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


                                    FORM 10-K

(Mark One)
               [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended November 30, 1996

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

        For the transition period from _______________ to _______________
                         Commission File Number: 0-16527

                             LEHMAN ABS CORPORATION
             (Exact name of registrant as specified in its charter)

      Delaware                                                  13-3447441
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                            Identification No.)

                   200 Vesey Street, 20th floor, New York, NY         10285
                    (Address of principal executive offices)        (Zip Code)

                                  212-526-5594
              (Registrant's telephone number, including area code)

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

                                                          Name of Each Exchange
Title of Each Class                                        on which registered
          None                                                     None

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

                                      None
                                (Title of class)

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___.

Registrant had 1,000 shares of common stock outstanding (all owned indirectly by
Lehman Brothers Holdings Inc.) as of February 24, 1997.

THE REGISTRANT  MEETS THE CONDITIONS SET FORTH IN GENERAL  INSTRUCTION J (1) (a)
AND (b) OF FORM  10-K AND  THEREFORE  IS  FILING  THIS  FORM  WITH  THE  REDUCED
DISCLOSURE FORMAT CONTEMPLATED THEREBY.


<PAGE>



                                      INDEX
                      LEHMAN ABS CORPORATION and SUBSIDIARY
Cover
Index                                                                      Page

PART I
        Item 1 - Business                                                    1
        -----------------

        Item 2 - Properties                                                  1
        -------------------

        Item 3 - Legal Proceedings                                           2
        --------------------------

        Item 4 - Submission of Matters to a Vote of Security Holders         2
        ------------------------------------------------------------

PART II
        Item 5 - Market for Registrant's Common Stock
                      and Related Stockholder Matters                        2

        Item 6 - Selected Financial Data                                     2
        --------------------------------

        Item 7 - Management's Discussion and Analysis of
                      Financial Condition and Liquidity and Capital
                      Resources and Results of Operations                2 - 4
                      -----------------------------------

        Item 8 - Financial Statements and Supplementary Data                 5
        ----------------------------------------------------

        Item 9 - Changes in and Disagreements with Accountants
                      on Accounting and Financial Disclosure                 5

PART III
        Item 10 - Directors and Executive Officers
                       of the Registrant                                     5

        Item 11 - Executive Compensation                                     5
        --------------------------------

        Item 12 - Security Ownership of Certain Beneficial
                       Owners and Management                                 5

        Item 13 - Certain Relationships and Related Transactions             5
        --------------------------------------------------------

PART IV
        Item 14 - Exhibits, Financial Statement Schedules,
                       and Reports on Form 8-K                               6

Signatures                                                                   7


<PAGE>


                                     PART I

ITEM 1            Business

                  The consolidated  financial statements include the accounts of
                  Lehman ABS  Corporation and Lehman Asset Backed Caps Inc., its
                  wholly owned subsidiary (together, the "Company").  Lehman ABS
                  Corporation  was  incorporated  in the  State of  Delaware  on
                  January 29, 1988 as a special purpose finance corporation. The
                  Company's  activities  consist  of the  issuance  and  sale of
                  securities  (the  "Securities")  primarily  collateralized  by
                  purchased  receivables  arising from loans or financings  (the
                  "Receivables")  or collateralized by government and government
                  agency obligations or corporate debt securities (the "Bonds").
                  All of  the  outstanding  common  stock  is  owned  by  Lehman
                  Commercial  Paper Inc.  ("LCPI"),  an  indirect  wholly  owned
                  subsidiary of Lehman Brothers Holdings Inc.
                  ("Holdings").

                  Lehman Asset Backed Caps Inc. was incorporated in the State of
                  Delaware on June 15,  1994 for the  purpose of  entering  into
                  interest rate cap agreements and related support agreements in
                  connection with securitization transactions.

                  The Company derives income from trading and/or interest earned
                  on securities owned. Trading income includes the profit (loss)
                  from  the  issuance  and  sale  of   securities   and  valuing
                  securities owned at market or fair value.

                  Securities  may be issued  and sold by the  Company  in one or
                  more  series  on terms to be  determined  at the time of sale.
                  Each series of Securities  may consist of one or more classes.
                  Each series of Securities may be  collateralized  or otherwise
                  secured or backed by  receivables  arising in connection  with
                  the sale or lease of motor vehicles,  credit card purchases or
                  other  designated  receivables  arising as a result of certain
                  loans,  financings,   or  other  specified  transactions,   by
                  Pass-through  Certificates  evidencing a fractional  undivided
                  ownership  interest in one or more grantor  trusts that own or
                  hold one or more pools, or participations in one or more pools
                  of  Receivables,  or  other  collateral,  including,  but  not
                  limited to, cash deposits, letters of credit, etc. Each series
                  of Securities may also be  collateralized or otherwise secured
                  or backed by U.S. Government and government agency securities,
                  foreign  government  obligations or corporate debt  securities
                  and certain  derivative  products  including interest rate and
                  currency  swaps,  options,  and  other  interest  rate  option
                  products including caps, collars and floors.

                  The Company has filed registration statements on Form S-3 with
                  the  Securities  and Exchange  Commission  (the  "Commission")
                  which  permit  the  Company  to  issue,  from  time  to  time,
                  Securities  collateralized  by  Receivables  in the  principal
                  amount not to exceed  $11.33  billion.  The  Company  has also
                  filed registration  statements on Form S-3 for the issuance of
                  $.5 billion  principal amount of Securities  collateralized by
                  Bonds. As of November 30, 1996, approximately $5.3 billion was
                  available  for  issuance  under  the  registration  statements
                  referred to above.

ITEM 2            Properties

                  The Company owns no physical properties.



<PAGE>




ITEM 3            Legal Proceedings

                  There are no pending legal proceedings.


ITEM 4            Submission of Matters to a Vote of Security Holders
------            ---------------------------------------------------

                  Pursuant  to  General   Instruction   J  of  Form  10-K,   the
                  information required by Item 4 is omitted.


                                     PART II

ITEM 5            Market for Registrant's Common Stock and Related
------            ------------------------------------------------
                  Stockholder Matters
                  -------------------

                  The  Company's  sole class of  capital  stock is its $0.25 par
                  value common  stock,  which is all owned by LCPI.  There is no
                  public market for the Company's common stock.

ITEM 6            Selected Financial Data

                  Pursuant  to  General   Instruction   J  of  Form  10-K,   the
                  information required by Item 6 is omitted.

ITEM 7            Management's Discussion and Analysis of Financial Condition
                  and Liquidity and Capital Resources and Results of Operations

                  Set forth below is  management's  discussion  and  analysis of
                  financial  condition and  liquidity and capital  resources and
                  results of operations for the twelve months ended November 30,
                  1996 and 1995 and the eleven months ended November 30, 1994.

                  Financial Condition and Liquidity and Capital Resources

                  The Company's  assets increased from $27.6 million at November
                  30, 1995 to $34.4 million at November 30, 1996. The incease is
                  primarily  due  to  a  $5.6  million   increase  in  financial
                  instruments owned. Financial instruments owned at November 30,
                  1996  aggregated  $31.4  million and  represent the portion of
                  issued securities  retained by the Company as well as the fair
                  value  of  interest  rate  cap   agreements   purchased   from
                  affiliates.  These  securities  are  carried at market or fair
                  value, as appropriate.

                  Stockholder's  equity increased from $23.7 million at November
                  30, 1995 to $28.3 million at November 30, 1996  primarily as a
                  result of net income of $4.7  million.  Capital  contributions
                  from LCPI are made to fund securities  retained by the Company
                  from new  issuances or to fund  operating  expenses  including
                  income  taxes.  The Company  continually  monitors its capital
                  position  and makes  capital  distributions  to LCPI as excess
                  funds are realized from securities related transactions.




<PAGE>


ITEM 7            Management's Discussion and Analysis of Financial Condition
                  and Liquidity and Capital Resources and Results of Operations
                  (continued)
                  --------------------------------------------------------------


                  Results of Operations

                  For the  twelve  months  ended  November  30,  1996 and twelve
                  months ended November 30, 1995:

                  During 1996,  the Company issued Lehman Home Equity Loan Trust
                  1996-1 totaling approximately $146.2 million principal amount,
                  Short-Term  Card Account Trust 1995-1  totaling  approximately
                  $1.6 billion principal  amount,  Lehman FHA Title I Loan Trust
                  1996-2 totaling approximately $279.3 million principal amount,
                  Lehman Home Equity Loan Trust  1996-2  totaling  approximately
                  $122.1  million  principal  amount,  Delta Funding Home Equity
                  Loan  Trust  1996-1  totaling   approximately  $225.0  million
                  principal  amount,  Banc One Home  Equity  Loan  Trust  1996-A
                  totaling approximately $232.2 million principal amount, Lehman
                  FHA Title I Loan Trust 1996-3  totaling  approximately  $155.5
                  million  principal  amount,  Provident  Bank Home  Equity Loan
                  Trust 1996-1 totaling  approximately  $153.7 million principal
                  amount,  Delta Funding Home Equity Loan Trust 1996-2  totaling
                  approximately  $180.0 million principal amount,  Champion Home
                  Equity Loan Trust 1996-3 totaling approximately $120.0 million
                  principal   amount,    Wal-Mart   1996   Series   1   totaling
                  approximately  $20.0 million principal  amount,  Wal-Mart 1996
                  Series  2  totaling   approximately  $30.0  million  principal
                  amount,   and   Dayton-Hudson   Series   1996-DHC-1   totaling
                  approximately $12.6 million principal amount.

                  Trading  revenues  totaled  $8,799,660  and $7,557,756 for the
                  twelve months ended November 30, 1996 and 1995,  respectively,
                  principally   attributable   to  the   issuance  and  sale  of
                  securities and valuing  financial  instruments owned at market
                  or fair value.

                  Interest  income  increased  from  $1,623,749  for the  twelve
                  months ended  November 30, 1995 to  $2,780,800  for the twelve
                  months ended  November 30, 1996.  The increase is  principally
                  due to an increase in interest bearing  financial  instruments
                  owned  during  the  period.  Management  fees  increased  from
                  $2,310,369  for the twelve  months ended  November 30, 1995 to
                  $2,913,510  for the twelve  months  ended  November  30, 1996,
                  reflecting  increased trading and operating  activities of the
                  Company.  Management  fees  are  the  principal  component  of
                  general  and  administrative   expenses  in  the  accompanying
                  Consolidated Statements of Operations.



<PAGE>


                  Management's Discussion and Analysis of Financial Condition
                  and Liquidity and  Capital Resources and Results of Operations
                 (continued)

                  For the  twelve  months  ended  November  30,  1995 and eleven
                  months ended November 30, 1994:

                  During 1995,  the Company issued Lehman Home Equity Loan Trust
                  1995-1 totaling approximately $128.1 million principal amount,
                  Lehman   Home   Improvement   Loan   Trust   1995-2   totaling
                  approximately $66.8 million principal amount, Lehman FHA Title
                  I Loan  Trust  1995-3  totaling  approximately  $85.0  million
                  principal  amount,  Lehman  FHA  Title  I  Loan  Trust  1995-4
                  totaling approximately $110.0 million principal amount, Lehman
                  Home Equity Loan Trust  1995-5  totaling  approximately  $55.0
                  million principal amount, Lehman FHA Title I Loan Trust 1995-6
                  totaling approximately $205.0 million principal amount, Lehman
                  Home Equity Loan Trust 1995-7  totaling  approximately  $130.0
                  million  principal  amount and Delta  Funding Home Equity Loan
                  Trust 1995-2 totaling  approximately  $150.0 million principal
                  amount.

                  Trading  revenues  totaled  $7,557,756  for the twelve  months
                  ended  November 30, 1995 and  $304,814  for the eleven  months
                  ended  November  30,  1994,  principally  attributable  to the
                  issuance  and  sale  of  securities   and  valuing   financial
                  instruments owned at market or fair value.

                  Interest  income  decreased  from  $2,319,670  for the  eleven
                  months ended  November 30, 1994 to  $1,623,749  for the twelve
                  months ended  November 30, 1995.  The decrease is  principally
                  due to a decrease in interest  bearing  financial  instruments
                  owned and a decrease in interest  bearing  deposits  held with
                  trustees  during the period.  Management  fees  increased from
                  $768,466  for the eleven  months  ended  November  30, 1994 to
                  $2,310,369  for the twelve  months  ended  November  30, 1995,
                  reflecting  increased trading and operating  activities of the
                  Company.  Management  fees  are  the  principal  component  of
                  general  and  administrative   expenses  in  the  accompanying
                  Consolidated Statements of Operations.


<PAGE>




ITEM 8            Financial Statements and Supplementary Data
------            -------------------------------------------

                  The financial statements required by this Item and included in
                  this Report are referenced in the index appearing on page F-1.

ITEM 9            Changes in and Disagreements with Accountants on Accounting
------            -----------------------------------------------------------
                  and Financial Disclosure
                  ------------------------

                  Not applicable.


                                    PART III

ITEM 10           Directors and Executive Officers of the Registrant
-------           --------------------------------------------------

                  Pursuant  to  General   Instruction   J  of  Form  10-K,   the
                  information required by Item 10 is omitted.

ITEM 11           Executive Compensation

                  Pursuant  to  General   Instruction   J  of  Form  10-K,   the
                  information required by Item 11 is omitted.

ITEM 12           Security Ownership of Certain Beneficial Owners and
-------           ---------------------------------------------------
                  Management
                  ----------

                  Pursuant  to  General   Instruction   J  of  Form  10-K,   the
                  information required by Item 12 is omitted.

ITEM 13           Certain Relationships and Related Transactions
-------           ----------------------------------------------

                  Pursuant  to  General   Instruction   J  of  Form  10-K,   the
                  information required by Item 13 is omitted.




<PAGE>


                                     PART IV

ITEM 14     Exhibits, Financial Statement Schedules, and Reports on Form 8-K
-------     ----------------------------------------------------------------

            (a)        (1) and (2) Financial Statements and Schedules

                       See Index to Financial Statements appearing on Page F-1

                       (3) Exhibits

                           23.  Consent of Ernst & Young LLP*
                           27.  Finance Data Schedule*

            (b)        Reports on Form 8-K:
 
               * Filed herewith 

                         12/24/1996
                         12/24/1996
                         12/19/1996
                         12/16/1996
                         12/12/1996
                         12/11/1996
                         12/10/1996
                         12/09/1996
                         11/25/1996
                         11/21/1996
                         11/21/1996
                         09/26/1996
                         09/25/1996
                         09/25/1996
                         09/18/1996
                         09/17/1996




<PAGE>



                                   SIGNATURES

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

                                                 LEHMAN ABS CORPORATION
                                                 (Registrant)


                                                  By:  THEODORE P. JANULIS
                                                         Theodore P. Janulis
                                                         President and Director


Date:  February 24, 1997

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


    SIGNATURE                   POSITION                             DATE

    THEODORE P. JANULIS         President and Director      February 24, 1997
    --------------------  
    Theodore P. Janulis

    DAVID GOLDFARB              Controller                  February 24, 1997
    David Goldfarb

    MARK L. ZUSY                Chairman and Director       February 24, 1997
    ---------------------
    Mark L. Zusy



<PAGE>


                                                           
                      LEHMAN ABS CORPORATION AND SUBSIDIARY

                   INDEX to CONSOLIDATED FINANCIAL STATEMENTS


 Report of Independent Auditors                                            F-2

 Consolidated Statements of Operations for the twelve months ended
   November 30, 1996 and 1995 and the eleven months
   ended November 30, 1994                                                 F-3

 Consolidated Statements of Financial Condition as of
   November 30, 1996 and 1995                                              F-4

 Consolidated  Statements  of Changes in  Stockholder's  Equity for the
   twelve months ended November 30, 1996 and 1995
   and the eleven months ended November 30, 1994                           F-5

 Consolidated  Statements  of Cash  Flows for the twelve  months  ended
   November 30, 1996 and 1995 and the eleven months
   ended November 30, 1994                                                 F-6

 Notes to Consolidated Financial Statements                        F-7 to F-10



 
                                     F-1

<PAGE>



Report of Independent Auditors

The Board of Directors and Stockholder of
Lehman ABS Corporation and Subsidiary


We have audited the accompanying  consolidated statements of financial condition
of Lehman ABS Corporation and Subsidiary (the "Company") as of November 30, 1996
and November 30, 1995,  and the related  consolidated  statements of operations,
changes in stockholder's  equity and cash flows for the years ended November 30,
1996 and 1995 and for the  eleven-month  period ended  November 30, 1994.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits 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,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  consolidated  financial  position  of Lehman  ABS
Corporation and Subsidiary at November 30, 1996 and 1995, and the results of its
operations and its cash flows for the years ended November 30, 1996 and 1995 and
for the  eleven-month  period  ended  November  30,  1994,  in  conformity  with
generally accepted accounting principles.



                                                      ERNST & YOUNG LLP

February 21, 1997



   
                                   F-2


<PAGE>


                      LEHMAN ABS CORPORATION and SUBSIDIARY
                      CONSOLIDATED STATEMENTS of OPERATIONS


                          Twelve months        Twelve months     Eleven months 
                           ended                 ended              ended
                        November 30,           November 30,        November 30,
                           1996                   1995                1994
                     ---------------------   ------------------    -------------

   Revenues:

     Trading                 $  8,799,660           $7,557,756      $  304,814

     Interest                   2,780,800            1,623,749       2,319,670
                          --------------------   --------------- ---------------

                               11,580,460            9,181,505       2,624,484
                          --------------------   ---------------- --------------



   Expenses:


     Compensation                   5,000                5,000           4,587

     General and
         administrative         2,913,682            2,325,762         773,852
                          --------------------   ---------------- --------------

                                2,918,682            2,330,762         778,439
                          --------------------   ---------------- --------------


      Income before income
         tax provision          8,661,778            6,850,743       1,846,045

   Income tax provision         3,988,749            3,154,767         849,968
                          --------------------   ----------------- -------------

   Net income                  $4,673,029           $3,695,976     $    996,077
                          ====================   ================  =============






                 See notes to consolidated financial statements



                                      F-3



<PAGE>


                      LEHMAN ABS CORPORATION and SUBSIDIARY
                 CONSOLIDATED STATEMENTS of FINANCIAL CONDITION


                                     ASSETS
<TABLE>
<CAPTION>
                                                    November 30, 1996          November 30, 1995
                                                 ----------------------    ----------------------
<S>                                                       <C>                        <C>                        
Cash                                                    $    268,832            $      99,245
Financial instruments owned, at fair value                31,369,972               25,772,380
Receivables from brokers, dealers and
  financial institutions                                     739,056                  872,920
Due from others                                              108,027                  105,077
Deferred registration costs, net of
  accumulated amortization of $2,198,888 and
  $1,069,032 in 1996 and 1995, respectively                1,922,860                  755,748
                                                   ----------------------    ----------------------

                                                         $34,408,747              $27,605,370
                                                   ======================    ======================


                      LIABILITIES and STOCKHOLDER'S EQUITY
Liabilities:
Financial instruments sold but not yet purchased         $  44,073              $    497,590
Issuance expenses payable                                    1,394                   429,118
Payables to brokers, dealers and
  financial institutions                                 2,394,770                    29,800
Payables to affiliates                                   3,660,939                 2,978,394
                                                 ----------------------    -----------------------
                    Total liabilities                    6,101,176                 3,934,902
                                                 ----------------------    -----------------------

Stockholder's equity:
Common stock, $0.25 par value;
      1,000 shares authorized,
      issued and outstanding                                   250                       250
Additional paid- in capital                             18,793,811                18,829,737
Retained earnings                                        9,513,510                 4,840,481
                                                 ----------------------    -----------------------

                    Total stockholder's equity          28,307,571                23,670,468
                                                 ----------------------    -----------------------

                                                       $34,408,747               $27,605,370
                                                 ======================    =======================

</TABLE>


                 See notes to consolidated financial statements



                                      F-4


<PAGE>


                      LEHMAN ABS CORPORATION and SUBSIDIARY
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY

             for the twelve months ended November 30, 1996 and 1995
                  and the eleven months ended November 30, 1994

<TABLE>
<CAPTION>

                                                                   Additional                                       Total
                                            Common Stock        Paid-in Capital       Retained Earnings         Stockholder's
                                                                                                                   Equity
                                          ------------------    -----------------     -------------------     ------------------
<S>                                                <C>                   <C>                     <C>                     <C>
Balance, December 31, 1993                         $  250            $27,998,469             $148,428             $28,147,147

Net income                                              -                      -              996,077                 996,077

Capital contributions by parent                         -             44,992,585                    -              44,992,585

Capital distributions to parent                         -            (53,008,286)                   -             (53,008,286)
                                          ------------------    -----------------     -------------------     ------------------

Balance, November 30, 1994                            250             19,982,768            1,144,505              21,127,523

Net income                                              -                      -            3,695,976               3,695,976

Capital contributions by parent                         -            250,340,432                    -             250,340,432

Capital distributions to parent                         -         (251,493,463)                     -            (251,493,463)
                                          ------------------    -----------------     -------------------     ------------------

Balance, November 30, 1995                            250             18,829,737            4,840,481              23,670,468

Net income                                              -                      -            4,673,029               4,673,029
    
Capital contributions by parent                         -             29,000,940                    -              29,000,940

Capital distributions to parent                         -            (29,036,866)                   -             (29,036,866)
                                          ------------------    -----------------     -------------------     ------------------

Balance, November 30, 1996                         $  250            $18,793,811           $9,513,510             $28,307,571
                                          ==================    =================     ===================     ==================



</TABLE>





                 See notes to consolidated financial statements.




                                      F-5

<PAGE>


                      LEHMAN ABS CORPORATION and SUBSIDIARY
                      CONSOLIDATED STATEMENTS of CASH FLOWS
<TABLE>
<CAPTION>


                                                              Twelve months             Twelve months            Eleven months
                                                           ended November 30,        ended November 30,          ended November
                                                                  1996                      1995                    30, 1994
                                                           -----------------------   ----------------------    ---------------------
<S>                                                                     <C>                      <C>                      <C>
Cash flows from operating activities:
   Net income                                                       $4,673,029            $   3,695,976             $    996,077
                                                           -----------------------   ----------------------    ---------------------

Adjustments to reconcile net income to net
cash provided by operating activities:
    Amortization                                                      1,129,856                  310,407                  535,762
Effect of changes in operating assets and liabilities:
    Financial instruments owned, at fair value                       (5,597,592)               1,657,381               (4,674,002)
      Receivables from brokers, dealers and
       financial institutions                                           133,864                 (689,523)                (183,397)
      Due from others                                                    (2,950)                  (2,941)               5,947,775
      Deferred registration costs                                    (2,296,968)                (773,386)                (413,794)
      Financial instruments sold but not yet
       purchased                                                       (453,517)              (2,435,317)               2,932,907
      Issuance expenses payable                                        (427,724)                (317,281)                (105,857)
      Payables to brokers, dealers and
       financial institution                                         2,364,970               (1,772,165)               1,801,965
      Payables to affiliates                                           682,545                2,539,847                  346,051
      Income taxes payable to affiliate                                      -                 (985,195)                 849,968
      Other liabilities and accrued expenses                                 -                  (19,385)                   8,133
                                                         -----------------------   ----------------------    ---------------------

                Net cash provided by
                  operating activities                                 205,513                1,208,418                8,041,588
                                                           ---------------------   ----------------------    ---------------------

      Cash flows from financing activities:
              Capital contributions by parent                       29,000,940               250,340,432              44,992,585
      Capital distributions to parent                              (29,036,866)             (251,493,463)            (53,008,286)
                                                           ---------------------   ----------------------    ---------------------

                Net cash (used in) financing
                 activities                                            (35,926)              (1,153,031)              (8,015,701)
                                                           ---------------------   ----------------------    ---------------------

      Net increase in cash                                             169,587                   55,387                   25,887
  
     Cash at the beginning of the period                                99,245                   43,858                   17,971
                                                           ---------------------   ----------------------    ---------------------

     Cash at the end of the period                                 $   268,832           $       99,245           $       43,858
                                                           =====================   ======================    =====================


</TABLE>

                 See notes to consolidated financial statements


                                      F-6



<PAGE>


                      LEHMAN ABS CORPORATION and SUBSIDIARY

                   NOTES to CONSOLIDATED FINANCIAL STATEMENTS

                                                         

      1.       Summary of Significant Accounting Policies:

               Basis of Presentation

               The  consolidated  financial  statements  include the accounts of
               Lehman ABS  Corporation  and Lehman Asset  Backed Caps Inc.,  its
               wholly owned  subsidiary  (together,  the "Company").  Lehman ABS
               Corporation was  incorporated in the State of Delaware on January
               29, 1988 as a special purpose finance  corporation  organized for
               the purpose of issuing and selling  securities (the "Securities")
               primarily  collateralized by purchased  receivables  arising from
               loans or financings (the  "Receivables").  All of the outstanding
               common stock is owned by Lehman  Commercial Paper Inc.  ("LCPI"),
               an indirect wholly owned  subsidiary of Lehman Brothers  Holdings
               Inc. ("Holdings").

               Lehman Asset Backed Caps Inc.  was  incorporated  in the State of
               Delaware  on June  15,  1994 for the  purpose  of  entering  into
               interest rate cap  agreements and related  support  agreements in
               connection with securitization transactions.

               The  Company  derives  its income from  trading  and/or  interest
               earned on securities  owned.  Trading income  includes the profit
               (loss)  from the  issuance  and sale of  securities  and  valuing
               securities owned at market or fair value.

               The Company has filed  registration  statements  on Form S-3 with
               the Securities and Exchange  Commission  which permit the Company
               to  issue,  from  time  to  time,  securities  collateralized  by
               Receivables in the principal amount not to exceed $11.33 billion.
               The Company has also filed  registration  statements  on Form S-3
               for the issuance of $.5 billion  principal  amount of  Securities
               collateralized by government and government agency obligations or
               corporate debt securities. As of November 30, 1996, approximately
               $5.3 billion was  available for issuance  under the  registration
               statements referred to above.

               The  Company   has   established   trusts  to  issue   securities
               collateralized by receivables and other  securities.  The Company
               has  surrendered to trusts all future  economic  interests in the
               Securities  issued to date together with the related  collateral.
               According   to  the   terms   of  the   trust   agreements,   the
               securityholders  can  look  only to the  related  collateral  for
               repayment of both  principal  and interest.  In  accordance  with
               generally  accepted  accounting  principles,  the  Securities and
               related  collateral  have  been  removed  from  the  accompanying
               Consolidated Statements of Financial Condition.

               The Company uses the trade date basis of accounting for recording
               principal transactions.

               Use of Estimates

               The  preparation  of  financial  statements  in  conformity  with
               generally accepted  accounting  principles requires management to
               make estimates and assumptions  that affect the amounts  reported
               in the financial  statements and accompanying  notes.  Management
               believes that the  estimates  utilized in preparing its financial
               statements  are  reasonable  and prudent.  Actual  results  could
               differ from these estimates.


   
                                   F-7

<PAGE>
                      LEHMAN ABS CORPORATION and SUBSIDIARY

                   NOTES to CONSOLIDATED FINANCIAL STATEMENTS


     1.        Summary of Significant Accounting Policies (continued):

               Deferred Registration Costs

               Deferred  registration  costs  relate  to  filing  fees and other
               direct costs paid by the Company in  connection  with filings for
               the  registration of Securities which were or are to be issued by
               the Company.  These costs are deferred in  anticipation of future
               revenues  upon the  issuance of  securities  from the  respective
               shelf  that has been  established.  Amortization  of the costs is
               based upon the percentage of issued  Securities to the respective
               shelf from which the  Securities  are issued and is included as a
               component of net trading revenue in the accompanying Consolidated
               Statements of Operations.

               Financial Instruments Owned

               Financial  instruments  owned and securities and other  financial
               instruments  sold  but not yet  purchased  principally  represent
               subordinated  interests  in  pools  of  receivables,  instruments
               representing   the  right  to  receive  certain  future  interest
               payments on the  underlying  receivables  and  interest  rate cap
               agreements   and  are  valued  at  fair  value with the  related 
               profit  (loss)  recorded  in the  Consolidated Statements of 
               Operations.  Fair value is determined based on relevant factors,
               such as, broker or  dealer price quotations and valuation pricing
               models which take into account time value and volatility factors
               underlying the securities. 
               

               Income Taxes

               The Company's income is included in the consolidated U.S. federal
               income tax return of  Holdings  and in  combined  state and local
               returns with other  affiliates of Holdings.  The Company computes
               its income tax provision on a separate return basis in accordance
               with the terms of a tax allocation agreement between Holdings and
               its subsidiaries.  The provision for income taxes is greater than
               that calculated by applying the statutory federal income tax rate
               principally due to state and local taxes.

     2.        Related Party Transactions:

               All  receivables  used  to   collateralize   the  Securities  are
               purchased  from and recorded at an  affiliate's  carrying  value,
               which for such broker/dealer affiliates represents fair value.

               Certain  directors and officers of the Company are also directors
               and  officers  of  Lehman   Brothers  Inc.,   LCPI  and/or  other
               affiliates of the Company.

               Pursuant to a management agreement (the "Agreement"), the Company
               is charged a management fee for various services  rendered on its
               behalf by LCPI. The Agreement provides for an allocation of costs
               based upon the level of activity  processed  by LCPI on behalf of
               the Company. Management fees of $2,913,510 and $2,310,369 for the
               twelve months ended November 30, 1996 and 1995, respectively, and
               $768,466 for the eleven  months  ended  November 30, 1994 are the
               principal component of general and administrative expenses in the
               accompanying Consolidated Statements of Operations. The Agreement
               is   renewable   each  year  unless   expressly   terminated   or
               renegotiated by the parties.


                                      F-8


<PAGE>

                     
                      LEHMAN ABS CORPORATION and SUBSIDIARY

                   NOTES to CONSOLIDATED FINANCIAL STATEMENTS


      2.       Related Party Transactions (continued):

               Compensation  expense represents amounts allocated to the Company
               by  LCPI  for  compensation  paid  to a  common  director  of the
               Company.

               Income  taxes  of  $3,988,749  and  $4,139,962  were  paid by the
               Company to LCPI in accordance with the terms of the Company's tax
               allocation  agreement during the twelve months ended November 30,
               1996 and 1995,  respectively.  No income  taxes  were paid by the
               Company during 1994.

               The Company  believes that amounts  arising through related party
               transactions,   including  the  fees   referred  to  above,   are
               reasonable  and  approximate  the  amounts  that  would have been
               recorded if the Company operated as an unaffiliated entity.

     3.        Due from Others:

               At November 30, 1996 and 1995,  the Company had interest  bearing
               deposits of $108,027 and $105,077, respectively, with independent
               trustees  in  accordance  with  the  terms  of  a  securitization
               transaction.

     4.        Financial Instruments with Off-Balance Sheet Risk and
               Concentration of Credit Risk:

               The Company's activities are principally conducted with financial
               institutions.  In  connection  with the  terms of  securitization
               transactions,  the  Company  has sold  interest  rate caps with a
               notional  amount of $1.32 billion,  maturing in the year 2000, to
               trusts.  The  fair  value  of the  interest  rate  caps  sold  is
               approximately  $44,000 and is reported as  financial  instruments
               sold but not yet  purchased  in the  Consolidated  Statements  of
               Financial  Condition  at November  30,  1996.  In  addition,  the
               Company has purchased interest rate caps, from an affiliate, with
               a notional  amount of $1.32  billion,  maturing in the year 2000.
               The  fair  value  of  the   interest   rate  caps   purchased  is
               approximately  $870,000 and is included in financial  instruments
               owned in the  Consolidated  Statements of Financial  Condition at
               November 30, 1996. At November 30, 1996, the Company had no other
               material individual counterparty concentration of credit risk.

     5.        Fair Value of Financial Instruments:

               Statement  of  Financial  Accounting  Standards  (SFAS) No.  107,
               "Disclosures About Fair Value of Financial Instruments," requires
               the  Company to report the fair value of  financial  instruments,
               for which it is  practicable  to estimate  that fair  value.  The
               scope of SFAS No. 107  excludes  certain  financial  instruments,
               such as trade  receivables  and payables when the carrying  value
               approximates the fair value, employee benefit obligations and all
               non-financial  instruments,  such as fixed assets. The fair value
               of  the  Company's  assets  and  liabilities   which  qualify  as
               financial instruments under SFAS No. 107 approximate the carrying
               amounts  presented in the  Consolidated  Statements  of Financial
               Condition.


                                      F-9


<PAGE>

                      LEHMAN ABS CORPORATION and SUBSIDIARY

                   NOTES to CONSOLIDATED FINANCIAL STATEMENTS


     5.        Fair Value of Financial Instruments (continued):

               Financial  instruments owned principally  represent  subordinated
               interest in pools of  receivables  and are carried at fair value,
               with the remaining instruments  representing the right to receive
               certain future interest  payments on the underlying  receivables.
               These financial  instruments are generally  non-rated or rated as
               non-investment  grade by recognized  rating agencies.  Changes in
               interest  rates could  potentially  have an adverse impact on the
               future cash flows for financial  instruments  owned. In addition,
               for certain securities,  defaults on receivables underlying these
               instruments  could  have a greater  than  proportional  impact on
               their fair value since the payments of principal and interest are
               subordinate to other securities issued in the same series.  These
               risks,  among other risks, are incorporated in the  determination
               of fair value of financial instruments owned.

      6.       Change of Fiscal Year-End

               During  1994,  the  Company  changed  its  fiscal  year-end  from
               December 31 to November 30. Such a change to a non-calendar cycle
               shifts  certain  year-end  administrative  activities  to a  time
               period that  conflicts  less with the business needs of Holdings'
               institutional customers.

     7.       Accounting for Transfers of Financial Assets

               In June 1996, the FASB issued  Statement of Financial  Accounting
               Standards  No. 125,  "Accounting  for  Transfers and Servicing of
               Financial Assets and  Extinguishments of Liabilities"  ("SFAS No.
               125"),  which  is  effective  for  transactions  occurring  after
               December 31, 1996. SFAS No. 125 provides new accounting  guidance
               for the transfer of financial assets, including  securitizations,
               repurchase agreements and securities lending  transactions.  SFAS
               No.  125  outlines  specific  conditions  which  must  be met for
               financial  asset  transfers  to obtain  either sale or  financing
               treatment.  Sale  treatment is  generally  obtained if the seller
               meets  the  specified  conditions  to  demonstrate  that  it  has
               surrendered   control   over   the   assets;   consequently   the
               counterparty  to the sale must  recognize  the related  financial
               assets received. Financing treatment is generally obtained if the
               borrower agrees to repurchase  substantially  the same securities
               prior to maturity of the  agreement  while  maintaining  adequate
               collateral  levels,  provided  that control of the  securities is
               retained by the borrower  (i.e.  the owner of the  securities has
               the ability to redeem the collateral on short notice).

               In December  1996,  the FASB issued  SFAS No. 127  deferring  the
               effective  date one year for certain  provisions  of SFAS No. 125
               dealing with repurchase agreements, dollar repurchase agreements,
               securities lending and similar financing transactions.

               It is unlikely that SFAS No. 125 will have an impact on the 
               Company's financial condition.



                                      F-10




<PAGE>





                                                               Exhibit 23



<PAGE>






                         CONSENT OF INDEPENDENT AUDITORS


         We  consent  to the  incorporation  by  reference  in the  Registration
         Statements  (Form S-3 Nos.  333-14293 and 33-73438) of Lehman
         ABS  Corporation of our report dated February 21, 1997, with respect to
         the  consolidated   financial  statements  of  Lehman  ABS  Corporation
         included in this Annual Report (Form 10-K) for the year ended  November
         30, 1996.



                                                              ERNST & YOUNG LLP



         New York, New York
         February 24, 1997



<PAGE>



                                                                 Exhibit 27