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, 1995

             [ ] 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 1, 1996.

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                                           1
                -----------------  

       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
                -----------------------------------

       Item 8 - Financial Statements and Supplementary Data                 4
                --------------------------------------------

       Item 9 - Changes in and Disagreements with Accountants
                on Accounting and Financial Disclosure                      4
                --------------------------------------
PART III
       
       Item 10 - Directors and Executive Offic eof the Registrant           4
                 ------------------------------------------------
                  
       Item 11 - Executive Compensation                                     4
                 ----------------------

       Item 12 - Security Ownership of Certain Beneficial
                 Owners and Management                                      4
                 ---------------------

       Item 13 - Certain Relationships and Related Transactions             4
                 ----------------------------------------------

PART IV
       
       Item 14 - Exhibits, Financial Statement Schedules,
                 and Reports on Form 8-K                                    5
                 -----------------------


Signatures                                                                  6


<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  capital  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 $5.83 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, 1995, approximately $3.1 billion was
                  available  for  issuance  under  the  registration  statements
                  referred to above.

ITEM 2            Properties

                  The Company owns no physical properties.

ITEM 3            Legal Proceedings

                  There are no pending legal proceedings.


<PAGE>




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,
                  1995, the eleven months ended November 30, 1994 and the twelve
                  months ended December 31, 1993.

                  Financial Condition and Liquidity and Capital Resources

                  The Company's  assets decreased from $28.1 million at November
                  30, 1994 to $27.6  million at  November  30,  1995.  Financial
                  instruments  owned  at  November  30,  1995  aggregated  $25.8
                  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  an  affiliate.   These
                  securities   are   carried  at  market  or  fair   value,   as
                  appropriate.

                  Stockholder's  equity increased from $21.1 million at November
                  30, 1994 to $23.7  million at November 30, 1995 as a result of
                  net income  partially  offset by net capital  distributions to
                  LCPI.  Capital  contributions  from  LCPI  are  made  to  fund
                  securities  retained by the Company  from new  issuances.  The
                  Company  continually  monitors its capital  position and makes
                  capital  distributions  to LCPI as excess  funds are  realized
                  from securities related transactions.

                  Results of Operations

                  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

<PAGE>



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

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

                  For the  eleven  months  ended  November  30,  1994 and twelve
                  months ended December 31, 1993:

                  During 1994,  the Company  issued  Lehman Card  Account  Trust
                  1994-2 totaling approximately $267.8 million principal amount,
                  Lehman Card Account Trust 1994-1 totaling  approximately  $1.1
                  billion,   Lehman  Home  Equity  Loan  Trust  1994-2  totaling
                  approximately  $52.2 million  principal amount and Lehman Home
                  Equity Loan Trust 1994-1 totaling approximately $208.5 million
                  principal   amount.   In   addition,    the   Company   issued
                  approximately   $353  million  principal  amount  of  mortgage
                  pass-through certificates in private placements.  During 1993,
                  the Company  issued  Lehman  Home  Equity Loan Trusts  1993-3,
                  1993-2  and  1993-1  totaling  approximately  $147.1  million,
                  $303.9   million   and  $166.1   million   principal   amount,
                  respectively.  In  addition,  the  Company  issued,  through a
                  Trust,   $150   million  of   securities   collateralized   by
                  receivables in a private placement.

                  Trading  revenues totaled $304,814 for the eleven months ended
                  November  30,  1994,   principally   attributable  to  valuing
                  financial  instruments owned at market or fair value.  Trading
                  revenues totaled $441,519 for the twelve months ended December
                  31, 1993, principally attributable to the issuance and sale of
                  securities and valuing  financial  instruments owned at market
                  or fair value.

                  Interest  income  increased  from $1,262 for the twelve months
                  ended  December 31, 1993 to  $2,319,670  for the eleven months
                  ended November 30, 1994. The increase is principally due to an
                  increase in interest bearing  financial  instruments owned and
                  an increase in interest  bearing  deposits  held with trustees
                  during the period. Management fees increased

<PAGE>



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

                  from $123,201 for the twelve months ended December 31, 1993 to
                  $768,466  for the  eleven  months  ended  November  30,  1994,
                  reflecting  the  increase  in revenues  for the eleven  months
                  ended  November 30, 1994.  Management  fees are the  principal
                  component  of  general  and  administrative  expenses  in  the
                  accompanying Consolidated Statements of Operations.

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

                       Not applicable

               (b)     Reports on Form 8-K:  None



<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


Date:  February 23, 1996

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


SIGNATURE                      POSITION                       DATE

THEODORE P. JANULIS            President                      February 23, 1996
Theodore P. Janulis

DAVID GOLDFARB                 Controller                     February 23, 1996
David Goldfarb

BRIAN R. ZIPP                  Director                       February 23, 1996
Brian R. Zipp

MICHAEL J. O'HANLON            Chairman and Director          February 23, 1996
Michael J. O'Hanlon



<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, 1995,  eleven months ended November 30, 1994 and twelve
            months ended December 31, 1993                                 F-3

          Consolidated Statements of Financial Condition as of
            November 30, 1995 and 1994                                     F-4

          Consolidated  Statements  of Changes in  Stockholder's  Equity for the
            twelve months ended November 30, 1995,  eleven months ended November
            30, 1994 and twelve months ended December 31, 1993             F-5

          Consolidated  Statements  of Cash  Flows for the twelve  months  ended
            November 30, 1995,  eleven months ended November 30, 1994 and twelve
            months ended December 31, 1993                                 F-6

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

          Consent of Independent Auditors                                  F-11



<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, 1995
and November 30, 1994,  and the related  consolidated  statements of operations,
changes in  stockholder's  equity and cash flows for the year ended November 30,
1995, for the eleven-month period ended November 30, 1994 and for the year ended
December 31, 1993.  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, 1995 and 1994, and the results of its
operations  and its cash flows for the year ended  November  30,  1995,  for the
eleven-month  period ended November 30, 1994 and for the year ended December 31,
1993, in conformity with generally accepted accounting principles.



                                        ERNST & YOUNG LLP

January 10, 1996


<PAGE>


                      LEHMAN ABS CORPORATION and SUBSIDIARY
                      CONSOLIDATED STATEMENTS of OPERATIONS

<TABLE>
<CAPTION>
                                                                  Twelve months ended      Eleven months ended  Twelve months ended
                                                                   November 30, 1995           November 30,1994   December 31, 1993
                                                                 ---------------------    ---------------------   -----------------

Revenues:

<S>       <C>                                                           <C>                      <C>                      <C>
  Trading ...............................................               $7,557,756               $  304,814               $  441,519

  Interest ..............................................                1,623,749                2,319,670                    1,262
                                                                        ----------               ----------               ----------

                                                                         9,181,505                2,624,484                  442,781
                                                                        ----------               ----------               ----------



Expenses:


  Compensation ..........................................                    5,000                    4,587                    5,000

  General and
      administrative ....................................                2,325,762                  773,852                  125,806
                                                                        ----------               ----------               ----------

                                                                         2,330,762                  778,439                  130,806
                                                                        ----------               ----------               ----------


   Income before income
      tax provision .....................................                6,850,743                1,846,045                  311,975

Income tax provision ....................................                3,154,767                  849,968                  143,665
                                                                        ----------               ----------               ----------

Net income ..............................................               $3,695,976               $  996,077               $  168,310
                                                                        ==========               ==========               ==========

</TABLE>












                 See notes to consolidated financial statements


<PAGE>


                      LEHMAN ABS CORPORATION and SUBSIDIARY
                 CONSOLIDATED STATEMENTS of FINANCIAL CONDITION


<TABLE>
                                     ASSETS
<CAPTION>

                                                       November 30, November 30, 
                                                           1995         1994
<S>                                                    <C>         <C>            <C>

Cash .............................................    $    99,245    $    43,858
Financial instruments owned, at fair value .......     25,772,380     27,429,761
Receivables from brokers, dealers and
  financial institutions .........................        872,920        183,397
Due from others ..................................        105,077        102,136
Deferred registration costs, net of
  accumulated amortization of $1,069,032 and
  $758,625 in 1995 and 1994, respectively ........        755,748        292,769
                                                      -----------    -----------

                                                      $27,605,370    $28,051,921
                                                      ===========    ===========


                      LIABILITIES and STOCKHOLDER'S EQUITY

Liabilities:
Financial instruments sold but not yet purchased ...    $  497,590    $2,932,907
Issuance expenses payable ..........................       429,118       746,399
Payables to brokers, dealers and
  financial institutions ...........................        29,800     1,801,965
Payables to affiliates .............................     2,978,394       438,547
Income taxes payable to affiliate ..................          --         985,195
Other liabilities and accrued expenses .............          --          19,385
                                                        ----------    ----------

                    Total liabilities ..............     3,934,902     6,924,398
                                                        ----------    ----------

Stockholder's equity:
Common stock, $0.25 par value;
      1,000 shares authorized,
      issued and outstanding .....................            250            250
Additional paid- in capital ......................     18,829,737     19,982,768
Retained earnings ................................      4,840,481      1,144,505
                                                      -----------    -----------

                    Total stockholder's equity ...     23,670,468     21,127,523
                                                      -----------    -----------

                                                      $27,605,370    $28,051,921
                                                      ===========    ===========
</TABLE>


                 See notes to consolidated financial statements


<PAGE>


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

                 for the twelve months ended November 30, 1995,
                    eleven months ended November 30, 1994 and
                      twelve months ended December 31, 1993

<TABLE>
<CAPTION>

                                                                                                        Retained
                                                                                                        Earnings
                                                                                Additional            (Accumulated         Total
                                                        Common Stock         Paid-in Capital            Deficit)      Stockholder's
                                                                                                                           Equity
                                                       ----------------     -------------------    -------------------    ---------

<S>    <C>        <C> <C>  <C>                          <C>       <C>       <C>                  <C> <C>              <C>
Balance, December 31, 1992 ......................       $         250       $     225,533        $     (19,882)       $     205,901

Net income ......................................                --                  --                168,310              168,310

Capital contributions by parent .................                --            30,675,202                 --             30,675,202

Capital distributions to parent .................                --            (2,902,266)                --             (2,902,266)
                                                        -------------       -------------        -------------        -------------

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
                                                        =============       =============        =============        =============



</TABLE>



                     See  notes  to  consolidated   financial statements.


<PAGE>


                      LEHMAN ABS CORPORATION and SUBSIDIARY
                      CONSOLIDATED STATEMENTS of CASH FLOWS

<TABLE>
<CAPTION>
                                                                      Twelve months            Eleven months           Twelve months
                                                                      ended November          ended November          ended December
                                                                       30, 1995                30, 1994                 31, 1993
                                                                  -------------------     --------------------    ------------------

<S>                            <C>                                      <C>                          <C>                 <C>
Cash flows from operating activities:

Net income                                                            $   3,695,976               $     996,077      $     168,310
                                                                       -------------               -------------      -------------

Adjustments to reconcile  net income to net
cash provided by (used in) operating activities:

Amortization .....................................................           310,407                     535,762            198,719
Effect of changes in operating assets and
liabilities:
Financial instruments owned, at fair
value ............................................................         1,657,381                  (4,674,002)       (22,755,759)
Receivables from brokers, dealers and
financial institutions ...........................................          (689,523)                   (183,397)              --
Due from others ..................................................            (2,941)                  5,947,775         (6,049,911)
Deferred registration costs.......................................          (773,386)                   (413,794)          (482,250)
Financial instruments sold but not yet
purchased .............................................                   (2,435,317)                  2,932,907               --
Issuance expenses payable.........................................          (317,281)                   (105,857)           852,256
Payables to brokers, dealers and
financial institutions............................................        (1,772,165)                  1,801,965               --
Payables to affiliates............................................         2,539,847                     346,051             92,496
Income taxes payable to affi .....................................          (985,195)                    849,968            143,975
Other liabilities and accrued expenses ...........................           (19,385)                      8,133             (2,760)
                                                                       -------------               -------------      -------------

Net cash provided by (used in)
operating activities..............................................         1,208,418                   8,041,588        (27,834,924)
                                                                       -------------               -------------      -------------

Cash flows from financing activities:
Capital contributions by parent...................................       250,340,432                  44,992,585         30,675,202
Capital distributions to parent...................................      (251,493,463)                (53,008,286)        (2,902,266)
                                                                       -------------               -------------      -------------

Cash (used in) provided by
financing activities..............................................        (1,153,031)                 (8,015,701)        27,772,936
                                                                       -------------               -------------      -------------

Net increase (decrease) in cash...................................            55,387                      25,887            (61,988)

Cash at the beginning of the period...............................            43,858                      17,971             79,959
                                                                       -------------               -------------      -------------

Cash at the end of the period.....................................            99,245               $      43,858      $      17,971
                                                                       =============               =============      =============

</TABLE>

                 See notes to consolidated financial statements


<PAGE>


                      LEHMAN ABS CORPORATION and SUBSIDIARY

                   NOTES to CONSOLIDATED FINANCIAL STATEMENTS


      1.       Organization:

               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
               capital 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 $5.83 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.  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. As
               of November 30, 1995,  approximately  $3.1 billion was  available
               for issuance under the registration statements referred to above.

               The  Company   has   established   trusts  to  issue   securities
               collateralized  by  receivables.  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  bondholders  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.

               During  the  twelve   months  ended   November  30,  1995,   LCPI
               contributed  $250.3  million in capital to the  Company,  and the
               Company made capital distributions to LCPI of $251.5 million.


<PAGE>


     2.        Summary of Significant Accounting Policies:

               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 and financial  instruments sold but
               not yet purchased:

               Financial  instruments  owned and 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.   Financial
               instruments  owned  and  financial  instruments  sold but not yet
               purchased  are valued at market or fair  value,  as  appropriate,
               with the  related  profit  (loss)  recorded  in the  Consolidated
               Statements  of  Operations.  Market value is  generally  based on
               listed market prices.  If listed market prices are not available,
               fair  value  is  determined  based  on  other  relevant  factors,
               including  broker  or  dealer  price  quotations,  and  valuation
               pricing  models which take into account time value and volatility
               factors underlying the securities.

               All  securities  transactions  are  recorded in the  accompanying
               financial statements on a trade date basis.

               Income taxes:

               The Company 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.

               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.

     3.        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 market 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.

     3.        Related Party Transactions (continued):

               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 $2,310,369 for the twelve months
               ended  November  30, 1995,  $768,466 for the eleven  months ended
               November  30,  1994 and  $123,201  for the  twelve  months  ended
               December  31,  1993 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.

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

               Income  taxes of  $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, 1995. No
               income taxes were paid by the Company during 1994 and 1993.

               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.

     4.        Due from Others:

               At November 30, 1995 and 1994,  the Company had interest  bearing
               deposits of $105,077 and $102,136, respectively, with independent
               trustees  in  accordance  with  the  terms  of  a  securitization
               transaction.

     5.        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   $.5  million   and  is   reported  as   financial
               instruments  sold  but  not  yet  purchased  in the  Consolidated
               Statements  of  Financial  Condition  at November  30,  1995.  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  $2.4  million  and is  included  in  financial
               instruments  owned in the  Consolidated  Statements  of Financial
               Condition at November 30, 1995. At November 30, 1995, the Company
               had no other material  individual  counterparty  concentration of
               credit risk.

      6.       Fair Value of Financial Instruments:

               Statement  of  Financial  Accounting  Standards  (SFAS) No.  107,
               "Disclosures About Fair Value of Financial Instruments," requires
               disclosure of the fair values of most on- and  off-balance  sheet
               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

<PAGE>


     6.        Fair Value of Financial Instruments (continued):

               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.

               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.

      7.       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.

               The  following is selected  financial  data for the  eleven-month
               transition  period ending  November 30 and the  comparable  prior
               year period:
<TABLE>
<CAPTION>
                                                                                     Eleven months ended
                                                                       November 30,              November 30,
                                                                               1994                      1993
                                                                       -------------------       ------------
                                                                           (Unaudited)
                      <S>                                                   <C>                        <C>
                      Revenues                                              $2,624,484                 $ 271,594
                      Expenses                                                 778,439                    85,898
                                                                              --------                   -------
                      Income before income tax provision                     1,846,045                   185,696
                      Income tax provision                                     849,968                    85,513
                                                                              --------                   -------
                      Net income                                             $ 996,077                 $ 100,183
                                                                             =========                 =========

</TABLE>

<PAGE>



                         CONSENT OF INDEPENDENT AUDITORS


         We  consent  to the  incorporation  by  reference  in the  Registration
         Statements  (Form S-3 Nos.  33-20084,  33-58010 and 33-67542) of Lehman
         ABS  Corporation of our report dated January 10, 1996,  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, 1995.



                                                             ERNST & YOUNG LLP



         New York, New York
         February 23, 1996