UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K
   X      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, 1995 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 1-9997 KOGER
                                  EQUITY, INC.
             (Exact name of Registrant as specified in its Charter)

                                     FLORIDA
         (State or other jurisdiction of incorporation or organization)

                                   59-2898045
                      (I.R.S. Employer Identification No.)

                     3986 Boulevard Center Drive, Suite 101
                           Jacksonville, Florida         32207
               (Address of principal executive office) (Zip code)

       Registrant's telephone number, including area code: (904) 398-3403

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

     Title of Each Class             Name of Exchange on Which Registered
Common Stock, Par Value $.01                   American Stock Exchange
Warrants to Purchase Shares of Common Stock    American Stock Exchange

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

                                 Title of Class
                                      NONE

Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___

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

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant on February 28, 1996 was approximately $205,066,000.

The number of shares of  registrant's  Common Stock  outstanding on February 28,
1996 was 17,831,834.

                       Documents Incorporated by Reference
The Company's  Proxy  Statement to be filed pursuant to Regulation 14A under the
Securities  Act  of  1934  for  the  1996  Annual  Meeting  of  Shareholders  is
incorporated by reference in Part III of this report.



<PAGE>



                                TABLE OF CONTENTS

ITEM NO.                              DESCRIPTION                       PAGE NO.


PART I
    1.  BUSINESS......................................................      1

    2.  PROPERTIES....................................................      4

    3.  LEGAL PROCEEDINGS.............................................     10

    4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........     11

PART II
    5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS..........................................     11

    6.  SELECTED FINANCIAL DATA.......................................     12

    7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS..........................     13

    8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................     29

    9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE..........................     54

PART III
    10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............     54

    11. EXECUTIVE COMPENSATION........................................     55

    12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
         OWNERS AND MANAGEMENT........................................     55

    13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................     55

PART IV
    14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
         AND REPORTS ON FORM 8-K......................................     56

        SIGNATURES....................................................     61



<PAGE>



                                     PART I

Item 1.       BUSINESS

General

         Koger Equity,  Inc., a Florida corporation ("KE"), is currently engaged
in the  ownership,  operation  and  management  of  commercial  suburban  office
buildings for the  production  of income.  As of December 31, 1995, KE owned 216
buildings  located in 13  metropolitan  areas  throughout the  southeastern  and
southwestern  United  States.  KE acquired a total of 126  buildings  from Koger
Properties,  Inc., a Florida corporation  ("KPI"),  or its subsidiaries  through
1990.  In connection  with a Chapter 11 bankruptcy  case filed on behalf of KPI,
KPI merged with and into KE on December 21, 1993 (the "Merger").  As a result of
the Merger,  KE acquired an additional  93  buildings,  three of which were sold
during 1995 (as described  below).  Since the Merger,  KE has been totally self-
administered and self-managed.

         As part of the Merger, KPI transferred to Southeast  Properties Holding
Corporation,   a  Florida  corporation  and  a  wholly-owned  subsidiary  of  KE
("Southeast"),  all of KPI's debt and equity interests in The Koger Partnership,
Ltd., a Florida limited partnership ("TKPL"), which had also been the subject of
a Chapter 11 bankruptcy case. At the time of the Merger,  TKPL owned 92 suburban
office buildings located in five metropolitan areas.  Following the Merger, such
buildings were managed by KE, as delegee of Southeast,  pursuant to a management
agreement  between  TKPL and  Southeast.  On July  31,  1995,  TKPL  sold its 92
buildings and parcels of related land to Koala Miami Realty Holding, Inc., Koala
Norfolk Realty Holding, Inc., Koala Raleigh Realty Holding, Inc., Koala Richmond
Realty  Holding,  Inc.,  and Koala Tampa  Realty  Holding,  Inc.  (collectively,
"Koala"),  all of which are wholly owned by a co-mingled pension trust for which
Morgan  Guaranty  Trust  Company  of New York is the  trustee  and  J.P.  Morgan
Investment  Management Inc. is the investment  manager.  Simultaneously with the
sale  by TKPL  of its  properties,  KE sold  to  certain  Koala  entities  three
buildings and related parcels of land for an aggregate  purchase price of $25.26
million.  Koala  continues to hold an option to purchase from KE two  additional
parcels of land in Miami, Florida.

         In addition to managing its own properties, KE, through certain related
entities, provides property management services to third parties. In conjunction
with Koger Real Estate Services,  Inc., a Florida corporation and a wholly-owned
subsidiary  of KE  ("KRES"),  KE  manages 20 office  buildings  owned by Centoff
Realty Company, Inc. ("Centoff"),  a subsidiary of Morgan Guaranty Trust Company
of New York.  More  significantly,  Koger  Realty  Services,  Inc.,  a  Delaware
corporation  and an  entity  in which  KE has a  significant  economic  interest
("KRSI"), manages 95 buildings owned by Koala. KRSI was incorporated during 1995
to, among other  things,  provide  leasing and property  management  services to
owners of  commercial  office  buildings.  KE has purchased all of the preferred
stock of KRSI,  which  preferred  stock  represents at least 95% of the economic
value of KRSI. Such preferred stock is non-voting but is convertible into voting
common  stock.  Accordingly,  KE has  consolidated  KRSI in the  1995  financial
statements  (KE,  Southeast,  KRES  and KRSI are  hereafter  referred  to as the
"Company").

         During 1995 (prior to the sale by TKPL of its properties),  KE acquired
$32.3 million in aggregate  principal  amount (subject to provisions  permitting
prepayment  at a discount) of  promissory  notes issued by TKPL to third parties
(the "TKPL  Notes")  for an  aggregate  purchase  price of  approximately  $18.2
million. To permit the acquisition of the TKPL Notes, KE obtained

                                        1

<PAGE>



certain modifications to the loan agreements governing KE's indebtedness. During
the quarter ended  September 30, 1995,  TKPL retired the TKPL Notes. KE recorded
approximately $13.1 million of interest revenue on the TKPL Notes in 1995.

         KE operates  in a manner so as to qualify as a real  estate  investment
trust (a "REIT") under the  provisions of the Internal  Revenue Code of 1986, as
amended (the "Code" ). As a REIT, KE will not, with certain limited  exceptions,
be  taxed  at  the  corporate  level  on  taxable  income   distributed  to  its
shareholders  on a current  basis.  KE  distributes  at least 95  percent of its
annual REIT taxable income (which term is used herein as defined and modified in
the Code) to its  shareholders.  To qualify as a REIT, a  corporation  must meet
certain  substantive  tests: (a) at least 95 percent of its gross income must be
derived from certain passive and real estate sources; (b) at least 75 percent of
its gross income must be derived from certain real estate sources; (c) less than
30  percent  of its  gross  income  must be  derived  from  the  sale  or  other
disposition of certain items, including certain real property held for less than
four years;  (d) at the close of each  calendar  quarter,  it must meet  certain
tests  designed  to ensure  that its  assets  consist  principally  (at least 75
percent by value) of real estate assets,  cash and cash equivalents and that its
holdings  of  securities  are  adequately  diversified;  (e) each year,  it must
distribute  at least 95 percent of its REIT taxable  income;  and (f) at no time
during the second half of any calendar year may KE be "closely held" (i.e.  have
more  than 50  percent  in  value  of its  outstanding  stock  owned,  directly,
indirectly  or  constructively,   by  not  more  than  five  individuals).   The
constructive  ownership rules,  among other things,  treat the shareholders of a
corporation as owning  proportionately any stock in another corporation owned by
the first corporation. Management fee revenue does not qualify as real estate or
passive  income  for  purposes  of  determining  whether  KE has  met  the  REIT
requirements  that at least 95  percent of KE's  gross  income be  derived  from
certain  real  estate and  passive  sources  and that at least 75 percent of its
gross income be derived from certain real estate  sources.  Accordingly,  in the
event KE derives  income in excess of five  percent  from  management  and other
"non-real estate" and "non-passive"  activities, KE would no longer qualify as a
REIT for federal income tax purposes and would be required to pay federal income
taxes as a business  corporation.  KRSI is not a qualified REIT subsidiary under
the Code and,  therefore,  is taxed as a regular corporation and will be subject
to federal income tax on its taxable income.  Amounts  distributed by KRSI to KE
in respect of the preferred  stock of KRSI owned by KE will generally be treated
as dividends and, accordingly, will be included in KE's passive income.

         No single  tenant  occupies 10 percent or more of the net rentable area
of the Company's  buildings or  contributes  10 percent or more of the Company's
rental revenues,  except for a major governmental  tenant (the State of Florida,
when all of its  departments  and  agencies  which lease space in the  Company's
buildings are combined)  which accounted for an aggregate of 11.9 percent of the
Company's  total  net  rentable  square  feet  leased  and 14.1  percent  of the
Company's total annualized  rental revenues as of December 31, 1995. Some of the
Company's  principal  tenants  are the State of  Florida,  the United  States of
America,  Blue Cross and Blue Shield of Florida,  Aetna Life Insurance  Company,
Lumbermen  Mutual  Casualty  Company,  the State of Texas,  Travelers  Insurance
Company,  General Motors Acceptance Corporation,  USAA Federal Savings Bank, and
BellSouth  Communications,  Inc.  Governmental  tenants  (including the State of
Florida and the United States of America), which account for 22.7 percent of the
Company's  leased  space,  may be  subject  to  budget  reductions  in  times of
recession  and   governmental   austerity.   There  can  be  no  assurance  that
governmental appropriations for rents may not be reduced. Additionally,  certain
private-sector  tenants which have  contributed to the Company's rent stream may
reduce their  current  demands,  or curtail  their future need,  for  additional
office space.

                                        2

<PAGE>



Competition

         The Company competes in the leasing of office space with a considerable
number of other realty  concerns,  both local and  national,  some of which have
greater  resources  than the Company.  Through its ownership  and  management of
suburban  office parks,  the Company seeks to attract tenants by offering office
space convenient to residential areas and away from the congestion and attendant
traffic problems of the downtown business districts.  In recent years both local
and national  concerns have built competing office parks and single buildings in
suburban  areas in which the  Company's  centers are located.  In addition,  the
Company  competes for tenants with large high-rise  office  buildings  generally
located in the downtown business districts of these metropolitan areas. Although
competition  from other  lessors of office space  varies from city to city,  the
Company  has been able to attain and  maintain  what it  considers  satisfactory
occupancy levels at satisfactory rental rates. However, higher vacancy levels in
metropolitan  areas in which the  Company's  properties  are located have had an
adverse  affect on the  Company's  ability to  increase  its rental  rates while
maintaining satisfactory occupancy levels.

Investment Policies

         Based on its improved financial  structure and results as of the end of
1995, the Company believes that it is in a position to capitalize on some of its
strengths, such as the value of its franchise in the suburban office park market
and its operating systems,  development  expertise and unimproved land available
for  development.  Therefore,  the  Company has  committed  to a plan to enhance
shareholder value by refinancing indebtedness and increasing growth. The Company
intends to  refinance or  restructure  its  existing  indebtedness  to eliminate
certain restrictive  covenants which limit the Company's ability to grow through
development and  acquisitions.  In addition,  the Company intends to establish a
new bank  revolving  credit  facility which would be available to finance growth
opportunities. The plan also contemplates the possible use by the Company of its
existing  inventory of 228 acres of land held for development,  most of which is
partially or wholly  improved  with streets  and/or  utilities and is located in
various  metropolitan areas where the Company currently operates suburban office
parks.  The Company  may also  acquire  existing  office  buildings  or land for
development  in other markets in the  Southeast  and Southwest  that the Company
considers favorable.

         The  investment  policies of KE may be changed by KE's directors at any
time without  notice to, or a vote of,  security  holders.  Although,  KE has no
current  policy which limits the  percentage of its assets which may be invested
in any one type of  investment or the  geographic  areas in which KE may acquire
properties, KE intends to continue to operate so as to qualify for tax treatment
as a REIT.  Although  it has no  current  plans to do so,  KE may in the  future
invest  in other  types  of  office  buildings,  apartment  buildings,  shopping
centers, and other properties.  KE also may invest in the securities  (including
mortgages) of companies primarily engaged in real estate activities; however, it
does not intend to become an investment  company  regulated under the Investment
Company Act of 1940.

         For the year ended  December  31,  1995,  all of the  Company's  rental
revenues  were  derived  from the  buildings  purchased  from  KPI or  buildings
acquired  pursuant to the Merger.  The  Company's  1995  interest  revenues were
derived from temporary cash investments and KE's investment in the TKPL Notes.


                                        3

<PAGE>



Employees

         In  connection  with its current  real estate  operations  and property
management  agreements,  the Company has a combined  financial,  administrative,
leasing,  and center  maintenance  staff of 270  employees.  A resident  general
manager is  responsible  for the leasing and  operations  of all  buildings in a
center  or city.  The  Company  has  approximately  114  employees  who  perform
maintenance activities.

Item 2.       PROPERTIES

General

         As of December 31, 1995, the Company owned 216 office buildings located
in 18 office  centers (each a "Koger  Center") in the 13  metropolitan  areas of
Jacksonville,  Orlando,  St.  Petersburg,  and  Tallahassee,  Florida;  Atlanta,
Georgia; Charlotte and Greensboro, North Carolina; Tulsa, Oklahoma;  Greenville,
South Carolina; Memphis, Tennessee; and Austin, El Paso, and San Antonio, Texas.
The Koger Centers have been  developed in  campus-like  settings with  extensive
landscaping  and ample  tenant  parking.  The  buildings  are  generally  one to
five-story  structures  of  contemporary  design  and  constructed  of  masonry,
concrete and steel, with facings of brick, concrete and glass. The Koger Centers
are generally located with easy access, via expressways, to the central business
district and to shopping and  residential  areas in the respective  communities.
The properties are well maintained and adequately covered by insurance.

         Leases on the Company's  buildings vary between net leases (under which
the tenant  pays some  operating  expenses,  such as  utilities,  insurance  and
repairs)  and gross leases  (under which the Company pays all such items).  Most
leases are on a gross basis and are for terms  generally  ranging  from three to
five years. In some instances,  such as when a tenant rents the entire building,
leases are for terms of up to 20 years.  As of December 31, 1995,  the Company's
buildings  were on average 91 percent leased and the average annual rent per net
rentable  square foot leased was $13.72.  The buildings are occupied by numerous
tenants,  many of whom lease  relatively  small  amounts of space,  conducting a
broad range of commercial activities.

         New leases and  renewals  of  existing  leases  are  negotiated  at the
current market rate at the date of execution.  The Company  endeavors to include
escalation  provisions  in all of its gross  leases.  As of December  31,  1995,
approximately  34 percent of the Company's  annualized gross rental revenues was
derived from existing leases containing rental escalation  provisions based upon
changes in the  Consumer  Price Index (some of which  contain  maximum  rates of
increase);  approximately  59 percent of such  revenues  was derived from leases
containing  escalation  provisions  based  upon real  estate  tax and  operating
expense increases; and approximately 7 percent of such revenues was derived from
leases  without  escalation  provisions.  Some of the Company's  leases  contain
options  which allow the lessee to renew for varying  periods,  generally at the
same  rental  rate and  subject,  in most  instances,  to  Consumer  Price Index
escalation provisions.






                                        4

<PAGE>



         The Company owns  approximately 228 acres of unimproved land (224 acres
of which are  suitable for  development)  located in the  metropolitan  areas of
Birmingham,  Alabama; Jacksonville,  Miami, Orlando and St. Petersburg, Florida;
Atlanta,  Georgia;  Charlotte and Greensboro,  North Carolina;  Tulsa, Oklahoma;
Columbia and Greenville,  South  Carolina;  Memphis,  Tennessee;  Austin and San
Antonio,  Texas; and Richmond,  Virginia. Each of these parcels of land has been
partially or wholly developed with streets and/or utilities.

Title to Property

         No  examinations  of title to real  properties  have  been made for the
purpose of this report.  However,  the Company  obtained title insurance on each
property  acquired  by it prior to the  Merger at the time of such  acquisition.
Although no additional title insurance was obtained in respect of the properties
acquired  from KPI  pursuant  to the  Merger,  the  Company  succeeded  to KPI's
existing title policies on such properties. The Company believes that all of the
real  estate  described  herein as owned by the  Company  is owned in fee simple
without  encumbrances,  except for the leases and  mortgages  described  in this
report and other encumbrances which do not substantially  interfere with the use
of the properties or have a material adverse effect upon their values.































                                        5

<PAGE>



Property Location and Other Information

         The following table sets forth  information  relating to the properties
owned by the Company as of December 31, 1995.
<TABLE>

                                                Average                      Land
                                  Number        Age of         Net         Improved    Unimproved
                                    of         Buildings     Rentable     with Bldgs.     Land
Koger Center                    Buildings    (in Years)(1)    Sq. Ft.     (In Acres)   (In Acres)
------------                    ---------    -------------   --------     -----------  ----------
<S>                                <C>             <C>      <C>             <C>        <C>  
Atlanta Chamblee                    22             15        947,920         76.2        2.5
Atlanta Gwinnett                                                                        31.0
Austin                              12             15        370,860         29.6        1.8
Birmingham                                                                              30.0
Charlotte Carmel                     1              4        109,600          7.6       27.0
Charlotte East                      11             15        468,820         39.9        3.9
Columbia Spring Valley                                                                   1.0
El Paso                             14             23        251,930         19.6
Greensboro South                    13             13        610,470         46.0
Greensboro Wendover                                                                     18.5
Greenville                           8             13        290,560         24.7        4.5
Jacksonville Baymeadows              4              5        467,860         34.6       13.3
Jacksonville Central                32             23        677,680         48.4        0.4
Memphis Germantown                   3              7        258,400         18.4       16.2
Miami                                                                                    8.1
Orlando Central                     22             24        565,220         46.0
Orlando University                   2              7        159,600         11.6       15.5
Richmond South                                                                          23.0
San Antonio                         26             18        788,670         63.5        7.2
St. Petersburg                      15             15        519,320         64.4       11.0
Tallahassee Apalachee Pkwy          14             19        408,500         33.7
Tallahassee Capital Circle           4              6        300,700         23.3
Tulsa North                          2             14        103,520          9.1       13.4
Tulsa South                         11             17        372,760         26.9
                                   ---                     ---------        -----      -----    
    Total                          216                     7,672,390        623.5      228.3
                                   ===                     =========        =====      =====

    Average                                        15
                                                   ==
</TABLE>

(1)  The age of each  building was weighted by the net rentable  square feet for
     such building to determine the weighted average age of (a) the buildings in
     each Koger Center and (b) all buildings owned by the Company.

                                        6

<PAGE>



Percent Leased and Average Rental Rates

         The following table sets forth, with respect to each Koger Center,  the
number of buildings, number of leases, net rentable square feet, percent leased,
and the average annual rent per net rentable square foot leased, in each case as
of December 31, 1995.
<TABLE>

                                                                     Net                                Average
                                      Number           Number      Rentable                             Annual
                                       of                of         Square          Percent            Rent Per
Koger Center                        Buildings          Leases        Feet          Leased (1)        Square Foot(2)
------------                        ---------          ------      --------        ----------        --------------
<S>                                    <C>             <C>        <C>                <C>                <C>   
Atlanta Chamblee                        22               182        947,920           96%               $14.42
Austin                                  12               187        370,860           88%                15.43
Charlotte Carmel                         1                19        109,600          100%                15.78
Charlotte East                          11               194        468,820           71%                12.88
El Paso                                 14               197        251,930           98%                13.21
Greensboro South                        13               182        610,470           90%                13.34
Greenville                               8               157        290,560           94%                13.79
Jacksonville Baymeadows                  4                32        467,860           99%                15.62
Jacksonville Central                    32               264        677,680           93%                11.60
Memphis Germantown                       3                55        258,400           99%                16.82
Orlando Central                         22               186        565,220           86%                13.95
Orlando University                       2                47        159,600           90%                15.99
San Antonio                             26               314        788,670           84%                11.49
St. Petersburg                          15               184        519,320           93%                12.58
Tallahassee Apalachee Pkwy              14                99        408,500           94%                15.69
Tallahassee Capital Circle               4                10        300,700          100%                17.66
Tulsa North                              2                33        103,520           79%                10.75
Tulsa South                             11               165        372,760           85%                 9.75
                                       ---             -----      ---------
    Total                              216             2,507      7,672,390
                                       ===             =====      =========

                                                                                      91%               $13.72
                                                                                      ===               ======
</TABLE>

(1)      The percent  leased rates have been  calculated  by dividing  total net
         rentable  square feet leased in a building by net rentable  square feet
         in such building, which excludes public or common areas.
(2)      Rental rates are computed by dividing (a) total  annualized rents for a
         Koger  Center as of December  31, 1995 by (b) the net  rentable  square
         feet applicable to such total annualized rents.

                                        7

<PAGE>



Lease Expirations on the Company's Properties

         The following  schedule sets forth with respect to all of the Company's
office  buildings  (a) the number of leases which will expire in calendar  years
1996 through  2004,  (b) the total net  rentable  area in square feet covered by
such  leases,  (c) the  percentage  of total net  rentable  square  feet  leased
represented by such leases, (d) the average annual rent per square foot for such
leases,  (e) the current annual rental  represented by such leases,  and (f) the
percentage of gross annual rental  contributed by such leases.  This information
is based on the  buildings  owned by the Company on December 31, 1995 and on the
terms of leases in effect as of December 31, 1995, on the basis of then existing
base  rentals,  and  without  regard  to  the  exercise  of  options  to  renew.
Furthermore,  the  information  below does not  reflect  that some  leases  have
provisions for early termination for various reasons,  including, in the case of
government  entities,  lack of budget  appropriations.  Leases  were  renewed on
approximately  67 percent and 61 percent of the  Company's  net rentable  square
feet which were scheduled to expire during 1995 and 1994, respectively.

<TABLE>

                                             Percentage of       Average                                Percentage
                                             Total Square        Annual Rent                            of Total
              Number of      Number of       Feet Leased         per Square         Total Annual        Annual Rents
              Leases         Square Feet     Represented by      Foot Under         Rents Under         Represented by
Period        Expiring       Expiring        Expiring Leases     Expiring Leases    Expiring Leases     Expiring Leases
------        ---------      -----------     ---------------     ---------------    ---------------     ---------------
<C>            <C>             <C>              <C>                  <C>                <C>                 <C>  
1996           1,214           1,955,695         28.0%               $13.61             $26,616,124          27.8%
1997             531           1,359,859         19.5%                13.84              18,824,227          19.6%
1998             467           1,719,488         24.6%                13.49              23,189,091          24.2%
1999             141             685,496          9.8%                12.99               8,905,517           9.3%
2000             103             608,067          8.7%                14.98               9,109,422           9.5%
2001              24             232,027          3.3%                14.73               3,418,096           3.6%
2002               6             121,161          1.8%                13.63               1,651,822           1.7%
2003              10              74,023          1.1%                13.76               1,018,762           1.1%
2004               2              22,794          0.3%                10.71                 244,168           0.3%
Other              9             203,306          2.9%                13.88               2,822,674           2.9%
               -----           ---------        ------                                  -----------         ------
   Total       2,507           6,981,916        100.0%               $13.72             $95,799,903         100.0%
               =====           =========        ======               ======             ===========         ======
</TABLE>

Building Improvements, Tenant Improvements and Deferred Tenant Costs on the
Company's Properties

         The following table sets forth certain  information with respect to the
building  improvements  made, and tenant  improvement  costs and deferred tenant
costs (leasing commissions and tenant relocation costs) incurred, by the Company
during the three years ended December 31, 1995. The  information set forth below
is not necessarily indicative of future expenditures for these items.
<TABLE>


               Number           Building Improvements           Tenant Improvements             Deferred Tenant Costs
              of Office                       Per Net Sq.                     Per Net Sq.                     Per Net Sq.
Year          Buildings        Total          Ft. Owned       Total           Ft. Owned        Total          Ft. Owned
<C>               <C>          <C>                <C>         <C>                 <C>         <C>                 <C>  
1993(1)           126          $1,680,000         $0.41       $4,534,000          $1.12       $   598,000         $0.15
1994              219           3,749,000          0.47        7,334,000           0.93         1,112,000          0.14
1995(2)           216           2,991,000          0.39        8,592,000           1.12         1,060,000          0.14

</TABLE>

(1) Excludes the 93 buildings acquired on December 21, 1993 pursuant to the 
    Merger.
(2) Excludes the three buildings sold on July 31, 1995.

                                        8

<PAGE>



Fixed Rate Indebtedness on the Company's Properties

         The  following  table sets forth with  respect to each Koger Center the
principal  amount (dollars in thousands) of, and the weighted  average  interest
rate on,  the  indebtedness  of the  Company  having a fixed  interest  rate and
encumbering  the  Company's  properties  in such Koger Center as of December 31,
1995.

                                           Weighted
                             Mortgage      Average
                             Loan          Interest
Koger Center                 Balance       Rate
------------                 --------      --------
Atlanta Chamblee             $ 27,542      7.79%
Austin                          1,642      9.46%
Charlotte Carmel                8,912      6.62%
Charlotte East                 13,972      8.15%
El Paso                         1,072      9.00%
Greensboro South               21,953      8.73%
Greenville                      7,029      6.40%
Jacksonville Baymeadows        34,293      6.62%
Jacksonville Central           12,699      6.71%
Memphis Germantown             13,244      8.57%
Orlando Central                17,001      8.06%
Orlando University              9,426      6.53%
San Antonio                     5,571      7.78%
St. Petersburg                 19,723      7.82%
Tallahassee Apalachee Pkwy     14,325      6.54%
Tallahassee Capital Circle     20,710      8.04%
Tulsa South                     4,416      9.98%
                             --------      -----
     Total                   $233,530      7.81%

         For  additional  information  concerning  certain  interest  rate reset
provisions  and reset  dates for these  loans see Note 5,  "Mortgages  and Loans
Payable" of the Notes to Consolidated Financial Statements.


                                        9

<PAGE>



Indebtedness with Variable Interest Rates

         In  addition  to the fixed rate  indebtedness  described  above,  as of
December 31, 1995, the Company had outstanding an aggregate  principal amount of
$22,276,000 of indebtedness  having variable  interest rates and encumbering the
Company's  properties.  This indebtedness bears interest at rates based upon the
applicable  lender's prime rate. The following table sets forth information with
respect to this indebtedness (dollars in thousands):
<TABLE>


                                                                                           Approximate        Approximate
                             Balance          Weighted Avg.             Maximum            Average            Wtg Avg Int
 Year Ended                  at End           Int Rate at               Amount             Amount             Rate During
 December 31                 of Period        End of Period             Outstanding        Outstanding        the Period(1)
 -----------                 ---------        -------------             -----------        -----------        -------------
<S>  <C>                      <C>                <C>                    <C>                 <C>                  <C> 
     1995                     $22,276            9.5%                   $ 58,352            $47,945              8.4%
     1994                      58,352            9.1%                     59,028             58,718              7.9%
     1993                      58,861            6.6%                     98,262             95,110              6.2%
</TABLE>


(1)   The approximate  weighted  average  interest rates during the periods were
      computed  by  dividing  the  interest  costs  for the year by the  average
      balance outstanding during the year.

         As of December 31, 1995,  $1,152,000  of this  indebtedness  matures in
December,  2000 and accrues interest at the prime rate of the applicable lender.
Accrued interest on this indebtedness must be paid no later than December,  1998
and monthly  interest  payments are required  beginning  in January,  1999.  The
accrued interest on this  indebtedness is forgiven if this  indebtedness is paid
in full prior to December, 1996. This indebtedness is secured by properties that
also serve as  collateral  for certain  fixed rate  indebtedness  assumed by the
Company from KPI pursuant to the Merger.

         As of December 31, 1995,  $21,124,000 of this  indebtedness  matures in
2001 and  accrues  interest  at a rate equal to the sum of (a) the prime rate of
NationsBank of Florida,  N.A. plus (b) one percent,  with a minimum rate of 6.62
percent and a maximum rate of 10 percent.  Interest  only  payments are due on a
monthly basis. This indebtedness is collateralized by properties with a carrying
value of approximately $24,772,000 as of December 31, 1995.

Management Agreement

         Prior to the Merger, Koger Management,  Inc., a Florida corporation and
a  subsidiary  of KPI  ("KMI"),  was  responsible  for the  leasing,  operation,
maintenance and management of each of the Company's properties. The Company paid
KMI a  management  fee  equal  to five  percent  of the  gross  rental  receipts
collected  on the  property  managed for the Company by KMI.  For the year ended
December  31,  1993,  the  Company  incurred  management  fee  expense to KMI of
$2,184,000.  With the Merger,  the Company  assumed all of the leasing and other
management  responsibilities  for  its  properties,   including  the  properties
acquired in the Merger.

Item 3.       LEGAL PROCEEDINGS

         None.




                                       10

<PAGE>



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

         None.

                                     PART II

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

         KE's common stock is listed on the American  Stock  Exchange.  The high
and low closing sales prices for the periods indicated in the table below were:
<TABLE>


                                                                         Years
-----------------------------------------------------------------------------------------------------------------------
                                        1995                              1994                              1993
                                 ------------------                -------------------               ------------------
Quarter Ended                     High         Low                  High          Low                 High         Low
-------------                    ------       -----                ------        -----               ------       -----
<S>                             <C>          <C>                  <C>           <C>                  <C>         <C>     
March 31                        $ 7 7/8      $6 3/4               $ 8 1/2       $6 1/2               $9 3/8      $4 3/8
June 30                           9           6 3/4                 9 5/8        6 3/8                8 1/2       7 1/8
September 30                     10 1/8       8 5/8                10 1/2        8 1/4                9           7 1/8
December 31                      10 5/8       9 1/8                 8 7/8        6 7/8                9 1/4       7 3/4
</TABLE>


         KE intends that any dividend paid in respect of its common stock during
the last  quarter of each year will,  if  necessary,  be adjusted to satisfy the
REIT  qualification  requirement  that at least 95 percent of KE's REIT  taxable
income  for such  taxable  year be  distributed.  KE did not  declare or pay any
dividends during the three years ended December 31, 1995.

         The  terms  of  KE's  secured  debt  subject  KE  to  certain  dividend
limitations.  However,  such  limitations  will not  restrict KE from paying the
dividends  required during 1996 to maintain its  qualification as a REIT. In the
event that KE ceases to qualify as a REIT, additional dividend limitations would
be imposed by the terms of such debt. In addition, two of KE's bank lenders have
required  that,  until KE has raised an  additional  $50 million of equity,  the
following  limitations  on  dividends  will be applied:  (a) in 1996 and 1997, a
maximum of $11 million,  unless imposition of the limit would cause loss of REIT
status and (b) in 1998 and 1999,  a maximum of $11  million,  regardless  of the
impact on REIT status.

         On February 28, 1996, there were  approximately  1,107  shareholders of
record and the closing price of KE's common stock on the American Stock Exchange
was $11.50.



                                       11

<PAGE>



Item 6.       SELECTED FINANCIAL DATA

         The following  selected  financial  data should be read in  conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements (as defined below) and the
notes thereto.

<TABLE>
                                                          (In thousands except per share and property data)
                                                          -------------------------------------------------
Income Information                                   1995          1994          1993*         1992         1991
                                                   --------     ---------      --------      --------     --------
<S>                                                <C>          <C>            <C>           <C>          <C>     
Rental revenues and other rental services          $ 95,443     $  94,388      $ 46,108      $ 45,957     $ 45,393
Interest revenues                                    14,440         1,062           206           231        7,099
Total revenues                                      127,698       100,376        46,406        46,188       52,492
Property operating expenses                          40,830        39,711        21,034        19,579       18,541
Mortgage and loan interest                           23,708        25,872        11,471        11,530       13,065
Depreciation and amortization                        19,110        16,728         8,958         8,089        7,484
Net income (loss)                                    28,990         4,215         2,452           933       (5,949)
Earnings (loss) per common share-primary               1.61           .24           .18           .07         (.43)
Dividends per share                                    -             -              -             -            .77

Weighted average shares outstanding                  18,011        17,719        13,352        13,220       13,750

Balance Sheet Information
Operating properties (before depreciation)         $571,438      $578,237      $566,770      $311,286     $308,293
Undeveloped land                                     30,281        36,012        40,036             0            0
Loans to Koger Properties, Inc.
    foreclosed in-substance                               0             0             0        94,889       99,484
Total assets                                        579,382       613,806       615,089       396,841      399,241
Mortgages and loans payable                         254,909       323,765       330,625       155,362      158,805
Shareholders' equity                                310,697       280,601       275,450       235,514      234,581

Other Information
Funds from operations (1)                           $37,294     $  23,884     $  11,410     $  11,004    $  18,235
Income before interest, taxes,
    depreciation and amortization                   $72,128     $  47,042     $  22,881     $  20,552    $  14,600
Number of buildings (at end of  period)                 216           219           219           126          126
Percent leased (at end of period)                        91%           90%           88%           88%          91%
</TABLE>


* On December 21, 1993, KPI was merged with and into the Company.
(1)  The  Company  believes  that Funds from  Operations  is one  measure of the
     performance  of an  equity  REIT.  Funds  from  Operations  should  not  be
     considered  as an  alternative  to  net  income  as an  indication  of  the
     Company's financial  performance or to cash flow from operating  activities
     (determined  in  accordance  with  GAAP)  as a  measure  of  the  Company's
     liquidity, nor is it necessarily indicative of sufficient cash flow to fund
     all of the Company's needs.  Funds from Operations is calculated as follows
     (in thousands):
<TABLE>


                                                     1995          1994          1993        1992           1991
                                                   -------       --------      --------    ---------      ---------
  <S>                                              <C>           <C>           <C>         <C>            <C>      
  Net income (loss)                                $28,990       $  4,215      $  2,452    $     933      $ (5,949)
    Depreciation and amortization                   19,110         16,728         8,958        8,089         7,484
    Litigation settlement                              176          1,902
    Provision for loss on land held for sale           970            996
    Loss on sale of assets                             255             43
    Gain on TKPL note to Southeast                 (11,288)
    Gain on early retirement of debt                  (919)
    Provision for losses on loans to KPI                                                       1,982        16,700
                                                   -------        -------       -------      -------       -------
    Funds from Operations                          $37,294        $23,884       $11,410      $11,004       $18,235
                                                   =======        =======       =======      =======       =======
</TABLE>

    The 1995  calculated  Funds from  Operations  includes  $13,066 of  interest
    revenue  associated  with the TKPL mortgage  notes which KE acquired  during
    1995. These mortgage notes were retired by TKPL during 1995.

                                       12

<PAGE>



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

         The  following  discussion  should  be read  in  conjunction  with  the
selected  financial  data  and  the  consolidated   financial   statements  (the
"Consolidated   Financial  Statements")  appearing  elsewhere  in  this  report.
Historical  results and percentage  relationships in the Consolidated  Financial
Statements,  including  trends  which  might  appear,  should  not be  taken  as
indicative  of  future  operations  or  financial  position.   The  Consolidated
Financial  Statements  include  the  accounts  of KE,  Southeast,  KRES and KRSI
(collectively, the "Company").

GENERAL

         The Company has  prepared,  and is  responsible  for, the  accompanying
Consolidated   Financial  Statements  and  the  related  consolidated  financial
information included in this report. Such Consolidated Financial Statements were
prepared in accordance with generally accepted accounting principles and include
amounts  determined  using  management's  best  judgments  and  estimates of the
expected  effects  of  events  and  transactions  that are being  accounted  for
currently.

         The Company's independent auditors, Deloitte & Touche LLP, have audited
the  accompanying  Consolidated  Financial  Statements.  The  objective of their
audit,  conducted in accordance with generally accepted auditing standards,  was
to express an opinion on the fairness of presentation, in all material respects,
of the Company's  consolidated  financial position,  results of operations,  and
cash flows in conformity with generally  accepted  accounting  principles.  They
evaluated  the Company's  internal  control  structure to the extent  considered
necessary by them to determine  the audit  procedures  required to support their
report on the consolidated  financial statements and not to provide assurance on
such structure.

         The  Company  maintains  accounting  and other  control  systems  which
management  believes provide reasonable  assurance that the Company's assets are
safeguarded  and that the  Company's  books and records  reflect the  authorized
transactions  of the Company,  although  there are inherent  limitations  in any
internal control structure, as well as cost versus benefit  considerations.  The
Audit  Committee of KE's Board of Directors,  which is composed  exclusively  of
directors  who are  not  officers  of KE,  directs  matters  relating  to  audit
functions,  annually appoints the auditors subject to ratification of KE's Board
of Directors, reviews the auditors' independence,  reviews the scope and results
of the annual  audit,  and  periodically  reviews the adequacy of the  Company's
internal control structure.

RECENT DEVELOPMENTS

         During 1995, KE acquired  $32.3 million in aggregate  principal  amount
(subject to provisions permitting prepayment at a discount) of TKPL Notes for an
aggregate  purchase  price  of  approximately   $18.2  million.  To  permit  the
acquisition of the TKPL Notes,  KE obtained  certain  modifications  to the loan
agreements  governing KE's indebtedness.  During the quarter ended September 30,
1995, TKPL retired the TKPL Notes. KE recorded  $13,066,000 of interest  revenue
on the TKPL Notes in 1995.




                                       13

<PAGE>



         In  addition,  during  1995,  Southeast  received  approximately  $17.7
million as a partial  repayment of an unsecured note, issued by TKPL to KPI (and
subsequently  transferred by KPI to Southeast in connection  with the Merger) in
an original  principal amount of approximately $31 million.  This TKPL unsecured
note had been  valued and  carried on the books of the  Company at $0. A gain of
$11,288,000  was  recorded on this  repayment,  which was net of a write-off  of
unamortized  cost in excess of fair  value of net  assets  acquired  from KPI of
$6,412,000.

RESULTS OF OPERATIONS

         Rental Revenues.  For 1995, rental revenues  increased  $1,733,000 from
the year  ended  December  31,  1994.  This  increase  resulted  primarily  from
increases  in the  percent  leased  rate  and  the  average  rental  rate in the
Company's buildings,  which increases were partially offset by the sale of three
buildings (containing 233,980 net rentable square feet) on July 31, 1995. During
1995,  the  Company  earned  $2,228,000  in rental  revenues  from  these  three
buildings through the date of sale. Rental revenues  increased  $47,205,000 from
the year ended  December  31, 1993 to the year ended  December  31,  1994.  This
increase  resulted  primarily  from  the  rental  revenues  of the 93  buildings
acquired by the Company pursuant to the Merger (approximately  $46,560,000).  As
of December 31, 1995, the Company's buildings were on average 91 percent leased.
As of December  31, 1994 and 1993,  the  buildings  owned by the Company were on
average 90 and 88 percent leased, respectively.

         Management Fee Revenues.  Management fee revenues increased by $682,000
for 1995 as compared to 1994. This increase was due primarily to (a) an increase
in the fees earned under the management  contract with Centoff,  (b) an increase
in the fees  earned  under the  management  contract  with  Koala for the period
following  Koala's  purchase of TKPL's office  buildings and (c) the  management
fees earned for the  management  of the three  buildings  sold by the Company to
certain Koala entities on July 31, 1995. On May 5, 1994,  third party management
contracts  on two  buildings  terminated  due to a change of  ownership  of such
buildings.  Management  fee revenue  related to the management of such buildings
totalled  approximately  $106,000 during 1994. The Company earned $4,926,000 and
$92,000 of management fees from TKPL and third party management contracts, which
it assumed from KPI, during 1994 and 1993, respectively.

         Interest Revenues.  For 1995,  interest revenues increased  $13,378,000
from the year ended December 31, 1994. This increase was due to (i) the interest
revenue associated with the TKPL Notes  ($13,066,000),  (ii) the higher interest
rates earned on the Company's  temporary cash  investments  and (iii) the higher
average  balance of temporary  cash  investments.  Interest  revenues  increased
$856,000  for 1994 as  compared  to 1993.  This  increase  was due to (i) higher
interest rates earned on the Company's  temporary cash  investments and (ii) the
higher average balance of temporary cash investments.

         Expenses.   Property   operating   expenses  include  such  charges  as
utilities,  real estate  taxes,  janitorial,  maintenance,  property  insurance,
provision for uncollectible  rents, and management cost.  During 1995,  property
operating  expenses  increased by $1,119,000  or 2.8 percent,  compared to 1994,
primarily  due to the increase in management  cost for the Company's  buildings.
This increase in management  cost was primarily due to the accrued  compensation
expense ($876,000)  related to stock appreciation  rights granted in conjunction
with stock  options.  During  1994,  property  operating  expenses  increased by
$18,677,000  or 89 percent,  compared to 1993,  primarily  due to the  operating
expenses of the 93 buildings acquired by the Company pursuant

                                       14

<PAGE>



to the Merger (approximately $18,722,000). For 1995, property operating expenses
as a percentage of total rental  revenues were 42.8 percent.  For 1994 and 1993,
property  operating  expenses as a percentage of total rental revenues were 42.1
percent and 45.6  percent,  respectively.  In 1994,  the  decrease in  operating
expenses as a percentage of total rental  revenues was primarily due to the fact
that the 93  buildings  acquired  by the  Company  pursuant  to the Merger  were
generally newer and, therefore,  had lower operating expenses as a percentage of
total rental  revenues than the 126  buildings  which the Company owned prior to
the Merger.

         Interest expense  decreased by $2,164,000 during 1995 compared to 1994,
primarily due to (i) the reduction in the average balance of mortgages and loans
payable and (ii) the  forgiveness  of accrued  interest  on certain  debt due to
early repayment  ($1,362,000),  which  forgiveness was partially offset by yield
maintenance  payments  required  due to early  repayment  of  certain  mortgages
($882,000).  Interest expense  increased by $14,401,000  during 1994 compared to
1993  primarily  due to the  interest  expense on the  restructured  debt of KPI
assumed  pursuant to the Merger.  During  1995,  1994,  and 1993,  the  weighted
average interest rate on the Company's variable rate loans was 8.4 percent,  7.9
percent, and 6.2 percent, respectively. The Company's average outstanding amount
under such loans during 1995, 1994, and 1993 was $47,945,000,  $58,718,000,  and
$95,110,000 respectively.

         Depreciation  expense has been calculated on the  straight-line  method
based upon the useful lives of the Company's depreciable assets,  generally 3 to
40 years. For 1995,  depreciation  expense increased  $2,230,000 or 14.5 percent
compared to the prior year, due to improvements  made to the properties owned by
the  Company  during 1995 and 1994.  For 1994,  depreciation  expense  increased
$6,993,000 or 83 percent  compared to the prior year, due to (i) the acquisition
by the Company of 93 buildings pursuant to the Merger and (ii) improvements made
to the properties owned by the Company during 1994 and 1993.

         Amortization  expense  increased  by $152,000  during 1995  compared to
1994, due to amounts  incurred during 1995 for deferred tenant costs.  For 1994,
amortization  expense  increased  $777,000  compared to the prior  year,  due to
amounts  incurred  for  deferred  tenant  costs and due to having a full year of
amortization  of cost in excess  of the fair  value of  assets  acquired  by the
Company in the Merger.

         General and administrative  expenses were 1.2 percent, 1.0 percent, and
0.6 percent of average  invested assets for 1995,  1994 and 1993,  respectively.
For 1995, general and administrative  expenses increased  $1,193,000 compared to
the prior year,  primarily due to (i) increases in the accrual for  compensation
expense related to stock  appreciation  rights granted in conjunction with stock
options  ($423,000),  (ii) the accrual for expense  related to the  Supplemental
Executive Retirement Plan adopted during 1995 ($184,000), and (iii) increases in
compensation  costs. For 1994,  general and  administrative  expenses  increased
$3,955,000  compared to the prior year,  primarily due to the increased  general
and administrative functions performed by the Company following the Merger.

         During 1994, the Company settled a pending class action proceeding (the
"Securities Action"). The Company recorded a provision of $1,685,000 relating to
the settlement of the Securities Action and incurred additional costs related to
such settlement which totalled $217,000.


                                       15

<PAGE>



         During 1995, the Company recorded a provision for loss on land held for
sale which totalled $970,000.  This provision for loss was based upon a contract
for the  sale of a land  parcel  (approximately  8.1  acres)  which  is  located
adjacent to an office center sold to Koala. Contingent upon the assurances which
can be  received  from the local  government  concerning  the square  footage of
office  buildings  which can be  constructed  on this land parcel,  the contract
price ranges between $2,000,000 and $2,970,000.  In 1994, the Company recorded a
provision for loss on land held for sale which totalled $996,000. This provision
for  loss  was  based  upon   contracts   for  the  sale  of  two  land  parcels
(approximately 53 acres).  The sale of one of these land parcels  (approximately
23 acres) was  consummated  during 1994,  while the contract for the sale of the
other land parcel expired.

         Management  periodically  reviews  its  investment  in  properties  for
evidence  of other  than  temporary  impairments  in value.  Factors  considered
consist  of,  but are not  limited  to, the  following:  current  and  projected
occupancy  rates,  market  conditions  in  different   geographic  regions,  and
management's  plans with respect to its properties.  Where management  concludes
that  expected  cash flows will not enable the Company to recover  the  carrying
amount of its investments,  losses are recorded and asset values are reduced. No
such impairments in value existed during 1995, 1994 or 1993.

         Direct costs of  management  contracts  increased by $874,000 for 1995,
compared to 1994, due to increased costs to provide services  required under the
management  contracts with Centoff and Koala. The primary cause of the increased
cost was the increase in the accrual for  compensation  expense related to stock
appreciation  rights  which have been granted to certain  employees  who provide
these management services. During 1994 and 1993, the Company incurred $3,649,000
and $56,000, respectively, in direct costs to generate management fees from TKPL
and third party management contracts which the Company assumed from KPI pursuant
to the Merger.

         Real estate taxes and other costs related to the  Company's  unimproved
land decreased $155,000 during 1995,  compared to 1994, due to (i) the sale of a
parcel  of  unimproved  land  (approximately  23  acres)  during  October,  1994
($77,000) and (ii) the sale of two parcels of unimproved land  (approximately 44
acres) on July 31, 1995  ($22,000).  During 1994 and 1993, real estate taxes and
other  costs  related to the  unimproved  land  acquired  pursuant to the Merger
totalled $667,000 and $24,000, respectively.

         Operating  Results.  Net income  totalled  $28,990,000,  $4,215,000 and
$2,452,000 for 1995, 1994 and 1993, respectively. For 1995, net income increased
$24,775,000 over the prior year due to (i) the interest revenue  associated with
KE's  investment in the TKPL Notes,  (ii) the gain  associated  with the partial
repayment  of a note  owing  from  TKPL to  Southeast,  (iii) the  reduction  in
mortgage and loan interest,  (iv) the increase in rental  revenues,  and (v) the
gain on early  retirement of debt. For 1994, net income increased over the prior
year  primarily due to the positive  effect on the period of the  acquisition by
the Company of the 93  buildings  pursuant to the  Merger,  which was  partially
offset by the costs  related  to the  litigation  settlement  and the  provision
recorded for the loss on two land parcels held for sale.





                                       16

<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

         Operating  Activities.  During the year ended  December 31,  1995,  the
Company  generated  approximately  $43.9  million  in net  cash  from  operating
activities.  The  Company's  primary  internal  sources  of  cash  are  (i)  the
collection of rents from buildings  owned by the Company and (ii) the receipt of
management  fees paid to the Company in respect of properties  managed on behalf
of Koala,  TKPL,  Centoff,  and  others.  As a REIT,  KE is  required to pay out
annually,  as dividends,  95 percent of its REIT taxable income  (which,  due to
non-cash  charges,  including  provision  for  losses and  depreciation,  may be
substantially  less than cash flow).  In the past,  KE has paid out dividends in
amounts at least equal to its REIT  taxable  income.  KE believes  that its cash
provided  by  operating  activities  will be  sufficient  to cover debt  service
payments  and to pay the  dividends  required,  if any, to maintain  REIT status
through 1996.

         The level of cash flow  generated  by rents  depends  primarily  on the
occupancy rates of the Company's  buildings and increases in rental rates on new
and renewed  leases and under  escalation  provisions.  As of December 31, 1995,
approximately 93 percent of the Company's  annualized gross rental revenues were
derived  from  existing  leases  containing  provisions  for  rent  escalations.
However,  market  conditions may prevent the Company from escalating rents under
such provisions.

         As of December 31, 1995, leases representing approximately 27.8 percent
of the gross annual rent from the Company's  properties,  without  regard to the
exercise of options to renew,  were due to expire during 1996.  This  represents
1,214  leases for space in buildings  located in all of the 18 Koger  Centers in
which the Company owns  buildings.  Certain of these tenants may not renew their
leases  or  may  reduce  their   demand  for  space.   Leases  were  renewed  on
approximately  67  percent,  61  percent  and 74 percent  of the  Company's  net
rentable  square feet which were scheduled to expire during 1995, 1994 and 1993,
respectively.  For those leases which renewed  during 1995,  the average  rental
rate increased  from $13.60 to $14.48.  However,  current  market  conditions in
certain  markets may require that rental rates at which leases are renewed or at
which vacated space is leased be lower than rental rates under existing  leases.
Based upon the  significant  amount of leases which will expire  during 1996 and
the  competition for tenants in the markets in which the Company  operates,  the
Company has offered, and expects to continue to offer, incentives to certain new
and  renewal  tenants.  These  incentives  may  include  the  payment  of tenant
improvement  costs and, in certain  markets,  reduced rents during initial lease
periods.  The Company's  percent  leased rate has  increased  from 88 percent on
December 31, 1993 to 91 percent on December 31, 1995.  During 1994 and 1995, the
Company has benefitted  from improving  economic  conditions and reduced vacancy
levels  for  office  buildings  in many of the  metropolitan  areas in which the
Company  owns  buildings.   The  Company  believes  that  the  southeastern  and
southwestern  regions of the United States provide  significant  economic growth
potential due to their diverse regional economies, expanding metropolitan areas,
skilled work force and moderate labor costs. However, the Company cannot predict
whether such economic growth will continue.  Cash flow from operations  could be
reduced if economic growth were not to continue in the Company's  markets and if
this resulted in lower occupancy rates for the Company's buildings.

         Governmental  tenants  (including  the State of Florida  and the United
States of America)  which  accounted  for 22.7 percent of the  Company's  leased
space as of December 31, 1995,  may be subject to budget  reductions in times of
recession and governmental austerity measures.

                                       17

<PAGE>



Consequently,  there can be no assurance that  governmental  appropriations  for
rents may not be reduced.  Additionally,  certain of the private-sector  tenants
which have  contributed  to the  Company's  rent stream may reduce their current
demands, or curtail their future need, for additional office space.

         At the beginning of 1995, the Company had management  contracts for the
management of 113 commercial office properties.  On March 31, 1995, a management
agreement  to  manage  20  commercial  office  buildings  owned by  Centoff  was
automatically  extended to March 31, 1996.  This management  agreement  provides
that,  so long as no default has  occurred,  the  management  agreement  will be
automatically  extended  from year to year  until  such  time as the  management
agreement  is  terminated.  The  Company  earned  fees of  $1,791,000  from this
management  agreement  during 1995.  Another  agreement to manage one commercial
office  building has been  extended to June 30, 1996.  During 1995,  the Company
earned management fees of $121,000 for the management of this building. With the
sale of TKPL's 92 buildings to Koala, Southeast's management agreement with TKPL
ended.  However,  KRSI has entered  into a  management  agreement  with Koala to
manage for five years the 95 buildings  which Koala  purchased from TKPL and the
Company.

         Investing  Activities.  At December 31, 1995,  substantially all of the
Company's invested assets were in real properties. Improvements to the Company's
existing properties have been financed through internal operations. During 1995,
the Company's  expenditures for improvements to existing properties increased by
$3,288,000  over the  prior  year,  primarily  due to the  $2,663,000  which the
Company  expended for energy  management  improvements to its buildings.  During
1995, the Company did not purchase any buildings.

         During 1995, KE acquired $32.3 million in aggregate principal amount of
TKPL Notes for an aggregate  purchase price of approximately  $18.2 million.  To
permit the acquisition of the TKPL Notes, KE obtained  certain  modifications to
the loan  agreements  governing  KE's  indebtedness.  During the  quarter  ended
September 30, 1995, TKPL retired the TKPL Notes. KE recorded approximately $13.1
million of interest revenue on the TKPL Notes in 1995.

         During 1995,  Southeast  received $17.7 million as partial repayment of
an unsecured note issued by TKPL to KPI (and subsequently  transferred by KPI to
Southeast  in  connection  with the Merger) in an original  principal  amount of
approximately $31 million.

         During  1995,  the  Company  sold  to  Koala  three  office   buildings
(containing  233,980 net rentable  square feet),  two  undeveloped  land parcels
(totalling  approximately 44 acres),  and certain other assets for approximately
$25,268,000, net of selling costs.

         The  terms  of the  restructured  indebtedness  of KPI  assumed  by the
Company pursuant to the Merger and the terms of the Company's other indebtedness
require that a substantial  portion of any debt or equity  offering  effected by
the Company  during the  foreseeable  future be applied to the  reduction of the
current secured  indebtedness of the Company.  The loan agreements governing the
Company's indebtedness contain provisions requiring the Company to use the first
$50 million of proceeds from any equity offering to pay down certain portions of
such  indebtedness.  To the extent that the equity offering  proceeds exceed $50
million,  one  half of the  excess  proceeds  must be used to pay  down  certain
portions of such indebtedness, with the remainder being available for use at the
Company's discretion. In addition, the Company's bank

                                       18

<PAGE>



loans contain  certain  principal  prepayment  obligations in addition to normal
principal  repayment.  Two of these bank loans  require  that the  Company  make
additional  principal payments totalling $10 million by December,  1998. So long
as these provisions  remain in effect, it is unlikely that the Company will have
financial resources available to complete any significant additional development
or purchases of income-producing properties, even if the Company determined that
such purchases were otherwise available.

         Based on its improved financial  structure and results as of the end of
1995, the Company believes that it is in a position to capitalize on some of its
strengths, such as the value of its franchise in the suburban office park market
and its operating systems,  development  expertise and unimproved land available
for  development.  Therefore,  the  Company has  committed  to a plan to enhance
shareholder value by refinancing indebtedness and increasing growth. The Company
intends to  refinance or  restructure  its  existing  indebtedness  to eliminate
certain restrictive  covenants which limit the Company's ability to grow through
development and  acquisitions.  In addition,  the Company intends to establish a
new bank  revolving  credit  facility which would be available to finance growth
opportunities. The plan also contemplates the possible use by the Company of its
existing  inventory of 228 acres of land held for development,  most of which is
partially or wholly  improved  with streets  and/or  utilities and is located in
various  metropolitan areas where the Company currently operates suburban office
parks.  The Company  may also  acquire  existing  office  buildings  or land for
development  in other markets in the  Southeast  and Southwest  that the Company
considers  favorable.  The  Company  also  intends to spend an  additional  $1.6
million for energy management improvements to existing properties during 1996.

         Financing  Activities.  Historically,  the Company's  primary  external
sources  of cash have been bank  borrowings,  mortgage  financings,  and  public
offerings of equity  securities.  The proceeds of these  financings were used by
the  Company to acquire  buildings  from KPI.  The  Company has no open lines of
credit,  but had cash and temporary cash investments which totalled  $25,650,000
at December 31, 1995.

         In December,  1993, in connection with the Merger and the resolution of
KPI's Chapter 11 bankruptcy  case, the Company  entered into agreements with its
major bank lenders which  provided for revised terms and  conditions,  including
extended maturity dates and modified interest rates and amortization  schedules.
With  respect to  approximately  $70 million of secured bank  indebtedness,  the
maturity  of such  indebtedness  was  extended  to December  21,  2000.  Through
December  1996,  the  interest  rate is  fixed at 6.43  percent  per  annum  for
approximately  $45.9  million and at 6.386  percent per annum for  approximately
$24.1  million.  During the remaining  four years of the term, the interest rate
will  be set at a rate  equal  to the  sum of (a) the  effective  interest  rate
prevailing on December 21, 1996 for U.S. Treasury  obligations  having a term to
maturity of four years,  plus (b) 210 basis  points,  subject to a maximum of 11
percent per annum.  Amortization  with respect to this  indebtedness is based on
equal monthly  installments over a 25 year amortization period. The Company will
be required to make additional  principal payments  totalling  approximately $10
million on December 21, 1998,  although the Company's  obligation to do so would
be  reduced  to the extent  that it had made  prepayments  in respect of secured
indebtedness to such lenders out of equity proceeds during the first three years
after the Merger. These lenders have required that, until the Company has raised
an aggregate of $50 million of equity,  the following  limitations  on dividends
will be  applied:  (i) in 1996  and  1997,  a  maximum  of  $11,000,000,  unless
imposition  of the limit  would  cause loss of REIT  status and (ii) in 1998 and
1999, a maximum of $11,000,000, regardless of impact on REIT status.

                                       19

<PAGE>



         In addition,  each of these lenders  required  affirmative and negative
covenants and other  agreements which may become  burdensome to the Company.  In
particular, each bank lender has required that, commencing on December 21, 1998,
the Company maintain a total  liabilities to net worth ratio of 1.0 to 1.0, that
the Company maintain  loan-to-value  ratios  determined on the basis of periodic
appraisals of bank collateral and that, under certain circumstances,  additional
collateral be provided for  indebtedness to such bank. At December 31, 1995, the
total liabilities to net worth ratio of the Company was 0.9 to 1.0. In addition,
each such bank lender has  required  other  covenants  generally  similar to the
provisions set forth in the loan agreements  governing the restructured  debt of
KPI. These other covenants include reporting  requirements,  provisions limiting
the amount of annual  dividends,  limitations  regarding  additional  debt,  and
limitations on general and administrative  expenses. In addition, the Company is
also required to maintain certain financial ratios.

         With the consummation of the Merger, the Company assumed  approximately
$182.6  million  of  restructured  debt  of  KPI.  At  December  31,  1995,  the
outstanding  balance  of  such  debt  was  approximately   $139.2  million.  For
additional  information  concerning terms, interest rates, and maturity dates of
the restructured  debt of KPI, see the "Mortgages and Loans Payable" footnote in
the notes to the Consolidated Financial Statements.

         Based upon  interest  rates in effect on December 31, 1995 and assuming
only scheduled  principal  payments for 1995,  management expects total interest
expense for 1996 to decrease to approximately $19.5 million.  However,  the high
degree of leverage of the Company,  when compared to other REITs,  may result in
the  impairment  of  its  ability  to  obtain  additional  financing,   to  make
acquisitions,  and to take advantage of significant business  opportunities that
may arise,  including  activities which require significant  funding.  This high
degree of leverage may also increase the vulnerability of the Company to adverse
general economic and industry conditions and to increased competitive pressures,
especially rental pressures from less highly leveraged competitors. During 1995,
the Company fully repaid $3,958,000 of the outstanding  balances of 22 tax notes
assumed by the Company from KPI pursuant to the Merger.  With the proceeds  from
the sale of three  office  buildings,  the Company  repaid  approximately  $21.4
million  of  mortgage  loans  during  1995.  In  addition,  the  Company  repaid
approximately  $39.5 million of the outstanding  balances of mortgages and loans
payable  during  1995.  These early  repayments  resulted  in the  release  from
mortgages of 37 buildings  (containing 1,175,380 net rentable square feet) which
had been  collateral  for such loans.  At December 31, 1995,  the Company had 86
buildings   (containing   2,516,230   net  rentable   square  feet)  which  were
unencumbered.

         Loan maturities and normal  amortization of mortgages and loans payable
are expected to total  approximately  $4.1 million over the next twelve  months.
The Company  believes that these  obligations will be paid from cash provided by
operations  or  from  current  cash  balances.  Significant  maturities  of  the
Company's mortgages and loans payable do not begin to occur until 1998.

         In order to generate  funds  sufficient to make  principal  payments in
respect of  indebtedness of the Company over the long term, as well as necessary
capital and tenant  acquisition  expenditures,  the Company  will be required to
successfully  refinance its indebtedness or procure  additional  equity capital.
However, there can be no assurance that any such refinancing or equity financing
will be achieved or will  generate  adequate  funds on a timely  basis for these
purposes.  If additional funds are raised by issuing equity securities,  further
dilution to existing shareholders may result.  Moreover,  under the terms of the
Company's existing secured debt, the Company

                                       20

<PAGE>



will be required to utilize the first $50 million of any proceeds  from the sale
of equity securities, as well as half of such proceeds in excess of $50 million,
to reduce secured indebtedness.  The prepayments generally will be made pro rata
among the holders of secured  indebtedness  and will not  generally  relieve the
Company  of  the  obligation  to  meet  maturities  on  the  remaining   secured
indebtedness.  Unfavorable  conditions in the financial markets, the high degree
of  leverage  of the  Company,  restrictive  covenants  contained  in  its  debt
instruments  and various  other  factors may limit the ability of the Company to
successfully undertake any such financings,  and no assurance can be given as to
the availability of alternative sources of funds. On August 22, 1994, KE filed a
shelf  registration  statement  with respect to the  possible  issuance of up to
$100,000,000 of its common stock and/or preferred stock.  However, due to market
conditions,  KE has not yet issued any equity under such registration statement.
During  1995,  the Company  wrote off  $745,000 of certain  costs  incurred  for
potential  public and private  offerings of equity  securities  which management
determined had no future value.

         In  addition,  in the event KE is unable to generate  sufficient  funds
both to meet principal  payments in respect of its  indebtedness  and to satisfy
distribution  requirements  of 95 percent of annual REIT  taxable  income to its
shareholders,  KE may be unable to qualify as a REIT.  In such an event,  KE (i)
will incur federal income taxes and perhaps penalties, (ii) if KE is then paying
dividends,   may  be  required  to  decrease  any   dividend   payments  to  its
shareholders,  and (iii) the market price of KE's common stock may decrease.  KE
would also be prohibited from requalifing as a REIT for five years.

IMPACT OF INFLATION

         The Company may  experience  increases  in its  expenses as a result of
inflation;   however,   the  amount  of  such  increases  cannot  be  accurately
determined.  The Company attempts to pass on inflationary cost increases through
escalation clauses which are included in most leases. However, market conditions
may  prevent  the Company  from  escalating  rents.  Inflationary  pressure  may
increase operating expenses,  including labor and energy costs (and, indirectly,
property taxes) above expected levels,  at a time when it may not be possible to
increase  lease rates to offset such higher  operating  expenses.  In  addition,
inflation can have  secondary  effects upon  occupancy  rates by decreasing  the
demand for office space in many of the markets in which the Company operates. As
of December  31,  1995,  93 percent of the  Company's  annualized  rentals  were
subject  to  leases  having  annual   escalation   clauses  as  described  under
"Properties"  above.  As of  December  31,  1994 and  1993,  94  percent  of the
Company's  annualized  rentals were subject to leases having  annual  escalation
clauses.

         The interest rate on approximately  $22.3 million of the Company's debt
is floating. Interest rates on the Company's remaining debt are subject to reset
at various dates through  December 21, 2003,  based upon  then-current  interest
rates for U.S. Treasury obligations.  Therefore, the interest rates payable from
time to time on this debt will  reflect  changes in  underlying  market rates of
interest, and thus be subject to the effects of inflation.

         Historically,  inflation  has often  caused  increases  in the value of
income-producing  real estate through higher rentals. The Company,  however, can
provide no assurance that inflation will increase the value of its properties in
the  future,  and, in fact,  the rate of  inflation  over recent  years has been
considerably below that which obtained previously.


                                       21

<PAGE>



CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION FOR PURPOSE OF 
"SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

         The  Private  Securities  Litigation  Reform  Act of 1995  (the  "Act")
provides  a new  "safe  harbor"  for  forward-looking  statements  to  encourage
companies to provide prospective information about their businesses without fear
of litigation so long as those statements are identified as forward-looking  and
are  accompanied  by  meaningful  cautionary  statements  identifying  important
factors  that  could  cause  actual  results  to differ  materially  from  those
projected in such  statements.  The Company desires to take advantage of the new
"safe harbor" provisions of the Act.

         This Annual  Report on Form 10-K contains  forward-looking  statements,
together  with  related  data and  projections,  about the  Company's  projected
financial results and its future plans and strategies.  However,  actual results
and needs of the Company may vary materially from forward-looking statements and
projections  made from time to time by the Company on the basis of  management's
then-current expectations. The business in which the Company is engaged involves
changing and competitive  markets and a high degree of risk, and there can be no
assurance that  forward-looking  statements and projections will prove accurate.
Accordingly, the Company hereby identifies the following important factors which
could cause the Company's  actual  performance  and financial  results to differ
materially  from any results  which might be projected,  forecast,  estimated or
budgeted by the Company.

Real Estate Financing Risks

         Existing Debt. The Company is subject to risks normally associated with
debt  financing,  including  (a) the risk that the  Company's  cash flow will be
insufficient to meet required  payments of principal and interest,  (b) the risk
that  the  existing  debt in  respect  of the  Company's  properties  (which  in
substantially all cases will not have been fully amortized at maturity) will not
be able to be refinanced  and (c) the risk that the terms of any  refinancing of
any existing debt will not be as favorable as the terms of such  existing  debt.
The Company currently has outstanding debt of approximately  $254.9 million, all
of which is secured by certain of the Company's properties. Approximately $129.3
million of such debt will mature before 2001, with most of the balance  maturing
through  2003.  If  principal  payments  due at maturity  cannot be  refinanced,
extended or paid with proceeds of other capital transactions, such as new equity
capital,  the Company expects that its cash flow will not be sufficient to repay
all such  maturing  debt.  Furthermore,  if prevailing  interest  rates or other
factors at the time of  refinancing  (such as the  reluctance of lenders to make
commercial real estate loans) result in higher  interest rates upon  refinancing
than the interest rates on the existing debt, the interest  expense  relating to
such refinanced debt would increase,  which would adversely affect the Company's
cash flow and the amount of  distributions  the Company would be able to make to
its  shareholders.  If the Company has mortgaged a property to secure payment of
debt and the Company is unable to meet the mortgage payments, then the mortgagee
may  foreclose  upon,  or  otherwise  take  control  of, such  property,  with a
consequent loss of income and asset value to the Company.

         Restrictions on Incurrence of Additional Debt. The existing debt of the
Company  contains  provisions  restricting  the  Company's  ability to incur any
significant new debt and requiring  major portions of new financings,  including
equity proceeds, to be applied to the reduction of existing

                                       22

<PAGE>



debt.  While the  Company's  policy is to continue to reduce its existing  debt,
these  restrictions  could limit the  Company's  ability to develop its existing
land and otherwise take advantage of favorable real estate opportunities.

         Risk of Rising  Interest  Rates and  Variable  Rate Debt.  The  Company
currently has $22.3  million in variable rate debt.  The Company may incur other
variable rate debt in the future. Increases in interest rates on such debt could
increase  the  Company's  interest  expense,  which would  adversely  affect the
Company's cash flow and its ability to pay distributions to its shareholders.

Existing Leverage; No Limitation on Debt

         As of December 31, 1995, the debt to total market  capitalization ratio
of the Company was approximately  57%. The Company's policy is to seek to reduce
this ratio over time to  approximately  35%. The Company's policy regarding this
ratio (i.e.,  total  consolidated  debt as a percentage of the sum of the market
value of issued and outstanding  capital stock plus total  consolidated debt) is
not subject to any  limitation in the  organizational  documents of the Company.
Accordingly,  the Board of  Directors  could alter or  eliminate  this policy or
decide  to borrow on a  case-by-case  or other  basis,  thereby  increasing  the
Company's  debt to  total  market  capitalization  ratio.  If this  policy  were
changed,  the  Company  could  become  more highly  leveraged,  resulting  in an
increase in debt service that (a) could adversely affect the Company's cash flow
and, consequently, the amount of cash available for distribution to shareholders
and (b) could increase the risk of default on the Company's debt.

         For  purposes of  establishing  and  evaluating  its debt  policy,  the
Company measures its leverage by reference to the total market capitalization of
the  Company  rather  than by  reference  to the book value of its  assets.  The
Company has used total market  capitalization  because it believes that the book
value of its assets  (which to a large extent is  comprised  of the  depreciated
value  of  real  property,  the  Company's  primary  tangible  asset)  does  not
accurately reflect its ability to borrow and to meet debt service  requirements.
The market  capitalization of the Company,  however,  is more variable than book
value, and does not necessarily  reflect the fair market value of the underlying
assets of the Company at all times.  The Company also  considers  factors  other
than its market  capitalization in making decisions  regarding the incurrence of
indebtedness,  such as the purchase price of properties to be acquired with debt
financing, the estimated market value of its properties upon refinancing and the
ability of particular  properties,  and the Company as a whole, to generate cash
flow to cover expected debt service.

Geographic Concentration

         The Company's  revenues and the value of its properties may be affected
by a number of factors,  including the regional and local  economic  climates of
the metropolitan  areas in which the Company's  buildings are located (which may
be adversely  impacted by business  layoffs or downsizing,  industry  slowdowns,
changing  demographics  and other  factors)  and  regional and local real estate
conditions in such areas (such as oversupply of, or reduced  demand for,  office
and other competing commercial properties).  All of the Company's properties are
located in the  southeastern  and  southwestern  United  States.  The  Company's
performance  and its  ability to make  distributions  to its  shareholders  are,
therefore, dependent on economic conditions in these market areas. The Company's
historical growth has occurred during periods when the economy in the

                                       23

<PAGE>



southeastern United States has out-performed the national economy.  There can be
no  assurance  as to the  continued  growth of the  economy in the  southeastern
United States or the future growth rate of the Company.

Renewal of Leases and Reletting of Space

         The Company is subject to the risks that upon  expiration of leases for
space located in its  buildings (a) such leases may be not be renewed,  (b) such
space may not be relet or (c) the terms of renewal  or  reletting  (taking  into
account the cost of required  renovations)  may be less  favorable  than current
lease  terms.  Leases on a total of 28.0%  and  19.5% of the total net  rentable
square  feet  leased in the  Company's  buildings  will expire in 1996 and 1997,
respectively.  The Company has  established  annual  reserves for renovation and
reletting  expenses,  which take into consideration its view of both the current
and expected  business  conditions in the southeastern  and southwestern  United
States,  but no assurance can be given that these reserves will be sufficient to
cover such expenses.  If the Company is unable to promptly  relet,  or renew the
leases for, all or a substantial  portion of the space located in its buildings,
or if the rental rates upon such renewal or reletting  are  significantly  lower
than expected  rental rates,  or if the  Company's  reserves for these  purposes
prove inadequate,  then the Company's cash flow and its ability to make expected
distributions to its shareholders may be adversely affected.

Real Estate Investment Risks

         General Risks. Real property investments are subject to varying degrees
of risk. The yields  available from equity  investments in real estate depend in
large part on the  amount of income  generated  and  expenses  incurred.  If the
Company's  properties  do not generate  revenues  sufficient  to meet  operating
expenses, including current levels of debt service, tenant improvements, leasing
commissions  and other  capital  expenditures,  the  Company  may have to borrow
additional  amounts to cover  fixed  costs and the  Company's  cash flow and its
ability to make  distributions to its shareholders  will be adversely  affected.
The Company must obtain external financing to meet future debt maturities.

         The  Company's  net  revenues  and the value of its  properties  may be
adversely affected by a number of factors, including the national,  regional and
local  economic  climates;  regional  and  local  real  estate  conditions;  the
perceptions of prospective tenants as to the attractiveness of the property; the
ability  of  the  Company  to  provide  adequate  management,   maintenance  and
insurance;  and  increased  operating  costs  (including  real estate  taxes and
utilities).  In addition, real estate values and income from properties are also
affected by such factors as applicable laws,  including tax laws,  interest rate
levels and the availability of financing.

         Illiquidity  of  Real  Estate.   Equity  real  estate  investments  are
relatively  illiquid.  Such  illiquidity  will tend to limit the  ability of the
Company to vary its  portfolio  promptly  in  response to changes in economic or
other  conditions.  In addition,  the Internal Revenue Code limits the Company's
ability to sell  certain  properties  held for fewer than four years,  which may
affect the Company's ability to sell its properties.

     Competition. Numerous office buildings compete with the Company's buildings
in  attracting  tenants to lease space.  Some of these  competing  buildings are
newer,  better  located  or  better  capitalized  than  some  of  the  Company's
buildings. Moreover, the Company believes that
                                       24

<PAGE>



major national or regional  commercial property developers will continue to seek
development  opportunities in the  southeastern and southwestern  United States.
These  developers may have greater  financial  resources  than the Company.  The
number of competitive  commercial  properties in a particular  area could have a
material adverse effect on the Company's ability to lease space in its buildings
or at newly developed or acquired properties and the rents charged.

         Changes in Laws. Because increases in income, service or transfer taxes
are generally not passed  through to tenants  under leases,  such  increases may
adversely  affect the Company's cash flow and its ability to make  distributions
to its  shareholders.  The  Company's  properties  are also  subject  to various
federal,  state and local regulatory  requirements,  such as requirements of the
Americans  with  Disabilities  Act (the "ADA") and state and local fire and life
safety  requirements.  Failure to comply with these requirements could result in
the  imposition  of fines by  governmental  authorities  or awards of damages to
private  litigants.  The Company  believes that its  properties are currently in
compliance  with all such  regulatory  requirements.  However,  there  can be no
assurance that these  requirements  will not be changed or that new requirements
will not be imposed which would require significant  unanticipated  expenditures
by the Company and could have an adverse  effect on the Company's  cash flow and
expected distributions.

         Uninsured Loss. The Company presently carries comprehensive  liability,
fire,  flood (where  appropriate),  extended  coverage and rental loss insurance
with respect to its properties,  with policy  specifications  and insured limits
customary for similar  properties.  There are, however,  certain types of losses
(such  as  from  wars)  that  may be  either  uninsurable  or  not  economically
insurable. Should an uninsured loss or a loss exceeding policy limits occur, the
Company could lose both its capital  invested in, and anticipated  profits from,
one or more of its properties.

         Bankruptcy and Financial Condition of Tenants. At any time, a tenant of
the Company's  buildings may seek the protection of the bankruptcy  laws,  which
could result in the rejection and termination of such tenant's lease and thereby
cause a reduction in the cash flow available for distribution by the Company. No
assurance can be given that tenants will not file for  bankruptcy  protection in
the future or, if any  tenants  file,  that they will  affirm  their  leases and
continue to make rental payments in a timely manner. In addition,  a tenant from
time to time may  experience  a downturn  in its  business  which may weaken its
financial  condition and result in its failure to make rental payments when due.
If a  tenant's  lease is not  affirmed  following  bankruptcy  or if a  tenant's
financial condition weakens, the Company's income may be adversely affected.

         Americans with  Disabilities Act Compliance.  Under the ADA, all public
accommodations  and commercial  facilities are required to meet certain  federal
requirements relating to access and use by disabled persons.  These requirements
became  effective in 1992.  Compliance  with the  requirements  of the ADA could
require removal of access barriers and non-compliance could result in imposition
of fines by the U.S.  government  or an award of damages  to private  litigants.
Although  the  Company  believes  that  its  properties  are   substantially  in
compliance with these  requirements,  the Company may incur  additional costs to
comply with the ADA. Although the Company believes that such costs will not have
a material adverse effect on the Company,  if required changes involve a greater
expenditure than the Company  currently  anticipates,  the Company's  ability to
make distributions to its shareholders could be adversely affected.




                                       25

<PAGE>



         Risks  Involved in Property  Ownership  Through  Partnership  and Joint
Ventures.  Although the Company owns fee simple interests in its properties,  in
the future the Company  could,  if then  permitted by the  covenants in its loan
agreements  and its  financial  position,  participate  with other  entities  in
property ownership through partnerships or joint ventures.  Partnership or joint
venture  investments  may,  under  certain  circumstances,   involve  risks  not
otherwise present in property ownership,  including the possibility that (a) the
Company's partners or co-venturers  might become bankrupt,  (b) such partners or
co-venturers  might at any time have  economic or other  business  interests  or
goals  which  are  inconsistent  with  the  business  interests  or goals of the
Company,  and (c) such  partners  or  co-venturers  may be in a position to take
action  contrary to the  instructions or the requests of the Company or contrary
to the Company's  policies or  objectives,  including  the  Company's  policy to
maintain  its  qualification  as a REIT.  The  Company  will,  however,  seek to
maintain sufficient control of such participants or joint ventures to permit the
Company's business  objectives to be achieved.  There is no limitation under the
Company's  organizational documents as to the amount of available funds that may
be invested in partnerships or joint ventures.

         Impact of  Inflation.  The  Company  may  experience  increases  in its
expenses, including debt service, as a result of inflation. The Company attempts
to pass on  inflationary  cost increases  through  escalation  clauses which are
included  in most of its  leases.  However,  market  conditions  may prevent the
Company from  escalating  rents.  Inflationary  pressure may increase  operating
expenses,  including  labor and energy costs (and,  indirectly,  property taxes)
above  expected  levels at a time when it may not be possible for the Company to
increase  lease rates to offset such higher  operating  expenses.  In  addition,
inflation can have  secondary  effects upon  occupancy  rates by decreasing  the
demand for office space in many of the markets in which the Company operates.

         Although inflation has historically often caused increases in the value
of income-producing  real estate through higher rentals, the Company can provide
no assurance  that  inflation  will increase the value of its  properties in the
future  and,  in  fact,  the  rate of  inflation  over  recent  years  has  been
considerably below that which obtained previously.

Risk of Development, Construction and Acquisition Activities

         Within the  constraints of the terms of its current loan agreements and
its  policy to reduce its  leverage  over time,  the  Company  may in the future
develop and construct office  buildings,  particularly on its undeveloped  land.
Risks  associated with the Company's  development and  construction  activities,
including activities relating to its undeveloped land, may include:  abandonment
of  development  opportunities;  construction  costs  of  a  property  exceeding
original estimates and possibly making the property  uneconomical;  insufficient
occupancy  rates and rents at a newly  completed  property to make the  property
profitable;  unavailability of financing on favorable terms for development of a
property;  and the failure to complete  construction  and  lease-up on schedule,
resulting in increased debt service expense and construction costs. In addition,
new  development  activities,  regardless of whether or not they are  ultimately
successful,  typically  require a substantial  portion of management's  time and
attention. Development activities are subject to risks relating to the inability
to obtain, or delays in obtaining,  all necessary zoning,  land- use,  building,
occupancy and other required governmental permits and authorizations.

         The  Company  might  in  the  future  also  acquire  office  buildings.
Acquisitions  of office  buildings  entail risks that  investments  will fail to
perform in accordance with  expectations.  Estimates of the cost of improvements
to bring an acquired building up to standards established

                                       26

<PAGE>



for the market  position  intended for such  building may prove  inaccurate.  In
addition, there are general investment risks associated with any new real estate
investment.

         The Company  anticipates that any future  developments and acquisitions
would be financed  through a combination  of equity  investments  and secured or
unsecured  financing.  If new  developments  are financed  through  construction
loans,  there  is a  risk  that,  upon  completion  of  construction,  permanent
financing  for  newly  developed  properties  may  not  be  available  or may be
available only on disadvantageous terms.

Changes in Policies Without Stockholder Approval

         The investment,  financing,  borrowing and distribution policies of the
Company, as well as its policies with respect to all other activities, including
growth,  debt,  capitalization  and  operations,  are determined by the Board of
Directors.  Although the Board of Directors  has no present  intention to do so,
these  policies  may be  amended or revised at any time and from time to time at
the discretion of the Board of Directors  without a vote of the  shareholders of
the Company.  A change in these  policies could  adversely  affect the financial
condition  or results of  operations  of the Company or the market  price of the
Common Stock.

Limitations of REIT Status on Business of Subsidiaries

         Certain requirements for REIT qualification may in the future limit the
Company's ability to increase fee development, management and leasing operations
conducted,  and related services offered, by the Company's  subsidiaries without
jeopardizing the Company's qualification as a REIT.

Adverse Consequences of Failure to Qualify as a REIT

         The Company  believes it has  operated so as to qualify as a REIT under
the Internal  Revenue Code since its inception in 1988.  Although  management of
the Company  intends that the Company  continue to operate so as to qualify as a
REIT,  no  assurance  can be given that the Company  will remain  qualified as a
REIT.  Qualification  as a REIT involves the  application  and  satisfaction  of
highly technical and complex Code  requirements for which there are only limited
judicial and administrative  interpretations.  Uncertainty in the application of
such  requirements,  as well as circumstances  not entirely within the Company's
control, may affect the Company's ability to qualify as a REIT. In addition,  no
assurance  can  be  given  that  legislation,  new  regulations,  administrative
interpretations  or court decisions will not  significantly  change the tax laws
with respect to  qualification  as a REIT or the federal income tax consequences
of such  qualification.  The Company,  however,  is not aware of any pending tax
legislation  that would adversely  affect the Company's  ability to operate as a
REIT.

Possible Environmental Liabilities

         Under various federal,  state and local environmental laws,  ordinances
and  regulations,  a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic  substances or petroleum
product  releases  at such  property  and may be held  liable to a  governmental
entity  or to third  parties  for  property  damage  and for  investigation  and
clean-up  costs incurred by such parties in connection  with the  contamination.
Such laws typically

                                       27

<PAGE>



impose clean-up responsibility and liability without regard to whether the owner
knew, or caused the presence, of the contaminants,  and the liability under such
laws has been  interpreted  to be joint and several unless the harm is divisible
and there is a reasonable basis for allocation of  responsibility.  The costs of
investigation, remediation or removal of such substances may be substantial, and
the  presence  of such  substances,  or the failure to  properly  remediate  the
contamination on such property, may adversely affect the owner's ability to sell
or rent such property or to borrow using such property as collateral. Any person
who arranges for the disposal or treatment of hazardous or toxic substances at a
disposal or  treatment  facility  also may be liable for the costs of removal or
remediation  of a release of hazardous or toxic  substances  at such disposal or
treatment  facility,  whether or not such  facility is owned or operated by such
person. In addition,  some  environmental laws create a lien on the contaminated
site in  favor of the  government  for  damages  and  costs  that it  incurs  in
connection with the contamination.  Finally,  the owner of a site may be subject
to common law claims by third parties based on damages and costs  resulting from
environmental contamination emanating from a site.

         Certain  federal,  state and local  laws,  regulations  and  ordinances
govern  the  removal,   encapsulation  or  disturbance  of   asbestos-containing
materials  ("ACM") when such  materials are in poor condition or in the event of
construction,  remodeling, renovation or demolition of a building. Such laws may
impose  liability  for release of ACM and may provide for third  parties to seek
recovery  from  owners or  operators  of real  properties  for  personal  injury
associated  with ACM. In  connection  with its  ownership  and  operation of its
properties, the Company may be potentially liable for such costs. All ACM in the
Company's buildings has been found to be in good condition and non-friable,  and
should not present a risk as long as it continues to be properly managed.

         The Company's  environmental  assessments  of its  properties  have not
revealed any  environmental  liability  that the Company  believes  would have a
material  adverse effect on its business,  assets or results of operations taken
as a  whole,  nor is  the  Company  aware  of any  such  material  environmental
liability.  Nevertheless,  it is possible that the Company's  assessments do not
reveal all  environmental  liabilities or that there are material  environmental
liabilities of which the Company is unaware. Moreover, there can be no assurance
that  future  laws,  ordinances  or  regulations  will not impose  any  material
environmental  liability or the current environmental condition of the Company's
properties  will  not be  affected  by  tenants,  by the  condition  of  land or
operations  in  the  vicinity  of  such  properties  (such  as the  presence  of
underground storage tanks), or by third parties unrelated to the Company.

Effect of Market Interest Rates on Price of Common Stock

         One of the factors that will  influence  the market price of the Common
Stock in public  markets  will be the annual  dividend  yield on the share price
reflected  by  dividend  distributions  by the  Company.  An  increase in market
interest  rates could reduce cash available for  distribution  by the Company to
its  shareholders  and,  accordingly,  adversely  affect the market price of the
Common Stock.

Additional Information

         For  additional  disclosure  of risk  factors  to which the  Company is
subject,  see the other  sections of  "Management's  Discussion  and Analysis of
Financial Condition and Results of Operations."

                                       28

<PAGE>



Item 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                        AND FINANCIAL STATEMENT SCHEDULES

                                                                       PAGE NO.

Independent Auditors' Report........................................         30

Consolidated Financial Statements:
     Consolidated Balance Sheets as of December 31, 1995
        and 1994....................................................         31

     Consolidated Statements of Operations for Each
        of the Three Years in the Period Ended
        December 31, 1995...........................................         32

     Consolidated Statements of Changes in
        Shareholders' Equity for Each of the Three
        Years in the Period Ended December 31, 1995.................         33

     Consolidated Statements of Cash Flows for Each
        of the Three Years in the Period Ended
        December 31, 1995...........................................         34

     Notes to Consolidated Financial Statements for
        Each of the Three Years in the Period Ended
        December 31, 1995...........................................         35

Financial Statement Schedules:
     Schedule II - Valuation and Qualifying Accounts
        for the Three Years Ended December 31, 1995.................         50

     Schedule III - Real Estate and Accumulated
        Depreciation as of December 31, 1995........................         51


                                       29

<PAGE>






INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Koger Equity, Inc.
Jacksonville, Florida

We have audited the  accompanying  consolidated  balance sheets of Koger Equity,
Inc. and subsidiaries  (the "Company") as of December 31, 1995 and 1994, and the
related consolidated statements of operations,  changes in shareholders' equity,
and cash flows for each of the three  years in the  period  ended  December  31,
1995. Our audits also included the financial  statement  schedules listed in the
Index at Item 8. These financial  statements and financial  statement  schedules
are the  responsibility of the Company's  management.  Our  responsibility is to
express  an  opinion  on these  financial  statements  and  financial  statement
schedules based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards 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.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of Koger Equity, Inc. and subsidiaries
as of December 31, 1995 and 1994, and the results of their  operations and their
cash flows for each of the three years in the period ended  December 31, 1995 in
conformity with generally accepted accounting principles.  Also, in our opinion,
such financial  statement  schedules,  when  considered in relation to the basic
consolidated  financial  statements  taken as a whole,  presents  fairly  in all
material respects the information set forth therein.



DELOITTE & TOUCHE LLP


Jacksonville, Florida
March 4, 1996

                                       30

<PAGE>

<TABLE>


                       KOGER EQUITY, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      AS OF DECEMBER 31, 1995 AND 1994 (In
                          Thousands Except Share Data)

                                                                                 1995              1994
                                                                               --------          --------
<S>                                                                            <C>               <C>     
ASSETS
Real Estate Investments:
   Operating properties:
     Land                                                                      $ 98,727          $102,161
     Buildings                                                                  471,145           474,879
     Furniture and equipment                                                      1,566             1,197
     Accumulated depreciation                                                   (62,885)          (46,106)
                                                                               --------          --------
       Operating properties - net                                               508,553           532,131
   Undeveloped land held for investment                                          21,150            33,054
   Undeveloped land held for sale, at lower
     of cost or market value                                                      9,131             2,958
Cash and temporary investments                                                   25,650            23,315
Accounts receivable, net of allowance for uncollectible
   rents of $391 and $362                                                         5,260             4,276
Management fees and other receivables from TKPL                                                     1,851
Cost in excess of fair value of net assets acquired from KPI,
   net of accumulated amortization of $345 and $688                               2,211             9,295
Other assets                                                                      7,427             6,926
                                                                               --------          --------
      TOTAL ASSETS                                                             $579,382          $613,806
                                                                               ========          ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
   Mortgages and loans payable                                                 $254,909          $323,765
   Accounts payable                                                               2,641             2,823
   Accrued interest                                                                 206             1,047
   Accrued real estate taxes payable                                              2,222               970
   Accrued liabilities - other                                                    5,133             1,268
   Advance rents and security deposits                                            3,574             3,332
                                                                               --------          --------
     Total Liabilities                                                          268,685           333,205
                                                                               --------          --------

Commitments and Contingencies (Notes 2, 11 and 12)                                    -               -
Shareholders' Equity
   Preferred stock, $.01 par value; 50,000,000  shares
     authorized; issued: none
   Common stock, $.01 par value; 100,000,000 shares
      authorized; issued: 20,476,705 and 20,474,019 shares;
       outstanding: 17,753,677 and 17,604,295 shares                                205               205
   Capital in excess of par value                                               318,609           318,589
   Warrants; outstanding 1,114,217 and 1,114,889                                  2,250             2,251
   Retained earnings (Accumulated dividends in excess
     of net income)                                                              13,210           (15,657)
   Treasury stock, at cost; 2,723,028 and 2,869,724 shares                      (23,577)          (24,787)
                                                                               --------          --------
     Total Shareholders' Equity                                                 310,697           280,601
                                                                               --------          --------
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                $579,382          $613,806
                                                                               ========          ========

</TABLE>
See Notes to Consolidated Financial Statements.


                                       31

<PAGE>



                       KOGER EQUITY, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    FOR EACH OF THE THREE YEARS IN THE PERIOD
                             ENDED DECEMBER 31, 1995
                      (In Thousands Except Per Share Data)
<TABLE>



                                                                            1995             1994              1993
                                                                        --------         --------           -------
<S>                                                                     <C>              <C>                <C>    
Revenues
  Rental                                                                $ 94,865         $ 93,132           $45,927
  Other rental services                                                      578            1,256               181
  Management fees ($1,685, $3,288  and $89 from TKPL)                      5,608            4,926                92
  Interest ($13,066 from TKPL in 1995)                                    14,440            1,062               206
  Gain on TKPL note to Southeast                                          11,288
  Gain on early retirement of debt                                           919                                   
                                                                        --------         --------           -------
     Total revenues                                                      127,698          100,376            46,406
                                                                        --------         --------           -------

Expenses
  Property operations                                                     40,830           39,711            18,850
  Management fee to Koger Management, Inc.                                                                    2,184
  Mortgage and loan interest                                              23,708           25,872            11,471
  Depreciation and amortization                                           19,110           16,728             8,958
  General and administrative                                               7,559            6,366             2,411
  Direct cost of management fees                                           4,523            3,649                56
  Settlement of litigation and related costs                                 176            1,902
  Provision for loss on land held for sale                                   970              996
  Undeveloped land costs                                                     512              667                24
  Loss on sale of assets                                                     255               43
  Write-off of deferred offering costs                                       745                                   
                                                                        --------         --------           -------
      Total expenses                                                      98,388           95,934            43,954
                                                                        --------         --------           -------

Income Before Income Taxes                                                29,310            4,442             2,452
Income taxes                                                                 320              227                  
                                                                        --------         --------           -------

Net Income                                                              $ 28,990        $   4,215          $  2,452
                                                                        ========         ========           =======

Earnings Per Common Share and Common
  Equivalent Share:
   Primary                                                           $      1.61      $      0.24         $    0.18
                                                                        ========         ========           =======
   Fully Diluted                                                     $      1.60      $      0.24         $    0.18
                                                                        ========         ========           =======

See Notes to Consolidated Financial Statements.
</TABLE>












                                       32

<PAGE>



                       KOGER EQUITY, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                    FOR EACH OF THE THREE YEARS IN THE PERIOD
                             ENDED DECEMBER 31, 1995
                                 (In Thousands)
<TABLE>




                                                                                        Retained Earnings
                                                        Capital                         (Accumulated                    Total
                                   Common Stock         in Excess                       Dividends                       Share-
                               Shares        Par        of Par                          in Excess of  Treasury          holders'
                               Issued        Value      Value         Warrants          Net  Income)  Stock             Equity
                                ------       ----       --------      --------           ---------    ---------         --------
BALANCE,
<S>                             <C>          <C>        <C>                              <C>          <C>               <C>     
  DECEMBER 31, 1992             14,313       $143       $267,824                         $(22,324)    $(10,129)         $235,514

Common stock issued              6,159         62         50,750                                                          50,812
Treasury stock acquired                                                                                (14,696)          (14,696)
Warrants issued                                                        $1,368                                              1,368
Net income                                                                                  2,452                          2,452
                                ------       ----       --------      --------           ---------    ---------         --------

BALANCE,
  DECEMBER 31, 1993             20,472        205        318,574        1,368             (19,872)     (24,825)          275,450

Treasury stock reissued                                       (3)                                           38               35
Warrants issued                                                           885                                                885
Warrants exercised                   1                        12           (2)                                                10
Options exercised                    1                         6                                                               6
Net income                                                                                  4,215                          4,215
                                ------       ----       --------      --------           ---------    ---------         --------

BALANCE,
  DECEMBER 31, 1994             20,474        205        318,589        2,251             (15,657)     (24,787)          280,601

Treasury stock reissued                                                                      (123)       1,217             1,094
Warrants exercised                   1                         7           (1)                                                 6
Options exercised                    1                         7                                            (7)
Stock appreciation
  rights exercised                   1                         6                                                               6
Net income                                                                                 28,990                         28,990
                                ------       ----       --------      --------           ---------    ---------         --------

BALANCE,
  DECEMBER 31, 1995             20,477       $205       $318,609       $2,250           $  13,210     $(23,577)         $310,697
                                ======       ====       ========       ======           =========     =========         ========
</TABLE>







See Notes to Consolidated Financial Statements.










                                       33

<PAGE>



                       KOGER EQUITY, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    FOR EACH OF THE THREE YEARS IN THE PERIOD
                             ENDED DECEMBER 31, 1995
                                 (In Thousands)
<TABLE>

                                                                         1995           1994           1993
                                                                       --------       --------       --------
Operating Activities
<S>                                                                    <C>            <C>            <C>     
    Net income                                                         $ 28,990       $  4,215       $  2,452
    Adjustments to reconcile net income to net cash
      provided by operating activities:
      Depreciation and amortization                                      19,110         16,728          8,958
      Gain on TKPL note to Southeast                                    (11,288)
      Warrants issued - litigation settlement                                              885
      Provision for loss on land held for sale                              970            996
      Loss on sale of assets                                                255             43
      Gain on early debt repayment                                         (919)
      Provision for uncollectible rents                                     172            212            343
      Accrued interest added to principal                                   496          1,336             38
      Amortization of mortgage discounts                                    175            219            267
      Changes in assets and liabilities, net of
         effects from purchase of assets from KPI:
         Increase (decrease) in accounts payable,
            accrued liabilities and other liabilities                     5,126             35           (104)
         Increase in payable to KPI                                                                     1,287
         Increase in receivables and other assets                        (1,062)        (3,176)        (1,316)
         Decrease (increase) in receivable from TKPL                      1,851         (1,217)              
                                                                       --------       --------       --------
      Net cash provided by operating activities                          43,876         20,276         11,925
                                                                       --------       --------       --------
Investing Activities
   Purchase of TKPL mortgage notes                                      (18,195)
   Proceeds from TKPL mortgage notes                                     18,195
   Proceeds from sale of assets                                          25,268          3,499
   Proceeds from TKPL note to Southeast                                  17,105
   Tenant improvements to existing properties                            (8,644)        (7,334)        (4,662)
   Building improvements to existing properties                          (3,064)        (3,749)        (1,761)
   Energy management improvements                                        (2,663)
   Deferred tenant costs                                                 (1,085)        (1,112)          (598)
   Additions to furniture and equipment                                    (353)          (383)
   Merger costs                                                                           (344)        (4,221)
   Cash acquired in purchase of assets from KPI                             307          2,316         15,596
   Payments received on loans to KPI - Cash
      Collateral Order                                                                                  1,392
                                                                       --------       --------       --------
      Net cash provided by (used in) investing activities                26,871         (7,107)         5,746
                                                                       --------       --------       --------
Financing Activities
   Principal payments on mortgages and loans                            (68,608)        (8,267)        (7,670)
   Proceeds from exercise of warrants and stock options                       6             16              1
   Proceeds from sale of stock under Stock Investment Plan                  206             35
   Financing costs                                                          (16)          (204)          (719)
                                                                       --------       --------       --------
      Net cash used in financing activities                             (68,412)        (8,420)        (8,388)
                                                                       --------       --------       --------
Net increase in cash and cash equivalents                                 2,335          4,749          9,283
Cash and cash equivalents - beginning of year                            23,315         18,566          9,283
                                                                       --------       --------       --------
Cash and cash equivalents - end of year                                 $25,650        $23,315        $18,566
                                                                       ========       ========       ========

</TABLE>

See Notes to Consolidated Financial Statements.


                                       34

<PAGE>



                       KOGER EQUITY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR EACH OF THE THREE YEARS IN THE PERIOD
                             ENDED DECEMBER 31, 1995

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

         Organization.  Koger Equity, Inc. ("KE") was incorporated in Florida on
June 21,  1988.  Koger  Properties,  Inc.  ("KPI") had  maintained  a 20 percent
interest in KE through June 28, 1991. On June 29, 1991, KE repurchased 1,081,081
shares of its common stock from KPI, which reduced KPI's percentage ownership to
13.5 percent of KE's issued and  outstanding  shares.  On December 21, 1993, KPI
was  merged  with and into KE (the  "Merger").  The Merger was part of a plan of
reorganization  (the  "KPI  Plan")  in a Chapter  11  bankruptcy  case (the "KPI
Chapter 11 Case") filed on behalf of KPI.

         Principles of  Consolidation.  The  consolidated  financial  statements
include  the  accounts of KE, its wholly  owned  subsidiaries  and Koger  Realty
Services,  Inc. (the  "Company").  KE owns all of the  preferred  stock of Koger
Realty Services, Inc. which represents  approximately 95 percent of the economic
benefits of this entity. All material intercompany accounts have been eliminated
in consolidation.

         Real Estate Investments. Operating properties, furniture and equipment,
and  undeveloped  land held for investment  are stated at cost less  accumulated
depreciation.  Undeveloped land held for sale is carried at the lower of cost or
market value.

         Periodically, management reviews its portfolio of operating properties,
undeveloped land held for investment and related goodwill and in those instances
where properties have suffered an impairment in value that is deemed to be other
than temporary, the properties and related goodwill will be reduced to their net
realizable value. This review includes a quarterly  analysis of occupancy levels
and rental rates for the Company's  properties  in order to identify  properties
which may have suffered an impairment in value. Management prepares estimates of
future cash flows for these properties to determine  whether the Company will be
able to recover its investment.  In making such estimates,  management considers
the conditions in the commercial real estate markets in which the properties are
located,  current and expected  occupancy  rates,  current and  expected  rental
rates,  and expected  changes in operating costs. As of December 31, 1995, there
were no such  impairments  in value.  Maintenance  and  repairs  are  charged to
operations. Acquisitions, additions, and improvements are capitalized.

         Depreciation  and  Amortization.  The  Company  uses the  straight-line
method for depreciation  and  amortization.  Acquisition  costs and building and
tenant   improvements  are  depreciated  over  the  periods  benefitted  by  the
expenditures  which range from 3 to 40 years.  Deferred  tenant  costs  (leasing
commissions  and tenant  relocation  costs) are  amortized  over the term of the
related leases.  Deferred  financing charges are amortized over the terms of the
related agreements. Cost in excess of fair value of net assets acquired pursuant
to the Merger is being amortized over 15 years.




                                       35

<PAGE>



         Revenue  Recognition.  Rentals are generally recognized as revenue over
the lives of leases  according to provisions of the lease  agreements.  However,
the straight-line  basis,  which averages annual minimum rents over the terms of
leases,  is used to recognize  minimum rent revenues  under leases which provide
for material  varying rents over their terms. For 1995 and 1994, the recognition
of rental revenues on this basis for applicable leases increased rental revenues
by $80,000 and  $512,000,  respectively,  over the amount  which would have been
recognized  based upon the  contractual  provisions  of these  leases.  Interest
income is  recognized  on the  accrual  basis on  interest-earning  investments.
Interest for which  payment was due,  based upon the  contractual  provisions of
loans to KPI under a  Restated  Credit  Agreement  and a Land  Credit  Agreement
between the Company and KPI,  after KPI filed a petition under Chapter 11 of the
United States  Bankruptcy Code in September 1991 and through  December 21, 1993,
was not accrued.

         Federal  Income  Taxes.  The Company is  qualified  and has elected tax
treatment as a real estate  investment  trust under the Internal Revenue Code (a
"REIT").  Accordingly,  the Company  distributes at least 95 percent of its REIT
taxable income to its shareholders. Since the Company had no REIT taxable income
in 1995, 1994 or 1993, no distributions to shareholders were made. To the extent
that the Company pays dividends equal to 100 percent of REIT taxable income, the
earnings of the Company are taxed at the shareholder level.  However, the use of
net operating loss carryforwards,  which may reduce REIT taxable income to zero,
are limited for alternative  minimum tax purposes.  Koger Realty Services,  Inc.
("KRSI") is not a qualified REIT subsidiary  under the Internal  Revenue Code of
1986 (the "Code"). Although, KRSI is consolidated with the Company for financial
reporting  purposes,  this entity is subject to Federal income tax and will file
separate Federal and state income tax returns.

         Earnings Per Common Share. Earnings per common share have been computed
based on the weighted  average number of shares of common stock and common stock
equivalents outstanding as follows:

      Year                     Primary                         Fully Diluted
      ----                   ----------                        -------------
      1995                   18,011,076                         18,091,029
      1994                   17,718,757                         17,718,757
      1993                   13,351,525                         13,351,525

         Fair Value of  Financial  Instruments.  The Company  believes  that the
carrying amount of its financial  instruments (cash and short-term  investments,
accounts  receivable,  management  fees and  other  receivables  from The  Koger
Partnership,  Ltd. ("TKPL"),  accounts payable, and mortgages and loans payable)
is a reasonable estimate of fair value of these instruments.

         Statements  of Cash  Flows.  Cash in  excess of daily  requirements  is
invested in short-term monetary securities. Such temporary cash investments have
an  original  maturity  of less  than  three  months  and are  deemed to be cash
equivalents for purposes of the statements of cash flows.

         During 1993, KPI was merged with and into the Company.  Pursuant to the
Merger,  the  Company  received  the  collateral  for loans to KPI,  which  were
accounted for as foreclosed  in-substance,  in full satisfaction of those loans.
As of December 21, 1993, the loans to KPI foreclosed in-substance had a carrying
value of approximately  $93,498,000  which was management's best estimate of the
fair value of the  collateral  received  ($121,743,000)  less the mortgage  debt
related to such collateral ($28,245,000) which was assumed by the Company.

                                       36

<PAGE>



         In addition,  the Company acquired the remaining assets and liabilities
of KPI by issuing  6,158,977 shares of the Company's common stock (the "Shares")
and  warrants  to  purchase  644,000  Shares  (the  "Warrants").  The  following
represents the fair value of the KPI assets acquired and liabilities  assumed by
the  Company  pursuant to the Merger in exchange  for the  Company's  Shares and
Warrants (in thousands).

    Fair value of assets and treasury stock
         acquired, including cash of $15,596                         $215,855
    Fair value of common stock and warrants
         issued and direct merger costs                               (56,461)
                                                                     ---------
    Fair value of liabilities assumed                                $159,394
                                                                     ========

         During 1994, the fair value of the KPI assets  acquired and liabilities
assumed  pursuant to the Merger was  adjusted as  follows:  (1) assets  acquired
increased  $2,250,000;  (2)  liabilities  assumed  increased  $243,000;  and (3)
additional  direct merger costs were incurred  which totalled  $344,000.  During
1995, the fair value of KPI assets acquired and liabilities  assumed pursuant to
the Merger was adjusted as follows: (1) assets acquired increased $169,000;  and
(2)  liabilities  assumed  increased  $1,000.  In  addition,  $6,412,000  of the
unamortized  cost in excess of fair  value of net assets  acquired  from KPI was
written off and offset  against  proceeds  received by  Southeast  from the TKPL
unsecured  note.  This  write-off  was  based on  management's  analysis  of the
remaining  value of the intangible  assets based on the  liquidation of TKPL and
the partial repayment of the TKPL unsecured note.

         During 1995, the Company  contributed 122,441 shares of common stock to
the Company's 401(k) Plan.  These shares had a value of  approximately  $888,000
based on the closing price of the Company's  common stock on the American  Stock
Exchange on December 30, 1994. In addition,  TKPL  assigned  $595,000 of its net
assets to Southeast as payment on the unsecured note to Southeast during 1995.

         For 1995,  1994, and 1993,  total interest  payments were  $23,823,000,
$23,525,000 and $12,421,000,  respectively,  for the Company. For 1995 and 1994,
payments for income taxes  totalled  $387,000 and $227,000  respectively.  There
were no payments for income taxes during 1993.

         Estimates.  The preparation of financial  statements in conformity with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts of  revenues  and  expenses  during  each
reporting period. Actual results could differ from those estimates.

         New  Accounting  Standards.  In March 1995,  the  Financial  Accounting
Standards  Board issued  Statement of Financial  Accounting  Standards  No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" ("SFAS 121"). SFAS 121 establishes  accounting standards for the
impairment of long-lived assets, certain identifiable intangibles,  and goodwill
related  to those  assets  to be held and used  and for  long-lived  assets  and
certain  identifiable  intangibles  to be disposed of. SFAS 121 is effective for
the Company for the year ending  December 31, 1996. The Company does not believe
adoption of SFAS 121 will have a material effect on the financial  statements of
the Company.

                                       37

<PAGE>



         In October 1995, the Financial  Accounting  Standards Board also issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation"  ("SFAS 123").  SFAS 123  establishes a fair value based method of
accounting for stock-based employee  compensation plans; however, it also allows
companies  to  continue  to  measure  cost for such  plans  using the  method of
accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25"). Companies that elect to continue with
the accounting  under APB 25 must provide  certain pro forma  disclosures of net
income,  as if  SFAS  123  had  been  applied.  The  accounting  and  disclosure
requirements of SFAS 123 are effective for the Company for transactions  entered
into in 1996. The Company is currently  evaluating its  alternatives  under SFAS
123,  however,  its impact on operating  results when  initially  adopted is not
expected to be material.

     Reclassification.  Certain 1994 and 1993 amounts have been  reclassified to
conform with 1995 presentation.

2.       TRANSACTIONS WITH RELATED PARTIES.

         General.  The Company was  incorporated for the purpose of investing in
the  ownership  of income  producing  properties,  primarily  commercial  office
buildings  developed  by KPI. On  September  25,  1991,  KPI and TKPL, a Florida
limited  partnership  of  which  KPI was the  managing  general  partner,  filed
petitions under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy
Code").  On August 10, 1993, TKPL completed the  establishment of a $4.5 million
reorganization  financing  facility which  represented  the  fulfillment and the
final condition to TKPL's  emergence from bankruptcy and, as a result,  the plan
of  reorganization  for the TKPL Chapter 11 Case became  effective as of June 1,
1993. On December 21, 1993, KPI was merged with and into the Company.

         Management  Agreement.  Prior to the  Merger,  Koger  Management,  Inc.
("KMI") was responsible for the leasing, operation,  maintenance, and management
of each of the Company's properties.  The management fee was five percent of the
gross rental receipts  collected on the property managed for the Company by KMI.
For the year ended  December  31,  1993,  the Company  incurred  management  fee
expenses to KMI of $2,184,000 for property management  services.  The Management
Agreement  expired on December  31, 1991,  but was extended on a  month-to-month
basis through the date of the Merger.  With the Merger,  the Company assumed all
of  the  leasing  and  other  management  responsibilities  for  its  properties
including those acquired in the Merger.

         Other.  A director  of the  Company is a Senior  Vice  President  of an
affiliate  of a  shareholder  who along  with  certain of its  affiliates  owned
approximately  18.8 percent of the outstanding Shares of the Company at December
31, 1995.  The Company has entered into an agreement  with this  shareholder  to
register  shares owned by the  shareholder  and its  affiliates  pursuant to the
registration  requirements  of the  Securities  Act of 1933 in up to five public
offerings  and include these Shares in an unlimited  number of public  offerings
which may be made on behalf of the Company or others for a period of eight years
following December 21, 1993. All expenses, except for brokerage discount, of any
of these offerings will be borne by the Company.




                                       38

<PAGE>



         In addition, one of the agreements contains provisions which permit the
shareholder  and certain of its  affiliates to own the greater of (i) 23 percent
of the  outstanding  Shares or (ii)  4,047,350  of the  outstanding  Shares,  as
adjusted for  recapitalization  without  triggering  the Company's  common stock
rights  agreement  or the  right  of the  Company  pursuant  to its By  Laws  to
repurchase  all Shares held by the  shareholder  and its affiliates in excess of
9.8  percent  of  outstanding  Shares.  The  Company  has also  covenanted  that
following  December 21, 1993,  for a period of eight years the Company would not
amend,  alter or otherwise  modify the common stock rights agreement or take any
action, which would limit or eliminate certain rights of the shareholder and its
affiliates without prior consent of the shareholder.

3.       KPI MERGER.

         The Merger  became  effective  on December  21,  1993.  The  accounting
treatment for the Merger was separated into two  components:  (i) the receipt by
the  Company  of the  collateral  for loans to KPI made  pursuant  to a Restated
Credit   Agreement  and  a  Land  Credit  Agreement  (loans  to  KPI  foreclosed
in-substance),  in full satisfaction of these loans; and (ii) the acquisition by
the Company of the remaining  assets and  restructured  liabilities of KPI under
the purchase method of accounting.

         Unpaid  interest  (amounting  to $30.3  million  from the date of KPI's
Chapter 11 Case to December  20, 1993) on loans to KPI  foreclosed  in-substance
made prior to KPI's Chapter 11 Case, has not been recognized in the accompanying
consolidated financial statements of the Company. Therefore,  interest earned in
1993 of  approximately  $12 million was not  recognized  as interest  revenue in
1993.

         For 1993, revenues and expenses of the assets and liabilities  acquired
from KPI are reflected in the  Consolidated  Statements of Operations for the 11
days from the date of the Merger, December 21, 1993, through December 31, 1993.

4.       INVESTMENTS IN THE KOGER PARTNERSHIP, LTD.

         General.   Pursuant  to  the  Merger,   Southeast   Properties  Holding
Corporation,  Inc.  ("Southeast"),  a wholly  owned  subsidiary  of the Company,
became the managing  general partner of TKPL.  Immediately  prior to the Merger,
KPI transferred all of its debt and equity interest in TKPL to Southeast.  These
interests  included (1) 90,360 TKPL General and Limited  Partnership  Units (the
"Units") and (2) a restructured unsecured note from TKPL with a principal amount
of  approximately  $31  million.  In  light of the  terms  of the  TKPL  plan of
reorganization  (the  "TKPL  Plan")  and  its  restructured  debt,  the  Company
determined that at the time of the Merger these investments had no value. During
1995, TKPL sold all of its operating properties.  The net proceeds from the sale
were  sufficient to repay in full all secured debt and accrued  interest of TKPL
with the remaining  excess sales proceeds and available cash of TKPL used to pay
Southeast  for amounts owed on  subordinate  debt and accrued  interest.  During
1995,  TKPL  repaid  $17.7  million of the  subordinate  debt to  Southeast.  On
December 4, 1995,  the  Bankruptcy  Court in the TKPL Chapter 11 Case entered an
order  authorizing  and directing  Southeast to take all necessary and advisable
action  to  wind  up  TKPL's  affairs  and  to  terminate  its  existence  as  a
partnership.  On December 26, 1995, TKPL was dissolved.  The Company  recorded a
gain on the  recovery of the TKPL note to Southeast  of  $11,288,000,  which was
calculated as follows:


                                       39

<PAGE>



   Proceeds from TKPL unsecured note to Southeast               $17,700,000
   Partial Write-off of Cost in Excess of Fair Value of
     Net Assets Acquired from KPI                                (6,412,000)
                                                                -----------
       Gain on TKPL Note to Southeast                           $11,288,000
                                                                ===========

         Basis  of  Accounting  for  the  Investment  in  TKPL.   Southeast  had
significant  influence over TKPL's activities because it owned  approximately 32
percent of TKPL's outstanding Units. However, Southeast did not control TKPL for
accounting  purposes and,  accordingly,  accounted for its investment  using the
equity method.  No losses of TKPL were allocated to Southeast  because Southeast
was not  obligated  to fund  losses of TKPL as stated in the Third  Amended  and
Restated Agreement of Limited Partnership dated August 3, 1993.

         Duties to and  Compensation  from TKPL.  Southeast,  in its capacity as
Managing General Partner, generally had responsibility for all aspects of TKPL's
operations and received as compensation  for its services a management fee equal
to nine percent of the gross rental  revenues  derived  from the  properties  it
managed for TKPL. All third-party leasing commissions incurred on TKPL buildings
were the  responsibility  of the Company.  During 1995 and 1994,  the management
fees earned were approximately $1,685,000 and $3,288,000, respectively. From the
date of the Merger, December 21, 1993, through December 31, 1993, the management
fees  earned  were  approximately  $89,000.  During the fourth  quarter of 1995,
approximately  $500,000 of management  fees from TKPL  previously  recorded were
written off because collection of these fees could have potentially affected the
Company's REIT status.

         Purchase of TKPL  Mortgage  Notes.  During 1995,  the Company  acquired
$27.8  million  principal  amount of TKPL New  Secured  Notes  and $4.5  million
principal amount of TKPL Converted Loan Notes for approximately $18.2 million in
the aggregate. During the quarter ended September 30, 1995, the TKPL New Secured
Notes and the TKPL  Converted  Loan Notes  were  retired  by TKPL.  The  Company
recorded  $13,066,000  of interest  revenue  related to these notes  during 1995
which  represented  repayment  proceeds on the notes in excess of the  Company's
cost basis.  These excess proceeds were recorded as an interest yield adjustment
on the notes.

5.       MORTGAGES AND LOANS PAYABLE.

         During  1993,  the  Company's  existing  bank loans were  modified  and
extended  in  connection  with the Merger.  These bank loans had an  outstanding
balance of $70,040,000 at December 31, 1995.  Prior to the  modification  of the
loans, the loans bore interest at rates equal to such banks' prime rates.  These
loans are  collateralized  by  mortgages  on certain  operating  properties.  At
December 31, 1995, one of these loans in the amount of $45,945,000 bore interest
at 6.43 percent and has a final maturity date of December 21, 2000. This loan is
collateralized by properties with a carrying value of approximately $67,146,000.
At December  31,  1995,  the other bank loan in the amount of  $24,095,000  bore
interest at 6.386  percent and has a final  maturity  date of December 21, 2000.
This loan is collateralized by properties with a carrying value of approximately
$42,117,000.  The interest  rate on both of these bank loans will be adjusted in
December,  1996 to a rate equal to the sum of (i) the  effective  interest  rate
prevailing on four year U.S. Treasury  obligations,  plus (ii) 210 basis points,
subject to a maximum of 11 percent  per annum.  Monthly  payments on these loans
include  principal  amortization  based  on a 25 year  amortization  period.  In
addition, the Company will be required to make additional

                                       40

<PAGE>



principal  payments  totalling  $10  million by  December,  1998.  Each of these
lenders required  affirmative and negative  covenants and other agreements which
may become  burdensome  to the Company.  In  particular,  both bank lenders have
required  that,  commencing on December 21, 1998,  the Company  maintain a total
liabilities  to net  worth  ratio  of 1.0 to  1.0,  that  the  Company  maintain
loan-to-value  ratios  determined  on the basis of periodic  appraisals  of bank
collateral  and that,  under  certain  circumstances,  additional  collateral be
provided  for  indebtedness  to such  bank.  At  December  31,  1995,  the total
liabilities to net worth ratio of the Company was 0.9 to 1.0. In addition,  both
of these bank lenders have required  other  covenants  generally  similar to the
provisions set forth in the KPI Plan with respect to the KPI restructured debt.

         At  December  31,  1995,  the  Company had  mortgages  payable  with an
outstanding  balance of $45,666,000  which is net of a $897,000  discount.  Such
mortgages  are  generally  amortizing,  bear  interest at rates ranging from 8.5
percent to 10.125 percent,  and are  collateralized  by office  buildings with a
carrying value of approximately $84,589,000 at December 31, 1995.

         Senior Bank Mortgage Debt with  outstanding  balances of  approximately
$74,898,000  will mature in December,  2003.  Interest  payments are due monthly
based on a 6.62 percent interest rate with monthly  amortization  which began in
December,  1994. The interest rate will adjust in April, 1998 to a rate equal to
the sum of (i) the then  prevailing  interest  rate on five year  U.S.  Treasury
obligations plus (ii) 210 basis points with a maximum rate of 10 percent.  These
loans are  collateralized  by properties with a carrying value of  approximately
$76,619,000 at December 31, 1995.

         Junior Bank Mortgage Debt totalling approximately $1,152,000 is secured
by properties  that also serve as collateral  for Senior Bank Mortgage Debt. The
Junior Bank Mortgage Debt matures in December,  2000 and accrues interest at the
prime rate of the lender (8.75 percent at December 31, 1995).  Accrued  interest
on Junior Bank Mortgage Debt must be paid no later than December,  1998. Monthly
interest payments are required  beginning in January,  1999. Accrued interest on
this debt will be forgiven if the  outstanding  balance is paid in full prior to
December, 1996. Interest accrued and forgiven will be reflected as an adjustment
to interest expense in the year forgiven.

         Insurance  Company Mortgage Debt with outstanding  balances at December
31, 1995 of approximately  $41,838,000 are non-recourse to the Company,  but are
secured by all properties on which each lender holds mortgages.  The contractual
interest  rates on these  loans  currently  range from 8 percent to 10  percent.
These mortgages  include  provisions during the period ending December 21, 1996,
that a portion of the interest  earned,  equal to 25 percent,  20 percent and 15
percent in, respectively,  the first, second and third years, may be deferred at
the option of the Company and added to principal,  subject to a minimum interest
payment rate of seven and one-half  percent per annum.  During 1995, the Company
elected to  discontinue  the  deferral of  interest on these loans with  certain
lenders. The interest rates will be reset on various dates, as defined. No reset
interest rate may be less than eight percent per annum. However, if any interest
reset rate  would  exceed  ten  percent  per  annum,  the  Company  may elect to
establish  the interest  reset rate at ten percent per annum,  in which case the
maturity  of the  indebtedness  in  question  shall  be the date on which a U.S.
Treasury  obligation  purchased on the interest  reset date in question  with an
effective  interest  rate of 210 basis  points below ten percent per annum would
mature.  In the  absence of an election  to fix any  interest  reset rate at ten
percent per annum,  all of such  indebtedness  matures on December 21, 2003. The
loans begin principal amortization in 1997

                                       41

<PAGE>



and are  collateralized  by properties  with a carrying  value of  approximately
$60,173,000 at December 31, 1995.  Additional  Insurance  Company  Mortgage Debt
totalling  $191,000 which  retained their existing  balances and terms were also
acquired  from KPI in  connection  with the Merger.  The interest  rate on these
loans is 8.5  percent.  These  loans are  collateralized  by  properties  with a
carrying value of approximately $970,000 at December 31, 1995.

         Other  Mortgage Debt totals  approximately  $21,124,000  and matures in
June, 2001.  Interest  payments are due monthly based on the prime rate plus one
percent  with a minimum  rate of 6.62  percent and a maximum rate of 10 percent.
These  loans  are   collateralized  by  properties  with  a  carrying  value  of
approximately $24,772,000 at December 31, 1995.

         The  Company's  restructured  debt  contains  provisions  requiring the
Company to use the first $50 million of proceeds from any equity offering to pay
down  certain  debt.  To the extent that  equity  offering  proceeds  exceed $50
million, one half of the excess must be used to pay down debt with the remainder
being  available for use at the Company's  discretion.  In addition to reporting
and other  requirements,  the restructured  debt agreements  contain  provisions
limiting the amount of annual dividends,  limiting  additional  borrowings to $5
million,  and limiting general and administrative  expense.  The Company is also
required to maintain certain financial ratios.

         The annual maturities of loans and mortgages  payable,  which are gross
of $897,000 of unamortized discounts, as of December 31, 1995, are summarized as
follows:

               Year Ending                              Amount
             December 31,                           (In thousands)
             -------------                          --------------
             1996                                         $4,082
             1997                                         12,937
             1998                                         19,355
             1999                                          5,751
             2000                                         87,181
             Subsequent Years                            126,500
                                                        --------
               Total                                    $255,806
                                                        ========

6.       LEASES.

         The Company's  operations consist  principally of owning and leasing of
office  space.  Most of the  leases  are  for  terms  of  three  to five  years.
Generally, the Company pays all operating expenses,  including real estate taxes
and  insurance.  At December 31, 1995,  93 percent of the  Company's  annualized
rentals were subject to rent escalations  based on changes in the Consumer Price
Index or  increases  in real estate  taxes and  certain  operating  expenses.  A
substantial  number of leases  contain  options  that allow  leases to renew for
varying periods.

         The Company's  leases are operating  leases and expire at various dates
through 2005.  Minimum future rental  revenues from leases in effect at December
31, 1995,  determined  without  regard to renewal  options,  are  summarized  as
follows:





                                       42

<PAGE>



          Year Ending                             Amount
          December 31,                          (In  thousands)
          ------------                          ---------------
          1996                                     $   81,196
          1997                                         60,755
          1998                                         40,224
          1999                                         22,380
          2000                                         14,207
          Subsequent Years                             37,847
                                                     --------
            Total                                    $256.609
                                                     ========

         The above  minimum  future  rental  income does not include  contingent
rentals  that  may  be  received  under  provisions  of  the  lease  agreements.
Contingent  rentals  amounted to  $1,792,000,  $2,172,000 and $1,407,000 for the
years 1995, 1994, and 1993, respectively.

         At December 31, 1995, annualized rental revenues totalled approximately
$13,503,000  for the State of Florida,  when all of its departments and agencies
which lease space in the Company's buildings were combined.

7.       STOCK OPTIONS AND RIGHTS.

         1988 Stock Option Plan.  The Company's  Amended and Restated 1988 Stock
Option Plan (the "1988  Plan")  provides for the granting of options to purchase
up to 500,000 shares of its common stock to key employees of the Company and its
subsidiaries.  The 1988 Plan  provides  that the options  granted  contain stock
appreciation  rights which may be  exercised in lieu of the option.  To exercise
the option, payment of the option price is required before the option shares are
delivered.  Alternatively,  the  optionee  may elect to receive  shares equal in
value to the  difference  between the aggregate  fair market value of the shares
exercised on the exercise date and the aggregate exercise price of those shares.
With the consent of the Company's Compensation Committee,  the optionee may also
elect to  exercise  the  option in part by  having  withheld  cash  equal to the
minimum amount  required to be withheld for payroll tax purposes and the balance
by receiving  shares equal to the  difference  between the aggregate fair market
value and the aggregate  exercise  price,  less any cash  received.  All options
originally  granted under the 1988 Plan on August 25, 1988, at an exercise price
of $20.00 per share have either been surrendered or forfeited.

         Pursuant to the 1988 Plan, the Compensation  Committee of the Company's
Board of Directors (the  "Compensation  Committee")  granted options to purchase
213,750 shares on January 27, 1994 to certain  employees at an exercise price of
$7.625 per share,  which was the  closing  market  price on the  American  Stock
Exchange on the date of the grant.  These  options  expire  seven years from the
date of grant and are exercisable  beginning one year from the date of the grant
at the rate of 20 percent  per annum of the shares  covered by each  option on a
cumulative basis being fully exercisable five years after the date of grant. The
grant of  certain  of these  options  was  conditioned  upon  the  surrender  of
previously  granted and  outstanding  options to purchase  173,246  shares at an
exercise  price of $20.00 per share.  On February  21,  1995,  the  Compensation
Committee  granted options to purchase 18,000 shares to certain key employees at
an exercise price of $7.50 per share,  which was the closing market price on the
American  Stock  Exchange on the date of the grant.  These options  expire seven
years from the


                                       43

<PAGE>



date of the grant and are exercisable  beginning one year from the date of grant
at a cumulative  annual rate of 20 percent of the shares  covered by each option
being fully exercisable five years after the date of grant.

         1993 Stock Option Plan. The Company's 1993 Stock Option Plan (the "1993
Plan")  provides for the granting of options to purchase up to 1,000,000  shares
of its common stock to key employees of the Company and its affiliates. The 1993
Plan provides that the options granted contain stock  appreciation  rights which
may be exercised in lieu of the option.  To exercise the option,  payment of the
option price is required before the option shares are delivered.  Alternatively,
the  optionee  may  elect to  receive  shares  equal in value to the  difference
between the aggregate fair market value of the shares  exercised on the exercise
date and the aggregate  exercise price of those shares.  With the consent of the
Compensation  Committee,  the  optionee may also elect to exercise the option in
part by having withheld cash equal to the minimum amount required to be withheld
for  payroll  tax  purposes  and the balance by  receiving  shares  equal to the
difference  between the aggregate  fair market value and the aggregate  exercise
price, less any cash received.

         Pursuant to the 1993 Plan, the Compensation  Committee  granted options
to purchase  552,200  shares on January 27, 1994 to certain key  employees at an
exercise  price of $7.625 per share,  which was the closing  market price on the
American Stock Exchange on the date of the grant. These options expire ten years
from the date of grant and are  exercisable  beginning one year from the date of
the grant at the rate of 20  percent  per annum of the  shares  covered  by each
option on a cumulative  basis being fully  exercisable five years after the date
of grant. In addition,  the Compensation  Committee  granted options to purchase
207,332  shares on May 9, 1994 to certain key employees at an exercise  price of
$7.625 per share,  which was the  closing  market  price on the  American  Stock
Exchange on the date of the grant.  These options expire ten years from the date
of grant with 115,000 shares fully  exercisable  six months from the date of the
grant and  92,332  shares  exercisable  beginning  one year from the date of the
grant at the rate of 20 percent  per annum of the shares  covered by each option
on a cumulative basis being fully exercisable five years from the date of grant.
On February 21, 1995, the  Compensation  Committee  granted  options to purchase
279,800 shares to certain key employees at an exercise price of $7.50 per share,
which was the closing market price on the American Stock Exchange on the date of
grant. These options expire ten years from the date of grant and are exercisable
beginning one year from the date of grant at the rate of 20 percent per annum of
the shares covered by each option on a cumulative basis being fully  exercisable
five years after the date of grant. On May 15, 1995, the Compensation  Committee
granted  options to  purchase  14,000  shares to  certain  key  employees  at an
exercise  price of $8.125 per share,  which was the closing  market price on the
American  Stock  Exchange on the date of grant.  These options  expire ten years
from the date of grant and are  exercisable  beginning one year from the date of
grant at the rate of 20 percent  per annum of the shares  covered by each option
on a  cumulative  basis  being  fully  exercisable  five years after the date of
grant.








                                       44

<PAGE>



          Summary  of Options  Granted.  Information  as of  December  31,  1995
concerning the options granted is summarized below.
<TABLE>

                                                   Remaining              Options
                                Date of           Shares Under          Exercisable              Exercise Price
Plan                             Grant              Option              at 12/31/95        Per Share          Total
                                -------              -------              -------           ------       ----------
<C>                             <C>                  <C>                  <C>               <C>          <C>       
1988 Stock Option Plan          2/05/92              283,496              168,996           $5.125       $1,452,917
                                1/27/94              162,900               31,927            7.625        1,242,113
                                2/21/95               10,000                    0            7.500           75,000

1993 Stock Option Plan          1/27/94              388,000               75,040           $7.625       $2,958,500
                                5/09/94              177,666              127,533            7.625        1,354,703
                                2/21/95              215,800                    0            7.500        1,618,500
                                5/15/95               14,000                    0            8.125          113,750
</TABLE>


         At December 31, 1995,  there were 40,034 shares  available for granting
of options under the 1988 Plan and 201,334 shares  available for the granting of
options  under the 1993 Plan.  Through  December 31,  1995,  options to purchase
2,754 shares had been exercised under the 1988 Plan and 4,016 stock appreciation
rights had been exercised to acquire 560 shares under the 1988 Plan and the 1993
Plan.

         Warrants.  The Company had 1,114,217 and 1,114,889 Warrants outstanding
on December 31, 1995 and 1994,  respectively.  Each Warrant gives the holder the
right to  purchase  one Share at a price of $8.00 per share,  such  rights to be
exercisable  until June 30, 1999.  The Warrants are subject to redemption at the
option  of the  Company  at prices  currently  ranging  from  $2.90 to $5.24 per
Warrant.

         Shareholder  Rights Plan.  Pursuant to a  Shareholder  Rights Plan (the
"Rights  Plan"),  on September  30, 1990,  the Board of Directors of the Company
declared a dividend  of one Common  Stock  Purchase  Right for each  outstanding
share of common  stock of the Company.  Under the terms of the Rights Plan,  the
rights which were distributed to the shareholders of record on October 11, 1990,
trade together with the Company's common stock and are not exercisable until the
occurrence of certain events (none of which have occurred  through  December 31,
1995),  including  acquisition  of, or  commencement  of a tender  offer for, 15
percent  or more of the  Company's  common  stock.  In such  event,  each  right
entitles  its  holder  (other  than the  acquiring  person or bidder) to acquire
additional shares of the Company's common stock at a fifty percent discount from
the market price. The rights are redeemable under  circumstances as specified in
the Rights Plan. The Rights Plan was amended  effective  December 21, 1993 for a
certain  shareholder  and its affiliates.  See Note 2 for further  discussion of
this amendment.

8.       STOCK INVESTMENT PLAN.

         During 1994, the Company  adopted a Monthly Stock  Investment Plan (the
"SIP") which provides for regular purchases of the Company's common stock by all
employees and  directors.  The SIP provides for monthly  payroll and  directors'
fees  deductions  up to  $1,700  per  month  with  the  Company  making  monthly
contributions for the account of each participant as follows:  (i) 25 percent of
amounts up to $50; (ii) 20 percent of amounts between $50 and $100; and (iii) 15
percent  of  amounts  between  $100 and  $1,700,  which  amounts  are used by an
unaffiliated  Administrator to purchase shares from the Company. The Company has
reserved a total of

                                       45

<PAGE>



200,000  shares for issuance under the SIP. The Company's  contribution  and the
expenses  incurred in administering the SIP totalled  approximately  $34,800 and
$7,900 for 1995 and 1994, respectively. Through December 31, 1995, 29,731 shares
have been issued under the SIP.

9.        EMPLOYEE BENEFIT PLANS.

         During  1994,  the Company  adopted a 401(k) plan (the  "401(k)  Plan")
which  permits  contributions  by employees.  The  Company's  Board of Directors
approved a Company  contribution to the 401(k) Plan for 1994. This  contribution
was in the form of the  Company's  common  stock and was made  during  February,
1995.  The   contribution   totalled   122,441  Shares  which  had  a  value  of
approximately  $888,000 on December 31, 1994. For 1995,  the Company's  Board of
Directors approved a Company  contribution to the 401(k) Plan in the form of the
Company's Shares (43,804 Shares which had a value of  approximately  $465,000 on
December 31, 1995) and cash  ($443,000).  The  contribution for 1995 was made on
February 12, 1996.

         The Company's  Board of Directors has adopted a supplemental  executive
retirement plan (the "SERP"),  an unfunded  defined benefit plan. The purpose of
the SERP is to facilitate  the  retirement of select key executive  employees by
supplementing  their  benefits  under the  Company's  401(k) Plan.  The document
establishing  the SERP, which became effective on June 28, 1995, was executed by
the Company on August 18,  1995.  The benefits are based on years of service and
the  employee's  average  base salary  during the last three  calendar  years of
employment.

         Net periodic pension cost for the SERP for 1995 was as follows:

                                                              Amount
                                                           (In thousands)
         Service Cost                                       $     28
         Interest Cost                                           102
         Amortization of Unrecognized Prior Service Cost         119
                                                            --------
              Total                                         $    249
                                                            ========

         Assumptions  used in the  computation of net periodic  pension cost for
the SERP were as follows:

         Discount rate                                     7.5%
         Rate of increase in salary levels                 5.0%












                                       46

<PAGE>



         The following  table sets forth the status of the unfunded SERP and the
amounts included in accrued  liabilities-other in the Consolidated Balance Sheet
at December 31, 1995:

                                                               Amount
                                                           (In thousands)
                                                           --------------
         Accumulated benefit obligation                        $  2,074
         Effect of projected future salary increases                657
                                                               --------
         Projected benefit obligation                          $  2,731
                                                               --------

         Actuarial present value of projected benefit
              obligations in excess of plan assets             $ (2,731)
         Unrecognized prior service cost                          2,612
         Additional minimum liability                            (1,955)
                                                               ---------
         Accrued pension cost                                  $ (2,074)
                                                               =========

10.      DIVIDENDS.

         The Company paid no dividends during the three years ended December 31,
1995. The Company intends that the quarterly dividend payout in the last quarter
of each year will be adjusted to reflect the distribution of at least 95 percent
of the Company's taxable income as required by the Federal income tax laws.

         The terms of the secured  debt of the Company  provide that the Company
will be  subject  to  certain  dividend  limitations  which,  however,  will not
restrict  the  Company  from  paying the  dividends  required  to  maintain  its
qualifications as a REIT. In the event that the Company no longer qualifies as a
REIT,  additional  dividend  limitations  would be  imposed by the terms of such
debt. In addition,  two of the  Company's  bank lenders have required that until
the  Company  has raised an  aggregate  of $50  million of equity the  following
limitations on dividends will be applied:  (a) 1996 and 1997, $11 million unless
imposition  of the limit  would  cause  loss of REIT  status and (b) in 1998 and
1999, $11 million regardless of impact on REIT status.

11.      FEDERAL INCOME TAXES.

         The  Company is  operated  in a manner so as to qualify and has elected
tax treatment as a REIT. The Company's  taxable loss prior to the dividends paid
deduction  for  the  years  ended   December  31,  1995,   1994,  and  1993  was
approximately $(23,233,000),  ($15,954,000), and $(8,375,000), respectively. The
difference  between  net income for  financial  reporting  purposes  and taxable
income results  primarily  from  different  methods of accounting for bad debts,
depreciable  lives related to the properties  owned,  advance rents received and
net operating  loss  carryforwards.  At December 31, 1995, the net book basis of
the Company's  assets and  liabilities  exceeded the net tax basis of assets and
liabilities in the amount of approximately $15.6 million.

         On the Company's 1994 Federal income tax return,  the Company  utilized
approximately  $323,000 of its 1993 net operating loss carryforward to eliminate
any REIT taxable income for 1994.  Pursuant to the Merger, the Company succeeded
to KPI's net operating loss carryforward  which,  based upon KPI's final Federal
income tax return, totalled approximately  $98,000,000.  However, the portion of
KPI's net operating loss  carryforward  which is usable each year by the Company
is limited  to  approximately  $7,900,000.  The  Company's  net  operating  loss
carryforward

                                       47

<PAGE>



available  to  offset  REIT  taxable   income  for  1995  totals   approximately
$24,070,000,  which can be used to offset REIT taxable  income through 2007. The
use of net operating loss carryforwards are limited for alternative  minimum tax
purposes.  The Company paid  approximately  $104,000 of alternative  minimum tax
when its 1993  Federal  income tax return was filed.  The  Company  requested  a
refund of $70,000 when its 1994 Federal  income tax return was filed.  For 1995,
the Company recorded a provision for alternative  minimum taxes of approximately
$100,000 and a non-REIT  subsidiary  recorded a provision for federal income tax
of approximately $215,000.

         The  Company's  1992 and 1993 Federal  income tax returns are currently
being  examined by the Internal  Revenue  Service.  The Company does not believe
that the results of this  examination  will materially  affect its operations or
its REIT status.

12.      LITIGATION.

         A derivative  action  against the Company in the U. S. District  Court,
Middle  District of Florida (the "District  Court"),  which commenced on October
29, 1990, has been resolved in favor of the Company. Various amended filings and
counter-claims have been filed against the Company of which the Company does not
believe  that the outcome will  materially  affect its  operations  or financial
position.  The  Company  and the other  parties to this  derivative  action have
agreed on a settlement of all claims and have submitted documentation thereof to
the District  Court.  On January 10, 1996,  the District Court entered its order
approving this settlement (the "Approval Order") after notice to stockholders of
the Company.  The Approval Order became final on or about February 12, 1996, and
the parties are now required to exchange documentation and effect other steps to
consummate this settlement. During 1995, the Company paid $50,000 for settlement
of this litigation.

         During 1994, the Company settled a pending class action proceeding (the
"Securities Action"). The Company recorded a provision of $1,685,000 relating to
the settlement of the Securities Action and incurred additional costs related to
the settlement which totalled $217,000.

         Under the terms of the merger  agreement  between  the Company and KPI,
the Company has agreed to  indemnify  the former  non-officer  directors  of KPI
other  than Ira M. Koger (the  "Indemnified  Persons")  in respect of amounts to
which such  Indemnified  Person would be otherwise  entitled to  indemnification
under Florida law, the articles of  incorporation  or the by-laws of KPI arising
out of acts or omissions prior to September 25, 1991 (the "Indemnity").  Certain
of the former  non-officer  directors  of KPI are  defendants  in a Pension Plan
class  action  suit.  The  Company is not named in this suit.  However,  certain
former non-officer directors of KPI may be Indemnified Persons. The obligations,
if any, of the Company under such  indemnification  do not exceed (i) $1,000,000
in the  aggregate and (ii)  $200,000 per  Indemnified  Person and are subject to
certain other conditions  precedent.  Based upon its  investigation to date, the
Company does not believe that this suit will give rise to any material liability
to  Indemnified  Persons or to the Company.  Accordingly,  no provision has been
made in the Consolidated  Financial Statements for any liability that may result
from the Indemnity.






                                       48

<PAGE>



13.      INTERIM FINANCIAL INFORMATION (UNAUDITED).

         Selected  quarterly  information  for the two years in the period ended
December 31, 1995, is presented below (in thousands except per share amounts):

<TABLE>

                                                                               Net                    Earnings
                                     Rental             Total                  Income                 (Loss) Per
Quarters Ended                       Revenues           Revenues               (Loss)                 Common Share
--------------                        -------            -------               -------                ------------
<S>                                   <C>                <C>                   <C>                        <C> 
March 31, 1994                        $23,073            $24,908               $ 2,692                    $.15
June 30, 1994 (1)                      23,190             24,678                (1,075)                   (.06)
September 30, 1994                     23,426             25,494                 1,432                     .08
December 31, 1994                      23,443             25,296                 1,166                     .07
March 31, 1995                         23,482             25,446                 2,204                     .12
June 30, 1995                          24,255             26,125                 2,026                     .11
September 30, 1995 (2)                 23,762             45,568                18,983                    1.05
December 31, 1995 (3)                  23,366             30,559                 5,777                     .32

</TABLE>

(1)   The  results  for the  quarter  ended June 30,  1994 were  affected by the
      accrual for the settlement of the Securities  Action and the provision for
      loss on two land parcels held for sale.
(2)   The results for the quarter ended  September 30, 1995 were affected by (i)
      the interest revenue associated with the Company's  investment in the TKPL
      mortgage notes,  (ii) the gain associated with the partial  repayment of a
      TKPL note to Southeast and (iii) the write-off of deferred offering costs.
(3)   The results  for the  quarter  ended  December  31, 1995 were  affected by
      additional gain  associated  with the partial  repayment of a TKPL note to
      Southeast.

                                       49

<PAGE>



                                                                     SCHEDULE II
                       KOGER EQUITY, INC. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1995
                                 (In Thousands)

<TABLE>


                                                                   Additions
                                                   Balance at      Charged to   Charged to                       Balance at
                                                  beginning of     costs and      other                            end of
Description                                          period         expenses    accounts            Deductions     period
---------------------------------                   ---------       -------     ----------          ---------     ---------
<S>                                                 <C>             <C>         <C>                 <C>           <C>      
1995
----
Allowance for uncollectible rents                   $     362       $   172     $        0          $   143(a)    $     391
Valuation allowance - land held                     =========       =======     ==========          ==========    =========
   for sale                                         $     550       $   970     $        0          $     0       $   1,520
                                                    =========       =======     ==========          ==========    =========
1994
----
Allowance for uncollectible rents                   $     651       $   212     $        0          $   501(a)    $     362
Valuation allowance - land held                     =========       =======     ==========          =======       =========
   for sale                                         $       0       $   996     $        0          $   446(b)    $     550
                                                    =========       =======     ==========          =======       =========
1993
----
Allowance for uncollectible rents                   $     130       $   343     $      493(c)       $   315(a)    $     651
                                                    =========       =======     ==========          ==========    =========

</TABLE>


(a)   Receivable balance which was determined to be uncollectible and written-
        off in the applicable year.
(b)   Land parcel was sold for which valuation allowance had been recorded.
(c)   Balance acquired pursuant to Merger on December 21, 1993.


                                       50

<PAGE>



                KOGER EQUITY, INC. AND SUBSIDIARIES Schedule III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 1995
                                 (in thousands)
<TABLE>


                                                            COSTS CAPITALIZED
                                                                SUBSEQUENT
                                         INITIAL COST         TO ACQUISITION                TOTAL COST               
                                     ----------------       -------------------       --------------------------     (d)
                                                 BLDGS &    IMPROVE    CARRYING               BLDGS &     (b)(c)     ACCUM.
CENTER                                 LAND      IMPROV.     MENTS      COSTS         LAND    IMPROV.      TOTAL     DEPR .
------                               --------   --------    -------- ---------- ----------  ---------   --------    -------
<S>                                  <C>        <C>         <C>      <C>        <C>         <C>         <C>         <C>    
OPERATING REAL ESTATE:
   ATLANTA CHAMBLEE                  $ 13,145   $ 63,211    $  6,382 $        0 $   13,145  $  69,593   $ 82,738    $10,207
   ATLANTA GWINNETT                         0          3           0          0          0          3          3          1
   AUSTIN                               4,274     13,650       1,585          0      4,274     15,235     19,509      1,218
   CHARLOTTE CARMEL                       910      9,993          98          0        910     10,091     11,001        512
   CHARLOTTE EAST                       5,788     25,078       1,533          0      5,788     26,611     32,399      2,708
   EL PASO                              3,108     10,107       2,433          0      3,108     12,540     15,648      2,053
   GREENSBORO SOUTH                     6,384     38,700       2,915          0      6,384     41,615     47,999      4,938
   GREENSBORO WENDOVER                      0         11           0          0          0         11         11          3
   GREENVILLE                           3,833     16,104       1,972          0      3,833     18,076     21,909      2,703
   JACKSONVILLE BAYMEADOWS              7,625     23,716         316          0      7,625     24,032     31,657      1,282
   JACKSONVILLE CENTRAL                 6,915     35,321       5,253          0      6,915     40,574     47,489      5,479
   MEMPHIS GERMANTOWN                   3,518     21,821       1,621          0      3,518     23,442     26,960      3,425
   ORLANDO CENTRAL                      8,342     30,575       4,408          0      8,342     34,983     43,325      6,199
   ORLANDO UNIVERSITY                   2,900     12,218         543          0      2,900     12,761     15,661      1,301
   RICHMOND SOUTH                           0         16           0          0          0         16         16          8
   ST. PETERSBURG                       6,657     29,525       3,116          0      6,657     32,641     39,298      4,520
   SAN ANTONIO                          9,638     29,649       5,594          0      9,638     35,243     44,881      5,534
   TALLAHASSEE APALACHEE PKWY           6,063     28,043       3,116          0      6,063     31,159     37,222      4,900
   TALLAHASSEE CAPITAL CIRCLE           3,561     22,903         234          0      3,561     23,137     26,698      2,717
   TULSA NORTH                          1,600      4,300         552          0      1,600      4,852      6,452        771
   TULSA SOUTH                          4,466     12,834       1,297          0      4,466     14,131     18,597      1,934
                                     --------   --------    -------- ---------- ----------  ---------   --------    -------
         SUBTOTALS                     98,727    427,778      42,968          0     98,727    470,746    569,473     62,413
   FURNITURE & EQUIPMENT                           1,566                                        1,566      1,566        472
    IMPROVEMENTS IN PROGRESS                                     399                              399        399
                                     --------   --------    -------- ---------- ----------  ---------   --------    -------
             TOTAL OPERATING
               REAL ESTATE           $ 98,727   $429,344     $43,367 $        0    $98,727   $472,711   $571,438    $62,885
                                     --------   --------    -------- ---------- ----------  ---------   --------    -------

</TABLE>



                                         (a)
                                         MORT-         DATE         DEPRECIABLE
CENTER                                   GAGES       ACQUIRED        LIFE
------                               ---------     -----------     ------------
OPERATING REAL ESTATE:
   ATLANTA CHAMBLEE                  $  27,542     1988 - 1993     3 - 40 YRS.
   ATLANTA GWINNETT                          0       1993               7 YRS.
   AUSTIN                                 1642     1990 - 1993     3 - 40 YRS.
   CHARLOTTE CARMEL                      8,912       1993          3 - 40 YRS.
   CHARLOTTE EAST                       13,972     1989 - 1993     3 - 40 YRS.
   EL PASO                               1,072     1990 - 1993     3 - 40 YRS.
   GREENSBORO SOUTH                     21,953     1988 - 1993     3 - 40 YRS.
   GREENSBORO WENDOVER                       0       1993               7 YRS.
   GREENVILLE                            7,029     1988 - 1993     3 - 40 YRS.
   JACKSONVILLE BAYMEADOWS              34,293       1993          3 - 40 YRS.
   JACKSONVILLE CENTRAL                 12,699     1989 - 1993     3 - 40 YRS.
   MEMPHIS GERMANTOWN                   13,244     1988 - 1993     3 - 40 YRS.
   ORLANDO CENTRAL                      17,001     1988 - 1993     3 - 40 YRS.
   ORLANDO UNIVERSITY                    9,426     1990 - 1993     3 - 40 YRS.
   RICHMOND SOUTH                            0        1993              4 YRS.
   ST. PETERSBURG                       19,723     1988 - 1993     3 - 40 YRS.
   SAN ANTONIO                           5,571     1990 - 1993     3 - 40 YRS.
   TALLAHASSEE APALACHEE PKWY           14,325     1988 - 1993     3 - 40 YRS.
   TALLAHASSEE CAPITAL CIRCLE           20,710     1988 - 1993     3 - 40 YRS.
   TULSA NORTH                               0       1990          3 - 40 YRS.
   TULSA SOUTH                           4,416     1990 - 1993     3 - 40 YRS.
                                       -------
         SUBTOTALS                     233,530
   FURNITURE & EQUIPMENT                                           3  - 7 YRS.
    IMPROVEMENTS IN PROGRESS           ------- 
             TOTAL OPERATING
               REAL ESTATE            $233,530
                                      --------

                                       51

<PAGE>



                KOGER EQUITY, INC. AND SUBSIDIARIES               Schedule III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 1995
                                 (in thousands)
<TABLE>


                                                                    COSTS CAPITALIZED
                                                                    SUBSEQUENT
                                 INITIAL COST      TO ACQUISITION          TOTAL COST                  
                              ------------------  ----------------  ----------------------------    (d)    (a)
                                          BLDGS &  IMPROVE  CARRYING          BLDGS &   (b)(c)     ACCUM.  MORT- DATE    DEPRECIABLE
CENTER                            LAND    IMPROV.   MENTS    COSTS    LAND    IMPROV.    TOTAL     DEPR .  GAGES ACQUIRED  LIFE
------                            ----    -------  -------  -------- -----    -------   ------     ------  ----- -------- ----------
UNIMPROVED LAND:
<S>                           <C>       <C>       <C>      <C>     <C>       <C>       <C>       <C>      <C>       <C> 
  ATLANTA GWINNETT            $   5,780 $      0  $     0  $    0  $  5,780  $      0  $  5,780  $     0  $      0  1993
  BIRMINGHAM                      1,200        0        0       0     1,200         0     1,200        0         0  1993
  CHARLOTTE CARMEL                3,250        0        0       0     3,250         0     3,250        0         0  1993
  CHARLOTTE EAST                    468        0        0       0       468         0       468        0         0  1993
  COLUMBIA SPRING VALLEY            150        0        0       0       150         0       150        0         0  1993
  GREENSBORO WENDOVER             1,491        0        0       0     1,491         0     1,491        0         0  1993
  GREENVILLE                        949        0        0       0       949         0       949        0         0  1993
  JACKSONVILLE BAYMEADOWS         2,318        0        0       0     2,318         0     2,318        0         0  1993
  MEMPHIS GERMANTOWN              4,505        0        0       0     4,505         0     4,505        0         0  1993
  MIAMI                           2,000        0        0       0     2,000         0     2,000        0         0  1993
  ORLANDO UNIVERSITY              2,880        0        0       0     2,880         0     2,880        0         0  1993
  RICHMOND SOUTH                  1,860        0        0       0     1,860         0     1,860        0         0  1993
  ST. PETERSBURG                  1,000        0        0       0     1,000         0     1,000        0         0  1993
  SAN ANTONIO                     1,430        0        0       0     1,430         0     1,430        0         0  1993
  TULSA NORTH                     1,000        0        0       0     1,000         0     1,000        0         0  1993
                               -------- --------  -------  ------  --------  --------  --------  -------  --------
        TOTAL UNIMPROVED LAND    30,281        0        0       0    30,281         0    30,281        0         0
                               -------- --------  -------  ------  --------  --------  --------  -------  --------
                               $129,008 $429,344  $43,367  $    0  $129,008  $472,711  $601,719  $62,885  $233,530
                               ======== ========  =======  ======  ========  ========  ========  =======  ========

            TOTAL
</TABLE>



                                       52

<PAGE>



                KOGER EQUITY, INC. AND SUBSIDIARIES Schedule III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 1995
                                 (in thousands)
----------------------------------
(a)       At December 31, 1995, the outstanding balance of mortgages payable was
          $233,530. In addition, the Company has loans outstanding with variable
          interest  rates  which are  collateralized  by  mortgages  on pools of
          buildings.  At December 31,  1995,  the  outstanding  balance of these
          loans was $22,276.

(b)       Aggregate cost basis for Federal income tax purposes was $636,106  at
          December 31, 1995.

(c)       Reconciliation of total real estate carrying value for the years ended
          December 31, 1995, 1994 and 1993 is as follows:

                                                  1995        1994        1993
                                                  ----        ----        ----
          Balance at beginning of year         $614,249     $606,806    $311,286
            Acquisitions                            353          384     289,097
            Improvements                         14,371       11,083       6,423
            Transfer from other assets               16
            Provision for loss - land parcels      (970)        (996)
            Sale of unimproved land              (4,761)      (3,028)
            Sale of operating real estate       (21,539)
                                                -------     --------    --------
          Balance at close of year             $601,719     $614,249    $606,806

          Acquisitions  of land and buildings  during 1993 were made pursuant to
          the Merger. For 1995, the provision for loss was based upon a contract
          for the sale of the  Miami  land  parcel  held for sale for  which the
          contract price ranges between  $2,000 and $2,970  contingent  upon the
          square  footage of office  buildings  which can be constructed on this
          land parcel. For 1994, the provision for loss was based upon contracts
          for the  sale of two  land  parcels.  The  sale of one of  these  land
          parcels was consummated  during 1994,  while the contract for the sale
          of the other land parcel expired.

(d)       Reconciliation of accumulated depreciation for the years ended 
          December 31, 1995, 1994 and 1993 is as follows:

                                                  1995        1994        1993
                                                  ----        ----        ----
          Balance at beginning of year         $46,106      $30,706     $22,300
           Depreciation expense:
            Operating real estate               17,363       15,202       8,403
            Furniture and equipment                267          198           3
           Sale of operating real estate          (851)
                                               -------     --------    --------
         Balance at close of year              $62,885      $46,106     $30,706
                                               =======      =======     =======

                                       53

<PAGE>



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

         None.

                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information  about  directors  of the  Company  who are  not  executive
officers  is  contained  in the  Company's  Proxy  Statement  (the  "1996  Proxy
Statement") and is incorporated herein by reference.

         The following  tabulation lists the executive  officers of the Company,
their ages and their occupations for the past five years:

S. D. Stoneburner.....  Chairman of the Board
Irvin H. Davis........  Vice Chairman of the Board and Chief Executive Officer
Victor A. Hughes, Jr..  President, Chief Financial Officer and Director
James L. Stephens ....  Treasurer and Chief Accounting Officer
James C. Teagle.......  Senior Vice President of Operations
W. Lawrence Jenkins...  Vice President of Administration and Corporate Secretary

     Mr. Stoneburner,  age 77, was elected as Chairman of the Board of Directors
of the  Company on  December  20,  1991,  and has been a Director of the Company
since June, 1988.

         Mr. Davis,  age 66, was elected Vice Chairman of the Board of Directors
of the Company on August 22, 1995.  He has been the Chief  Executive  Officer of
the Company  since  December 11, 1991.  He held the position of President of the
Company from  December 11, 1991 to August 22, 1995.  He has served as a Director
of the Company  since  August 15,  1991.  He  previously  held the  positions of
Executive Vice President and Chief Executive  Officer pro tempore of the Company
from August 15, 1991 to December  10,  1991.  Mr.  Davis held the  positions  of
Execuitve  Vice  President  and Chief  Executive  Officer  pro  tempore of Koger
Advisors,  Inc. ("KA") from August 15, 1991 to December 31, 1991.  Prior to that
Mr. Davis served the Company as Senior Vice President/Asset  Manager from August
1, 1991 to August 14,  1991 and as Senior  Vice  President  from  June,  1988 to
January 31, 1991. He held the position of Senior Vice President of KA from June,
1988 to  Janaury  31,  1991.  Mr.  Davis was a Senior  Vice  President  of Koger
Management, Inc. from February 1, 1991 to August 1, 1991.

         Mr. Hughes,  age 60, was elected President of the Company on August 22,
1995.  He has been the Chief  Financial  Officer of the Company  since March 31,
1991. He held the position of Senior Vice  President of the Company from May 20,
1991 through August 21, 1995, and Assistant  Secretary of the Company from March
11, 1991  through  December  21,  1993.  Mr.  Hughes was elected to the Board of
Directors  of the  Company on July 29,  1993.  Mr.  Hughes  was the Senior  Vice
President  and Chief  Financial  Officer of KA from May 20, 1991 to December 31,
1991. He was the  Assistant  Secretary of KA from March 11, 1991 to December 31,
1991.  Mr. Hughes held the position of Vice  President of the Company from April
1, 1990 to May 19, 1991. He held the position of Vice President of KA from April
1, 1990 to May 19, 1991.



                                       54

<PAGE>



     Mr. Stephens,  age 38, has been the Treasurer and Chief Accounting  Officer
of the Company since March 31, 1991. He held the position of Assistant Secretary
of the Company from May 20, 1991 through December 21, 1993. Mr. Stephens was the
Treasurer,  Chief Accouting Officer,  and Assistant Secretary of KA from May 20,
1991 to December 31, 1991. Mr.  Stephens was the  Accounting  Manager of KA from
December, 1990 to May 19, 1991.

     Mr.  Teagle,  age 54, has been a Senior Vice President of the Company since
May 10,  1994.  He had  previously  held the  position of Vice  President of the
Company from December 21, 1993 to May 10, 1994.  Mr. Teagle was a Vice President
of KPI from July, 1973 to December 21, 1993.

     Mr. Jenkins,  age 52, has been the Corporate Secretary of the Company since
December 21, 1993,  and Vice  President of the Company  since May 10, 1994.  Mr.
Jenkins was a Vice President and Corporate Secretary of KPI from August, 1990 to
December 21, 1993.

         Section  16(a) of the  Securities  Exchange  Act of 1934  requires  the
Company's  directors  and  executive  officers to file with the  Securities  and
Exchange  Commission (the "SEC") and the American Stock Exchange initial reports
of  ownership  and reports of changes in  ownership  of the common  stock of the
Company.  Executive officers and directors are required by the SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.

         To the  Company's  knowledge,  based  solely on review of the copies of
such reports furnished to the Company and written  representations that no other
reports were  required,  during the fiscal year ended  December  31,  1995,  the
Company's  executive  officers and  directors  complied  with all Section  16(a)
filing  requirements,  except for a Form 4 report for the month of December 1995
reflecting  a stock  purchase  for  the  account  of Mr.  Hiley  pursuant  to an
automatic deduction from his director's retainer.

Item 11. EXECUTIVE COMPENSATION

         Information   regarding  executive   compensation  is  incorporated  by
reference  to the  section  headed  "Executive  Compensation"  in the 1996 Proxy
Statement  (except for information  contained  under the headings  "Compensation
Committee Report on Executive  Compensation" and "Shareholder Return Performance
Presentation").

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The stock  ownership  of each  person  known to the  Company  to be the
beneficial owner of more than five percent (5%) of its outstanding  common stock
is incorporated by reference to the section headed "Principal  Holders of Voting
Securities"  of the 1996 Proxy  Statement.  The  beneficial  ownership of Common
Stock of all  directors  of the  Company is  incorporated  by  reference  to the
section headed "Election of Directors" contained in the 1996 Proxy Statement.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Reference  is  made  to  Item  1.   "Business,"  2.   "Properties,"  7.
"Management's  Discussion  and Analysis of Financial  Conditions  and Results of
Operations"  and Note 2  "Transactions  With  Related  Parties"  to the Notes to
Consolidated  Financial  Statements  contained in this Report and to the heading
"Certain  Relationships and Transactions"  contained in the 1996 Proxy Statement
for information  regarding certain  relationships and related transactions which
information is incorporated herein by reference.

                                       55

<PAGE>



                                     PART IV

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

             (a)(1)      See "Item 8 - Financial  Statements  and  Supplementary
                         Data - Index to Consolidated  Financial  Statements and
                         Financial  Statement  Schedules"  for  a  list  of  the
                         financial statements included in this report.
                (2)      The  consolidated   supplemental   financial  statement
                         schedules  required by  Regulation  S-X are included on
                         pages 50 through 53 in this Form.
             (b)         Reports on Form 8-K:
                         There  were no  reports  on Form 8-K filed  during  the
                         quarter ended December 31, 1995.
             (c)         The following exhibits are filed as part of this 
                         report:

Exhibit
Number              Description
-------             ------------------------------------------------------------
     2              Agreement and Plan of Merger,  dated as of December 21, 1993
                    between the Company and Koger Properties,  Inc. Incorporated
                    by  reference  to  Exhibit  2 of  Form  10-K  filed  by  the
                    Registrant  for the period ended December 31, 1993 (File No.
                    1-9997). 3(a) Amended and Restated Articles of Incorporation
                    of Koger Equity,  Inc.  Incorporated by reference to Exhibit
                    IV of the 1993 Proxy  Statement  filed by the  Registrant on
                    June 30, 1993 (File No.1-9997).
     3(b)           Koger  Equity,  Inc.  By Laws,  as Amended  and  Restated on
                    August 21, 1995.  Incorporated  by reference to Exhibit 3 of
                    the Form 8-K,  dated August 21, 1995 filed by the Registrant
                    on August 31, 1995 (File No. 1-9997).
     4(a)           Common Stock  Certificate of Koger Equity,  Inc. See Exhibit
                    4(a) to  Registration  Statement on Form S-11  (Registration
                    No.  33-22890)  which  Exhibit  is  herein  incorporated  by
                    reference.
     4(b)(1)(A)     KogerEquity,  Inc. Rights Agreement (the "Rights Agreement")
                    dated as of  September  30,  1990  between  the  Company and
                    Wachovia  Bank and  Trust  Company,  N.A.  as  Rights  Agent
                    ("Wachovia").  See Exhibit 1 to a Registration  Statement on
                    Form 8-A,  dated  October 3, 1990,  (File No.  1-9997) which
                    Exhibit is herein incorporated by reference.
     4(b)(1)(B)     FirstAmendment  to the Rights  Agreement,  dated as of March
                    22, 1993,  between the Company and First Union National Bank
                    of North Carolina, as Rights Agent ("First Union"),  entered
                    into for the purpose of replacing Wachovia.  Incorporated by
                    reference  to Exhibit  4(b)(4) of the Form 10-Q filed by the
                    Registrant for the quarter ended March 31, 1993 (File No. 1-
                    9997).
     4(b)(1)(C)     Second  Amendment  to  the  Rights  Agreement,  dated  as of
                    December 21, 1993,  between the Company and First Union. See
                    Exhibit 5 to an  Amendment  on Form 8-A/A to a  Registration
                    Statement on Form 8-A,  dated  December 21, 1993,  (File No.
                    1-9997) which Exhibit is herein incorporated by reference.
     4(b)(2)        Form of Common Stock Purchase Rights  Certificate  (attached
                    as  Exhibit  A to the  Rights  Agreement).  Pursuant  to the
                    Rights  Agreement,  printed  Common  Stock  Purchase  Rights
                    Certificates  will not be mailed until the Distribution Date
                    (as defined in the Rights Agreement).
     4(b)(3)        Summary of Common Stock Purchase Rights (attached as Exhibit
                    B to the Rights Agreement).


                                       56

<PAGE>



Exhibit
Number              Description
-----------         ------------------------------------------------------------
     4(c)(1)        Warrant  Agreement,  dated as of December 21, 1993,  between
                    the Company and First Union (the "Warrant  Agreement").  See
                    Exhibit 2 to an  Amendment  on Form 8-A/A to a  Registration
                    Statement on Form 8-A,  dated  December 21, 1993,  (File No.
                    1-9997) which Exhibit is herein incorporated by reference.
     4(c)(2)        Form of a Common Share Purchase  Warrant issued  pursuant to
                    the Warrant Agreement. See Exhibit 1 to an Amendment on Form
                    8-A/A to a  Registration  Statement  on Form 8-A  (File  No.
                    1-9997)  dated  December 21, 1993,  which  Exhibit is herein
                    incorporated by reference.
     10(a)(1)       Purchase   Agreement   among  Koger  Equity,   Inc.,   Koger
                    Properties,  Inc.,  and The Koger Company.  Incorporated  by
                    reference  to  Exhibit  10(a)  of Form  10- K  filed  by the
                    Registrant  for the period ended December 31, 1988 (File No.
                    1-9997).
     10(a)(2)       First  Amendment  to  Purchase  Agreement.  Incorporated  by
                    reference  to  Exhibit  10(a)(2)  of Form 10-Q  filed by the
                    Registrant  for the  quarter  ended June 30,  1989 (File No.
                    1-9997).
     10(b)(1)       Credit Agreement among Koger Equity, Inc., Koger Properties,
                    Inc.  and The Koger  Company.  Incorporated  by reference to
                    Exhibit 10(b) of Form 10-K filed by the  Registrant  for the
                    period ended December 31, 1988 (File No. 1- 9997).
     10(b)(2)       First  Amendment  to  Credit   Agreement.   Incorporated  by
                    reference  to  Exhibit  10(b)(2)  of Form 10-Q  filed by the
                    Registrant  for the  quarter  ended June 30,  1989 (File No.
                    1-9997).
     10(c)          Advisory  Agreement  between  Koger  Equity,  Inc. and Koger
                    Advisors, Inc. Incorporated by reference to Exhibit 10(c) of
                    Form  10-K  filed by the  Registrant  for the  period  ended
                    December 31, 1988 (File No. 1-9997).
     10(d)(1)       Management  Agreement  between Koger Equity,  Inc. and Koger
                    Management,  Inc. Incorporated by reference to Exhibit 10(d)
                    of Form 10-K filed by the  Registrant  for the period  ended
                    December 31, 1988 (File No. 1-9997).
     10(d)(2)       Amended Schedule "A" to Management  Agreement  between Koger
                    Management,  Inc. and Koger  Equity,  Inc.  Incorporated  by
                    reference  to  Exhibit  10(d)(2)  of Form 10-Q  filed by the
                    Registrant  for the quarter  ended  September 30, 1989 (File
                    No. 1-9997).
     10(e)(1)(A)    Koger Equity,  Inc. 1988 Stock Option Plan.  Incorporated by
                    reference  to  Exhibit  10(e)(2)  of Form 10-Q  filed by the
                    Registrant  for the quarter  ended  September 30, 1989 (File
                    No. 1-9997).
     10(e)(1)(B)    Koger  Equity,  Inc.  Amended and Restated 1988 Stock Option
                    Plan.  Incorporated  by reference to Exhibit  10(e)(1)(A) of
                    Form 10-Q filed by the Registrant for the quarter ended June
                    30, 1992 (File No. 1-9997).  10(e)(2)(A) Koger Equity,  Inc.
                    1988 Stock Option  Agreement.  Incorporated  by reference to
                    Exhibit  10(e)(2) of Form 10-Q filed by the  Registrant  for
                    the quarter ended March 31, 1989 (File No. 1-9997).
     10(e)(2)(B)    Form of Stock  Option  Agreement  pursuant to Koger  Equity,
                    Inc.  1988  Stock  Option  Plan,  as amended  and  restated.
                    Incorporated  by  reference to Exhibit  10(e)(2)(A)  of Form
                    10-Q filed by the  registrant for the quarter ended June 30,
                    1992 (File No. 1-9997).
     10(e)(3)(A)    Koger Equity, Inc. 1993 Stock Option Plan. See Exhibit II to
                    Registrant's  Proxy  Statement dated June 30, 1993 (File No.
                    1-9997) which is incorporated herein by reference.
     10(e)(3)(B)    Form of Stock  Option  Agreement  pursuant to Koger  Equity,
                    Inc.  1993 Stock Option Plan.  Incorporated  by reference to
                    Exhibit 10(e)(3)(B) of Form 10-K filed by the Registrant for
                    the period ended December 31, 1994 (File No. 1-9997).
                                       57

<PAGE>



Exhibit
Number              Description
----------          -------------------------------------------
     10(g)          Addendum  Agreement  between  Koger  Equity,  Inc. and Koger
                    Properties,  Inc. Incorporated by reference to Exhibit 10(g)
                    of Form 10-K filed by the  Registrant  for the period  ended
                    December 31, 1988 (File No. 1-9997).
     10(h)          Agreement  between KPI and the Company,  dated September 30,
                    1990.  Incorporated  by reference  to Exhibit  10(h) of Form
                    10-Q filed by the Registrant for the quarter ended September
                    30, 1990 (File No. 1-9997).
     10(i)          Land Credit  Agreement dated December 31, 1990 between Koger
                    Properties, Inc. and the Company.  Incorporated by reference
                    to Exhibit  10(i) of Form 10-K filed by the  Registrant  for
                    the year ended December 31, 1990 (File No. 1-9997).
     10(j)          Second  Amendment To Credit  Agreement dated as of March 30,
                    1990.  Incorporated  by reference  to Exhibit  10(j) of Form
                    10-K filed by the Registrant for the year ended December 31,
                    1990 (File No. 1-9997).
     10(k)          Amended and Restated  Credit  Agreement  dated  December 31,
                    1990.  Incorporated  by reference  to Exhibit  10(k) of Form
                    10-K filed by the Registrant for the year ended December 31,
                    1990 (File No. 1-9997).
     10(m)          Loan Agreement with Barnett Bank of Jacksonville, N.A. dated
                    April 5, 1991. Incorporated by reference to Exhibit 10(m) of
                    Form 10-Q filed by the Registrant for the quarter ended June
                    30, 1991 (File No. 1-9997).
     10(m)(1)       Commitment  letter to Koger Equity,  Inc., from Barnett Bank
                    of  Jacksonville,  N.A.,  to modify and extend  term  loans,
                    dated  September  22,  1993.  Incorporated  by  reference to
                    Exhibit  10(m)(1) of Form 10-Q filed by the  Registrant  for
                    the quarter ended September 30, 1993 (File No. 1-9997).
     10(m)(2)       Consolidated Renewal Promissory Note between Barnett Bank of
                    Jacksonville,  N.A., and Koger Equity,  Inc., dated December
                    21, 1993.  Incorporated by reference to Exhibit  10(m)(2) of
                    Form  10-K  filed by the  Registrant  for the  period  ended
                    December 31, 1993 (File No. 1-9997).
     10(n)(1)       Commitment  Letter to Koger  Equity,  Inc.  with First Union
                    National Bank of Florida dated April 19, 1991.  Incorporated
                    by reference  to Exhibit  10(n)(1) of Form 10-Q filed by the
                    Registrant  for the  quarter  ended June 30,  1991 (File No.
                    1-9997).
     10(n)(2)       Amendment to commitment  Letter to Koger  Equity,  Inc. with
                    First  Union  National  Bank of Florida  dated June 5, 1991.
                    Incorporated  by reference to Exhibit  10(n)(2) of Form 10-Q
                    filed by the  Registrant for the quarter ended June 30, 1991
                    (File No. 1-9997).
     10(n)(3)       Commitment  Letter to Koger Equity of South  Carolina,  Inc.
                    with First  Union  National  Bank of  Florida  dated May 31,
                    1991.  Incorporated by reference to Exhibit 10(n)(3) of Form
                    10-Q filed by the  Registrant for the quarter ended June 30,
                    1991 (File No. 1-9997).
     10(n)(4)       Commitment  Letter to Koger Equity of South  Carolina,  Inc.
                    with First  Union  National  Bank of  Florida  dated May 31,
                    1991.  Incorporated by reference to Exhibit 10(n)(4) of Form
                    10-Q filed by the  Registrant for the quarter ended June 30,
                    1991 (File No. 1-9997).
     10(n)(5)       Commitment  Letter to Koger Equity of North  Carolina,  Inc.
                    with First  Union  National  Bank of  Florida  dated May 31,
                    1991.  Incorporated by reference to Exhibit 10(n)(5) of Form
                    10-Q filed by the  Registrant for the quarter ended June 30,
                    1991 (File No. 1-9997).
     10(n)(6)       Amendment  to  Commitment  Letter  to Koger  Equity of North
                    Carolina,  Inc.  with First Union  National  Bank of Florida
                    dated June 5, 1991.  Incorporated  by  reference  to Exhibit
                    10(n)(6)  of  Form  10-Q  filed  by the  Registrant  for the
                    quarter ended June 30, 1991 (File No. 1-9997). 58
<PAGE>



Exhibit
Number              Description
-------------       ------------------------------------------------------------
     10(n)(7)       Loan  Extension   Agreement  and  Modification  of  Mortgage
                    between Koger Equity, Inc., and First Union National Bank of
                    Florida.  Incorporated  by reference to Exhibit  10(n)(7) of
                    Form 10-Q  filed by the  Registrant  for the  quarter  ended
                    September      30,  1993  (File  No.   1-9997).   
     10(n)(8)       Loan Extension  Agreement and  Modification  of Mortgage and
                    Assignment  of Leases  (and  Consent of  Guarantor)  between
                    Koger Equity of South Carolina,  Inc.,  Koger Equity,  Inc.,
                    and First Union  National Bank of Florida.  Incorporated  by
                    reference  to  Exhibit  10(n)(8)  of Form 10-Q  filed by the
                    Registrant  for the quarter  ended  September 30, 1993 (File
                    No. 1-9997).
     10(n)(9)       Loan Extension  Agreement and  Modification of Deed of Trust
                    (and  Consent of  Guarantor)  between  Koger Equity of North
                    Carolina, Inc., Koger Equity, Inc., and First Union National
                    Bank  of  Florida.  Incorporated  by  reference  to  Exhibit
                    10(n)(9)  of  Form  10-Q  filed  by the  Registrant  for the
                    quarter ended September 30, 1993 (File No. 1-9997).
     10(n)(10)      Commitment  letter to Koger Equity,  Inc.,  with First Union
                    National Bank of Florida to restructure  loan, dated October
                    19, 1993.  Incorporated by reference to Exhibit 10(n)(10) of
                    Form 10-Q  filed by the  Registrant  for the  quarter  ended
                    September 30, 1993 (File No. 1-9997). 10(n)(11) Consolidated
                    Note between First Union  National Bank of Florida and Koger
                    Equity,  Inc.,  dated  December  21, 1993.  Incorporated  by
                    reference  to  Exhibit  10(n)(11)  of Form 10-K filed by the
                    Registrant  for the period ended December 31, 1993 (File No.
                    1-9997).
     10(o)          Shareholders  Agreement,  dated August 9, 1993,  between the
                    Company  and  TCW  Special  Credits,  a  California  general
                    partnership.  Incorporated  by reference to Exhibit 10(o) of
                    Form  10-K  filed by the  Registrant  for the  period  ended
                    December 31, 1993 (File No. 1-9997).
     10(p)          Registration  Rights Agreement,  dated as of August 9, 1993,
                    between the company and TCW Special  Credits,  a  California
                    general  partnership.  Incorporated  by reference to Exhibit
                    10(p) of Form 10-K  filed by the  Registrant  for the period
                    ended December 31, 1993 (File No. 1-9997).
     10(q)(1)       Amended and Restated Management  Agreement,  dated August 3,
                    1993,  between  The  Koger   Partnership,   Ltd.  and  Koger
                    Properties,   Inc.  Incorporated  by  reference  to  Exhibit
                    10(q)(1) of Form 10-K filed by the Registrant for the period
                    ended December 31, 1993 (File No. 1-9997).
     10(q)(2)       First   Amendment   to  Amended  and   Restated   Management
                    Agreement,  dated  December  21,  1993,  between  The  Koger
                    Partnership, Ltd. and Koger Properties, Inc. Incorporated by
                    reference  to  Exhibit  10(q)(2)  of Form 10-K  filed by the
                    Registrant  for the period ended December 31, 1993 (File No.
                    1- 9997).
     10(q)(3)       TKP Co-Management Agreement,  dated as of December 21, 1993,
                    between  The Koger  Partnership,  Ltd.  and the  Company and
                    Southeast Properties Holding Corporation,  Inc. Incorporated
                    by reference  to Exhibit  10(q)(3) of Form 10-K filed by the
                    Registrant  for the period ended December 31, 1993 (File No.
                    1-9997).
     10(q)(4)       Delegation  of  Duties  Under TKP  Co-Management  Agreement,
                    dated as of December 21,  1993,  between the Company and its
                    wholly owned  subsidiary,  Koger Real Estate Services,  Inc.
                    Incorporated  by reference to Exhibit  10(q)(4) of Form 10-K
                    filed by the  Registrant  for the period ended  December 31,
                    1993 (File No. 1-9997).
     10(r)(1)       Incentive Fee Agreement,  dated August 3, 1993,  between The
                    Koger   Partnership,   Ltd.  and  Koger   Properties,   Inc.
                    Incorporated  by reference to Exhibit  10(r)(1) of Form 10-K
                    filed by the  Registrant  for the period ended  December 31,
                    1993 (File No. 1-9997).
                                       59

<PAGE>



Exhibit
Number              Description
-------------       ------------------------------------------------------------
     10(r)(2)       First  Amendment to Incentive Fee Agreement,  dated December
                    21,  1993,  between The Koger  Partnership,  Ltd,  and Koger
                    Properties,   Inc.  Incorporated  by  reference  to  Exhibit
                    10(r)(2) of Form 10-K filed by the Registrant for the period
                    ended December 31, 1993 (File No. 1-9997).
     10(s)          Limited  Recourse  Guaranty  and Security  Agreement,  dated
                    August 3, 1993,  by The Koger  Partnership,  Ltd.  and Koger
                    Properties,  Inc.  in  favor  of the  holders  of the  Basic
                    Restructured  Mortgage Notes of The Koger Partnership,  Ltd.
                    Incorporated  by  reference  to  Exhibit  10(s) of Form 10-K
                    filed by the  Registrant  for the period ended  December 31,
                    1993 (File No. 1-9997). 
     10(t)          Option and  Purchase  and Sale  Agreement,  dated  August 3,
                    1993,  between  The  Koger   Partnership,   Ltd.  and  Koger
                    Properties,  Inc. Incorporated by reference to Exhibit 10(t)
                    of Form 10-K filed by the  Registrant  for the period  ended
                    December 31, 1993 (File No. 1-9997).
     10(u)          Subordination  Agreement,   dated  as  of  August  3,  1993,
                    executed   and   delivered   by   Koger   Properties,   Inc.
                    Incorporated  by  reference  to  Exhibit  10(u) of Form 10-K
                    filed by the  Registrant  for the period ended  December 31,
                    1993 (File No. 1-9997).
     10(v)          License Agreement,  dated as of July 28, 1995, between Koger
                    Equity, Inc. and Koger Realty Services, Inc. Incorporated by
                    reference  to  Exhibit  10(v)  of  Form  10-Q  filed  by the
                    Registrant  for the  quarter  ended June 30,  1995 (File No.
                    1-9997).
     10(w)          Supplemental  Executive  Retirement Plan, dated as of August
                    18, 1995 to be effective  as of June 28, 1995.  Incorporated
                    by  reference  to  Exhibit  10(w) of Form 10-Q  filed by the
                    Registrant  for the quarter  ended  September 30, 1995 (File
                    No. 1-9997.)
     10(x)          Form of Indemnification Agreement between Koger Equity, Inc.
                    and its Directors and certain of its officers.*
     11             Earnings Per Share Computations.*
     21             Subsidiaries of the Registrant.*
     23             Independent Auditors' Consent.*
     27             Financial Data Schedule.*
     28(a)          Order  Granting  Debtor's  Motion  to  Use  Cash  Collateral
                    entered in RE Chapter 11 of Koger Properties, Inc. (Case No.
                    91-12294-8P1)  by United  States  Bankruptcy  Court,  Middle
                    District  of  Florida,   Tampa  Division.   Incorporated  by
                    reference to Exhibit 28 of Form 10-K filed by the Registrant
                    for the year ended  December  31,  1991  (File No.  1-9997).
     28(b)          First Amended and Restated Disclosure Statement, dated as of
                    March 1, 1993,  pursuant to Section  1125 of the  Bankruptcy
                    Code  to  accompany  First  Amended  and  Restated  Plan  of
                    Reorganization   dated  as  of  March  1,  1993,  for  Koger
                    Properties, Inc., proposed jointly by Koger Properties, Inc.
                    and Koger  Equity,  Inc.,  including  all exhibits  thereto.
                    Incorporated  by  reference to Exhibit 29 of Form 10-K filed
                    by the Registrant for the year ended December 31, 1992 (File
                    No. 1-9997).
*Filed with this Report.

                                       60

<PAGE>



                                   SIGNATURES

        Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant,  Koger Equity,  Inc., has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

                               KOGER EQUITY, INC.

By:     VICTOR A.  HUGHES, JR.
        Victor A. Hughes, Jr.  President and
        Chief Financial Officer

Date:  March 12, 1996

        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 in the capacities and on the dates indicated.

          Signature      Title                                   Date

IRVIN H.  DAVIS          Vice Chairman, Chief Executive          March 12, 1996
(Irvin H. Davis)         Officer and Director

VICTOR A. HUGHES, JR.    President, Chief Financial              March 12, 1996
(Victor A. Hughes, Jr.)  Officer and Director

JAMES L. STEPHENS        Treasurer and Chief Accounting          March 12, 1996
(James L. Stephens)      Officer

S. D. STONEBURNER        Chairman of the Board of                March 12, 1996
(S. D. Stoneburner)      Directors and Director

D. PIKE ALOIAN           Director                                March 12, 1996
(D. Pike Aloian)

BENJAMIN C. BISHOP       Director                                March 12, 1996
(Benjamin C. Bishop)

DAVID B. HILEY           Director                                March 12, 1996
(David B. Hiley)

G. CHRISTIAN LANTZSCH    Director                                March 12, 1996
(G. Christian Lantzsch)

GEORGE F. STAUDTER       Director                                March 12, 1996
(George F. Staudter)



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