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

                                   FORM 10-K

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

                   For the fiscal year ended 31 December 1997

                       Commission File Number: 001-12809

                            ELMWOOD FUNDING LIMITED
             (Exact name of registrant as specified in its charter)

       Cayman Islands                                                 N/A
(state or other jurisdiction of                                  (IRS Employer
incorporation or  organisation)                             Identification No.)
      
                                  PO Box 1984
                              Elizabethan Square
                                  George Town
                                 Grand Cayman
                              British West Indies
                                (345) 949-8244
    (Address, including zip code, and telephone number, including area code
                  of registrant's principal executive office)
                   Deutsche Morgan Grenfell (Cayman) Limited
                                  PO Box 1984
                              Elizabethan Square
                                  George Town
                                 Grand Cayman
                              British West Indies
                           Attention: Derrie Boggess
                                (345) 949-8244
           (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)

Registrant had 1,000 shares of common stock outstanding (all owned directly by
Deutsche Morgan Grenfell (Cayman) Limited, as share trustee) as of 31 December
1997.

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 
                      ---                 ---                    


--------------------------------------------------------------------------------
                                                                          Page 1
<PAGE>
 
ELMWOOD FUNDING LIMITED
Year ended 31 December 1997


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


                               TABLE OF CONTENTS

                                                                     Page number

                                    PART I
 
Item 1.    Business                                                     4
 
Item 2.    Properties                                                   4

Item 3.    Legal Proceedings                                            5
 
Item 4.    Submission of Matters to a Vote of Security Holders          5
 
                                    PART II

Item 5.    Market for Registrant's Common Equity and Related            5
           Stockholder Matters
 
Item 6.    Selected Financial Data                                      5
 
Item 7.    Management's Discussion and Analysis of Financial
           Condition and Results of Operation                           6-8
 
Item 8.    Financial Statements and Supplementary Data
 
           Audited Statement of Operations                              9
 
           Audited Statement of Financial Condition                     10
 
           Audited Statement of Cash Flows                              11
 
           Notes to Financial Statements                                12-16
 
Item 9.    Changes in and Disagreements with Accountants on Accounting  17
           and Financial Disclosure


                                    PART III

Item 10.   Directors and Executive Officers of the Registrant           17-18


--------------------------------------------------------------------------------
                                                                          Page 2
<PAGE>
 
ELMWOOD FUNDING LIMITED
Year ended 31 December 1997


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

                               TABLE OF CONTENTS
                                                                     Page number

                                   PART III
 
Item 11.    Executive Compensation                                      18
 
Item 12.    Security Ownership of Certain Beneficial Owners and
            Management                                                  18
 
Item 13.    Certain Relationships and Related Transactions              18
 
                                    PART IV

Item 14.    Exhibits, Financial Statements, and Reports on Form 8-K     19-20



--------------------------------------------------------------------------------
                                                                          Page 3
<PAGE>
 
ELMWOOD FUNDING LIMITED
Year ended 31 December 1997


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

                                    PART I
                                        
ITEM 1.   BUSINESS

ELMWOOD FUNDING LIMITED (the "Company") was incorporated under the Companies Law
(Revised) of the Cayman Islands on 17 September 1996 as an exempted company.
The Company's operations consist solely of fulfilling its obligations as
depositor, relating to the issue of Bond-backed Investment Certificates (the
"certificates") offered through, and which represent in the aggregate, the
entire beneficial ownership in a trust (the "Trust") formed pursuant to the
Trust Agreement dated as of 14 March 1997 and  Series Supplements to the Trust
Agreement dated 14 March (1997-AT&T), 12 May 1997 (1997-Du Pont), and 16 June
1997 (1997-Du Pont-2), between the Company and the United States Trust Company,
as trustee. The fourth series of certificates, Series 1997-US Treasury-1, was
issued on 22 August 1997, pursuant to the Trust Agreement dated as of 1 August
1997 and a  Series Supplement to the Trust Agreement dated 22 August 1997.

The Company has thus surrendered to the Trust all future economic interests in
both the certificates issued and the underlying securities by which they are
collateralised.   According to the terms of the trust agreements, the holders of
the certificates can look only to the related collateral held by the Trust for
repayment of both principal and interest. The certificates do not represent a
recourse obligation or interest in the Company and in accordance with United
States generally accepted accounting principles the certificates and related
collateral are not reflected in the accompanying statement of financial
condition.

Each series of certificates represents the entire beneficial ownership interest
in a publicly issued fixed income debt security issued pursuant to an effective
registration statement filed with the Securities and Exchange Commission, or in
a debt security issued, or directly and fully guaranteed or insured, by the
Government of the United States of America, or by any of certain specified
entities controlled or supervised by and acting as an instrumentality of the
Government of the United States of America and exempt from the Securities Act of
1933, as amended, by reason of Section 3(a)(2) thereof, or another Federal
Statute, or a pool of such debt securities together with other assets designed
to assure the service or timely distribution of payments to holders of the
certificates.  These underlying securities are deposited in a trust for the
benefit of holders of certificates of such series.


ITEM 2.   PROPERTIES

The Company owns no physical property.



--------------------------------------------------------------------------------
                                                                          Page 4
<PAGE>
 
ELMWOOD FUNDING LIMITED
Year ended 31 December 1997


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

ITEM 3.   LEGAL PROCEEDINGS

The Company is not aware of any legal proceedings involving it, other than
ordinary and routine legal matters incidental to its duties under agreements and
other documents to which it is a party.


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

No matter was submitted to vote or consent of stockholders during the fiscal
year covered by this report.


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

The Company has 1,000 shares of common stock outstanding (all owned directly by
Deutsche Morgan Grenfell (Cayman) Limited, as share trustee).  There is no
established secondary market for this stock.


Item 6.   SELECTED FINANCIAL DATA

<TABLE> 
<CAPTION> 
=======================================================================================
                                                        31 December         31 DECEMBER
                                                               1997                1996
                                                              (US$)               (US$)
---------------------------------------------------------------------------------------
<S>                                                   <C>                   <C>
Sales/Operating Revenues                                          -                   -
---------------------------------------------------------------------------------------
Income (Loss)                                                     -                   -
---------------------------------------------------------------------------------------
Income (loss) / Share                                             -                   -
---------------------------------------------------------------------------------------
Total Assets                                                  1,000               1,000
---------------------------------------------------------------------------------------
Long-Term Obligations                                             -                   -
---------------------------------------------------------------------------------------
Cash Dividends / Common Share                                     -                   -
=======================================================================================
</TABLE>
                                                                                

--------------------------------------------------------------------------------
                                                                          Page 5
<PAGE>
 
ELMWOOD FUNDING LIMITED
Year ended 31 December 1997


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


Item 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATION
 
Financial condition

The Company purchased US$25,000,000, nominal value, of the US$500,000,000 7.75%
notes due 1 March 2007 issued by AT&T on 7 March 1995 (the "Notes").  The Notes
were transferred to the Trust as collateral for the 1997-AT&T series of bond
backed investment certificates issued by the Trust.  The transfer extinguished
all amounts due to the Trust by the Company and fulfilled its obligation as
depositor pursuant to the Trust Agreement.

On 25 March 1997 the Company effected an issue on behalf of the Trust of
US$25,000,000, nominal value, bond backed investment certificates under the
1997-AT&T series.  The underwriters purchased the certificates at 98% of the
outstanding principal balance.  The proceeds were immediately transferred to the
Company to purchase the Notes.  The certificates bear interest at a fixed rate
of 7.4%.  Distributions of interest and principal will be made on or about 1
March and 1 September of each year commencing September 1997.  The holders of
the certificates will receive principal distributions as principal is received
on the Notes.  The certificates are scheduled to mature on 1 March 2007.

The Company purchased US$16,500,000, nominal value, of the US$300,000,000 8.25%
notes due 15 September 2006 issued by EI du Pont de Nemours and Company which
were transferred to the Trust as collateral for the 1997-Du Pont series of bond
backed investment certificates issued by the Trust. The Company purchased a
further US$10,250,000, nominal value, of the US$300,000,000 8.25% notes due 15
September 2006 issued by EI du Pont de Nemours and Company which were
transferred to the Trust as collateral for the 1997-Du Pont-2 series of bond
backed investment certificates issued by the Trust.  The transfer extinguished
all amounts due to the Trust by the Company and fulfilled its obligation as
depositor pursuant to the Trust Agreement.

On 12 May 1997 the Company effected an issue on behalf of the Trust of
US$16,500,000, nominal value, bond backed investment certificates under the
1997-Du Pont series.  The underwriters purchased the certificates at 98.2% of
the outstanding principal balance.  The proceeds were immediately transferred to
the Company to purchase the underlying securities.  The certificates bear
interest at a fixed rate of 7.5%.  Distributions of interest and principal will
be made on or about 15 March and 15 September of each year commencing September
1997.  The holders of the certificates will receive principal distributions as
principal is received on the Notes.  The certificates are scheduled to mature on
15 September 2006.




--------------------------------------------------------------------------------
                                                                          Page 6
<PAGE>
 
ELMWOOD FUNDING LIMITED
Year ended 31 December 1997



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

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

Financial condition (continued)

On 16 June 1997 the Company effected an issue on behalf of the Trust of
US$10,250,000, nominal value, bond backed investment certificates under the
1997-Du Pont-2 series.  The underwriters purchased the certificates at 98.2% of
the outstanding principal balance.  The proceeds were immediately transferred to
the Company to purchase the underlying securities.  The certificates bear
interest at a fixed rate of 7.25%.  Distributions of interest and principal will
be made on or about 15 March and 15 September of each year commencing September
1997.  The holders of the certificates will receive principal distributions as
principal is received on the Notes.  The certificates are scheduled to mature on
15 September 2006.

The Company purchased US$20,000,000, nominal value, of the US$16,015,000,000
6.875% notes due 15 May 2006 issued by the Government of the United States of
America which were transferred to the Trust as collateral for the 1997-US
Treasury-1 series of bond backed investment certificates issued by the Trust.
The transfer extinguished all amounts due to the Trust by the Company and
fulfilled its obligation as depositor pursuant to the Trust Agreement.

On 22 August 1997 the Company effected an issue on behalf of the Trust of
US$20,000,000, nominal value, bond backed investment certificates under the
1997-US Treasury-1 series.  The underwriters purchased the certificates at 98.5%
of the outstanding principal balance.  The proceeds were immediately transferred
to the Company to purchase the underlying securities.  The certificates bear
interest at a fixed rate of 6.375%.  Distributions of interest and principal
will be made on or about 15 May and 15 November of each year commencing November
1997.  The holders of the certificates will receive principal distributions as
principal is received on the Notes.  The certificates are scheduled to mature on
15 May 2006.

The Company has surrendered to the Trust all future economic interests in both
the certificates issued and the underlying securities by which they are
collateralised.   According to the terms of the trust agreements, the holders of
the certificates can look only to the related collateral held by the Trust for
repayment of both principal and interest. The certificates do not represent a
recourse obligation or interest in the Company.




--------------------------------------------------------------------------------
                                                                          Page 7
<PAGE>
 
ELMWOOD FUNDING LIMITED
Year ended 31 December 1997

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

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

Results of operations

In fulfilling its obligations as depositor and pursuant to the Trust Agreement,
the Company has no future economic interest or obligation in relation to the
certificates issued or the underlying securities transferred to the Trust.
Accordingly no income or expenses have been incurred through the operations of
the Company.

All ongoing fees of the Company are met by the holders of the Retained Interest
and distributed by the trusts.  Therefore, these expenses are not included in
the statement of operations.


--------------------------------------------------------------------------------
                                                                          Page 8
<PAGE>
 
ELMWOOD FUNDING LIMITED
Year ended 31 December 1997


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

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

AUDITED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                   Year ended                           Three Months Ended
                                                  31 December                  31 December            31 December
                                                         1997                         1997                   1196
                                       Note             (US$)                        (US$)                  (US$)
<S>                                  <C>         <C>                          <C>                     <C> 
INCOME                                                                                   -                      -
                                                                                         
                                             -------------------      --------------------     ------------------

                                                               -                         -                      -
                                             -------------------      --------------------     ------------------
 
EXPENDITURE                                                                              -                      -
                                             -------------------      --------------------     ------------------ 
 
                                                               -                         -                      -
                                             -------------------      --------------------     ------------------
 
                                             -------------------      --------------------     ------------------ 
 
NET INCOME FOR THE PERIOD                                      -                         -                      -
                                             ===================      ====================     ==================
 
                                             -------------------      --------------------     ------------------
RETAINED EARNINGS AT THE BEGINNING           
 AND END OF THE PERIOD                                         -                         -                      -
                                             ===================      ====================     ==================
</TABLE>



--------------------------------------------------------------------------------
                                                                          Page 9
<PAGE>
 
ELMWOOD FUNDING LIMITED
Year ended 31 December 1997


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


Item 8.   Financial Statements and Supplementary Data

AUDITED STATEMENT OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                          31 December              31 December
                                                                 1997                     1996 
                                                                                          
                                            Note                (US$)                    (US$)
<S>                                    <C>              <C>                        <C>
Assets
 
Sundry debtors and prepayments                 2                1,000                    1,000
 
                                                      ---------------       ------------------

                                                                1,000                    1,000
                                                      ---------------       ------------------
 
LIABILITIES
                                                      ---------------       ------------------

                                                      ---------------       ------------------
                                                                    -                        -
                                                      ---------------       ------------------
 
NET ASSETS                                                      1,000                    1,000
                                                      ===============       ==================
 
 
CAPITAL AND RESERVES
Share capital                                  8                1,000                    1,000
Retained earnings                                                   -                        -
 
                                                      ---------------        ----------------- 

                                                                1,000                    1,000
                                                      ===============        =================
</TABLE>



--------------------------------------------------------------------------------
                                                                         Page 10
<PAGE>
 
ELMWOOD FUNDING LIMITED
Year ended 31 December 1997



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


Item 8.   Financial Statements and Supplementary Data

AUDITED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
 
                                                                  YEAR                  THREE MONTHS 
                                                                 ENDED                         ENDED
                                                      31 DECEMBER 1997              31 DECEMBER 1996
                                                                                               ENDED
                                            Note                 (US$)                         (US$)
<S>                                        <C>      <C>                         <C>  
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                           -                            -
Adjustments to reconcile net income to
net cash used in operating activities
 Net change in:
                                                  
  Sundry debtors                                 2                                           (1,000)
                                                  --------------------      -----------------------

  NET CASH USED IN OPERATING ACTIVITIES                              -                       (1,000)
                                                  --------------------      -----------------------

 
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds of disposal of investments            5,6          76,453,768                            -
Purchase of investments                          4         (76,453,768)                           -

                                                  --------------------      -----------------------
  NET CASH USED IN INVESTING ACTIVITIES                              -                            -

                                                  --------------------      -----------------------
 
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital             8                   -                        1,000
                                                  --------------------      -----------------------
  NET CASH PROVIDED BY FINANCING                  
   ACTIVITIES                                                        -                        1,000
                                                  --------------------      -----------------------

 
NET CHANGE IN CASH FOR THE PERIOD                                    -                            -
                                                  ====================      =======================
 
CASH AT THE BEGINNING OF THE PERIOD                                  -                            -
 
                                                  --------------------      -----------------------

CASH AT THE END OF THE PERIOD                                        -                            -
                                                  ====================      =======================
</TABLE>




--------------------------------------------------------------------------------
                                                                         Page 11
<PAGE>
 
ELMWOOD FUNDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 1997



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

1 ORGANISATION

  ELMWOOD FUNDING LIMITED (the "Company") was incorporated under the Companies
  Law (Revised) of the Cayman Islands on 17 September 1996 as an exempted
  company. The Company's operations consist solely of fulfilling its obligations
  as depositor, relating to the issue of Bond-backed Investment Certificates
  (the "certificates") offered through, and which represent in the aggregate,
  the entire beneficial ownership in a trust (the "Trust") formed pursuant to
  the Trust Agreement dated as of 14 March 1997 and Series Supplements to the
  Trust Agreement dated 14 March (1997-AT&T), 12 May 1997 (1997-Du Pont), and 16
  June 1997 (1997-Du Pont-2), between the Company and the United States Trust
  Company, as trustee. The fourth series of certificates, Series 1997-US
  Treasury-1, were issued on 22 August 1997, pursuant to a Series Supplement to
  the Trust Agreement dated 22 August 1997.

  The Company has thus surrendered to the Trust all future economic interests in
  both the certificates issued and the underlying securities by which they are
  collateralised.   According to the terms of the trust agreements, the holders
  of the certificates can look only to the related collateral held by the Trust
  for repayment of both principal and interest. The certificates do not
  represent a recourse obligation or interest in the Company and in accordance
  with United States generally accepted accounting principles the certificates
  and related collateral are not reflected in the accompanying statement of
  financial condition.

  Each series of certificates represents the entire beneficial ownership
  interest in a publicly issued fixed income debt security issued pursuant to an
  effective registration statement filed with the Securities and Exchange
  Commission, or in a debt security issued, or directly and fully guaranteed or
  insured, by the Government of the United States of America, or by any of
  certain specified entities controlled or supervised by and acting as an
  instrumentality of the Government of the United States of America and exempt
  from the Securities Act of 1933, as amended, by reason of Section 3(a)(2)
  thereof, or another Federal Statute, or a pool of such debt securities
  together with other assets designed to assure the service or timely
  distribution of payments to holders of the certificates. These underlying
  securities are deposited in a trust for the benefit of holders of certificates
  of such series.


--------------------------------------------------------------------------------
                                                                         Page 12
<PAGE>
 
ELMWOOD FUNDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 December 1997


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

2. SIGNIFICANT ACCOUNTING POLICIES

   These audited financial statements are prepared in accordance with United
   States generally accepted accounting principles. The following are the
   significant accounting policies adopted by the Company:

   FAIR VALUE OF FINANCIAL INSTRUMENTS
   The only financial instruments held by the Company are sundry receivables and
   payables where carrying value approximates the fair value.

   USE OF ESTIMATES

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

3  FEES AND EXPENSES

   All ongoing fees of the Company are met by the holders of the Retained
   Interest and distributed by the trusts (see Note 6). Therefore, these
   expenses, estimated to be approximately US$60,000 for the year ended 
   December 31, 1997 (1996: US$19,000), are not included in the statement of 
   operations.

4  INVESTMENTS

   The Company purchased US$25,000,000, nominal value, of the US$500,000,000
   7.75% notes due 1 March 2007 issued by AT&T on 7 March 1995 (the "Notes")
   which were transferred to the Trust as collateral for the 1997-AT&T series of
   bond backed investment certificates issued by the Trust. The Company also
   purchased US$16,500,000, nominal value, of the US$300,000,000 8.25% notes due
   15 September 2006 issued by EI du Pont de Nemours and Company which were
   transferred to the Trust as collateral for the 1997-Du Pont series of bond
   backed investment certificates issued by the Trust. The Company purchased a
   further US$10,250,000, nominal value, of the US$300,000,000 8.25% notes due
   15 September 2006 issued by EI du Pont de Nemours and Company which were
   transferred to the Trust as collateral for the 1997-Du Pont-2 series of bond
   backed investment certificates issued by the Trust.


--------------------------------------------------------------------------------
                                                                         Page 13
<PAGE>
 
ELMWOOD FUNDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 December 1997


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

4  INVESTMENTS (CONTINUED)

   The Company also purchased US$20,000,000, nominal value, of the
   US$16,015,000,000 6.875% notes due 15 May 2006 issued by the Government of
   the United States of America which were transferred to the Trust as
   collateral for the 1997-US Treasury-1 series of bond backed investment
   certificates issued by the Trust. The transfers extinguished all amounts due
   to the Trust by the Company and fulfilled its obligation as depositor
   pursuant to the Trust Agreement.

5  BOND BACKED INVESTMENT CERTIFICATES

   On 25 March 1997 the Company effected an issue on behalf of the Trust of
   US$25,000,000, nominal value, bond backed investment certificates under the
   1997-AT&T series. The underwriters purchased the certificates at 98% of the
   outstanding principal balance. The proceeds were immediately transferred to
   the Company to purchase the Notes. The certificates bear interest at a fixed
   rate of 7.4%. Distributions of interest and principal will be made on or
   about 1 March and 1 September of each year commencing September 1997. The
   holders of the certificates will receive principal distributions as principal
   is received on the Notes. The certificates are scheduled to mature on 1 March
   2007.

   On 12 May 1997 the Company effected an issue on behalf of the Trust of
   US$16,500,000, nominal value, bond backed investment certificates under the
   1997-Du Pont series. The underwriters purchased the certificates at 98.2% of
   the outstanding principal balance. The proceeds were immediately transferred
   to the Company to purchase the underlying securities. The certificates bear
   interest at a fixed rate of 7.5%. Distributions of interest and principal
   will be made on or about 15 March and 15 September of each year commencing
   September 1997. The holders of the certificates will receive principal
   distributions as principal is received on the Notes. The certificates are
   scheduled to mature on 15 September 2006.

   On 16 June 1997 the Company effected an issue on behalf of the Trust of
   US$10,250,000, nominal value, bond backed investment certificates under the
   1997-Du Pont-2 series. The underwriters purchased the certificates at 98.2%
   of the outstanding principal balance. The proceeds were immediately
   transferred to the Company to purchase the underlying securities. The
   certificates bear interest at a fixed rate of 7.25%. Distributions of
   interest and principal will be made on or about 15 March and 15 September of
   each year commencing September 1997. The holders of the certificates will
   receive principal distributions as principal is received on the Notes. The
   certificates are scheduled to mature on 15 September 2006.


--------------------------------------------------------------------------------
                                                                         Page 14
<PAGE>
 
ELMWOOD FUNDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 DECEMBER 1997


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

5  BOND BACKED INVESTMENT CERTIFICATES (CONTINUED)

   On 22 August 1997 the Company effected an issue on behalf of the Trust of
   US$20,000,000, nominal value, bond backed investment certificates under the
   1997-US Treasury-1 series. The underwriters purchased the certificates at
   98.5% of the outstanding principal balance. The proceeds were immediately
   transferred to the Company to purchase the underlying securities. The
   certificates bear interest at a fixed rate of 6.375%. Distributions of
   interest and principal will be made on or about 15 May and 15 November of
   each year commencing November 1997. The holders of the certificates will
   receive principal distributions as principal is received on the Notes. The
   certificates are scheduled to mature on 15 May 2006.

6  OPTIONS, RIGHTS AND RETAINED INTERESTS

   The holder of the retained interest retains the right to a distribution equal
   to the premium of the interest earned on the underlying security over that
   paid on the trust certificate subject to payment of ordinary expenses of the
   trustee and administration expenses of the Company. The rights of the holder
   of the retained interest to the above premium is equal in priority to the
   rights of the holders of the certificate to receive interest on the
   underlying securities.

7  FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISK

   The Company's activities are primarily conducted with financial institutions.
   In connection with the terms of securitisation transactions, the bond backed
   investment certificates together with the underlying securities are held by
   the Trust and do not represent obligations of the Company.

8  SHARE CAPITAL

   Authorised...................50,000 ordinary shares of US$1.00 each.
   Issued and fully paid.........1,000 ordinary shares of US$1.00 each.

9  RELATED PARTY TRANSACTIONS

   Under the terms of a Declaration of Trust dated 27 September 1996 all of the
   issued and fully paid shares have been issued to the Share Trustee, Deutsche
   Morgan Grenfell (Cayman) Limited, the administrator of the Company. Pursuant
   to an administration agreement also dated 27 September 1996 Deutsche Morgan
   Grenfell (Cayman) Limited provides directors and administrative services to
   the Company.


--------------------------------------------------------------------------------
                                                                         Page 15
<PAGE>
 
ELMWOOD FUNDING LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31 December 1997



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


10  TAXATION

    Under the Cayman Islands Tax Concessions Law (1995 Revision), the Governor-
    in-Council of the Cayman Islands issued an undertaking to the Company on 8
    October 1996 exempting it from all local income, profit or capital gains
    taxes. The undertaking has been issued for a period of 20 years and at the
    present time, no such taxes are levied in the Cayman Islands. Accordingly,
    no provision for taxes on the Company's income in the Cayman Islands is
    recorded.



--------------------------------------------------------------------------------
                                                                         Page 16
<PAGE>
 
ELMWOOD FUNDING LIMITED
Year ended 31 December 1997



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

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

There was no change of accountants or disagreement with accountants on any
matter of accounting principals or practices of financial disclosure.


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

As at 31 December 1997 the directors of the Company, their ages, terms of
service and business experience were:

DAVID EGGLISHAW, SENIOR MANAGER OF DEUTSCHE MORGAN GRENFELL (CAYMAN) LIMITED.
David Egglishaw, age 30, is a member of the Institute of Chartered Accountants
in England and Wales and joined Deutsche Morgan Grenfell (Cayman) Limited in
June 1994 having previously held a position of Senior Fund Accountant with
Worthy Trust Company in Jersey, Channel Islands.  Mr. Egglishaw is also the
Secretary of the Cayman Islands Mutual Fund Administrators' Association.  David
Egglishaw was appointed as a director on 30 September 1996.

JOHN CULLINANE, ASSISTANT MANAGER, TRUST AND COMPANY OF DEUTSCHE MORGAN GRENFELL
(CAYMAN) LIMITED.
John Cullinane, age 33, is a member of the Institute of Chartered Secretaries
and Administrators and joined Deutsche Morgan Grenfell (Cayman) Limited in June
1996 having previously held a position of Assistant Manager with Deutsche Morgan
Grenfell (CI) Limited in Jersey, Channel Islands.  Mr. Cullinane was appointed a
director on 25 August 1997.

DERRIE BOGGESS, ASSISTANT MANAGER, TRUST AND COMPANY OF DEUTSCHE MORGAN GRENFELL
(CAYMAN) LIMITED.
Derrie Boggess, age 30, received her B.A. Degree from the University of North
Carolina at Chapel Hill and holds an Honours Law Degree from the University of
Liverpool.  Ms. Boggess joined Deutsche Morgan Grenfell (Cayman) Limited in
March 1994.  Ms. Boggess was appointed a director on 30 September 1996.

The above directors, all employees of Deutsche Morgan Grenfell (Cayman) Limited,
are provided by Deutsche Morgan Grenfell (Cayman) Limited in accordance with its
obligations under the terms of an Administrative Agreement dated 27 September
1996 between Deutsche Morgan Grenfell (Cayman) Limited and the Company.



--------------------------------------------------------------------------------
                                                                         Page 17
<PAGE>
 
ELMWOOD FUNDING LIMITED
Year ended 31 December 1997


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

The Company has no executive officers or other significant employees.

Section 16(a) Beneficial Ownership Reporting Compliance

There is nothing to report with respect to this item.


ITEM 11.  EXECUTIVE COMPENSATION

Because the Company has no executive officers or other paid employees, there is
nothing to report with respect to this requirement.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

<TABLE>
==============================================================================================
      (1)                     (2)                        (3)                      (4)
    TITLE OF          NAME AND ADDRESS OF               AMOUNT                  PERCENT
     CLASS                 BENEFICIAL                AND NATURE OF             OF CLASS
                             OWNER                    BENEFICIAL
                                                       OWNERSHIP

----------------------------------------------------------------------------------------------
<S>                  <C>                           <C>                      <C> 
Common stock          Deutsche Morgan Grenfell       1,000 shares owned        100%
                      (Cayman) Limited               directly, as share
                      P.O. Box 1984                  trustee
                      Elizabethan Square
                      George Town
                      Grand Cayman
                      British West Indies
==============================================================================================
</TABLE>



Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTION

There is nothing to report with respect to this item.



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                                                                         Page 18
<PAGE>
 
ELMWOOD FUNDING LIMITED
Year ended 31 December 1997


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

The following exhibits are filed as part of this Annual Report or, where
indicated, were heretofore filed and are hereby incorporated by reference:

(a)  Exhibits

     3.1  Certificate of Incorporation of the Company as currently in effect
          dated 17 September 1996, incorporated herein by reference from Exhibit
          3.1 to the Company's Registration Statement on Form S-3 (File No. 333-
          29327), as amended, filed with the Securities and Exchange Commission
          (the "Commission") on 16 June 1997.

     3.2  Memorandum and Articles of Incorporation of the Company as currently
          in effect dated 17 September 1996, incorporated herein by reference
          from Exhibit 3.2 to the Company's Registration Statement on Form S-3
          (File No. 333-29327), as amended, filed with the Securities and
          Exchange Commission the Commission on 16 June 1997.

     4.1  Standard Terms for Trust Agreements between the Company, as Depositor,
          and United States Trust Company, as Trustee, dated as of 1 August
          1997, incorporated herein by reference from Exhibit 4.1 to the
          Company's Registration Statement on Form S-3 (File No. 333-29327), as
          amended, filed with the Commission on 16 June 1997.

     4.2  Standard Terms for Trust Agreements between the Company, as
          Depositor, and United States Trust Company, as Trustee, dated as of 14
          March 1997, incorporated herein by reference from Exhibit 4.1 to the
          Company's Registration Statement on Form S-3 (File No. 333-5698), as
          amended, filed with the Commission on 2 October 1996.

     4.3  Series Supplement to the Standard Terms dated as of 22 August 1997 by
          and between the Company, as Depositor, and United States Trust Company
          of New York, as Trustee, creating the Bond-backed Investment
          Certificates Trust Series 1997-US Treasury-1 and providing for the
          issuance of the Series 1997-US Treasury-1 Certificates, incorporated
          herein by reference from Exhibit 4 to the Company's Registration
          Statement on Form 8-A (File No. 001-12809) as amended, filed with the
          Commission on 29 July 1997.


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                                                                         Page 19
<PAGE>
 
ELMWOOD FUNDING LIMITED
Year ended 31 December 1997


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Item 14.   Exhibits, Financial Statements, and Reports on Form 8-K (continued)

      4.4  Series Supplement to the Standard Terms dated as of 16 June 1997 by
           and between the Company, as Depositor, and United States Trust
           Company of New York, as Trustee, creating the Bond-backed Investment
           Certificates Trust Series 1997-Du Pont-2 and providing for the
           issuance of the Series 1997-Du Pont-2 Certificates, incorporated
           herein by reference from Exhibit 4 to the Company's Registration
           Statement on Form 8-A (File No. 001-12809), filed with the Commission
           on 13 June 1997.

      4.5  Series Supplement to the Standard Terms dated as of 12 May 1997 by
           and between the Company, as Depositor, and United States Trust
           Company of New York, as Trustee, creating the Bond-backed Investment
           Certificates Trust Series 1997-Du Pont and providing for the issuance
           of the Series 1997-Du-Pont Certificates, incorporated herein by
           reference from Exhibit 4 to the Company's Registration Statement on
           Form 8-A (File No. 001-12809), filed with the Commission on 8 May
           1997.

      4.6  Series Supplement to the Standard Terms dated as of 14 March 1997 by
           and between the Company, as Depositor, and United States Trust
           Company of New York, as Trustee, creating the Bond-backed Investment
           Certificates Trust Series 1997-AT&T and providing for the issuance of
           the Series 1997-AT&T and providing for the issuance of the Series
           1997-AT&T Certificates, incorporated herein by reference from Exhibit
           4 to the Company's Registration Statement on Form 8-A (File No. 001-
           12809), filed with the Commission on 14 March 1997.

      27   Financial Data Schedule



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                                                                         Page 20
<PAGE>
 
ELMWOOD FUNDING LIMITED
Signatures

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



/s/ John Cullinane        20 April 1998
------------------        -------------
John Cullinane            Date
Director



/s/ Derrie Boggess        20 April 1998
------------------        -------------
Derrie Boggess            Date
Director



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