                                  Amount         Share        Amount       Share      Amount       Share
                                               ------------   -----------  ------------  ---------   ---------   ---------
<S>                                            <C>            <C>          <C>           <C>         <C>         <C>
Interest on PIMs and PIMIs:
   Basic interest                              $      9,674   $       .52  $     11,260  $     .61   $  11,998   $     .66
   Additional Loan interest                           2,208           .12         1,784        .10       1,712         .09
   Participation interest                            11,873           .64         1,915        .11       1,592         .08
Interest income on MBS                                1,197           .07         1,455        .08       3,251         .18
Interest income - cash and cash equivalents             378           .02           564        .03       1,060         .06
Trust expenses                                       (2,081)         (.11)       (2,215)      (.12)     (2,274)       (.12)
Amortization of prepaid fees and
   expenses                                          (2,608)         (.14)       (2,132)      (.12)     (2,365)       (.13)
Reduction of provision for
   impaired Additional Loans                          1,500           .09           994        .05           -           -
                                               ------------   -----------  ------------  ---------   ---------   ---------
 Net Income                                    $     22,141   $      1.21  $     13,625  $     .74   $  14,974   $     .82
                                               ============   ===========  ============  =========   =========   =========

<Caption>
<S>                                                    <C>                        <C>                     <C>
Weighted Average
   Shares Outstanding                                  18,371,477                 18,371,477              18,371,477
                                                       ==========                 ==========              ==========
</Table>

The Trust's net income increased in 2001 when compared to 2000 primarily due to
an increase in participation interest on PIMs and PIMIs. This was partially
offset by a decrease in basic interest from PIMs and PIMIs. Participation
interest increased primarily due to the Seasons payoff in July 2001 and the
Falls at Hunters Pointe payoff in March 2001. The payoffs also caused basic
interest from PIMs and PIMIs to decrease.

The Trust's net income decreased 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. These items were partially offset as 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.

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.

                                       -9-
<Page>

                                    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:


<Table>
<Caption>
                                Position with Krupp                        Date of           Term
   Name and Age                 Government Income Trust II                 Election          Expires
   ------------                 --------------------------                 --------          -------
<S>                             <C>                                        <C>               <C>
   Douglas Krupp (55)           Chairman of Board of Trustees and Trustee  May, 1996         May, 2002
*  Charles N. Goldberg (60)     Trustee                                    April, 1991       May, 2002
*  J. Paul Finnegan (77)        Trustee                                    April, 1991       May, 2002
*  Stephen Puleo (67)           Trustee                                    February, 2001    May, 2002
   Robert A. Barrows (44)       Treasurer                                  August, 1995      N/A
   Scott D. Spelfogel (41)      Clerk                                      November, 1991    N/A
   MaryBeth Bloom (28)          Assistant Clerk                            November, 2000    N/A
</Table>

* 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 two operating companies through private equity investments.
Mr. Krupp has held the position of Co-Chairman since The Berkshire Group was
established as The Krupp Companies in 1969 and he has served as the Chief
Executive Officer since 1992. He is a graduate of Bryant College where he
received an honorary Doctor of Science in Business Administration in 1989.

Charles N. Goldberg is currently a partner of Oppel, Goldberg & 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 and treasury
functions 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.

                                      -10-
<Page>

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 57) 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 two
operating companies through private equity investments. Mr. Krupp has held the
position of Co-Chairman since The Berkshire Group was established as The Krupp
Companies in 1969. Mr. Krupp has been an instructor of history at the New Jewish
High School in Waltham, Massachusetts since September of 1997. Mr. Krupp
attended the University of Pennsylvania and Harvard University and holds a
Master's Degree in History from Brown University. Douglas and George Krupp are
brothers.

Peter F. Donovan (age 48) 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 10th largest in the United States based on servicing and
asset management of a $14.1 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 60) 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 52) 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 $14.1 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, the Mortgage Bankers Association and the Servicing Advisory Council for
Freddie Mac.

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 Stephen Puleo) a fee of $25,000 in 2001.

                                      -11-
<Page>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of January 8, 2002, 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>
Class of       Name of Beneficial           Amount and Nature of   Percent
 Stock              Owner                    Beneficial Interest   of Class
---------      ------------------           ---------------------  ---------
<S>            <C>                          <C>                      <C>
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 January 8, 2002.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 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. During 2001, the Advisor received
$1,309,430 related to the Asset Management Fee.

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. During 2001, The
Berkshire Companies Limited Partnership and Berkshire Mortgage Finance Limited
Partnership, affiliates of the Advisor, received a total of $273,830 in
reimbursements.

The Trust received $398,549 of base interest from The Seasons Additional Loan
in 2001. In addition, the Trust received $8,780,579 in 2001 related to
participating interest income on the Seasons PIMI. Maryland Associates
Limited Partnership was the owner of the Seasons. The Krupp Company Limited
Partnership- IV, the general partner of the Maryland Associates Limited
Partnership, is an affiliate of the Advisor.

ITEM 14. CONTROLS AND PROCEDURES

Not applicable.

                                      -12-
<Page>


ITEM 15. 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)  REPORTS ON FORM 8-K

     The Trust did not file any reports on Form 8-K during the quarter ended
     December 31, 2001.

(c)  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)].*

         (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.

                                      -13-
<Page>

                    [Exhibit 10.6 to Registrant's report on Form 10-K for the
                    year ended December 31, 1995 (File No. 0-20164)].*

                    MARTIN'S LANDING

         (10.7)     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)].*

         (10.8)     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)].*

         (10.9)     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)].*

         (10.10)    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)].*

                    CROSSINGS VILLAGE

         (10.11)    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)].*

         (10.12)    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)].*

         (10.13)    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)].*

                    SUNSET SUMMIT

         (10.14)    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)].*

         (10.15)    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)].*

         (10.16)    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)].*

         (10.17)    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)].*

         (10.18)    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)].*

                                      -14-
<Page>

         (10.19)    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

         (10.20)    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)].*

         (10.21)    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)].*

         (10.22)    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)].*

         (10.23)    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)].*

         (10.24)    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)].*

         (10.25)    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

         (10.26)    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

         (10.27)    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)].*

         (10.28)    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)].*

         (10.29)    Subordinate Multifamily Mortgage Agreement dated 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)].*

         (10.30)    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)].*

                                      -15-
<Page>

                    THE LAKES

         (10.31)    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)].*

         (10.32)    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)].*

         (10.33)    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)].*

         (10.34)    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)].*

         (10.35)    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)].*

         (10.36)    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

         (10.37)    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)].*

         (10.38)    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)].*

         (10.39)    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)].*

                    RIVERGREENS APARTMENTS

         (10.40)    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)].*

         (10.41)    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)].*

         (10.42)    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

         (10.43)    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)].*

                                      -16-
<Page>

         (10.44)    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)].*

         (10.45)    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)].*

         (10.46)    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)].*

     (99)           OTHER

         (99.1)     Chairman of the Board Certification pursuant to 18 U.S.C.
                    Section 1350, as adopted pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002.

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

         * Incorporated by reference
         + Filed herein

                                      -17-
<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 7th day
of January, 2003.

                                   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 7th day of January, 2003.

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

 /s/ Stephen Puleo                Trustee of Krupp Government Income Trust II
----------------------------
Stephen Puleo

                                      -18-
<Page>

CERTIFICATIONS

I, Douglas Krupp, certify that:

     1.  I have reviewed this annual report on Form 10-K/A of Krupp
         Government Income Trust II;

     2.  Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

     3.  Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report.

Date: January 7, 2003


                                                  /s/ Douglas Krupp
                                              -----------------------
                                                   Douglas Krupp
                                               Chairman of the Board

                                      -19-
<Page>

CERTIFICATIONS

I, Robert A. Barrows, certify that:

1.   I have reviewed this annual report on Form 10-K/A of Krupp Government
     Income Trust II;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report.

Date: January 7, 2003


                                                /s/ Robert A. Barrows
                                              -------------------------
                                                  Robert A. Barrows
                                               Chief Accounting Officer

                                      -20-
<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, 2001

                                      F-1
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

              INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                   ----------

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

Balance Sheets at December 31, 2001 and 2000                                                         F-4

Statements of Income and Comprehensive Income for the Years Ended December 31, 2001, 2000
and 1999                                                                                             F-5

Statements of Changes in Shareholders' Equity for the Years
Ended December 31, 2001, 2000 and 1999                                                               F-6

Statements of Cash Flows for the Years Ended December 31, 2001,
2000 and 1999                                                                                        F-7

Notes to Financial Statements                                                                 F-8 - F-20

Schedule II - Valuation and Qualifying Accounts                                                     F-21

Supplementary Data - Selected Quarterly Financial Data (Unaudited)                                  F-22
</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.

                                       F-2
<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, 2001 and 2000, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion,
the financial statement schedule listed in the accompanying index presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related financial statements. These financial statements
and financial statement schedule are the responsibility of the Trust's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.


PricewaterhouseCoopers LLP
Boston, Massachusetts
March 14, 2002

                                       F-3
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                                 BALANCE SHEETS

                           December 31, 2001 and 2000

                                   ----------

<Table>
<Caption>
                                                                      2001              2000
                                                                ---------------   ---------------
<S>                                                             <C>               <C>
                                     ASSETS

Participating Insured Mortgage Investments
 ("PIMIs")(Notes B, C and I)
    Insured mortgages                                           $    85,625,185   $   121,208,064
    Additional loans, net of impairment provision of $500,000
     and $2,000,000, respectively                                    17,654,500        22,292,351
Participating Insured Mortgages ("PIMs")
    (Notes B, D and I)                                               37,239,922        37,631,330
Mortgage-Backed Securities ("MBS")
    (Notes B, E and I)                                               15,600,964        19,124,031
                                                                ---------------   ---------------

           Total mortgage investments                               156,120,571       200,255,776

Cash and cash equivalents (Notes B and I)                             6,453,663         7,089,453
Interest receivable and other assets                                  1,174,106         1,552,568
Prepaid acquisition fees and expenses, net of
 accumulated amortization of $7,964,938 and
 $8,957,065, respectively (Note B)                                    2,913,250         4,838,771
Prepaid participation servicing fees, net of
 accumulated amortization of $2,420,697 and
 $2,711,086, respectively (Note B)                                    1,102,473         1,784,633
                                                                ---------------   ---------------

           Total assets                                         $   167,764,063   $   215,521,201
                                                                ===============   ===============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Deferred income on Additional Loans (Note B)                    $     1,242,282   $     2,503,604
Other liabilities                                                        25,985            53,273
                                                                ---------------   ---------------

           Total liabilities                                          1,268,267         2,656,877
                                                                ---------------   ---------------

Shareholders' equity (Notes A, F and J)
    Common stock, no par value; 25,000,000
      Shares authorized; 18,371,477 Shares
      issued and outstanding                                        166,214,677       212,783,023

    Accumulated comprehensive income
      (Notes B and E)                                                   281,119            81,301
                                                                ---------------   ---------------

           Total Shareholders' equity                               166,495,796       212,864,324
                                                                ---------------   ---------------

           Total liabilities and Shareholders' equity           $   167,764,063   $   215,521,201
                                                                ===============   ===============
</Table>

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

                                       F-4
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                  STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

              For the Years Ended December 31, 2001, 2000 and 1999

                                   ----------

<Table>
<Caption>
                                                               2001                2000                1999
                                                         ----------------    ----------------    ----------------
<S>                                                      <C>                 <C>                 <C>
Revenues:
    Interest income - PIMs and PIMIs:
      Basic interest                                     $      9,673,656    $     11,259,617    $     11,998,012
      Additional Loan interest                                  2,207,942           1,783,933           1,712,260
      Participation interest                                   11,873,054           1,915,557           1,591,932
    Interest income - MBS                                       1,197,120           1,455,367           3,251,078
    Interest income - cash and cash equivalents                   378,045             563,723           1,059,900
                                                         ----------------    ----------------    ----------------

         Total revenues                                        25,329,817          16,978,197          19,613,182
                                                         ----------------    ----------------    ----------------

Expenses:
    Asset management fee to an affiliate (Note G)               1,309,430           1,529,418           1,718,942
    Expense reimbursements to affiliates (Note G)                 267,554             300,348             276,901
    Amortization of prepaid fees and expenses (Note B)          2,607,681           2,131,748           2,365,254
    General and administrative (Note G)                           504,174             385,879             277,747
    Reduction of provision for impaired additional
      loan (Notes B and C)                                     (1,500,000)           (994,000)                  -
                                                         ----------------    ----------------    ----------------

         Total expenses                                         3,188,839           3,353,393           4,638,844
                                                         ----------------    ----------------    ----------------

Net income (Notes B and H)                                     22,140,978          13,624,804          14,974,338

Other comprehensive income:

    Net change in unrealized
      gain (loss) on MBS                                          199,818             635,251          (1,101,186)
                                                         ----------------    ----------------    ----------------

Total comprehensive income                               $     22,340,796    $     14,260,055    $     13,873,152
                                                         ================    ================    ================

Basic earnings per Share                                 $           1.21    $            .74    $            .82
                                                         ================    ================    ================

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.

                                       F-5
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                  STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

              For the Years Ended December 31, 2001, 2000 and 1999

                                   ----------

<Table>
<Caption>
                                                                                   Accumulated           Total
                                                                 Retained         Comprehensive      Shareholders'
                                            Common Stock         Earnings         Income (Loss)          Equity
                                           ---------------    ---------------    ---------------    ---------------
<S>                                        <C>                <C>                <C>                <C>
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 gain on MBS                         -                  -            635,251            635,251
                                           ---------------    ---------------    ---------------    ---------------

Balance at December 31, 2000                   212,783,023                  -             81,301        212,864,324

Dividends                                      (46,568,346)       (22,140,978)                 -        (68,709,324)

Net income                                               -         22,140,978                  -         22,140,978

Change in unrealized gain on MBS                         -                  -            199,818            199,818
                                           ---------------    ---------------    ---------------    ---------------

Balance at December 31, 2001               $   166,214,677    $             -    $       281,119    $   166,495,796
                                           ===============    ===============    ===============    ===============
</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.

                                       F-6
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                            STATEMENTS OF CASH FLOWS

              For the Years Ended December 31, 2001, 2000 and 1999

                                   ----------

<Table>
<Caption>
                                                                         2001               2000                1999
                                                                    ---------------    ---------------    ---------------
<S>                                                                 <C>                <C>                <C>
Operating activities:
  Net income                                                        $    22,140,978    $    13,624,804    $    14,974,338
  Adjustments to reconcile net income
    to net cash provided by operating activities:
      Amortization of net premium                                            75,585             58,017            173,055
      Amortization of prepaid fees and expenses                           2,607,681          2,131,748          2,365,254
      Reduction of provision for impaired additional loans               (1,500,000)          (994,000)                 -
      Changes in assets and liabilities:
         Decrease in interest receivable and other assets                   378,462             76,981             53,333
         Decrease in deferred income on Additional Loans                 (1,261,322)          (189,372)           (26,367)

         (Decrease) increase in other liabilities                          (127,288)             3,248            106,462
                                                                    ---------------    ---------------    ---------------

   Net cash provided by operating activities                             22,314,096         14,711,426         17,646,075
                                                                    ---------------    ---------------    ---------------

Investing activities:
  Principal collections on MBS                                            3,647,045          2,580,441         19,432,484
  Principal collections on Additional Loans                               6,137,851                  -          2,000,000
  Principal collections on PIMs and Insured Mortgages                    35,974,542         10,905,706          1,718,718
                                                                    ---------------    ---------------    ---------------

   Net cash provided by investing activities                             45,759,438         13,486,147         23,151,202
                                                                    ---------------    ---------------    ---------------

Financing activity:
  Dividends                                                             (68,709,324)       (29,761,793)       (50,154,182)
                                                                    ---------------    ---------------    ---------------

Net decrease in cash and cash equivalents                                  (635,790)        (1,564,220)        (9,356,905)

Cash and cash equivalents, beginning of period                            7,089,453          8,653,673         18,010,578
                                                                    ---------------    ---------------    ---------------

Cash and cash equivalents, end of period                            $     6,453,663    $     7,089,453    $     8,653,673
                                                                    ===============    ===============    ===============

Non cash activities:
 Increase (decrease) in Fair Value of MBS                           $       199,818    $       635,251    $    (1,101,186)
                                                                    ===============    ===============    ===============
</Table>

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

                                       F-7
<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 accounting principles generally
        accepted in the United States of America ("GAAP").

        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"), classifies its MBS portfolio
        as available-for-sale. The Trust classifies its MBS portfolio as
        available-for-sale as the Trust expects that a portion of the MBS
        portfolio will remain after all of the PIMs and PIMIs payoff and that
        it will be necessary to then sell the remaining MBS portfolio at that
        time in order to close out the Trust. In addition, other situations
        such as liquidity needs could arise which would necessitate the sale
        of a portion of the MBS portfolio. 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
        as these investments have a participation feature. As a result, the
        Trust would not sell or otherwise dispose of the MBS. Accordingly,
        the Trust has both the intention and ability to hold these
        investments to expected maturity. The Trust carries these MBS at
        amortized cost.

        The insured mortgage portion of the 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.

        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 the
        amount becomes fixed and the transaction that gives rise to such
        amount is finalized, cash is received and all contingencies are
        resolved. This could be the sale or refinancing of the

                                    Continued

                                       F-8
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued

                                   ----------

B.      SIGNIFICANT ACCOUNTING POLICIES, Continued

        PIMs AND PIMIs, continued

        underlying real estate which results in a cash payment to the Trust or a
        cash payment made to the Trust from surplus cash relative to the
        participation feature. The Trust defers the recognition of Additional
        Loan interest payments as income to the extent these interest payments
        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 and the
        Additional Loan value is deemed collectible, 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 Additional Loans which the Advisor believes
        that the collection of all amounts due in accordance with the
        contractual terms of the loan agreement are not likely. Impaired loans
        are measured based on the fair value of the underlying collateral net of
        estimated selling costs. The Trust measures impairment on these loans
        quarterly. Interest received on impaired loans is generally applied
        against the loan principal.

        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 estimated life 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.

        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 90% 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.

                                    Continued

                                       F-9
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued

                                   ----------

B.      SIGNIFICANT ACCOUNTING POLICIES, Continued

        ESTIMATES AND ASSUMPTIONS

        The preparation of financial statements in accordance with GAAP 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 seven PIMIs at December 31, 2001 and nine
        at December 31, 2000 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.

        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

                                    Continued

                                      F-10
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued

                                   ----------

C.      PIMIs, Continued

        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.

        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)
        Additional Loan 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

                                    Continued

                                      F-11
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued

                                   ----------

C.      PIMIs, Continued

        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.

        On July 25, 2001, the Trust finalized an agreement with the owner of the
        Windmill Lakes property which will allow for the release of the
        participation features on the PIMI in the event that the first mortgage,
        the Additional Loan and any accrued but unpaid base interest on the
        Additional Loan are repaid by September 1, 2002. In addition, the Trust
        required the owner to pay current and outstanding Additional Loan base
        interest as of March 1, 2001 of $512,500. In the event that the required
        payments are not received by September 1, 2002, the participation
        features will remain in force. As a result of the performance of the
        property, the Trust had initially established a valuation allowance of
        $2,000,000 on the Additional Loan in 1998. The Trust has reflected the
        $512,500 received plus $50,000 previously received as a reduction in the
        principal balance of the Additional Loan and related impairment
        provision. Additionally, based upon improved market conditions and
        property operations, the Trust has further reduced the impairment
        provision by $937,500 to $500,000 at December 31, 2001.

        On July 23, 2001, the Trust received a prepayment of the Seasons
        Subordinated Promissory Note and the Seasons Additional Loan. The Trust
        received $4,925,351 of the Additional Loan principal, $462,983 of
        surplus cash, $2,168,701 of Preferred Interest, $2,693,326 of contingent
        interest, $176,908 of Base Interest on Additional Loan and $3,325,696
        which represents the Trust's portion of the residual split. The Trust
        received $21,926,006 representing the principal proceeds on the first
        mortgage note on July 26, 2001. In addition, the Trust recognized
        $624,023 of Additional Loan interest that had been previously received
        and recorded in deferred income on additional loans. The Advisor paid a
        special dividend of $1.95 per share on August 17, 2001 from the proceeds
        of the Seasons PIMI prepayment.

        The payoff of the Seasons PIMI was a result of the sale of the
        underlying property by the borrower, Maryland Associates Limited
        Partnership ("MALP"), which is an affiliate of the Adviser, to an
        affiliate of MALP's general partner. Because the sale of the underlying
        property was to an affiliate, the Independent Trustees of the Trust were
        required to approve the transaction, which they did based upon a number
        of factors, including an appraisal of the underlying property prepared
        by an independent third party MAI appraiser. The purchase price paid by
        the affiliate for the underlying property was $1.6 million greater than
        the value indicated by such appraisal. Both the Trustees and the Advisor
        believed that the market capitalization rate utilized in the appraisal
        was too high based on their knowledge of recent sales in the market and
        agreed that the true fair value was the ultimate purchase price paid by
        the affiliate.

                                    Continued

                                      F-12
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued

                                   ----------

C.      PIMIs, Continued

        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 of $496,207
        (including all of the delinquent amounts), Preferred Interest of
        $492,543, Participating Appreciation Interest of $1,070,304 and late
        fees on the delinquent Participating Income Interest of $11,021. In
        addition, the Trust recognized $196,710 of additional loan interest and
        $311,132 of Participating Income Interest that had been previously
        received and recorded in deferred income on additional loans. On March
        20, 2001, the Trust paid a special dividend of $.83 per share from the
        proceeds of the Hunters Pointe PIMI payoff.

        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.

        At December 31, 2001 and 2000 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, 2001 and 2000:

<Table>
<Caption>
                                   Approximate                                   Balance Outstanding At December 31,
     Insured            Loan         Monthly        Interest        Maturity     -----------------------------------
    Mortgages          Amount        Payments         Rate            Date            2001                 2000
-----------------  -------------   ------------   ------------    ------------   --------------      ---------------
<S>                <C>            <C>                    <C>          <C>        <C>                 <C>
FHA
The Seasons        $  23,224,649  $           -              -               -   $            -      $    22,054,045

Hunters Pointe        12,789,100              -              -               -                -           12,362,037

Norumbega Point       15,598,500        101,100          7.375%       02/01/36       15,139,275           15,231,817

FNMA (a)
Crossings Village     12,907,334         82,500           6.75%       10/01/08       11,722,936           11,913,997

Martin's Landing      11,200,000         69,600           6.50%       12/01/08       10,153,225           10,322,038

Sunset Summit         10,192,801         63,400           6.50%       10/01/08        9,246,686            9,400,427

Oasis                 12,401,673         79,100           6.75%       07/01/09       11,432,503           11,603,141

Windmill Lakes        11,600,000         74,600          6.825%       03/01/10       10,767,647           10,920,913

The Lakes             18,387,653        118,000          6.825%       07/01/10       17,162,913           17,399,649
                   -------------  -------------                                  --------------      ---------------

                   $ 128,301,710  $     588,300                                  $   85,625,185(d)   $   121,208,064
                   =============  =============                                  ==============      ===============
</Table>

                                    Continued

                                      F-13
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued

                                   ----------

C.      PIMIs, Continued

<Table>
<Caption>
                                                                                             Base        Preferred
                                                                                Maturity    Interest      Interest
        Additional Loans                         2001              2000           Date        Rate          Rate
        ----------------                   -------------      -------------    ----------   --------     ---------
        <S>                                <C>                <C>                <C>           <C>        <C>
        The Seasons                        $           -      $   4,925,351             -       -            -
        Hunters Pointe                                 -            650,000             -       -            -
        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%(b)
        Oasis                                  2,290,000          2,290,000      09/01/09       7%        9.25%
        Windmill Lakes (c):
            Due Contractually                  2,000,000          2,000,000      03/01/10     7.5%         9.5%
            Interest applied                    (562,500)                 -
                                           -------------      -------------
            Carrying Value                     1,437,500          2,000,000
        The Lakes                              4,600,000          4,600,000      07/01/10       7%           9%
                                           -------------      -------------

                                           $  18,154,500(e)   $  24,292,351
                                           =============      =============
</Table>

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

<Table>
                    <S>                            <C>
                    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
</Table>

        (b)   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.

        (c)   The Trust finalized an agreement on July 25, 2001 with the owner
              which will allow for the release of the participation features in
              the event that the first mortgage, the Additional Loan and any
              accrued but unpaid interest on the Additional Loan are all paid
              off by September 1, 2002. In the event that the required payments
              are not received, the participation features will remain in force.

        (d)   The aggregate cost for federal income tax purposes is $85,625,185.

        (e)   The aggregate cost for federal income tax purposes is $18,717,000.

                                    Continued

                                      F-14
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued

                                   ----------

C.      PIMIs, Continued

        IMPAIRED ADDITIONAL 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. On July 25, 2001, the Trust received $512,500 in accrued but
        unpaid base interest. The Trust reflected the $512,500 received plus
        $50,000 previously received as a reduction in the principal balance of
        the Additional Loan and related impairment provision. During the fourth
        quarter of 2001, based on improved market conditions and property
        operations, the Trust reduced the impairment provision by an additional
        $937,500 to $500,000. The Trust did not receive interest income on the
        Windmill Lakes Additional Loan during 2000 or 1999 and has not
        recognized any interest income during 2001, 2000 or 1999.

        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 2000, property operations improved and, as a result, the
        Advisor determined that the Oasis Additional Loan was no longer
        impaired. Therefore, the valuation allowance was reversed.

        The activity in the valuation allowance together with the related
        recorded and carrying value of the mortgage loans is as follows as of
        December 31, 2001:

<Table>
<Caption>
                                          Recorded        Valuation      Carrying
                                            Value         Allowance       Value
                                        ------------     -----------    ----------
        <S>                             <C>              <C>            <C>
        Windmill Lakes                  $  1,437,500     $   500,000    $  937,500
                                        ============     ===========    ==========
</Table>

        Reconciliations of activity for 2001, 2000 and 1999 are as follows:

INSURED MORTGAGES

<Table>
<Caption>
                                                2001            2000             1999
                                           -------------    -------------    -------------
<S>                                        <C>              <C>              <C>
Balance at beginning of period             $ 121,208,064    $ 131,750,452    $ 133,132,325

Principal collections                        (35,582,879)     (10,542,388)      (1,381,873)
                                           -------------    -------------    -------------

Balance at end of period                   $  85,625,185    $ 121,208,064    $ 131,750,452
                                           =============    =============    =============
</Table>

                                    Continued

                                      F-15
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued

                                   ----------

C.      PIMIs, Continued

ADDITIONAL LOANS

<Table>
<Caption>
                                               2001             2000             1999
                                           -------------    -------------    -------------
<S>                                        <C>              <C>              <C>
Balance at beginning of period             $  22,292,351    $  21,298,351    $  23,298,351

Interest received and recognized
  as Additional Loan prepayment                 (562,500)               -                -

Additional Loan prepayments                   (5,575,351)               -       (2,000,000)

Adjustment to valuation allowance              1,500,000          994,000                -
                                           -------------    -------------    -------------

Balance at end of period                   $  17,654,500    $  22,292,351    $  21,298,351
                                           =============    =============    =============
</Table>

PROPERTY DESCRIPTIONS:

-   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.

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.

                                    Continued

                                      F-16
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued

                                   ----------

D.      PIMs, Continued

        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, 2001 and 2000 there are no insured mortgage loans within
        the Trust's portfolio that are delinquent of principal or interest.

        The Trust's PIMs consisted of the following at December 31, 2001 and
        2000:

<Table>
<Caption>
                                         Approximate
                          Original         Monthly         Interest        Maturity
        PIM                Amount          Payments          Rate            Date           Balance Outstanding At December 31,
     ---------         --------------   --------------   --------------  --------------     -----------------------------------
                                                                                                 2001                 2000
                                                                                            --------------       --------------
<S>                    <C>              <C>                       <C>          <C>          <C>                  <C>
FNMA
Mequon Trails          $   14,937,726   $       93,500             6.50%       01/01/08(a)  $   13,276,440       $   13,525,695

FHA
Rivergreens II              6,137,199           39,800            7.375%       01/01/35          5,917,280            5,956,517

Mill Ponds II               8,245,300           51,900            7.125%       12/01/35          7,982,225            8,034,349

The Fountains              10,336,000           70,800             7.50%(b)    11/01/36         10,063,977           10,114,769
                       --------------   --------------                                      --------------       --------------

   Total               $   39,656,225   $      256,000                                      $   37,239,922(c)    $   37,631,330
                       ==============   ==============                                      ==============       ==============
</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 $37,239,922.

                                    Continued

                                      F-17
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued

                                   ----------

D.      PIMs, Continued

        Reconciliations of activity for 2001, 2000 and 1999 are as follows:

<Table>
<Caption>
                                                                 2001            2000            1999
                                                             ------------    ------------    ------------
        <S>                                                  <C>             <C>             <C>
        Balance at beginning of period                       $ 37,631,330    $ 37,994,412    $ 38,331,257

        Discount amortization                                         255             236             217

        Principal collections                                    (391,663)       (363,318)       (337,062)
                                                             ------------    ------------    ------------

        Balance at end of period                             $ 37,239,922    $ 37,631,330    $ 37,994,412
                                                             ============    ============    ============
</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.

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, 2001 the Trust's MBS portfolio has an amortized cost of
        $15,319,845 and gross unrealized gains of $281,119. At December 31,
        2000, the Trust's MBS portfolio had an amortized cost of $19,042,730 and
        gross unrealized gains and losses of $134,943 and $53,642, respectively.
        The MBS have maturities ranging from 2008 to 2031.

<Table>
<Caption>
            Maturity Date                           Fair Value      Unrealized Gain
            -------------                         ---------------   ---------------
            <S>                                   <C>               <C>
            2002 - 2006                           $             -   $             -
            2007 - 2011                                 3,622,586            67,189
            2012 - 2031                                11,978,378           213,930
                                                  ---------------   ---------------

               Total                              $    15,600,964   $       281,119
                                                  ===============   ===============
</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.

                                    Continued

                                      F-18
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued

                                   ----------

G.      RELATED PARTY TRANSACTIONS

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

        The Trust also reimburses affiliates of the Advisor for certain 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, 2001, 2000, and 1999 these fees totaled $6,276, $1,533 and
        $778 respectively.

        The Trust earned or received $398,549 of base interest from The Seasons
        in 2001 and $443,282 in 2000 and 1999, respectively (see Note C). In
        addition, the Trust received $8,780,579 in 2001, $446,574 in 2000 and
        $392,816 in 1999 related to participating interest income.

H.      FEDERAL INCOME TAXES

        The reconciliation of the income reported in the accompanying statement
        of income with the income reported in the Trust's 2001 federal income
        tax return follows:

<Table>
        <S>                                                                          <C>
        Net income per statement of income                                           $ 22,140,978

        Less: Book to tax difference for amortization of prepaid fees and expenses     (1,322,819)

        Less: Book to tax difference for Additional Loan interest income               (1,037,081)

        Less: Reduction of provision for impaired mortgage loans                         (962,500)
                                                                                     ------------

        Net income for federal income tax purposes                                   $ 18,818,578
                                                                                     ============
</Table>

        The Trust paid dividends of $3.74 per share during 2001 which represents
        approximately $1.02 from ordinary income and $2.72 represents a
        non-taxable dividend for federal income tax purposes.

        The basis of the Trust's assets for financial reporting purposes is less
        than its tax basis by approximately $7,162,000 and $9,423,000 at
        December 31, 2001 and 2000, respectively. The basis of the Trust's
        liabilities for financial reporting purposes exceeded its tax basis by
        approximately $1,242,000 and $2,504,000 at December 31, 2001 and 2000,
        respectively.

                                    Continued

                                      F-19
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                    NOTES TO FINANCIAL STATEMENTS, continued

                                   ----------

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
        of approximately $281,000 December 31, 2001 and gross unrealized gains
        and losses of approximately $135,000 and $54,000 at December 31, 2000.

        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 of approximately $1,777,000 at December 31, 2001 and
        gross unrealized gains and losses of approximately $170,000 and
        $4,052,000, respectively at December 31, 2000.

        At December 31, 2001 and 2000, the estimated fair values of the Trust's
        financial instruments are as follows:

<Table>
<Caption>
                                                                   (rounded to thousands)
                                                              2001                        2000
                                                    ------------------------     -----------------------
                                                       Fair        Carrying        Fair        Carrying
                                                       Value         Value         Value         Value
                                                    ----------    ----------     ---------    ----------
         <S>                                        <C>           <C>            <C>          <C>
         Cash and cash equivalents                  $    6,454    $    6,454     $   7,089    $    7,089

         MBS                                            15,601        15,601        19,124        19,124

         PIMs and PIMIs:
             PIMs                                       37,978        37,240        36,568        37,631
             Insured mortgages                          86,664        85,625       118,389       121,208
             Additional loans                           17,655        17,655        22,292        22,292
                                                    ----------    ----------     ---------    ----------

                                                    $  164,352    $  162,575     $ 203,462    $  207,344
                                                    ==========    ==========     =========    ==========
</Table>

J.      SUBSEQUENT EVENT

        On February 13, 2002, the Trust received a prepayment of the Norumbega
        Subordinated Promissory Note and the Norumbega Pointe Additional Loan
        note. The Trust received $3,063,000 of Additional Loan principal,
        $302,877 of Shared Appreciation Interest and $2,280,362 of preferred
        interest. The Trust received $15,123,167 representing the principal
        proceeds on the first mortgage note on February 25, 2002. The Trust
        intends to pay a special dividend of $1.14 per share from the proceeds
        of the Norumbega Pointe prepayment in the first quarter of 2002.

                                      F-20
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

2001

<Table>
<Caption>
                  Balance at     Charged to                       Balance at
                  Beginning      costs and                          end of
Description       of Period       expenses       Recoveries         period
-----------      ------------   ------------    -------------    ------------
<S>              <C>            <C>             <C>              <C>
Valuation
Allowance        $  2,000,000   $          -    $  (1,500,000)   $    500,000
                 ============   ============    =============    ============
</Table>

2000

<Table>
<Caption>
                  Balance at     Charged to                       Balance at
                  Beginning      costs and                          end of
Description       of Period       expenses       Recoveries         period
-----------      ------------   ------------    -------------    ------------
<S>              <C>            <C>             <C>              <C>
Valuation
Allowance        $  2,994,000   $          -    $    (994,000)   $  2,000,000
                 ============   ============    =============    ============
</Table>

1999

<Table>
<Caption>
                  Balance at     Charged to                       Balance at
                  Beginning      costs and                          end of
Description       of Period       expenses       Recoveries         period
-----------      ------------   ------------    -------------    ------------
<S>              <C>            <C>             <C>              <C>
Valuation
Allowance        $  2,994,000   $          -    $           -    $  2,994,000
                 ============   ============    =============    ============
</Table>

                                      F-21
<Page>

                        KRUPP GOVERNMENT INCOME TRUST II

                               SUPPLEMENTARY DATA
                        SELECTED QUARTERLY FINANCIAL DATA
                                   (Unaudited)

                              FOR THE QUARTER ENDED

<Table>
<Caption>
                         March 31,         June 30,       September 30,     December 31,
                           2001             2001              2001              2001
                     ---------------   ---------------   ---------------   ---------------
<S>                  <C>               <C>               <C>               <C>
Total revenues       $     6,360,137   $     3,476,744   $    12,808,257   $     2,684,679
                     ===============   ===============   ===============   ===============

Net income           $     4,926,015   $     2,516,304   $    11,911,501   $     2,787,158
                     ===============   ===============   ===============   ===============

Earnings per Share   $           .27   $           .14   $           .64   $           .16
                     ===============   ===============   ===============   ===============
</Table>

                              FOR THE QUARTER ENDED

<Table>
<Caption>
                         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>

                                      F-22