SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


[ X ]                       QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended February 28, 1997

                                       OR

[     ]            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
           For the transition period from ____________ to ____________

                          Commission file number 1-6817

                              Lehman Brothers Inc.
             (Exact Name of Registrant As Specified In Its Charter)

            Delaware                                         13-2518466
(State or other jurisdiction of incorporation)           (I.R.S. Employer 
                                                            Identification No.)

          3 World Financial Center
              New York, New York                                       10285
             (Address of principal                                  (Zip Code)
                executive offices)

       Registrant's telephone number, including area code: (212) 526-7000

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 ______

The Registrant  meets the  conditions set forth in General  Instructions H 1 (a)
and (b) of Form  10-Q and  therefore  is  filing  this  form  with  the  reduced
disclosure format contemplated thereby.

As of April 11, 1997 1,006 shares of the  Registrant's  Common Stock,  par value
$.10 per share, were issued and outstanding.
                    
<PAGE>


                      LEHMAN BROTHERS INC. and SUBSIDIARIES

                                    FORM 10-Q

                     FOR THE QUARTER ENDED FEBRUARY 28, 1997

                                      INDEX

Part I.           FINANCIAL INFORMATION                              Page Number

      Item 1.      Financial Statements - (unaudited)

                Consolidated Statement of Operations -
                  Three Months Ended February 28, 1997
                  and February 29, 1996 ....................................  4


                Consolidated Statement of Financial Condition -
                  February 28, 1997 and November 30, 1996 ..................  5

                Consolidated Statement of Cash Flows -
                  Three Months Ended February 28, 1997
                  and February 29, 1996.....................................  7


                Notes to Consolidated Financial Statements..................  9

      Item 2.      Management's Discussion and Analysis of
                        Financial Condition and Results of Operations........13

Part II.          OTHER INFORMATION

         Item 1.      Legal Proceedings     ................................ 23

         Item 6.      Exhibits and Reports on Form 8-K          .............24

Signatures...................................................................25

EXHIBIT INDEX         .......................................................26

Exhibits




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<PAGE>



                      LEHMAN BROTHERS INC. and SUBSIDIARIES
                      CONSOLIDATED STATEMENT of OPERATIONS
                                   (Unaudited)
                                  (In millions)

                                                   Three months ended
                                           February 28              February 29
                                              1997                      1996
                                          -------------              ---------
Revenues
    Principal transactions                      $  226                    $  291
    Investment banking                             192                       160
    Commissions                                     83                        81
    Interest and dividends                       2,931                     2,528
    Other                                            8                         8
                                              --------                  --------
         Total revenues                          3,440                     3,068
     Interest expense                            2,819                     2,461
                                                 -----                     -----
         Net revenues                              621                       607
                                                ------                    ------
Non-interest expenses
     Compensation and benefits                     360                       314
     Brokerage, commissions and 
       clearance fees                               50                        47
     Communications                                 22                        26
     Professional services                          21                        17
     Business development                           17                        20
     Occupancy and equipment                        16                        20
     Depreciation and amortization                  13                        14
     Management fees                                15                        24
     Other                                          38                        47
                                               -------                   -------
          Total non-interest expenses              552                       529
                                                ------                    ------
Income before taxes                                 69                        78
      Provision for income taxes                    22                        33
                                               -------                   -------
Net income                                     $    47                   $    45
                                               =======                   =======







                 See notes to consolidated financial statements.

<PAGE>


                      LEHMAN BROTHERS INC. and SUBSIDIARIES
                  CONSOLIDATED STATEMENT of FINANCIAL CONDITION
                                   (Unaudited)
                                  (in millions)
<TABLE>
<CAPTION>

                                                                                             February 28       November 30
ASSETS                                                                                           1997                 1996
                                                                                          ---------------      -----------
<S>                                                                                                <C>               <C> 
Cash and cash equivalents                                                                     $      965       $       396

Cash and securities segregated and on deposit
  for regulatory and other purposes                                                                1,035               663

Securities and other financial instruments owned:
   Governments and agencies                                                                       26,727            21,251
   Corporate stocks                                                                                3,156             3,164
   Corporate debt and other                                                                        4,378             4,739
   Derivatives and other contractual agreements                                                    5,272             5,298
   Mortgages and mortgage-backed                                                                   1,470             2,055
   Certificates of deposit and other money market instruments                                      3,585             3,819
                                                                                                 -------           -------
                                                                                                  44,588            40,326
                                                                                                  ------            ------
Collateralized short-term agreements:
   Securities purchased under agreements to resell                                                37,765            33,145
   Securities borrowed                                                                            25,950            19,035

Receivables:
   Brokers, dealers and clearing organizations                                                     3,424             4,909
   Customers                                                                                       4,506             3,956
   Others                                                                                          4,202             4,611

Property, equipment and leasehold improvements
  (net of accumulated depreciation and amortization
  of $511 in 1997 and $502 in 1996)                                                                  276               283

Deferred expenses and other assets                                                                   245               214

Excess of cost over fair value of net assets
  acquired (net of accumulated amortization
  of $95 in 1997 and $94 in 1996)                                                                    165               166
                                                                                             -----------       -----------
       Total assets                                                                             $123,121          $107,704
                                                                                                ========          ========

</TABLE>


                 See notes to consolidated financial statements.


<PAGE>


                      LEHMAN BROTHERS INC. and SUBSIDIARIES
           CONSOLIDATED STATEMENT of FINANCIAL CONDITION - (Continued)
                                   (Unaudited)
                      (in millions, except per share data)

<TABLE>
<CAPTION>

                                                                                              February 28        November 30
LIABILITIES AND STOCKHOLDER'S EQUITY                                                             1997              1996
 
<S>                                                                                               <C>                 <C>
Commercial paper and short-term debt                                                         $     1,629        $     2,299
Securities and other financial instruments sold but not yet purchased:
   Governments and agencies                                                                       11,563              9,326
   Corporate stocks                                                                                3,091              1,143
   Corporate debt and other                                                                        2,396              2,735
   Derivatives and other contractual agreements                                                    4,192              4,662
                                                                                                 -------            -------
                                                                                                  21,242             17,866
                                                                                                  ------             ------
Collateralized short-term financing:
   Securities sold under agreements to repurchase                                                 61,980             52,200
   Securities loaned                                                                              13,752             10,085
Advances from Holdings and other affiliates                                                        9,385              8,552
Payables:
   Brokers, dealers and clearing organizations                                                     1,766              2,200
   Customers                                                                                       5,070              6,395
Accrued liabilities and other payables                                                             2,071              2,250
Long-term debt:
   Senior notes                                                                                      218                215
   Subordinated indebtedness                                                                       4,246              3,950
                                                                                               ---------          ---------
           Total liabilities                                                                     121,359            106,012
                                                                                                 -------            -------
Commitments and contingencies

Stockholder's Equity:
   Preferred stock, $.10 par value; 10,000 shares authorized;
        none outstanding
   Common Stock, $.10 par value;  10,000 shares authorized;  1,006 shares issued
       and outstanding in 1997 and 1996;
   Additional paid-in capital                                                                      1,851              1,828
   Foreign currency translation adjustment                                                             3                  3
   Accumulated deficit                                                                               (92)              (139)
                                                                                           -------------       ------------
            Total stockholder's equity                                                             1,762              1,692
                                                                                             -----------        -----------
            Total liabilities and stockholder's equity                                          $123,121           $107,704
                                                                                                ========           ========
</TABLE>

                 See notes to consolidated financial statements.

<PAGE>


                      LEHMAN BROTHERS INC. and SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)
                                  (In millions)

<TABLE>
<CAPTION>



                                                                                          Three months ended
                                                                                 February 28              February 29
                                                                                    1997                     1996
                                                                            ---------------------  --------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                   <C>                      <C>  
Net income                                                                        $     47                 $      45
  Adjustments to reconcile income to net cash provided by
      (used in) operating activities:
         Depreciation and amortization                                                  13                        14
         Provisions for losses and other reserves                                        9                        10
         Other adjustments                                                               2                         5
      Net change in:
         Cash and securities segregated                                               (372)                       20
         Securities and other financial instruments owned                           (4,262)                     (971)
         Securities purchased under agreements to resell                            (4,620)                   (6,161)
         Securities borrowed                                                        (6,915)                    1,916
         Receivables from brokers, dealers and clearing
            organizations                                                            1,485                    (4,778)
         Receivables from customers                                                   (550)                   (2,131)
         Securities and other financial instruments sold but
             not yet purchased                                                       3,376                     1,608
         Securities sold under agreements to repurchase                              9,780                     5,415
         Securities loaned                                                           3,667                       969
         Payables to brokers, dealers and clearing organizations                      (434)                    1,411
         Payables to customers                                                      (1,325)                    2,036
         Accrued liabilities and other payables                                       (188)                      576
         Other operating assets and liabilities, net                                   372                    (2,578)
                                                                                    ------                    ------

       Net cash provided by (used in) operating activities                        $     85                   $(2,594)
                                                                                  --------                   -------

</TABLE>


                 See notes to consolidated financial statements.


<PAGE>


                      LEHMAN BROTHERS INC. and SUBSIDIARIES
               CONSOLIDATED STATEMENT OF CASH FLOWS -- (Continued)
                                   (Unaudited)
                                  (In millions)
<TABLE>
<CAPTION>
                                                                                          Three months ended
                                                                                 February 28              February 29
                                                                                    1997                     1996
                                                                            ---------------------  --------------
CASH FLOWS FROM FINANCING ACTIVITIES
<S>                                                                                   <C>                        <C>   
Principal payments of senior notes                                                                           $   (44)
   Proceeds from issuance of subordinated indebtedness                            $   308                        200
   Principal payments of subordinated indebtedness                                     (9)
   Net payments for commercial paper and
     short-term debt                                                                 (670)                      (129)
   Decrease in advances from Holdings
     and other affiliates                                                             833                      2,662
   Capital contributions                                                               36
   Dividends and capital distributions paid                                           (12)                      (110)
                                                                                  -------                     ------
     Net cash provided by financing activities                                        486                      2,579
                                                                                   ------                      -----

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property, equipment and
     leasehold improvements                                                            (2)
                                                                                 --------
  Net cash used in investing activities                                                (2)
                                                                                 --------
  Net change in cash and cash equivalents                                             569                        (15)
                                                                                   ------                     ------
  Cash and cash equivalents, beginning of period                                      396                        287
                                                                                   ------                     ------
       Cash and cash equivalents, end of period                                    $  965                     $  272
                                                                                   ======                     ======

</TABLE>

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (in millions)

             Interest paid totaled  $2,833 and $2,462 for the three months ended
February 28, 1997 and February 29, 1996, respectively. Income taxes paid totaled
$27 and $14 for the three months ended  February 28, 1997 and February 29, 1996,
respectively.




                 See notes to consolidated financial statements.


<PAGE>



                      LEHMAN BROTHERS INC. and SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Basis of Presentation:

         The consolidated  financial  statements  include the accounts of Lehman
Brothers   Inc.,   a   registered   broker-dealer   ("LBI")   and   subsidiaries
(collectively,  the  "Company").  LBI is a  wholly-owned  subsidiary  of  Lehman
Brothers Holdings Inc. ("Holdings"). LBI is one of the leading global investment
banks serving institutional, corporate, government and high-net-worth individual
clients and  customers.  The Company's  worldwide  headquarters  in New York are
complemented by offices in additional  locations in North America,  Europe,  the
Middle  East,  Latin and South  America and the Asia  Pacific  Region.  Holdings
provides investment banking and capital markets services in Europe and Asia. The
Company is engaged primarily in providing financial  services.  The Company also
operates a  commodities  trading and sales  operation  in London.  All  material
intercompany  accounts and transactions  have been eliminated in  consolidation.
The Company's  financial  statements  have been prepared in accordance  with the
rules and regulations of the Securities and Exchange Commission (the "SEC") with
respect to the Form 10-Q and reflect all normal recurring adjustments which are,
in the opinion of management,  necessary for a fair  presentation of the results
for the  interim  periods  presented.  Pursuant  to such rules and  regulations,
certain  footnote  disclosures  which  are  normally  required  under  generally
accepted accounting principles have been omitted. The Consolidated  Statement of
Financial  Condition at November 30, 1996 was derived from the audited financial
statements.  It is recommended that these consolidated  financial  statements be
read in conjunction with the audited consolidated  financial statements included
in the Company's Annual Report on Form 10-K for the twelve months ended November
30, 1996 (the "Form 10-K").

         The nature of the  Company's  business  is such that the results of any
interim  period may vary  significantly  from  quarter to quarter and may not be
indicative  of the results to be expected  for the fiscal  year.  Certain  prior
period  amounts  reflect  reclassifications  to conform to the current  period's
presentation.

2.  Long-Term Debt:

         During the three months ended  February  28, 1997,  the Company  issued
$308 million of fixed-rate  subordinated  indebtedness  with maturities  ranging
from  1998 to 2007.  The  majority  of these  issuances  have  been  effectively
converted to floating rate  obligations,  based on the London Interbank  Offered
Rates ("LIBOR") through the use of interest rate swaps. In addition,  $9 million
of long-term debt matured during the three months ended February 28, 1997.

3.  Capital Requirements:

         As a registered  broker-dealer,  LBI is subject to SEC Rule 15c3-1, the
Net Capital  Rule,  which  requires LBI to maintain net capital of not less than
the greater of 2% of aggregate  debit items arising from customer  transactions,
as defined,  or 4% of funds required to be segregated  for customers'  regulated
commodity  accounts,  as defined.  At February 28, 1997,  LBI's  regulatory  net
capital,  as defined,  of $1,466  million  exceeded the minimum  requirement  by
$1,352 million.

         The Company's  triple-A rated derivatives  subsidiary,  Lehman Brothers
Financial   Products  Inc.,  has  established   certain  capital  and  operating
restrictions which are reviewed by various rating agencies.

         Repayment  of  subordinated   indebtedness  and  certain  advances  and
dividend  payments by LBI are restricted by the regulations of the SEC and other
regulatory agencies. In addition, certain instruments governing the indebtedness
of LBI contractually limit its ability to pay dividends.

4.  Derivative Financial Instruments:

         In the normal course of business,  the Company  enters into  derivative
transactions  both in a trading capacity and as an end user. Acting in a trading
capacity,  the Company enters into derivative  transactions to satisfy the needs
of its clients  and to manage the  Company's  own  exposure to market and credit
risks resulting from its trading  activities in cash instruments  (collectively,
"Trading-Related  Derivative  Activities").  For a  further  discussion  of  the
Company's derivative related activities,  refer to "Management's  Discussion and
Analysis of Financial  Condition and Results of  Operations - Off-Balance  Sheet
Financial Instruments and Derivatives" and Note 8 to the Consolidated  Financial
Statements, included in the Form 10-K.

Trading-Related  Derivative Activities

         The Company  records its  Trading-Related  Derivative  Activities  on a
mark-to-market  basis with realized and unrealized gains (losses)  recognized in
principal transactions in the Consolidated Statement of Operations.  The Company
records  unrealized  gains and losses on derivative  contracts on a net basis in
the Consolidated  Statement of Financial  Condition for those  transactions with
counterparties  executed under a legally  enforceable  master netting agreement.
Listed in the  following  table is the fair value and average  fair value of the
Company's Trading-Related Derivative Activities (in millions):

<TABLE>
<CAPTION>
                                                                                                     Average Fair Value*
                                                                      Fair Value*               Three Months Ended
                                                                 February 28, 1997                   February 28, 1997
                                                                 -----------------                   -----------------
                                                                  Assets      Liabilities          Assets       Liabilities
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>         <C>                 <C>          <C>
Interest rate and currency swaps and options
     (including caps, collars and floors)                         $4,249        $2,689            $4,200         $2,706
Foreign exchange forward contracts and options                       719         1,306               630          1,149
Options on other fixed income securities,
     mortgage-backed securities forward contracts
     and options                                                     155           144               166            168
Equity contracts (including equity swaps, warrants
     and options)                                                    132            35               129             44
Commodity contracts (including swaps, forwards,
     and options)                                                     17            18                36             32
                                                                -------------------------------------------------------

Total                                                             $5,272        $4,192            $5,161         $4,099
                                                                -------------------------------------------------------

</TABLE>

* Amounts represent carrying value (exclusive of collateral) of contracts and do
not  include   receivables  or  payables  related  to  exchange-traded   futures
contracts.


<PAGE>
                      LEHMAN BROTHERS INC. and SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



<TABLE>
<CAPTION>
                                                                                                 Average Fair Value*
                                                                      Fair Value*               Twelve Months Ended
                                                                November 30, 1996                     November 30, 1996
                                                                -----------------                     -----------------
                                                                  Assets      Liabilities          Assets       Liabilities
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>         <C>                 <C>          <C>
Interest rate and currency swaps and options
     (including caps, collars and floors)                         $3,943        $3,159             $3,336        $1,917
Foreign exchange forward contracts and options                       834         1,089                668         1,118
Options on other fixed income securities,    
     mortgage-backed securities forward contracts
     and options                                                     221           248                236           237
Equity contracts (including equity swaps, warrants
     and options)                                                    254           127                233            74
Commodity contracts (including swaps, forwards,
     and options)                                                     46            39                 51            50
                                                                 ------------------------------------------------------

Total                                                             $5,298        $4,662             $4,524        $3,396
                                                                  -----------------------------------------------------
</TABLE>

* Amounts represent carrying value (exclusive of collateral) of contracts and do
not  include   receivables  or  payables  related  to  exchange-traded   futures
contracts.

         Assets  included in the table above  primarily  represent the Company's
unrealized  gains, net of unrealized  losses for situations in which the Company
has a master netting  agreement.  Similarly,  liabilities  represent net amounts
owed  to  counterparties.  Therefore,  the  fair  value  of  assets  related  to
derivative   contracts  at  February  28,  1997  represents  the  Company's  net
receivable  for  derivative   financial   instruments  before  consideration  of
collateral.  Included  within this amount was $5,123  million and $149  million,
respectively, related to OTC and exchange-traded contracts.

         With  respect  to OTC  contracts,  the  Company's  views its net credit
exposure to be $3,537 million at February 28, 1997,  representing the fair value
of  the  Company's  OTC  contracts  in  an  unrealized   gain  position,   after
consideration of collateral of $1,586 million. Presented below is an analysis of
the  Company's  net  credit  exposure  for OTC  contracts  based  upon  internal
designations of counterparty credit quality.

Counterparty               S&P/Moody's                February 28, 1997
 Risk Rating                  Equivalent                    Net Credit
Exposure
       1                AAA/Aaa                               27%
       2                AA-/Aa3 or higher                     19%
       3                A-/A3 or higher                       43%
       4                BBB-/Baa3 or higher                    7%
       5                BB-/Ba3 or higher                      3%
       6                B+/B1 or lower                         1%
----------------------------------------------------------------------------

         These  designations are based on actual ratings made by external rating
agencies or by  equivalent  ratings  established  and utilized by the  Company's
Corporate Credit Department.


<PAGE>
                      LEHMAN BROTHERS INC. and SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         The   Company  is  also   subject  to  credit   risk   related  to  its
exchange-traded  derivative contracts.  Exchange-traded contracts are transacted
directly on the exchange.  To protect  against the potential for a default,  all
exchange  clearing houses impose net capital  requirements for their membership.
Additionally,  the exchange  clearing house requires  counterparties  to futures
contracts  to post  margin  upon the  origination  of the  contract  and for any
changes in the market  value of the contract on a daily basis  (certain  foreign
exchanges extend settlement to three days). Therefore,  the potential for losses
from exchange-traded products is limited.

5.  Other Commitments and Contingencies:

         In the normal  course of its  business,  the  Company  has been named a
defendant in a number of lawsuits and other legal proceedings. After considering
all  relevant  facts,  available  insurance  coverage  and the advice of outside
counsel,  in the  opinion  of the  Company  such  litigation  will  not,  in the
aggregate,  have  a  material  adverse  effect  on  the  Company's  consolidated
financial position or results of operations.

         As a leading global investment bank, risk is an inherent part of all of
the  Company's  businesses  and  activities.  The  extent to which  the  Company
properly and effectively identifies,  assesses, monitors and manages each of the
various  types  of  risks  involved  in  its  trading  (including  derivatives),
brokerage,  and  investment  banking  activities  is critical to the success and
profitability  of the  Company.  The  principal  types of risks  involved in the
Company's   activities  are  market  risk,  credit  or  counterparty  risk,  and
transaction risk.  Management has developed a control  infrastructure to monitor
and manage  each type of risk on a global  basis  throughout  the  Company.  For
further  discussion  of  these  matters,  refer  to Note 10 to the  Consolidated
Financial Statements, in the Form 10-K.

6.  Related Party Transactions:

         In the  normal  course of  business,  the  Company  engages  in various
securities  trading,  investment banking and financing  activities with Holdings
and  many of its  affiliates  (the  "Related  Parties").  In  addition,  various
charges, such as compensation, occupancy, administration and computer processing
are allocated among the Related Parties, based upon specific  identification and
allocation methods.

         During the three months ended  February 28, 1997,  the Company paid $12
million to Holdings as a return of capital.

7.   Incentive Plans:

         In the  first  quarter  of 1997,  Holdings  granted  approximately  2.2
million options (the "1997 Options") under the 1996 Management Ownership Plan to
members of the Corporate  Management  Committee and to certain senior  officers.
The 1997 Options  become  exercisable in four and one-half years and expire five
years after grant  date;  exercisability  is  accelerated  ratably in  one-third
increments at such time as the closing price of Holdings' common stock meets, or
exceeds,  $39, $42, and $45 for fifteen out of twenty consecutive  trading days.
If a minimum target price is not reached and maintained for the specified period
in the four and one-half year period  following  issuance,  the award recipients
may then exercise all of their options thereafter.  No compensation  expense has
been  recognized  for these  stock  options as they were issued with an exercise
price above the market price of the common stock on the date of the grant.


<PAGE>



                      LEHMAN BROTHERS INC. and SUBSIDIARIES

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

Business Environment

         The Company's  principal  business  activities,  investment banking and
securities  trading  and  sales,  are by their  nature  subject  to  volatility,
primarily due to changes in interest and foreign exchange rates, global economic
and  political  trends  and  industry  competition.  As a result,  revenues  and
earnings may vary significantly from quarter to quarter and from year to year.

         The  favorable  market and economic  conditions  experienced  in fiscal
1996,  continued  into the first  quarter  of 1997.  Market  conditions  in 1997
reflected strong investor demand in worldwide debt and equity markets, continued
strength in  corporate  finance  advisory  activities,  and a sustained  pace of
underwriting  in  fixed  income  products.  While  worldwide  market  conditions
continued to be favorable in the first quarter of 1997,  certain  market factors
weakened from the fourth quarter of 1996.

         Global fixed income  markets were robust  throughout  most of the first
quarter of 1997, with heavy trading volumes in both the U.S. and Europe. Trading
activity in the U.S. continued to be strong,  reflecting  investor optimism that
the  environment of sustained  growth and low inflation  levels would  continue.
Additionally,  U.S.  trading  activity was bolstered by active purchases of U.S.
securities  by  foreign  investors  due  to the  uncertainty  about  the  market
implications of European Monetary Union and the strong dollar.

         Worldwide equity markets saw continued strength in the level of trading
activity with U.S.  trading  volumes in the first  quarter  exceeding the record
levels experienced in the fourth quarter of 1996.  Valuation levels on worldwide
exchanges  continued to improve,  particularly  in the U.S.  and Europe.  In the
U.S.,  valuation levels were positively impacted by better than expected growth,
favorable  earnings  prospects and low  inflation  levels.  In Europe,  positive
industry  fundamentals in terms of market liquidity and earnings prospects along
with the strong U.S. dollar continued to drive the equity markets.

         Underwriting  volumes in worldwide fixed income products were robust in
the first  quarter  of 1997.  In the U.S.,  underwriting  volumes  continued  to
benefit  from the  strength in the spread  sectors,  particularly  in high yield
securities,  and from  increased  financings  timed in  anticipation  of  higher
interest rates. Equity and related  underwriting volumes were relatively strong,
but considerably below fourth quarter 1996 levels.

         In mid-February, investors became concerned about a possible tightening
in U.S.  interest rates based upon remarks by the Federal Reserve Board Chairman
and evidence that the U.S. economy was growing more rapidly than expected.  This
led to a rise in U.S. interest rates and a general decline in U.S. equity market
valuations,  which negatively affected customer flow and origination  activities
throughout  the latter part of February and into March.  On March 25, 1997,  the
Federal Reserve raised the Federal Funds rate 25 basis points to 5 1/2%.


<PAGE>


                      LEHMAN BROTHERS INC. and SUBSIDIARIES
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


         Corporate  finance  advisory  activities  maintained  strength in 1997,
reflecting increased consolidation and globalization across industry sectors and
the overall strength of the global capital markets. The pace of strategic merger
and acquisition activity is expected to hold throughout 1997.

         While fiscal 1996 and 1997 have been  characterized by strong financial
markets, nevertheless, the financial services industry is cyclical. As a result,
the Company's  businesses  are evaluated  across the market cycles for operating
profitability  and  their  contribution  to the  Company's  long-term  strategic
objectives.  The Company  strives to minimize the effects of economic  downturns
through  its  diversified  product  base,  its  global  presence,  and its  risk
management practices.





















Note:  Except for the historical information contained herein, this Management's
       Discussion and Analysis of Financial  Condition and Results of Operations
       contains   forward-looking   statements   that  are   based  on   current
       expectations, estimates and projections about the industries in which the
       Company   operates.   These  statements  are  not  guarantees  of  future
       performance  and involve  certain risks,  uncertainties  and  assumptions
       which are difficult to predict.  The Company  undertakes no obligation to
       update publicly any  forward-looking  statements,  whether as a result of
       new information, future events or otherwise.


<PAGE>



                      LEHMAN BROTHERS INC. and SUBSIDIARIES
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


Results of Operations
For the Three Months Ended February 28, 1997 and February 29, 1996

         The Company  reported  net income of $47 million for the first  quarter
ended February 28, 1997,  representing  an increase of 4% from net income of $45
million for the first quarter ended February 29, 1996.

         Net revenues  increased  to $621 million for the first  quarter of 1997
from $607  million for the first  quarter of 1996.  The increase in net revenues
from the first quarter of 1996 resulted from broad-based improvement in both the
Company's equity and investment banking  businesses,  due to increased levels of
customer flow and origination activities.

         The Company,  through its subsidiaries,  is a market-maker in all major
equity and fixed income products in both the domestic and international markets.
As  part  of its  market-making  activities,  the  Company  maintains  inventory
positions of varying amounts across a broad range of financial  instruments that
are  marked-to-market on a daily basis and along with the Company's  proprietary
trading positions,  give rise to principal  transactions  revenues.  The Company
utilizes  various  hedging  strategies  to minimize its exposure to  significant
movements in interest and foreign exchange rates and the equity markets.

         Net revenues from the Company's market-making and trading activities in
fixed income and equity products are recognized as either principal transactions
or net interest  revenues  depending upon the method of financing and/or hedging
related to  specific  inventory  positions.  The Company  evaluates  its trading
strategies  on an overall  profitability  basis which  includes  both  principal
transactions  revenues  and net  interest.  Therefore,  changes in net  interest
should  not be viewed in  isolation  but  should be viewed in  conjunction  with
revenues from principal  transactions.  Principal  transactions and net interest
revenues  decreased  to $338  million  for the first  quarter  of 1997 from $358
million for the first  quarter of 1996.  The decrease in the  combined  revenues
from  principal  transactions  and net  interest  in the first  quarter  of 1997
resulted from certain  fixed income  products  partially  offset by increases in
equity products.


<PAGE>



                      LEHMAN BROTHERS INC. and SUBSIDIARIES
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


         The  following   table  of  net  revenues  by  business  unit  and  the
accompanying discussion have been prepared in order to present the Company's net
revenues in a format that  reflects the manner in which the Company  manages its
businesses.  For internal management  purposes,  the Company has been segregated
into  four  major  business  units:  Fixed  Income,  Equity,  Corporate  Finance
Advisory,  and Merchant  Banking.  Each business  unit  represents a grouping of
financial activities and products with similar  characteristics.  These business
activities result in revenues that are recognized in multiple revenue categories
contained in the Company's Consolidated Statement of Operations. Net revenues by
business unit contain certain  internal  allocations,  including  funding costs,
which are centrally managed.

<TABLE>
<CAPTION>
Three Months Ended February 28, 1997

                                      Principal
                                  Transactions and                         Investment
                                     Net Interest        Commissions         Banking         Other         Total
---------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>               <C>             <C>              <C>           <C> 
Fixed Income                               $302              $  9            $  88            $ 2           $401
Equity                                       36                71               54                           161
Corporate Finance Advisory                                     45                              45
Merchant Banking                             (3)                                 3
Other                                         3                 3                2              6             14
---------------------------------------------------------------------------------------------------------------------------
                                           $338               $83             $192            $ 8           $621
---------------------------------------------------------------------------------------------------------------------------

</TABLE>

<TABLE>
<CAPTION>
Three Months Ended February 29, 1996

                                      Principal
                                  Transactions and                         Investment
                                      Net Interest       Commissions         Banking         Other         Total
---------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                <C>            <C>              <C>           <C> 
Fixed Income                               $351               $17            $  63            $ 3           $434
Equity                                        9                59               48              2            118
Corporate Finance Advisory                                     40                              40
Merchant Banking                             (2)                                 9                             7
Other                                                           5                               3              8
---------------------------------------------------------------------------------------------------------------------------
                                           $358               $81             $160            $ 8           $607
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


         Fixed Income.  The Company's fixed income net revenues reflect customer
flow  activities  (both  institutional  and  high-net-worth  retail),  secondary
trading, debt underwriting,  syndicate and financing activities related to fixed
income products. Fixed income products include dollar- and non-dollar government
securities,  mortgage-  and  asset-backed  securities,  money  market  products,
dollar- and non-dollar  corporate debt securities,  emerging market  securities,
municipal  securities,  financing  (global  access  to  debt  financing  sources
including  repurchase  and reverse  repurchase  agreements),  foreign  exchange,
commodities  and fixed  income  derivative  products.  Fixed income net revenues
decreased 8% to $401 million for the first quarter of 1997 from $434 million for
the first quarter of 1996.  The decrease in the first quarter  revenues from the
prior year reflected lower principal  transactions and net interest from certain
fixed  income  products   including  foreign  exchange,   governments  and  firm
financing, partially offset by improved overall underwriting results. Investment
banking  revenues,  as a component  of fixed income  revenues,  increased to $88
million for the first  quarter of 1997 from $63 million for the first quarter of
1996 due to increased  underwriting  volumes and an improved mix of underwriting
revenues.

<PAGE>



                      LEHMAN BROTHERS INC. and SUBSIDIARIES
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

         Equity.  Equity net revenues  reflect  customer flow  activities  (both
institutional   and   high-net-worth   retail),    secondary   trading,   equity
underwriting,  equity finance and arbitrage activities. The Company's equity net
revenues  increased  36% to $161 million for the first quarter of 1997 from $118
million for the first quarter of 1996. The increase  versus the first quarter of
1996  resulted  from  increased   contributions  from  convertible   securities,
distribution  of  international   equities  (primarily   European)  and  NASDAQ.
Investment banking revenues, as a component of equity revenues, increased to $54
million for the first  quarter of 1997 from $48 million for the first quarter of
1996 due to increased underwriting volumes.

         Corporate  Finance  Advisory.  Corporate finance advisory net revenues,
classified  in the  Consolidated  Statement  of  Operations  as a  component  of
investment banking revenues, result primarily from fees earned by the Company in
its role as strategic  advisor to its clients.  This role primarily  consists of
advising clients on mergers and acquisitions,  divestitures,  leveraged buyouts,
financial  restructurings,  and a  variety  of  cross-border  transactions.  Net
revenues from corporate finance advisory  increased to $45 million for the first
quarter of 1997 reflecting a 13% increase from the $40 million recognized in the
first quarter of 1996. This increase reflected continued strength in the overall
merger and acquisition market environment.

         Merchant Banking.  The Company is the general partner for four merchant
banking   partnerships.   Current  merchant  banking  investments  held  by  the
partnerships   include  both  publicly   traded  and  privately  held  companies
diversified on a geographic and industry  basis.  Merchant  banking net revenues
primarily  represent the Company's  proportionate  share of net realized and net
unrealized gains and losses from the sale and revaluation of investments held by
the partnerships.  Such amounts are classified in the Consolidated  Statement of
Operations as a component of investment  banking revenues.  Merchant banking net
revenues also reflect the net interest  expense relating to the financing of the
Company's  investment in the  partnerships.  Merchant  banking net revenues were
less than $1 million  for the first  quarter of 1997 and $7 million in the first
quarter of 1996.  This  decrease was  principally  due to a reduction in the net
gains recognized on the publicly traded investments held by the partnerships.

         Non-Interest Expenses.  Non-interest expenses were $552 million for the
first  quarter  of  1997  and  $529  million  for the  first  quarter  of  1996.
Compensation and benefits expense was $360 million for 1997 and $314 million for
1996.

         Income Taxes.  The  Company's  income tax provision was $22 million for
the first quarter of 1997 compared to $33 million for the first quarter of 1996.
The  effective  tax rate was 32% for the first  quarter  of 1997 and 42% for the
first  quarter of 1996.  The  decrease  in the  effective  tax rate  reflects an
increase in benefits  derived from income subject to preferential  tax treatment
and a reduction in state and local taxes.




<PAGE>



                      LEHMAN BROTHERS INC. and SUBSIDIARIES
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


 Liquidity and Capital Resources

Overview

As a leading global  investment  bank that actively  participates  in the global
capital markets, the Company has large and diverse capital requirements. Many of
the businesses in which the Company operates are capital  intensive.  Capital is
required to finance,  among other things,  the Company's  securities  inventory,
underwriting activities, principal investments,  merchant banking activities and
investments in fixed assets.

The Company's total assets increased to $123.1 billion at February 28, 1997 from
$107.7  billion at November 30, 1996.  The increase in total assets is primarily
attributable  to an increase in matched book fixed  income and equity  financing
activities  as well as an increased  level of government  and agency  securities
owned.

The Company's balance sheet is highly liquid and consists  primarily of cash and
cash equivalents,  securities and other financial  instruments  owned, which are
marked-to-market daily; and collateralized  short-term financing agreements.  As
the Company's primary  activities are based on customer flow  transactions,  the
Company experiences a rapid asset turnover rate. In addition,  the highly liquid
nature of these assets  provides the Company with  flexibility  in financing and
managing  its  business.  The overall  size of the  Company's  total  assets and
liabilities fluctuates from time to time and at specific points in time (such as
calendar quarter ends) and may be higher than at fiscal quarter ends.

Funding and Capital Policies

The Company's Finance  Committee,  which includes senior officers from key areas
of the Company,  is responsible  for  establishing  and managing the funding and
liquidity policies of the Company. The Finance Committee's funding and liquidity
policies include  recommendations  for capital and balance sheet size as well as
the allocation of capital and balance sheet to product areas.  In addition,  the
Finance  Committee  works with the Regional  Asset and  Liability  Committees to
ensure coordination of global funding efforts.  The Regional Asset and Liability
Committees  are aligned with the Company's  geographic  funding  centers and are
responsible for implementing  funding  strategies  consistent with the direction
set by the Finance  Committee and for monitoring and managing  liquidity for the
region.

The primary  goal of the  Company's  funding  policies is to provide  sufficient
liquidity and  availability  of funding  sources at all times and throughout all
market  environments.  There  are five key  elements  to the  Company's  funding
strategy which are:

o To maintain an  appropriate  Total  Capital  structure to support the business
activities in which the Company is engaged.

o    To minimize  liquidity and refinancing risk by funding the Company's assets
     on a global basis with  liabilities  which have  maturities  similar to the
     anticipated holding period of the assets.

<PAGE>



                      LEHMAN BROTHERS INC. and SUBSIDIARIES
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


o    To  maintain  sufficient  liquidity  during a period  of  financial  stress
     through a combination  of  collateralized  short-term  financings and Total
     Capital.   Financial   stress  is  defined  as  any  event  which  severely
     constraints the Company's access to unsecured funding sources.

o    To obtain  diversified  funding through a global investor base which
     maximizes liquidity and reduces concentration risk.

o    To maintain funding availability well in excess of actual utilization.

Short-Term Funding

The Company strives to maximize the portion of the Company's  balance sheet that
is funded through collateralized  borrowing sources, which in turn minimizes the
reliance placed upon unsecured short-term debt.

Collateralized   borrowing  sources  include   securities  and  other  financial
instruments  sold but not yet purchased,  as well as  collateralized  short-term
financings,  defined as securities sold under agreements to repurchase ("repos")
and securities loaned. Because of their secured nature, repos and other types of
collateralized borrowing sources are less credit-sensitive and have historically
been a more stable  financing  source under  adverse  market  conditions.  Also,
collateralized  borrowing  sources  generally provide the Company with access to
lower cost funding.

The  amount  of the  Company's  collateralized  borrowing  activities  will vary
reflecting  changes  in the mix and  overall  levels  of  securities  and  other
financial instruments owned and global market conditions. However, at all times,
the vast  majority  of the  Company's  assets  are  funded  with  collateralized
borrowing  sources.  At February 28, 1997 and November 30, 1996, $97 billion and
$80 billion,  respectively,  of the  Company's  total balance sheet was financed
using collateralized borrowing sources. As of February 28, 1997 and November 30,
1996,  respectively,  short-term  debt  outstanding  was $1.6  billion  and $2.3
billion.  There was no commercial paper  outstanding as of February 28, 1997 and
November 30, 1996.




<PAGE>


                      LEHMAN BROTHERS INC. and SUBSIDIARIES
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


Total Capital

In accordance with the Company's liquidity  policies,  the Company increased its
Total  Capital  base in 1997 to $6.2  billion  at  February  28,  1997 from $5.9
billion at November  30,  1996.  Total  Capital  increased  primarily  due to an
increase in long-term debt and the retention of earnings.

Total Capital
                                    February 28                November 30
(in millions)                          1997                       1996
--------------------------------------------------------------------------------
Long-Term Debt

     Senior Notes                     $   218                    $   215
     Subordinated Indebtedness          4,246                      3,950
                                      -------                    -------
                                        4,464                      4,165

Stockholder's Equity                    1,762                      1,692

--------------------------------------------------------------------------------
Total Capital                          $6,226                     $5,857
--------------------------------------------------------------------------------

During the first quarter of 1997,  the Company  issued $308 million in long-term
debt,  which was $299 million in excess of its  maturing  debt.  Long-term  debt
increased to $4.5 billion at February 28, 1997 from $4.2 billion at November 30,
1996 with a weighted  average maturity of 4.7 years at February 28, 1997 and 4.5
years at November 30, 1996.

The increase in Total Capital also reflects an increase in stockholders'  equity
to $1.8 billion at February 28, 1997 from $1.7 billion at November 30, 1996. The
net  increase in  stockholders'  equity was  primarily  due to the  retention of
earnings and capital contributions received.

At February 28, 1997, the Company had  approximately  $1.1 billion available for
the issuance of debt securities under various shelf registrations.



<PAGE>


                      LEHMAN BROTHERS INC. and SUBSIDIARIES
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


Dependence on Credit Ratings

         The Company, like other companies in the securities industry, relies on
external sources to finance a significant portion of its day-to-day  operations.
The Company's access and cost of funding is generally  dependent upon its short-
and long-term  debt  ratings.  As of February 28, 1997,  the current  short- and
long-term senior debt ratings of the Company are as follows:

                                                                  LBI
                                          Short-term           Long-term**
--------------------------------------------------------------------------------
Duff & Phelps Credit Rating Co.               D-1                A/A-
Fitch Investors Service Inc.                  F-1                A/A-
IBCA                                          A1                 A/A-
Moody's                                       P2                 A3*/Baa1
S&P+                                          A-1                A+*/A
Thomson BankWatch                             TBW-1              A/A-
-------------------------------------------------------------------------------
  * Provisional ratings on shelf registration
** Senior/subordinated
+  Long term ratings outlook revised to negative on September 21, 1994

         High Yield Securities.  The Company  underwrites,  trades,  invests and
makes  markets  in high  yield  corporate  debt  securities.  The  Company  also
syndicates,  trades  and  invests  in  loans  to  below  investment  grade-rated
companies.  For  purposes of this  discussion,  high yield debt  securities  are
defined as  securities or loans to companies  rated BB+ or lower,  or equivalent
ratings by recognized credit rating agencies, as well as non-rated securities or
loans  which,  in  the  opinion  of  management,   are   non-investment   grade.
Non-investment  grade securities generally involve greater risks than investment
grade securities due to the issuer's  creditworthiness  and the liquidity of the
market for such  securities.  In addition,  these  issuers have higher levels of
indebtedness,   resulting  in  an  increased  sensitivity  to  adverse  economic
conditions.  The Company  recognizes  these risks and aims to reduce  market and
credit risk through the diversification of its products and counterparties. High
yield debt securities are carried at market value and unrealized gains or losses
for these  securities are reflected in the Company's  Consolidated  Statement of
Operations.  The Company's portfolio of such securities at February 28, 1997 and
November 30, 1996  included  long  positions  with an aggregate  market value of
approximately $1.4 billion and $1.3 billion,  respectively,  and short positions
with an aggregate  market value of  approximately  $211 million and $99 million,
respectively.  The portfolio may from time to time contain concentrated holdings
of selected  issues.  The Company's  largest high yield position was $70 million
and $78 million at February 28, 1997 and November 30, 1996, respectively.

         Merchant Banking Activities.  The Company's merchant banking activities
include investments in four partnerships,  for which the Company acts as general
partner, as well as direct investments.  At February 28, 1997, the investment in
merchant banking partnerships was $100 million. The Company's policy is to carry
its investments,  including its partnership interests,  at fair value based upon
the Company's assessment of the underlying investments.


<PAGE>


                      LEHMAN BROTHERS INC. and SUBSIDIARIES
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS



         Non-Core  Activities  and  Investments.  In  March  1990,  the  Company
discontinued the origination of partnerships  (the assets of which are primarily
real estate) and  investments in real estate.  Currently,  the Company acts as a
general partner for approximately $3.9 billion of partnership investment capital
and manages the  remaining  real estate  investment  portfolio.  At February 28,
1997,  the Company's  investments  in these real estate  activities,  as well as
commitments and contingent  liabilities under guarantees and credit enhancements
were fully reserved.  In certain  circumstances,  the Company provides financial
and other support and  assistance  to such  investments  to maintain  investment
values. There is no contractual requirement that the Company continue to provide
this support.

         Management's  intention  with regard to non-core  assets is the prudent
liquidation of these investments as and when possible.






<PAGE>


                      LEHMAN BROTHERS INC. and SUBSIDIARIES

                           PART II - OTHER INFORMATION

ITEM 1   Legal Proceedings

         The Company is involved in a number of  judicial,  regulatory  and
arbitration  proceedings  concerning  matters  arising  in  connection  with the
conduct of its business.  Such  proceedings  include actions brought against LBI
and others with respect to  transactions in which LBI acted as an underwriter or
financial advisor, actions arising out of LBI's activities as a broker or dealer
in securities and  commodities  and actions brought on behalf of various classes
of claimants against many securities and commodities firms of which LBI is one.

         Although there can be no assurance as to the ultimate  outcome,  The
Company  has denied,  or believes it has  meritorious  defenses  and will deny,
liability in all  significant  cases  pending  against it including  the matters
described below, and intends to defend vigorously each such case. Although there
can be no assurance as to the ultimate outcome,  based on information  currently
available  and  established  reserves,  the Company  believes  that the eventual
outcome of the actions against it, including the matters  described below,  will
not,  in the  aggregate,  have a  material  adverse  effect on its  business  or
consolidated financial condition.

Action Relating to Mutual Fund Redemptions

On March 5, 1997,  the NASD  Regulation  Inc.  accepted a letter of  Acceptance,
Waiver and Consent  from LBI.  Without  admitting  or denying  the  allegations,
LBI  consented  to the entry of  findings  that,  during the period between
October 1, 1990 and February 16, 1996,  the Company  charged  excessive
fees/commissions  aggregating $1,963,485.70 for executing non-proprietary mutual
fund  redemption  transactions  in violation of NASD Conduct  Rules  2830(j) and
2110. LBI  consented to a censure, a fine in the amount of $250,000,
and agreed to disgorge to the relevant retail customers $2,923,482.61, including
pre-judgment interest.





<PAGE>


ITEM 6   EXHIBITS AND REPORTS ON FORM 8-K

         The  following  exhibits  and  reports on Form 8-K are filed as part of
this Quarterly Report, or where indicated,  were heretofore filed and are hereby
incorporated by reference:

(a)      Exhibits:

           12.    Computation in Support of Ratio of Earnings to Fixed Charges

           27.    Financial Data Schedule


(b)      Reports on Form 8-K:

         None




<PAGE>



                                   SIGNATURES




         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                                            LEHMAN BROTHERS INC.
                                                                (Registrant)





Date:  April 14, 1997                By          /s/ Richard S. Fuld, Jr.
                                              ---------------------------
                                              Richard S. Fuld, Jr.
                                              Chairman of the Board and
                                              Chief Executive Officer
                                              (Principal Executive Officer)




Date:    April 14, 1997              By          /s/ Charles B. Hintz
                                              -----------------------
                                              Charles B. Hintz
                                              Chief Financial Officer
                                              (Principal Financial Officer)






<PAGE>




                                  EXHIBIT INDEX


Exhibit No.         Exhibit



Exhibit 12.        Computation in Support of Ratio of Earnings to Fixed Charges

Exhibit 27.        Financial Data Schedule



<PAGE>


                                                                 Exhibit 12


<PAGE>


                      LEHMAN BROTHERS INC. and SUBSIDIARIES
          COMPUTATION in SUPPORT of RATIO of EARNINGS to FIXED CHARGES
                                   (Unaudited)
                              (Dollars in millions)


<TABLE>
<CAPTION>



                                                                 For the            For the             For the          For the
                                          For the Year        Eleven Months      Twelve Months       Twelve Months     Three Months
                                              Ended               Ended              Ended               Ended            Ended
                                            December 31        November 30        November 30         November 30      February 28
                                            -----------        -----------        -----------         -----------      -----------
                                         1992       1993           1994               1995               1996              1997
                                         ----       ----           ----               ----               ----              ----
<S>                                      <C>        <C>            <C>               <C>                 <C>               <C>  
Fixed charges:
  Interest expense:
    Subordinated indebtedness          $   210     $  192        $   184           $   204           $     221          $     61
    Bank loans and other
      borrowings*                        4,363      4,393          5,661             9,750               9,900             2,758
    Interest  component  of
     rentals
      of office and equipment               64         62             27                25                  18                 4
  Other adjustments**                                                 53                 2                   7                 4
                                          ----        ----        --------        ---------           ---------        ----------
                                           127        101
    TOTAL (A)                           $4,764     $4,748         $5,925            $9,981             $10,146            $2,827
                                        ======     ======         ======            ======             =======            ======

Earnings:
  Pre-tax income (loss) from
    continuing operations              $   319    $             $      1        $       78           $     309          $     69
                                                     (146)
  Fixed charges                          4,764      4,748          5,925             9,981              10,146             2,827
  Other adjustments***                     (68)       (68)           (52)               (1)                 (6)               (4)
                                      --------    --------       --------       -----------         -----------         ---------
    TOTAL (B)                           $5,015     $4,534         $5,874           $10,058             $10,449            $2,892
                                        ======      ======         ======           =======             =======            ======
(B / A)                                              ****           ****              1.01                1.03              1.02
                                          1.05
</TABLE>

*        Includes amortization of long-term debt discount.

**      Other adjustments include capitalized  interest and debt issuance costs,
        amortization of capitalized  interest and preferred stock dividends of a
        wholly owned subsidiary.

***     Other  adjustments  include adding the net loss of affiliates  accounted
        for  at  equity  whose  debt  is  not  guaranteed  by  the  Company  and
        subtracting  capitalized  interest costs and undistributed net income of
        affiliates  accounted for at equity and preferred  stock  dividends of a
        wholly owned subsidiary.

****    Earnings  were  inadequate to cover fixed  charges and would have had to
        increase  approximately  $214 million in 1993 and $51 million in 1994 in
        order to cover the deficiencies.




<PAGE>


                                                              Exhibit 27