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


                                  FORM 10-K

(Mark One)

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

For the fiscal year ended       December 31, 1999

                                      OR

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

For the transition period from        to

Commission file number              0-16817

                  Krupp Insured Plus-II Limited Partnership
            (Exact name of registrant as specified in its charter)

         Massachusetts                              04-2955007
(State or other jurisdiction of             (IRS Employe Identification No.)
incorporation or organization)



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

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

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

     Securities  registered  pursuant  to  Section  12(g) of the  Act:  Units of
     Depositary Receipts representing Units of Limited Partner Interests.

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
     required to be filed by Section 13 or 15(d) of the Securities  Exchange Act
     of 1934 during the preceding 12 months (or for such shorter period that the
     registrant was required to file such reports),  and (2) has been subject to
     such filing requirements for the past 90 days.

     Yes   X    No

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
     405 of Regulation S-K is not contained  herein,  and will not be contained,
     to the best of registrant's  knowledge,  in definitive proxy or information
     statements  incorporated  by reference in Part III of this Form 10-K or any
     amendment to this Form 10-K. [ ].

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

     Documents incorporated by reference: See Part IV, Item 14

     The exhibit index is located on pages 10-11.


<PAGE>



                                      PART I

     This form 10-K contains  forward-looking  statements  within the meaning of
     Section 27A of the Securities Act of 1933 and Section 21e of the Securities
     Exchange Act of 1934.  Actual  results could differ  materially  from those
     projected  in the  forward-looking  statements  as a result  of a number of
     factors, including those identified herein.

ITEM 1.  BUSINESS

     Krupp  Insured  Plus-II  Limited   Partnership  (the  "Partnership")  is  a
     Massachusetts limited partnership which was formed on October 29, 1986. The
     Partnership raised  approximately $292 million through a public offering of
     limited  partner  interests  evidenced  by  units  of  depositary  receipts
     ("Units")   and  used  the   investable   proceeds   primarily  to  acquire
     participating  insured mortgages  ("PIMs") and  mortgage-backed  securities
     ("MBS").  The  Partnership  considers  itself  to be  engaged  only  in the
     industry segment of investment in mortgages.

     The   Partnership's   investments  in  PIMs  on  multi-family   residential
     properties  consist  of a MBS (the  "insured  mortgage")  guaranteed  as to
     principal  and basic  interest.  These  insured  mortgages  were  issued or
     originated  under  or  in  connection  with  the  housing  program  of  the
     Government  National  Mortgage  Association  ("GNMA").   PIMs  provide  the
     Partnership  with monthly payments of principal and basic interest and also
     provide for Partnership  participation in the current revenue stream and in
     residual value, if any, from a sale or other  realization of the underlying
     property.  The borrower  conveys these rights to the Partnership  through a
     subordinated  promissory note and mortgage.  The participation features are
     neither insured nor guaranteed.

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

     Although the Partnership  will terminate no later than December 31, 2026 it
     is expected  that the value of the PIMs  generally  will be realized by the
     Partnership  through repayment or sale as early as ten years from the dates
     of the  closings  of the  permanent  loans  and that the  Partnership  will
     realize  the value of all of its other  investments  within that time frame
     thereby resulting in a dissolution of the Partnership  significantly  prior
     to December 31, 2026.

     The  Partnership's  investments  are not expected to be subject to seasonal
     fluctuations. Any ultimate realization of the participation features of the
     PIMs are  subject to similar  risks  associated  with  equity  real  estate
     investments,  including:  reliance on the owner's operating skills, ability
     to maintain  occupancy  levels,  control operating  expenses,  maintain the
     properties and provide  adequate  insurance  coverage;  adverse  changes in
     general  economic  conditions,  adverse  local  conditions,  and changes in
     governmental  regulations,  real estate zoning laws, or tax laws; and other
     circumstances over which the Partnership may have little or no control.

     The requirements for compliance with federal,  state and local  regulations
     to date have not had an adverse effect on the Partnership's operations, and
     no adverse effect is anticipated in the future.

     As of December 31, 1999, there were no personnel  directly  employed by the
     Partnership.

ITEM 2.  PROPERTIES

     None

ITEM 3.  LEGAL PROCEEDINGS

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

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

None.


<PAGE>


                                 PART II

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

    There currently is no established trading market for the Units.

     The  number  of  investors  holding  Units  as of  December  31,  1999  was
     approximately  13,200.  One of the  objectives  of  the  Partnership  is to
     provide  quarterly  distributions of cash flow generated by its investments
     in mortgages.  The  Partnership  anticipates  that future  operations  will
     continue to generate cash available for  distribution.  Adjustments  may be
     made to the  distribution  rate in the future due to realization and payout
     of the existing mortgages.

     During  1999,  the  Partnership  made  special   distributions   consisting
     primarily of principal  proceeds from the Stanford  Court,  Hillside Court,
     Carlyle Court,  Waterford Court,  Country Meadows and Le Coeur du Monde PIM
     prepayments.  The Partnership may make special  distributions in the future
     if PIMS prepay or a sufficient amount of cash is available from MBS and PIM
     principal collections.  On January 11, 2000, the Partnership paid a special
     distribution of $.43 per Unit from the Saratoga Apartments  prepayment that
     occurred in December 1999.  The  Partnership  anticipates  making a special
     distribution  of  $.58  per  Unit  in  March  2000  due to  the  Greenhouse
     Apartments PIM prepayment that occurred in February 2000.

     During  1998,  the  Partnership  made  special   distributions   consisting
     primarily of principal  proceeds from the Walden Village,  Longwood Villas,
     Harbor House,  Westbrook Manor, Fallwood and Greenbrier PIM prepayments and
     the repayment of the Brookside and Lily Flagg multi-family MBS's.

     The Partnership  made the following  distributions,  to its Partners during
     the two years ended December 31, 1999 and 1998:

<TABLE>
<CAPTION>

                                                       1999                              1998
                                               Amount      Per Unit            Amount           Per Unit

Distributions:
<S>                                       <C>                <C>           <C>                    <C>
   Limited Partners                       $  11,138,189      $ .76         $   16,414,173         $1.12
   General Partners                             217,645                           385,355

                                             11,355,834                        16,799,528

Special Distributions:
      Limited Partners                       51,587,401      $3.52             56,716,830         $3.87

Total Distributions                       $  62,943,235                    $   73,516,358
</TABLE>






ITEM 6.  SELECTED FINANCIAL DATA

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


<PAGE>

<TABLE>
<CAPTION>

                                       1999                  1998                  1997              1996              1995

<S>                            <C>                      <C>                   <C>                 <C>               <C>
Total revenues                 $    7,822,665           $15,335,618           $16,672,558         $15,855,280       $16,366,468

Net income                          6,146,718              12,017,670           12,972,600          12,331,212        12,656,200

Net income allocated to:
   Limited Partners                 5,962,316              11,657,140           12,583,422          11,961,276        12,276,514
   Average per Unit                    .41                       .80                   .86                 .82               .84

  General Partners                    184,402                 360,530              389,178             369,936           379,686
  Total assets at
   December 31                     60,161,993             117,626,762          180,126,977         207,552,419       212,789,466

  Distributions to:
   Limited Partners                11,138,189              16,414,173           16,414,173          16,414,171        16,414,173
   Average per Unit                       .76                   1.12                  1.12                1.12              1.12

    Special                        51,587,401              56,716,830           24,767,815                -               -

    Average per Unit                     3.52                   3.87                  1.69               -                -

  General Partners                    217,645                 385,355              436,626             432,214           430,359
</TABLE>


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

     Management's  Discussion and Analysis of Financial Condition and Results of
     Operations contains  forward-looking  statements including those concerning
     Management's  expectations  regarding the future financial  performance and
     future events.  These  forward-looking  statements involve significant risk
     and  uncertainties,  including those described  herein.  Actual results may
     differ   materially   from  those   anticipated  by  such   forward-looking
     statements.

    Impact of the Year 2000 Issue

     Starting  in 1997 the  General  Partners  conducted  an  assessment  of the
     Partnership's  core internal and external computer  information  systems to
     understand  the nature and extent of work required to make its systems Year
     2000 ready.  The Year 2000 readiness issue was concerned with the inability
     of computerized information systems to accurately calculate, store or use a
     date after 1999.  The General  Partners  believed that a system  failure or
     miscalculation could cause disruptions of operations.

     As a result of this  concern,  the  General  Partners,  along with  certain
     affiliates,  upgraded their computer  systems  including their hardware and
     software  so they  would be Year  2000  ready.  In  addition,  the  General
     Partners surveyed the Partnership's  material third-party service providers
     and  significant  vendors and received  assurances that they were Year 2000
     ready.  The General  Partners also developed  contingency  plans for all of
     their  "mission-critical functions" to insure  business  continuity.  As a
     result of these efforts and the efforts of third parties, the Year 2000 did
     not result in any disruption of activities to the Partnership.

<PAGE>

    Liquidity and Capital Resources

     The  most  significant  demands  on the  Partnership's  liquidity  are  the
     quarterly  distributions  paid to investors of approximately  $1.5 million.
     Funds for  investor  distributions  come  from the  monthly  principal  and
     interest payments  received on the PIMs and MBS, the principal  prepayments
     of the PIMs and MBS, and interest earned on the Partnership's cash and cash
     equivalents.  In general,  the General  Partners try to set a  distribution
     rate that provides for level  quarterly  distributions.  To the extent that
     quarterly  distributions  do not  fully  utilize  the  cash  available  for
     distribution  and cash balances  increase,  the General Partners may adjust
     the   distribution   rate  or  distribute  such  funds  through  a  special
     distribution.  The portion of  distributions  attributable to the principal
     collections  reduces  the  capital  resources  of the  Partnership.  As the
     capital  resources  decrease,  the total cash flows to the Partnership also
     will  decrease  and over time will  result in periodic  adjustments  to the
     distributions paid to investors.  The General Partners  periodically review
     the distribution rate to determine whether an adjustment is necessary based
     on  projected  future cash flows.  At this time the General  Partners  have
     determined that the Partnership can maintain its current  distribution rate
     of $.40 per Unit per year.

     On February 16, 2000 the Partnership  received the remaining balance on the
     Greenhouse  Apartments  PIM in the  amount of  $8,428,984.  The  underlying
     property was  foreclosed on by the first  mortgage  lender  during  January
     1999. The Partnership  continued to receive its full principal and interest
     payments  due on the PIM  while  the  underlying  mortgage  was in  default
     because those  payments were  guaranteed by GNMA. The  Partnership  did not
     receive any  participation  income from this  transaction and anticipates a
     first quarter special distribution of $.58 per unit.

     On January 11, 2000, the  Partnership  paid a special  distribution of $.43
     per Unit from the Saratoga Apartment PIM prepayment  proceeds in the amount
     of  $6,204,960,  received in December  1999.  The Saratoga PIM was paid off
     during 1999 when the property was refinanced. The underlying property value
     had  not  increased  sufficiently  enough  to  meet  the  criteria  for the
     Partnership to earn any participation income.

     On November 22, 1999 the  Partnership  paid a special  distribution of $.72
     per Unit from the Le Coeur du Monde  Apartments PIM prepayment  proceeds in
     the amount of $9,422,001,  received in October 1999. The  partnership  also
     received  participation income from its Le Coeur du Monde PIM investment in
     the  amount  of  $472,587  of  accrued  and  unpaid   participation  income
     attributable to property operations and $1,102,701 of participation  income
     attributable to the  Partnership's  share in the increase in the property's
     value.

     On June 18, 1999 the  Partnership  paid a special  distribution of $.83 per
     Unit from the Country  Meadows  Apartment  PIM  prepayment  proceeds in the
     amount of $12,015,224,  received in May 1999. The underlying property value
     had  not  increased  sufficiently  enough  to  meet  the  criteria  for the
     Partnership to earn any participation income. The Partnership did receive a
     $60,076 prepayment premium for the early payoff of the Country Meadows PIM.

     On February 26, 1999, the Partnership paid a special  distribution of $1.97
     per Unit  from the  prepayments  of the  Stanford  Court,  Hillside  Court,
     Carlyle Court and Waterford  Court Apartment PIMs. On January 25, 1999, the
     Partnership  received  prepayments of the Stanford  Court,  Hillside Court,
     Carlyle  Court  and  Waterford  Court  Apartment  PIMs  in the  amounts  of
     $6,609,242,   $4,266,759,  $7,696,897  and  $9,394,386,   respectively.  In
     addition to the prepayments,  the Partnership  received  $860,052 of Shared
     Appreciation  Interest  and  prepayment  penalties  and $432,877 of Minimum
     Additional Interest and Shared Income Interest during December 1998.

     During  1998,  the  Partnership  made  three  special  distributions.   The
     Partnership made special distributions of $.94, $1.63 and $1.30 per Unit in
     March  1998,  July 1998 and  December  1998,  respectively.  The March 1998
     special  distribution   consisted  of  the  prepayment  proceeds  from  the
     Fallwood,   Greenbrier   and   Westbrooks   PIMs.  The  July  1998  special
     distributions consisted of the prepayment proceeds from the Longwood Villas
     and  Harbor  House  PIMs and the  prepayment  proceeds  from the  Brookside
     insured mortgage.  The December 1998 special distribution  consisted of the
     prepayment  proceeds from the Walden Village PIM and the Lily Flagg insured
     mortgage.

     In addition to providing insured or guaranteed  monthly principal and basic
     interest  payments,  the  Partnership's  PIM  investments  also may provide
     additional  income  through  its  participation  feature in the  underlying
     properties  if they operate  successfully.  The  Partnership  may receive a
     share in any operating cash flow that exceeds debt service  obligations and
     capital needs or a share in any  appreciation  in value when the properties
     are sold or refinanced.  However,  this participation is neither guaranteed
     nor insured,  and it is dependent upon whether  property  operations or its
     terminal value meet certain criteria.

     The  Partnership's  only remaining PIM  investments are the GNMA securities
     backed by the first mortgage loans on Denrich Apartments and Richmond Park.
     Both  properties  are thirty years old, and as they have aged,  rental rate
     increases  have not kept pace  with the  increasing  costs of  maintenance,
     repairs and replacements.  Denrich Apartments does not compete successfully
     in the  Philadelphia  neighborhood  where it is located.  Occupancy,  which
     generally  fluctuates in the mid 80% range,  is adversely  affected by cash
     constraints  that  have lead to  extensive  deferred  maintenance.  Denrich
     Apartments   operates  under  a  long  term  workout   agreement  with  the
     Partnership  that  expires  at  the  end  of  2000.  The  General  Partners
     anticipate  the workout will be  renegotiated  and extended  under  similar
     terms.  Richmond Park maintains its position in the stable, older Cleveland
     suburb  where it is  located.  Occupancy  generally  hovers  in the low 90%
     range, but because the  neighborhood  does not support  significant  rental
     rate  increases,  the  property  only  generates  sufficient  cash flow for
     adequate   maintenance   and  not  enough  to  provide  for  major  capital
     improvements. Based on these conditions, the General Partners do not expect
     the  Partnership  will receive  significant  participation  income from the
     operations of either of the remaining PIM investments.

<PAGE>

     During the first five years, owners are prohibited from prepaying the first
     mortgage loans  underlying the PIMs.  During the second five years,  owners
     may prepay the loans by incurring a prepayment penalty. The Partnership has
     the option to call certain PIMs by accelerating  their maturity if they are
     not prepaid by the tenth year after permanent funding. The General Partners
     will  determine  the merits of  exercising  the call option for each PIM as
     economic  conditions  warrant.  Such factors as the condition of the asset,
     local market conditions,  the interest-rate environment and availability of
     financing will affect those decisions.

    Assessment of Credit Risk

     The Partnership's investments in mortgages are guaranteed or insured by the
     Government National Mortgage Association ("GNMA"),  Fannie Mae, the Federal
     Home Loan Mortgage Corporation ("FHLMC") or the United States Department of
     Housing and Urban Development  ("HUD") and therefore the certainty of their
     cash flows and the risk of material loss of the amounts invested depends on
     the creditworthiness of these entities.

     Fannie Mae is a federally  chartered  private  corporation  that guarantees
     obligations  originated under its programs.  FHLMC is a federally chartered
     corporation that guarantees  obligations  originated under its programs and
     is  wholly-owned by the twelve Federal Home Loan Banks.  These  obligations
     are not  guaranteed  by the U.S.  Government  or the Federal Home Loan Bank
     Board.  GNMA  guarantees the timely payment of principal and basic interest
     on the securities it issues,  which represents interest in pooled mortgages
     insured  by  HUD.  Obligations  insured  by  HUD,  an  agency  of the  U.S.
     Government, are backed by the full faith and credit of the U.S. Government.

     At December 31, 1999 the Partnership  includes in cash and cash equivalents
     approximately  $10.6  million  of  commercial  paper,  which is  issued  by
     entities with a credit rating equal to one of the top two rating categories
     of a nationally recognized statistical rating organization.

    Interest Rate Risk

     The  Partnership's  primary market risk exposure is to interest rate risk,
     which can be defined  as the  exposure  of the  Partnership's  net  income,
     comprehensive  income  or  financial  condition  to  adverse  movements  in
     interest rates. At December 31, 1999, the Partnership's PIMs, PIMIs and MBS
     comprise the majority of the Partnerhsip's  assets.  As such,  decreases in
     interest  rates  may   accelerate  the  prepayment  of  the   Partnership's
     investments.  The  Partnership  does not utilize any  derivatives  or other
     instruments to manage this risk as the Partnership plans to hold all of its
     investments to expected maturity.

     The Partnership  monitors  prepayments and considers  prepayment trends, as
     well as distribution requirements of the Partnership,  when setting regular
     dividend distribution 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   Partnership
     incorporates  prepayment assumptions into planning as individual properties
     notify the Partnership of the intent to prepay or as they mature.


<PAGE>

     The  table  below  provides   information  about  the  Company'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 by expected  maturity dates.  The expected  maturity
     date is contractual maturity adjusted for expectations of prepayments.

<TABLE>
<CAPTION>

                                    Expected maturity dates ($ in thousands)


                               2000     2001     2002      2003      2004    Thereafter     Total      Fair
                                                                                                       Value



Interest-sensitive assets:

<S>                         <C>        <C>      <C>        <C>      <C>       <C>          <C>        <C>
MBS                         $  1,527   $ 1,347  $ 1,194    $1,066   $  959    $  16,190    $22,283    $22,151
Weighted
Average interest rate           7.68%     7.68%    7.68%     7.68%    7.68%        7.68%      7.68%

PIMs                           8,685       271      292       315      340       16,321     26,224     26,702
Weighted
Average interest rate           7.28%     7.28%    7.28%     7.28%    7.28%        7.28%      7.28%

Total Interest-
sensitive assets            $ 10,212   $ 1,618   $1,486    $1,381   $1,299    $  32,511    $48,507    $48,853
</TABLE>


    Results of Operations

     The following discussion relates to the operation of the Partnership during
     the years ended December 31, 1999, 1998 and 1997.

<TABLE>
<CAPTION>
                                                         (Amounts in thousands)
                                                                1999            1998               1997
         Interest income on PIMs:
<S>                                                         <C>              <C>                <C>
           Basic interest                                   $   3,682        $   7,417          $  11,090
           Participation interest                               1,635            3,753              1,816
         Interest income on MBS                                 1,826            3,083              3,099
         Other interest income                                    680            1,083                668
         Partnership expenses                                    (778)          (1,287)            (1,793)
         Amortization of prepaid fees and
           expenses                                              (898)          (2,031)            (1,907)

              Net Income                                    $   6,147        $  12,018          $  12,973
</TABLE>

     Net income  decreased  during  1999 as compared  to 1998  primarily  due to
     significantly  lower  interest  income on PIMs,  MBS,  and  Other  interest
     income. This was partially offset by decreases in partnership  expenses and
     amortization.  The reduction in basic interest on PIMs is due to the payoff
     of the Carlyle Court,  Hillside  Court,  Stanford Court,  Waterford  Court,
     Country  Meadows  and Le  Coeur du Monde  PIMs in 1999,  and the  Westbrook
     Manor,  Fallwood,  Greenbrier,  Harbor House,  Walden  Village and Longwood
     Villas  PIMs  during  1998.  Participation  income  was  higher  in 1998 as
     compared  to  1999  due  primarily  to  the  Partnership  realizing  Shared
     Appreciation  Interest and/or  prepayment  premiums from the prepayments of
     the Westbrook Manor, Fallwood, Greenbrier, Walden Village, Harbor House and
     Longwood  Villas PIMs and the Brookside  and Lily Flagg  insured  mortgages
     which were in excess of those  amounts  received  when the  Carlyle  Court,
     Hillside  Court,  Stanford  Court,  Waterford  Court,  Country  Meadows and
     LeCouer du Monde PIMs prepaid during 1999. The reduction in interest income
     on MBS is due  primarily  to the  payoff of the Lily  Flagg  and  Brookside
     multi-family  MBS  during  1998 along with  continuing  prepayments  on the
     Partnership's  single-family MBS. The decrease in Partnership  expenses was
     due to a decrease in asset  management  fees which were a result of the PIM
     prepayments mentioned above that reduced the asset base.  Amortization also
     decreased due to the PIM  prepayments.  Other interest income  decreased in
     1999 as compared to 1998 due to  significantly  lower average cash balances
     available for short-term investing in 1999 versus 1998.

<PAGE>

     Net income  decreased  during  1998 as compared  to 1997  primarily  due to
     significantly  lower basic interest on PIMs.  This was partially  offset by
     increases in participation  income and other interest income and a decrease
     in Partnership expenses. The significant decrease in basic interest on PIMs
     was caused by the prepayments of the Westbrook Manor, Fallwood, Greenbrier,
     Harbor  House,  Walden  Village  and  Longwood  Villas PIMs during 1998 and
     Lakeside,  Colonial Park and Pine Ridge PIMs during 1997.  The  Partnership
     realized a significant  increase in  participation  income due primarily to
     Shared  Appreciation  Income and prepayment premiums realized from the 1998
     PIM prepayments of the Harbor House, Westbrook Manor, Fallwood, Greenbrier,
     Walden Village and Longwood  Villas  Apartment  PIMs, and the Brookside and
     Lily Flagg MBS as compared to amounts  received  from the 1997 Lakeside PIM
     prepayment.  The Partnership  also realized Shared Income Interest from its
     PIMs in 1998 which exceeded the amount realized during 1997. Other interest
     income  increased due to the Partnership  having higher average  short-term
     investment  balances as a result of the prepayments  mentioned  above.  The
     decrease in Partnership  expenses was due to a decrease in asset management
     fees which were a result of the 1998 PIM prepayments mentioned above.

     As the  Partnership  distributes  principal  collections  on MBS  and  PIMs
     through  quarterly or special  distributions,  the  invested  assets of the
     Partnership will decline which should result in a continuing decline in net
     income.


ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                  See Appendix A to this report.


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

                  None.

                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The Partnership has no directors or executive  officers.  Information as to
     the directors and executive  officers of Krupp Plus Corporation  which is a
     General  Partner of the  Partnership and is the general partner of Mortgage
     Services Partners Limited  Partnership,  which is the other General Partner
     of the Partnership, is as follows:
<TABLE>
<CAPTION>

<S>                        <C>
Name and Age               Position with Krupp Plus Corporation

Douglas Krupp (53)         President, Co-Chairman of the Board and Director
George Krupp (55)          Co-Chairman of the Board and Director
Peter F. Donovan (46)      Senior Vice President
Ronald Halpern (58)        Senior Vice President
Carol Mills (50)           Vice President
Robert A. Barrows (42)     Vice President and Treasurer
</TABLE>

     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 and
     financial  management,  and ownership of three operating  companies through
     private equity investments.  Mr. Krupp has held the position of Co-Chairman
     since The Berkshire  Group was  established as The Krupp  Companies in 1969
     and he has served as the Chief  Executive  Officer  since 1992.  Mr.  Krupp
     serves as a member of the Board of Trustees at Brigham & Women's  Hospital.
     He is a graduate of Bryant College where he received an honorary  Doctor of
     Science in Business Administration in 1989 and was elected trustee in 1990.
<PAGE>

     George Krupp (age 55) 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 and financial management, and ownership
     of three operating companies through private equity investments.  Mr. Krupp
     has  held the  position  of  Co-Chairman  since  The  Berkshire  Group  was
     established  as The  Krupp  Companies  in  1969.  Mr.  Krupp  has  been  an
     instructor   of  history  at  the  New  Jewish   High  School  in  Waltham,
     Massachusetts since September of 1997. Mr. Krupp attended the University of
     Pennsylvania and Harvard  University and holds a Master's Degree in History
     from Brown University.

     Peter F. Donovan 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 16th largest commercial mortgage servicer
     in the United  States with a servicing  and asset  management  portfolio of
     $7.2  billion.  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.

     Ronald Halpern is President and COO 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. He is currently a member of the
     Advisory  Council for Fannie Mae and Freddie Mac and was 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.

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

     Carol J.C. Mills 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 the  Boston,  Bethesda  and
     Seattle offices of Berkshire  Mortgage  Finance.  She manages the estimated
     $7.2  billion  portfolio of loans.  Ms. Mills joined  Berkshire in December
     1997 as Vice President and was promoted to Senior Vice President in January
     1999. From January 1989 through November 1997, Ms. Mills was Vice President
     of  First  Winthrop  Corporation  and  Winthrop  Financial  Associates,  in
     Cambridge,  MA. Ms. Mills earned a B.A.  degree from Mount Holyoke  College
     and a Master of Architecture degree from Harvard University. Ms. Mills is a
     member of the Real Estate  Finance  Association,  New England Women in Real
     Estate and the Mortgage Bankers Association.

ITEM 11.      EXECUTIVE COMPENSATION

    The Partnership has no directors or executive officers.


ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     As of  December  31,  1999,  no person  owned of record or was known by the
     General  Partners  to own  beneficially  more than 5% of the  Partnership's
     14,655,512  outstanding Units. The only interests held by management or its
     affiliates  consist of its General  Partner and Corporate  Limited  Partner
     Interests.

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information  required  under  this  Item  is  contained  in  Note  F to the
     Partnership's Notes To Financial Statements presented in Appendix A to this
     report.


<PAGE>


                                     PART IV

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

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

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


(b)  Exhibits:

     Number and Description
     Under Regulation S-K

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

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

          (4.1)Amended and Restated  Agreement of Limited  Partnership  dated as
               of May  29,  1987  [Exhibit  A to  Prospectus  included  in  Post
               Effective Amendment No. 1 of Registrant's  Registration Statement
               on Form S-11 dated June 18, 1987 (File No. 33-9889)].*

          (4.2)Second Amendment to Agreement of Limited  Partnership dated as of
               June 17, 1987 [Exhibit 4.6 in Post  Effective  Amendment No. l of
               Registrant's  Registration  Statement on Form S-11 dated June 18,
               1987 (File No. 33-9889)].*

          (4.3)Subscription  Agreement  whereby a subscriber  agrees to purchase
               Units and adopts  the  provisions  of the  Amended  and  Restated
               Agreement  of  Limited  Partnership   [Exhibit  D  to  Prospectus
               included  in  Post  Effective  Amendment  No.  1 of  Registrant's
               Registration Statement on Form S-11 dated June 18, 1987 (File No.
               33-9889)].*

          (4.4)Copy of Amended  Certificate  of Limited  Partnership  filed with
               the Massachusetts  Secretary of State on April 28, 1987. [Exhibit
               4.4 in Amendment No. 1 of Registrant's  Registration Statement on
               Form S-11 dated May 14, 1987 (File No. 33-9889)].*

     (10)   Material Contracts:

          (10.1) Form of agreement  between the  Partnership  and Krupp Mortgage
               Corporation.  [Exhibit  10.3 in Amendment  No. 1 of  Registrant's
               Registration  Statement on Form S-11 dated May 14, 1987 (File No.
               33-9889)].*
<PAGE>

            Denrich Apartments

          (10.2) Prospectus  for GNMA Pool No.  267075 (PL).  [Exhibit  10.29 to
               Registrant's  Report on Form 10-K for the year ended December 31,
               1988 (File No. 0-16817)].*

          (10.3)  Subordinated   Multifamily  Mortgage  (including  Subordinated
               Promissory  Note)  dated  November  3,  1988  between  Arthur  J.
               Stagnaro and Krupp Insured Plus-II Limited Partnership.  [Exhibit
               10.30 to  Registrant's  Report  on Form  10-K for the year  ended
               December 31, 1988 (File No. 0-16817)].*

          (10.4)  Modification  Agreement  dated June 28, 1995 between Arthur J.
               Stagnaro and Krupp Insured Plus-II Limited  Partnership  [Exhibit
               10.1 to  Registrant's  Report on Form 10-Q for the quarter  ended
               June 30, 1995 (File No. 0-16817)].*


            The Greenhouse

          (10.5)  Prospectus  for  GNMA  Pools  No.  259233(CS)  and  259234(PN)
               [Exhibit 19.1 to Registrant's Report on Form 10-Q for the quarter
               ended March 31, 1989 (File No. 0-16817)].*

          (10.6) Subordinated  Multifamily Deed of Trust (including Subordinated
               Promissory Note) dated January 5, 1989 between Farnam  Associates
               Limited   Partnership   and   Krupp   Insured   Plus-II   Limited
               Partnership.  [Exhibit 19.2 to  Registrant's  Report on Form 10-Q
               for the quarter ended March 31, 1989 (File No. 0-16817)].*

            Richmond Park Apartments

          (10.7)  Prospectus  for  GNMA  Pool  No.  260865  (PL)  [Exhibit  1 to
               Registrant's  Report on Form 8-K dated  August 30, 1989 (File No.
               0-16817)].*

          (10.8)  Subordinated   Multifamily   Open-Ended   Mortgage  (including
               Subordinated  Promissory  Note) dated July 14, 1989  between Carl
               Milstein,  Trustee, Irwin Obstgarten,  Al Simon and Krupp Insured
               Plus-II Limited Partnership. [Exhibit 2 to Registrant's Report on
               Form 8-K dated August 30, 1989 (File No. 0-16817)]*

          (10.9)  Participation  Agreement  dated July 31,  1989  between  Krupp
               Insured  Mortgage  Limited  Partnership and Krupp Insured Plus-II
               Limited  Partnership.  [Exhibit 3 to Registrant's  Report on Form
               8-K dated August 30, 1989 (File No. 0-16817)].*

      * Incorporated by reference.

(c)  Reports on Form 8-K

     During  the  last  quarter  of  the  year  ended  December  31,  1999,  the
     Partnership did not file any reports on Form 8-K.


<PAGE>

                                    SIGNATURES

     Pursuant  to the  requirements  of Section  13 or 15 (d) of the  Securities
     Exchange  Act of 1934,  the  registrant  has duly  caused this report to be
     signed on its behalf by the undersigned,  thereunto duly authorized, on the
     9th day of March, 2000.

          KRUPP INSURED PLUS-II LIMITED PARTNERSHIP

          By: Krupp Plus Corporation,
              a General Partner



          By:  /s/  Douglas  Krupp
               Douglas  Krupp, President, Co-Chairman
               (Principal Executive Officer) and Director of
               Krupp Plus Corporation


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
     report  has been  signed  below by the  following  persons on behalf of the
     registrant and in the capacities indicated, on the 9th day of March, 2000.

Signatures                     Title(s)


 /s/Douglas Krupp     President, Co-Chairman (Principal Executive Officer) and
Douglas Krupp         Director of Krupp Plus Corporation, a General Partner

 /s/George Krupp      Co-Chairman (Principal Executive Officer) and Director of
George Krupp          Krupp Plus Corporation, a General Partner

 /s/Peter F. Donovan  Senior Vice President of Krupp Plus Corporation,
Peter F. Donovan      a General Partner


 /s/Robert A. Barrows Treasurer and Chief Accounting Officer of
Robert A. Barrows     Krupp Plus Corporation, a General Partner


<PAGE>





                                  APPENDIX A

                   KRUPP INSURED PLUS-II LIMITED PARTNERSHIP







                       FINANCIAL STATEMENTS AND SCHEDULE
                               ITEM 8 of FORM 10-K

            ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
                       For the Year Ended December 31, 1999


<PAGE>


                   KRUPP INSURED PLUS-II LIMITED PARTNERSHIP

                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULE




Report of Independent Accountants                                           F-3

Balance Sheets at December 31, 1999 and 1998                                F-4

Statements of Income and Comprehensive Income for the Years Ended
December 31, 1999, 1998 and 1997                                            F-5

Statements of Changes in Partners' Equity for the Years Ended
December 31, 1999, 1998 and 1997                                            F-6

Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997                                            F-7

Notes to Financial Statements                                        F-8 - F-15

Schedule IV - Mortgage Loans on Real Estate                         F-16 - F-17


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





<PAGE>



                       REPORT OF INDEPENDENT ACCOUNTANTS





To the Partners of  Krupp Insured Plus-II Limited Partnership:

     In our opinion,  the accompanying balance sheets and the related statements
     of income and comprehensive income, of partners' equity and of cash flows,
     and Schedule IV, present fairly,  in all material  respects,  the financial
     position of Krupp Insured Plus Limited  Partnership (the  "Partnership") at
     December 31, 1999 and 1998 and the results of its  operations  and its cash
     flows for each of the three years in the period ended  December 31, 1999 in
     conformity  with  auditing  principles  generally  accepted  in the  United
     States.   These  financial   statements  are  the   responsibility  of  the
     Partnership's  management;  our  responsibility is to express an opinion on
     these financial  statements based on our audits. We conducted our audits of
     these statements in accordance with auditing  standards  generally accepted
     in the United  States  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 expressed above.




                                                      PricewaterhouseCoopers LLP

  Boston, Massachusetts
  March 17, 2000














<PAGE>

<TABLE>
<CAPTION>

                                KRUPP INSURED PLUS-II LIMITED PARTNERSHIP

                                              BALANCE SHEETS

                                        December 31, 1999 and 1998


                                                   ASSETS
                                                                                                     1999               1998

Participating Insured Mortgages ("PIMs")
<S>                                                                                            <C>                  <C>
  (Notes B, C, H and I)                                                                        $  26,224,388        $  82,258,207
Mortgage-Backed Securities and multi-family insured
 mortgages("MBS") (Notes B, D and H)                                                              22,277,956           24,792,352

      Total mortgage investments                                                                  48,502,344          107,050,559

Cash and cash equivalents (Notes B, C, H and I)                                                   11,093,183            8,758,737
Interest receivable and other assets                                                                 378,286              730,829
Prepaid acquisition fees and expenses, net of
 accumulated amortization of $1,203,575 and $6,024,495
 respectively (Note B)                                                                               179,095              889,863
Prepaid participation servicing fees, net of
 accumulated amortization of $200,032 and $1,876,746,
 respectively (Note B)                                                                                 9,085              196,774

      Total assets                                                                             $  60,161,993        $ 117,626,762
</TABLE>


<TABLE>
<CAPTION>

                                                  LIABILITIES AND PARTNERS' EQUITY


<S>                                                                                            <C>                  <C>
Liabilities                                                                                    $      19,948        $     252,769

Partners' equity (deficit) (Notes A, C, E and I):

  Limited Partners                                                                                60,360,347          117,123,621
   (14,655,512 Units outstanding)
  General Partners                                                                                  (323,383)            (290,140)
   Accumulated comprehensive income(Note B)                                                          105,081              540,512

    Total Partners' equity                                                                        60,142,045          117,373,993

      Total liabilities and Partners' equity                                                   $  60,161,993         $117,626,762
</TABLE>



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


<PAGE>

<TABLE>
<CAPTION>
                          KRUPP INSURED PLUS-II LIMITED PARTNERSHIP

                         STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

                      For the Years Ended December 31, 1999, 1998 and 1997


                                                                                 1999               1998                  1997

      Revenues:
         Interest income - PIMs:
<S>                                                                         <C>                  <C>                 <C>
           Basic interest                                                   $  3,681,868         $  7,416,814        $  11,089,440
           Participation income                                                1,634,686            3,752,675            1,816,364
         Interest income - MBS                                                 1,826,026            3,083,259            3,098,699
         Other interest income                                                   680,085            1,082,870              668,055

                Total revenues                                                 7,822,665           15,335,618           16,672,558

      Expenses:
         Asset management fee to an affiliate (Note F)                           496,464              981,223            1,365,013
         Expense reimbursement to affiliates (Note F)                             94,160               57,448              162,269
      Amortization of prepaid fees and expenses (Note B)                         898,457            2,031,454            1,907,062
         General and administrative                                              186,866              247,823              265,614

                Total expenses                                                 1,675,947            3,317,948            3,699,958

      Net income (Notes E and G)                                               6,146,718           12,017,670           12,972,600

      Other Comprehensive Income:

         Net change in unrealized gain  on MBS                                  (435,431)          (1,228,708)           1,213,884

      Total Comprehensive Income                                           $   5,711,287        $  10,788,962         $ 14,186,484

      Allocation of net income (Notes E and G.):

         Limited Partners                                                  $   5,962,316        $  11,657,140         $ 12,583,422

         Average net income per Limited Partner
          Interest (14,655,512 Limited Partner                             $         .41        $         .80         $        .86
          interests outstanding)

         General Partners                                                  $     184,402        $     360,530         $    389,178
</TABLE>




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




<PAGE>

<TABLE>
<CAPTION>


                             KRUPP INSURED PLUS-II LIMITED PARTNERSHIP

                              STATEMENTS OF CHANGES IN PARTNERS' EQUITY

                        For the Years Ended December 31, 1999, 1998 and 1997



                                                                                       Accumulated           Total
                                                  Limited              General        Comprehensive         Partners'
                                                 Partners              Partners            Income             Equity

<S>                                            <C>                    <C>             <C>                   <C>
Balance at December 31, 1996                   $207,196,050           $ (217,867)     $     555,336         $207,533,519

Net income                                        12,583,422             389,178              -               12,972,600

Quarterly distributions                          (16,414,173)           (436,626)             -              (16,850,799)

Special distributions                            (24,767,815)             -                   -              (24,767,815)

Change in unrealized gain on MBS                      -                    -              1,213,884            1,213,884

Balance at December 31, 1997                     178,597,484            (265,315)         1,769,220          180,101,389

Net income                                        11,657,140             360,530             -                12,017,670

Quarterly distributions                          (16,414,173)           (385,355)            -               (16,799,528)

Special distributions                            (56,716,830)               -                -               (56,716,830)

Change in unrealized gain on MBS                      -                    -             (1,228,708)          (1,228,708)

Balance at December 31, 1998                     117,123,621            (290,140)           540,512          117,373,993

Net income                                         5,962,316             184,402              -                6,146,718

Quarterly distributions                          (11,138,189)           (217,645)             -              (11,355,834)

Special distributions                            (51,587,401)               -             -                  (51,587,401)

Change in unrealized loss on MBS                      -                     -              (435,431)            (435,431)

Balance at December 31, 1999                   $  60,360,347          $(323,383)        $   105,081        $  60,142,045
</TABLE>


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


<PAGE>

<TABLE>
<CAPTION>
                             KRUPP INSURED PLUS-II LIMITED PARTNERSHIP

                                       STATEMENTS OF CASH FLOWS

                        For the Years Ended December 31, 1999, 1998 and 1997


                                                                      1999                    1998                 1997
Operating activities:
<S>                                                             <C>                      <C>                   <C>
 Net income                                                     $   6,146,718            $   12,017,670        $ 12,972,600
 Adjustments to reconcile net income to net
  cash provided by operating activities:
   Amortization of premiums                                             -                        -                  231,706
   Amortization of prepaid fees and expenses                          898,457                 2,031,454           1,907,062
   Shared Appreciation Income and prepayment
    premiums                                                       (1,162,777)               (2,390,707)           (602,856)
   Changes in assets and liabilities:
         Decrease in interest receivable
          and other assets                                            352,543                   449,831             423,641
         (Decrease) increase in liabilities                          (232,821)                  227,181               6,688

            Net cash provided by operating activities               6,002,120               12,335,429          14,938,841

Investing activities:
   Principal collections on
      PIMs including Shared Appreciation Income
      and prepayment premiums of  $1,162,777 in 1999,
      $2,255,077 in 1998, and $602,856 in 1997, respectively       57,196,596                42,044,923          18,422,260
   Principal collections on MBS including
    prepayment premiums of $135,630 in 1998                         2,078,965                18,842,263           9,388,723

            Net cash provided by investing activities              59,275,561                60,887,186          27,810,983

Financing activities:
Quarterly Distributions                                           (11,355,834)              (16,799,528)        (16,850,799)
   Special distributions                                          (51,587,401)              (56,716,830)        (24,767,815)

    Net cash used for financing activities                        (62,943,235)              (73,516,358)        (41,618,614)

Net increase (decrease) in cash and equivalents                     2,334,446                  (293,743)          1,131,210

Cash and cash equivalents, beginning of year                        8,758,737                 9,052,480           7,921,270

Cash and cash equivalents, end of year                          $  11,093,183            $    8,758,737        $  9,052,480

Supplemental disclosure of non-cash investing
   activities:
   Reclassification of investment in a PIM to a MBS             $      -                 $      -              $ 11,850,469

</TABLE>


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

<PAGE>

                       KRUPP INSURED PLUS-II LIMITED PARTNERSHIP

                            NOTES TO FINANCIAL STATEMENTS

A. Organization

     Krupp Insured Plus-II Limited Partnership (the "Partnership") was formed on
     October  29, 1986 by filing a  Certificate  of Limited  Partnership  in The
     Commonwealth  of  Massachusetts.  The  Partnership  was  organized  for the
     purpose of investing in multi-family  loans and mortgage backed securities.
     The Partnership  issued all of the General Partner  Interests to Krupp Plus
     Corporation and Mortgage Services Partners Limited  Partnership in exchange
     for capital contributions aggregating $3,000. The Partnership terminates on
     December 31, 2026, unless terminated earlier upon the occurrence of certain
     events as set forth in the Partnership Agreement.

     The Partnership  commenced the public offering of Units on May 29, 1987 and
     completed its public offering having sold 14,655,412 Units for $292,176,381
     net of  purchase  volume  discounts  of  $931,859  as of May 27,  1988.  In
     addition, Krupp Depository owns one hundred units.

B. Significant Accounting Policies

     The  Partnership  uses the  following  accounting  policies  for  financial
     reporting  purposes,  which may differ in certain  respects from those used
     for federal income tax purposes (Note G).

MBS

     The Partnership,  in accordance with Financial Accounting Standards Board's
     Statement  115,  "Accounting  for  Certain  Investments  in Debt and Equity
     Securities"    ("FAS 115"),    classifies    its   MBS    portfolio   as
     available-for-sale.  As such the Partnership carries its MBS at fair market
     value and reflects any unrealized gains (losses) as a separate component of
     Partners' Equity. The Partnership  amortizes purchase premiums or discounts
     over the life of the  underlying  mortgages  using the  effective  interest
     method.

     Effective  January  1,  1998 the  Partnership  adopted  the,  Statement  of
     Financial  Accounting Standards No. 130, 'Reporting  Comprehensive  Income'
     (FAS 130).  FAS 130  established  standards for  reporting  and  displaying
     comprehensive  income and its  components.  FAS 130 requires  comprehensive
     income and its components,  as recognized under accounting standards, to be
     displayed  in a  financial  statement  with  the same  prominence  as other
     financial statements, if material.  Accordingly,  unrealized gains (losses)
     on the  Partnership's  available-for  sale securities have been included in
     other comprehensive income.

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

PIMs

     The Partnership  accounts for the MBS portion of its PIM in accordance with
     FAS 115 under  the  classification  of held to  maturity.  The  Partnership
     carries  the  Government  National  Mortgage  Association  ("GNMA")  MBS at
     amortized cost.

     Basic interest on PIMs is recognized based on the stated coupon rate of the
     GNMA MBS.  Participation  income is  recognized  as earned and when  deemed
     collectible by the Partnership.

Cash and Cash Equivalents

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




                                      Continued
<PAGE>

                        KRUPP INSURED PLUS-II LIMITED PARTNERSHIP

                              NOTES TO FINANCIAL STATEMENTS



B. Significant Accounting Policies, continued

Prepaid Fees and Expenses

     Prepaid  fees and  expenses  consist of  acquisition  fees and expenses and
     participation  servicing  fees paid for the  acquisition  and  servicing of
     PIMs. The Partnership amortizes prepaid acquisition fees and expenses using
     a method that  approximates the effective  interest method over a period of
     ten to twelve years,  which  represents the actual  maturity or anticipated
     payoff of the underlying mortgage.

     The  Partnership  amortizes  prepaid  participation  servicing fees using a
     method that  approximates  the  effective  interest  method over a ten-year
     period beginning at final endorsement of the loan.

Income Taxes

     The  Partnership  is not liable for federal or state income  taxes  because
     Partnership income is allocated to the partners for income tax purposes. If
     the  Partnership's tax returns are examined by the Internal Revenue Service
     or state taxing  authority and such an  examination  results in a change in
     Partnership taxable income, such change will be reported to the partners.

Estimates and Assumptions

     The  preparation  of financial  statements  in  accordance  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that  affect the  reported  amount of assets and  liabilities,
     contingent  assets and  liabilities  and revenues  and expenses  during the
     period. Actual results could differ from those estimates.

C. PIMs

     At December 31, 1999 and 1998,  the  Partnership  had  investments in three
     PIMs and six PIMs,  respectively.  The Partnership's PIMs consist of a GNMA
     MBS  representing  the  securitized  first  mortgage loan on the underlying
     property and participation interests in the revenue stream and appreciation
     of the  underlying  property  above  specified  base  levels.  The borrower
     conveys these participation features to the Partnership generally through a
     subordinated promissory note and mortgage (the "Agreement").

     The Partnership receives guaranteed monthly payments of principal and basic
     interest on the GNMA MBS and HUD insures the first mortgage loan underlying
     the GNMA MBS.

     The borrower usually cannot prepay the first mortgage loan during the first
     five  years and  usually  may  prepay the first  mortgage  loan  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
     Partnership  may receive income 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"  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" is 25% 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"  is  25%  of  any  increase  in  the  value  of the
     underlying  property  in excess of a  specified  base.  Payment  of Minimum
     Additional  Interest and Shared Income  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.


                                       Continued
<PAGE>

                        KRUPP INSURED PLUS-II LIMITED PARTNERSHIP

                             NOTES TO FINANCIAL STATEMENTS


C. PIMs, continued

     The total amount of Minimum Additional Interest, Shared Income Interest and
     Shared Appreciation interest payable on the maturity date by the underlying
     borrower  usually  cannot  exceed  50%  of any  increase  in  value  of the
     property.

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

     Under the  Agreement,  the  Partnership,  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.

     In December 1999, the Partnership received principal of $6,204,960 from the
     repayment  of  the  Saratoga  Apartments  PIM.  On  January  11,  2000  the
     Partnership  paid a  special  distribution  of  $.43  per  Limited  Partner
     interest from the principal proceeds from the Saratoga payoff.

     In September 1999, the Partnership  received Shared  Appreciation  Interest
     and accrued Minimum Additional and Shared Income Interest of $1,102,701 and
     $472,587,  respectively  in connection  with the Le Coeur du Monde PIM. The
     Partnership also received  $279,447  relating to repayment of interest rate
     rebates.  The Partnership  received the principal proceeds of $9,422,001 in
     October.  The  principal  proceeds  and  Shared  Appreciation  Income  were
     distributed to the Limited Partners through a special  distribution of $.72
     per Limited Partner interest on November 22, 1999.

     On June 18, 1999, the Partnership  made a special  distribution of $.83 per
     Limited Partner  interest with the proceeds of the Country Meadows PIM. The
     Partnership  received  principal of $12,015,224 and a prepayment premium of
     $60,076 from this prepayment.

     On February 26, 1999 the  Partnership  made a special  distribution  to the
     Limited  Partners  of $1.97 per  Limited  Partner  Interest.  This  special
     distribution  was the  result  of the  prepayment  of the  Stanford  Court,
     Hillside  Court,  Carlyle Court and Waterford  Court  Apartment  PIMs.  The
     Partnership  received  principal of  $27,967,284  during  January 1999, and
     Shared  Appreciation  Interest and  prepayment  premiums of  $860,052,  and
     accrued  Minimum  Additional and Shared Income  Interest of $432,877 during
     December 1998 from these prepayments.

     On October 19, 1998,  the  Partnership  received a prepayment on the Walden
     Village  Apartment's PIM of $6,990,486.  Also, the  Partnership  received a
     prepayment premium of $165,599. On December 4, 1998, the Partnership made a
     special distribution to the investors of $.49 per Limited Partner interest.

     During the second quarter of 1998, the Partnership  received prepayments of
     the Harbor House and  Longwood  Villas  Apartments  PIMs.  The  Partnership
     received the outstanding  principal balance of $12,146,408 and a prepayment
     premium of $750,000 from the Harbor House PIM and the outstanding principal
     balance  of  $6,261,587  from the  Longwood  Villas  PIM.  During the first
     quarter of 1998, the Partnership  received a prepayment  premium of $62,616
     from the Longwood Villas PIM. The Partnership  made a special  distribution
     of $.43 per  Limited  Partner  interest  relating  to the  Longwood  Villas
     Apartments  PIM on July 17,  1998 and a  special  distribution  of $.88 per
     Limited Partner  interest for the Harbor House Apartment PIM prepayment was
     made on July 24, 1998.



                                      Continued
<PAGE>

                       KRUPP INSURED PLUS-II LIMITED PARTNERSHIP

                             NOTES TO FINANCIAL STATEMENTS

C. PIMs, continued

     During the first quarter of 1998, the Partnership  received  prepayments of
     the Westbrook Manor,  Fallwood and Greenbrier Apartment PIMs in the amounts
     of $4,841,446, $6,505,922, and $2,196,031, respectively. In addition to the
     prepayments,  the  Partnership  received  $416,810  of Shared  Appreciation
     Interest and  $632,002 of Minimum  Additional  Interest  and Shared  Income
     Interest. On March 27, 1998, the Partnership made a special distribution to
     the investors of $.94 per Limited Partner interest.

     At December 31, 1999 and 1998 there were no loans within the  Partnership's
     portfolio that were delinquent as to principal or interest.

<TABLE>
<CAPTION>

     Listed in the chart is a summary of the Partnership's PIM investments.  The
     Partnership's  PIMs  consisted  of the  following  at December 31, 1999 and
     1998:


                   Aggregate        Number          Permanent
                    Original        of PIMs         Interest            Maturity                Investment Basis
Issuer             Principal     at 12/31/99       Rate Range          Date Range                at December 31,
                                                                                             1999               1998
<S>             <C>                    <C>        <C>                  <C>                <C>                <C>
GNMA            $ 28,310,900           3          6.75%-8.5%           12/23 - 2/30       $26,224,388        $54,290,923
                                      (a)            (b)
Fannie
   Mae              -                  -              -                     -                   -             27,967,284

                $ 28,310,900           3                                                  $26,224,388        $82,258,207
</TABLE>

          (a)  Includes one PIM - Richmond Park - in which the Partnership holds
               a 62% interest and the remaining  portion is held by an affiliate
               of the Partnership.

          (b)  On June 28, 1995, the Partnership  entered into a temporary basic
               interest rate reduction  agreement on the Denrich Apartments PIM.
               Beginning July 1, 1995, the basic interest rate decreased from 8%
               per annum to 6.25% per annum for thirty months, then increased to
               6.75% per annum for the  following  thirty-six  month  period and
               then will increase to the original interest rate of 8% per annum.
               The  difference  between basic  interest at the original rate and
               the reduced  rates will  accumulate  and be payable  from surplus
               cash or from the net  proceeds  of a sale or  refinancing.  These
               accumulated  amounts  will  be  due  and  payable  prior  to  any
               distributions to the borrower or payment of participation  income
               to the Partnership.  Also under the agreement, the base level for
               calculating   Shared   Appreciation   Interest   decreased   from
               $4,025,000 to $3,500,000.

     The underlying  mortgages of the PIMs are  collateralized  by  multi-family
     apartment  complexes located in 3 states. The apartment  complexes range in
     size from 91 to 736 units.


                                   Continued
<PAGE>



                    KRUPP INSURED PLUS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


D. MBS

     On October 15, 1998, the Partnership received a repayment on the Lily Flagg
     MBS of  $11,721,863.  A  prepayment  premium of  $117,330  was  received on
     September 17, 1998.  On December 2, 1998,  the  Partnership  made a special
     distribution to investors of $.81 Per Limited Partner interest.

     On June 19, 1998,  the  Partnership  received a prepayment of the Brookside
     insured mortgage in the amount of $4,605,549,  representing the outstanding
     principal  balance,  and a prepayment  premium of $18,300.  The Partnership
     made a special  distribution of $.32 Per limited  partner  interest on July
     24, 1998.

     At December 31, 1999, the Partnership's MBS portfolio has an amortized cost
     of $10,409,242  and  unrealized  gains and losses of $247,471 and $142,390,
     respectively.  At December 31, 1998, the Partnership's MBS portfolio had an
     amortized  cost of  $12,380,666  and  unrealized  gains  of  $540,512.  The
     Partnership's  MBS have  maturities  ranging from 2007 to 2030. At December
     31,  1999 and 1998 the  Partnership's  Insured  Mortgage  Portfolio  had an
     amortized cost of $11,763,633 and $11,871,174, respectively.

<TABLE>
<CAPTION>

                                                                                            Unrealized
                  Maturity Date                               Fair Value                    Gain/(Loss)
                  <S>                                       <C>                          <C>
                  2001 - 2005                               $  -                         $       -
                  2006 - 2010                                 1,667,033                         107,249
                  2011 - 2030                                 20,483,993                       (129,098)

                              Total                         $ 22,151,026                 $      (21,849)
</TABLE>

E.    Partners' Equity

     Profits and losses from Partnership  operations and Distributable Cash Flow
     are allocated 97% to the  Unitholders  and Corporate  Limited  Partner (the
     "Limited Partners") and 3% to the General Partners.

     Upon the occurrence of a capital transaction, as defined in the Partnership
     Agreement,  net cash proceeds  will be  distributed  first,  to the Limited
     Partners until they have received a return of their total invested capital,
     second,  to the General Partners until they have received a return of their
     total invested  capital,  third,  99% to the Limited Partners and 1% to the
     General  Partners until the Limited Partners receive an amount equal to any
     deficiency  in the 11%  cumulative  return on their  invested  capital that
     exists through  fiscal years prior to the date of the capital  transaction,
     fourth, to the class of General Partners until they have received an amount
     equal  to  4%  of  all  amounts  of  cash  distributed  under  all  capital
     transactions  and fifth,  96% to the Limited Partners and 4% to the General
     Partners.

     Profits arising from a capital  transaction,  will be allocated in the same
     manner as related  cash  distributions.  Losses from a capital  transaction
     will  be  allocated  97%  to the  Limited  Partners  and 3% to the  General
     Partners.


     During 1999 the Partnership made quarterly  distributions totaling $.76 per
     Unit.  During 1998 and 1997 the  Partnership  made quarterly  distributions
     totaling  $1.12 per Unit. The  partnership  made special  distributions  of
     $3.52 and $3.87 and $1.69 per Unit in 1999, 1998 and 1997, respectively.




                                     Continued

<PAGE>

                    KRUPP INSURED PLUS-II LIMITED PARTNERSHIP

                           NOTES TO FINANCIAL STATEMENTS


E.    Partners' Equity, continued
<TABLE>
<CAPTION>

As of December 31, 1999,  the following  cumulative  partner  contributions  and
allocations have been made since the inception of the Partnership:

                                                 Corporate                           Accumulated
                                                  Limited           General         Comprehensive
                          Unitholders               Partner         Partners             Income            Total

<S>                       <C>                    <C>              <C>                 <C>            <C>
Capital                   $292,176,381           $   2,000        $    3,000          $    -         $  292,181,381
contributions

Syndication
costs                      (15,580,734)              -                -                    -            (15,580,734)


Quarterly
Distributions             (238,026,211)             (1,660)       (5,732,386)              -           (243,760,257)

Special
Distributions             (153,002,499)             (1,044)            -                   -           (153,003,543)

Net income                 174,792,893               1,221         5,406,003               -            180,200,117

Unrealized
gain on MBS                     -                     -                -                105,081              105,081

Total at
December 31
1999                    $   60,359,830           $      517      $  (323,383)        $  105,081       $   60,142,045
</TABLE>


F. Related Party Transactions

Under the terms of the  Partnership  Agreement,  the  General  Partners or their
affiliates  are entitled to an asset  management  fee for the  management of the
Partnership's   business,   equal  to  .75%  per  annum  of  the  value  of  the
Partnership's  actual and committed  mortgage  assets,  payable  quarterly.  The
General Partners may also receive an incentive management fee in an amount equal
to .3% per  annum  on the  Partnership's  total  invested  assets  provided  the
Unitholders have received their specified  non-cumulative annual return on their
Invested  Capital.  Total fees payable to the General  Partners  for  management
services shall not exceed 10% of cash available for  distribution  over the life
of the Partnership.  Additionally,  the Partnership reimburses affiliates of the
General  Partners for certain costs incurred in connection with  maintaining the
books  and  records  of the  Partnership  and the  preparation  and  mailing  of
financial reports, tax information and other communications to investors.


                                  Continued
<PAGE>



                   KRUPP INSURED PLUS-II LIMITED PARTNERSHIP

                        NOTES TO FINANCIAL STATEMENTS


G. Federal Income Taxes
<TABLE>
<CAPTION>

The  reconciliation  of  the  income  reported  in  the  accompanying  financial
statements with the income reported in the Partnership's 1999 federal income tax
return is as follows:

       <S>                                                                   <C>
       Net income per statement of income                                    $    6,146,718

            Less:       Book to tax difference for amortization of
                        prepaid expenses and fees                                (1,256,656)

            Net income for federal income tax purposes                       $    4,890,062
</TABLE>


<TABLE>
<CAPTION>

The  allocation  of the 1999 net income for  federal  income tax  purposes is as
follows:

                                                                             Portfolio
                                                                                Income

              <S>                                                            <C>
              Unitholders                                                    $ 4,778,210
              Corporate Limited Partner                                               33
              General Partners                                                   111,819

                                                                             $ 4,890,062
</TABLE>

For the years ended December 31, 1999, 1998 and 1997 the average per unit income
to the  Unitholders  for federal  income tax  purposes  was $.33,  $.68 and $.86
respectively.

The basis of the Partnership's  assets for financial  reporting purposes is less
than its tax basis by  approximately  $1,523,000  and $2,344,000 at December 31,
1999 and 1998,  respectively.  The basis of the  Partnership's  liabilities  for
financial  reporting purposes are the same as its tax basis at December 31, 1999
and 1998, respectively.

H.    Fair Value Disclosures of Financial Instruments

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

Cash and Cash Equivalents

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

MBS

The  Partnership  estimates  the fair value of MBS based on quoted market prices
while it estimates the fair value of insured mortgages based on quoted prices of
MBS with similar  interest rates.  Based on the estimated fair value  determined
using these methods and assumptions,  the  Partnership's  investments in MBS had
gross  unrealized  gains and losses of  approximately  $247,000 and $269, 000 at
December 31, 1999 and $541,000 and $0 at December 31, 1998.

PIMs

There is no active trading market for these  investments.  Management  estimates
the fair value of the PIMs using  quoted  market  prices of MBS having a similar
interest rate.  Management  does not include any  participation  interest in the
Partnership's estimated fair value arising from the properties, because

                                   Continued

<PAGE>

                     KRUPP INSURED PLUS-II LIMITED PARTNERSHIP

                            NOTES TO FINANCIAL STATEMENTS




H.    Fair Value Disclosures of Financial Instruments, continued

PIMs, continued

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 Partnership's  investments in PIMs had gross
unrealized  gains of  approximately  $478,000  at  December  31,  1999 and gross
unrealized gains of approximately $2,099,000 at December 31, 1998.
<TABLE>
<CAPTION>

At December 31, 1999 and 1998,  the estimated  fair values of the  Partnership's
financial instruments are as follows:

                                                                  1999                             1998
                                                           Fair           Carrying           Fair         Carrying
                                                           Value            Value           Value            Value

<S>                                                     <C>               <C>             <C>              <C>
Cash and cash equivalents                               $  11,093         $  11,093       $  8,759         $   8,759

MBS and insured mortgages                                  22,151            22,278          24,792           24,792

PIMs                                                       26,702            26,224          84,357           82,258

                                                        $  59,946         $  59,595        $117,908         $115,809
</TABLE>


I.   Subsequent Event

On February  16, 2000 the  Partnership  received  the  remaining  balance on the
Greenhouse  Apartments PIM in the amount of $8,428,984.  The underlying property
was  foreclosed  on by the  first  mortgage  lender  during  January  1999.  The
Partnership continued to receive its full principal and interest payments due on
the PIM while the underlying mortgage was in default because those payments were
guaranteed by GNMA. The  Partnership  did not receive any  participation  income
from this  transaction and  anticipates a first quarter special  distribution of
$.58 per unit.


<PAGE>



<TABLE>
<CAPTION>

                            KRUPP INSURED PLUS-II LIMITED PARTNERSHIP

                           SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE

                                        December 31, 1999



                                                          Normal
                                                          Monthly                                                 Carrying
                      Interest        Maturity            Payment          Original           Current             Amount at
PIMs (a)              Rate (b)        Date (g)             (h)            Face Amount       Face Amount          12/31/99(j)

GNMA

<S>                     <C>           <C>                 <C>             <C>               <C>                  <C>
Denrich Apartments      6.75%         12/15/23            24,900          $ 3,500,000       $ 3,193,146          $ 3,193,146
Philadelphia, PA       (c)(e)
                       (f)(i)

Richmond Park           7.50%          8/15/24            107,900          16,000,000        14,597,481           14,597,481
Richmond Heights,   (c)(e)(f)
 OH

The Greenhouse          8.50%          2/15/30             64,600           8,810,900         8,433,761            8,433,761
Omaha, NE           (d)(e)(f)


                                                                          $28,310,900       $26,224,388          $26,224,388
</TABLE>

          (a)  The  Participating   Insured  Mortgages  ("PIMs")  consist  of  a
               mortgage-backed  security  ("MBS")  guaranteed by the  Government
               National  Mortgage   Association   ("GNMA")  and  a  subordinated
               promissory  note  with  the  underlying   Borrower  that  conveys
               participation interests in the revenue stream and appreciation of
               the underlying property above certain specified base levels.

          (b)  Represents  the  permanent  interest  rate of the  GNMA  MBS.  In
               addition, the Partnership receives additional interest consisting
               of (i) Minimum Additional  Interest,  (ii) Shared Income Interest
               and (iii) Shared Appreciation Interest.

          (c)  Minimum  Additional  Interest  is at a  rate  of  .5%  per  annum
               calculated on the unpaid principal  balance of the first mortgage
               note.

<PAGE>

          (d)  Minimum  Additional  Interest  is at a rate  of  .75%  per  annum
               calculated on the unpaid principal  balance of the first mortgage
               note.

          (e)  Shared  Income  Interest is based on 25% of monthly  gross rental
               income over a specified base amount.

          (f)  Shared  Appreciation  Interest is based on 25% of any increase in
               the value of the project over the specified base value.

          (g)  The Partnership's GNMA MBS have call provisions,  which allow the
               Partnership to accelerate their respective maturity date.

          (h)  The normal  monthly  payment  consisting  of principal  and basic
               interest is payable monthly at level amounts over the term of the
               GNMA MBS. The GNMA MBS  generally  may not be prepaid  during the
               first five years and may be  prepaid  subject to a 9%  prepayment
               penalty in years six through  nine,  a 1%  prepayment  penalty in
               year ten and no prepayment penalty after year ten.



                         KRUPP INSURED PLUS-II LIMITED PARTNERSHIP

                  SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE, continued

                                    December 31, 1999


          (i)  On June 28, 1995, the Partnership  entered into a temporary basic
               interest rate reduction  agreement on the Denrich Apartments PIM.
               Beginning July 1, 1995, the basic interest rate decreased from 8%
               per annum to 6.25% per annum for thirty months, then increased to
               6.75% per annum for the  following  thirty-six  month  period and
               then will  increase  to the  original  rate of 8% per annum.  The
               difference  between basic interest at the original  interest rate
               and the reduced rates will accumulate and be payable from surplus
               cash or from the net  proceeds  of a sale or  refinancing.  These
               accumulated  amounts  will  be  due  and  payable  prior  to  any
               distributions to the borrower or payment of participation  income
               to the Partnership.  Also under the agreement, the Base Value for
               calculating   Shared   Appreciation   Interest   decreased   from
               $4,025,000 to $3,500,000.

          (j)  The  aggregate  cost of PIMs for federal  income tax  purposes is
               $26,224,388.
<TABLE>
<CAPTION>

A  reconciliation  of the carrying  value of PIMs for each of the three years in
the period ended December 31, 1999 is as follows:

                                                         1999                   1998                    1997

<S>                                                  <C>                   <C>                       <C>
Balance at beginning of period                       $ 82,258,207          $ 122,048,053             $151,717,926

Deductions during period:
   Reclassification                                           -                       -              (11,850,469)
Prepayments and
    principal collections                             (56,033,819)           (39,789,846)              (17,819,404)
Balance at end of period                             $ 26,224,388          $  82,258,207              $122,048,053
</TABLE>


<PAGE>



Unaudited  Distributable  Cash  Flow and Net  Cash  Proceeds  from  Capital
Transactions

Shown below is the calculation of Distributable  Cash Flow and Net Cash Proceeds
from  Capital  Transactions,  as  defined  by  Section  17  of  the  Partnership
Agreement,  and the source of cash distributions for the year ended December 31,
1999 and the period  from  inception  through  December  31,  1999.  The General
Partners  provide certain of the information  below to meet  requirements of the
Partnership  Agreement  and  because  they  believe  that  it is an  appropriate
supplemental measure of operating performance.  However, Distributable Cash Flow
and Net Cash Proceeds from Capital  Transactions should not be considered by the
reader as a  substitute  to net  income  as an  indicator  of the  Partnership's
operating performance or to cash flows as a measure of liquidity.

<TABLE>
<CAPTION>

                               (Amounts in thousands, except per Unit amounts)
                                                                                  Year Ended       Through Inception
                                                                                   12/31/99           12/31/99
Distributable Cash Flow:
<S>                                                                                <C>                  <C>
Income for tax purposes                                                            $  4,890             $181,828
Items not requiring (not providing) the use of
 operating funds:
   Amortization of prepaid fees and expenses                                          2,155              16,006
   Acquisition expenses paid from offering
    proceeds charged to operations                                                        -                 690
   Shared Appreciation Income/prepayment premiums                                    (1,163)             (6,158)
   Gain on sale of MBS                                                                  -                  (377)
Total Distributable Cash Flow ("DCF")                                              $  5,882            $191,989

Limited Partners Share of DCF                                                      $  5,705            $186,229

Limited Partners Share of DCF per Unit                                             $   .39             $  12.71

General Partners Share of DCF                                                      $   177             $  5,760

Net Proceeds from Capital Transactions:
Principal collections on PIMs and PIM sale proceeds
 including Shared Appreciation Income/prepayment premiums                          $57,197             $165,577
Principal collections on MBS and MBS sale proceeds                                   2,079               92,409
Reinvestment of MBS and PIM principal collections
 and sale proceeds                                                                    -                 (41,966)
Gain on sale of MBS                                                                   -                     377
Total Net Proceeds from Capital Transactions                                       $59,276             $216,397

Cash available for distribution

(DCF plus proceeds from Capital Transactions)                                      $65,158             $408,386

Distributions:

   Limited Partners                                                                $66,390(a)          $398,799(b)

   Limited Partners Average per Unit                                               $  4.53(a)        $  27.21(b)(c)

   General Partners                                                                $   177(a)        $  5,760(b)

           Total Distributions                                                     $66,567             $404,559
</TABLE>

          (a)  Represents  all  distributions  paid in 1999 except the  February
               1999  distribution and includes the special  distribution paid in
               January  2000 and an estimate of the  distribution  to be paid in
               February 2000.

          (b)  Includes  the special  distribution  paid in January  2000 and an
               estimate of the distribution to be paid in February 2000.

          (c)  Limited  Partners  average  per  Unit  return  of  capital  as of
               February  2000 is  $14.50  [$27.21 -  $12.71]  Return of  capital
               represents that portion of distributions which is not funded from
               DCF such as  proceeds  from the sale of assets and  substantially
               all of the principal collections received from MBS and PIMs.