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

                                    FORM 10-Q

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

                For the quarterly period ended 30 September 1998

                        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 Bank (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)

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 directly by
Deutsche Bank (Cayman) Limited, as share trustee) as of 30 September 1998.
<PAGE>
 
ELMWOOD FUNDING LIMITED
Quarterly period ended 30 September 1998
--------------------------------------------------------------------------------

INDEX

                                                                   Page number

PART I             FINANCIAL INFORMATION

      Item 1       Financial statements (unaudited)

                   Unaudited statement of operations:
                   Three months ended 30 September 1998,
                   nine months ended 30 September 1998
                   and year ended 31 December 1997                       3

                   Unaudited statement of financial condition:
                   30 September 1998 and 31 December 1997                4

                   Unaudited statement of cash flows:
                   Nine  months ended 30 September 1998
                   and year ended 31 December 1997                       5

                   Notes to financial statements                         6

      Item 2       Management's discussion and analysis of
                   financial condition and results of operations         10

PART II            OTHER INFORMATION

      Item 6       Exhibits and Reports on Form 8-K                      11

      Signatures                                                         12
<PAGE>
 
ELMWOOD FUNDING LIMITED
Unaudited statement of operations
-------------------------------------------------------------------------------

<TABLE> 
<CAPTION> 
                               Three months ended  Nine months ended   Year ended
                                     30 September       30 September  31 December
                                             1998               1998         1997
                         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> 

                       See notes to financial statements
--------------------------------------------------------------------------------
                    These financial statements are unaudited

                                                                          Page 3
<PAGE>
 
ELMWOOD FUNDING LIMITED 
Unaudited statement of financial condition 
as at 30 September 1998 and 31 December 1997
-------------------------------------------------------------------------------


                                         30 September    31 December
                                                 1998           1997
                                Note            (US$)          (US$)
Assets                                                   
                                                         
Cash at bank                      4            1,000              -
Sundry debtors and prepayments                     -          1,000
                                                                   
                                           ---------      ---------
                                                                   
                                               1,000          1,000
                                           ---------      ---------
Liabilities                                                        
                                           ---------      ---------
                                                                   
                                                   -              -
                                           ---------      ---------
                                                                   
                                                                   
                                           =========      =========
                                                                   
Net assets                                     1,000          1,000
                                           =========      =========
                                                                   
                                                                   
Capital and reserves                                               
Share capital                     9            1,000          1,000
Retained earnings                                  -              -
                                                                   
                                           =========      =========
                                                                   
                                               1,000          1,000
                                           =========      =========


                       See notes to financial statements
--------------------------------------------------------------------------------
                    These financial statements are unaudited

                                                                          Page 4
<PAGE>
 
ELMWOOD FUNDING LIMITED
Unaudited statement of cash flows

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


<TABLE> 
<CAPTION> 
                                                                     Nine months               Year
                                                                           ended              ended
                                                                    30 September        31 December 
                                                                            1998               1997
                                                          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                                                     1,000                  -

                                                                   --------------     --------------
      Net cash used in operating activities
                                                                         1,000                    -
                                                                   --------------     --------------

Cash flows from investing activities
Proceeds of disposal of investments                        6,7       21,531,997         76,453,768
Purchase of investments                                     5       (21,531,997)       (76,453,768)

                                                                   --------------     --------------
      Net cash used in investing activities                                  -                  -
                                                                   --------------     --------------

Cash flows from financing activities
Proceeds from issue of share capital                                         -                  -

                                                                   --------------     --------------
      Net cash provided by financing activities
                                                                             -                  -
                                                                   --------------     --------------

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

Net change in cash for the period                                        1,000                  -
                                                                   ==============     ==============

Cash at the beginning of the period                                          -                  -

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

Cash at the end of the period                                            1,000                  -
                                                                   ==============     ==============
</TABLE> 

                       See notes to financial statements
--------------------------------------------------------------------------------
                    These financial statements are unaudited

                                                                          Page 5
<PAGE>
 
ELMWOOD FUNDING LIMITED
Notes to the financial statements
30 September 1998
--------------------------------------------------------------------------------

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 between the Company and the United States Trust Company, as trustee.
      The first series of Certificates, Series 1997-AT&T, were issued on 25
      March 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.

--------------------------------------------------------------------------------
                    These financial statements are unaudited

                                                                          Page 6
<PAGE>
 
ELMWOOD FUNDING LIMITED
Notes to the financial statements (continued)
30 September 1998
--------------------------------------------------------------------------------

2     Significant accounting policies

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

      1.
      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 are not included in the statement of operations.

4     Cash at bank

      Cash at bank is comprised of funds on a call account maintained at
      Deutsche Bank (Cayman) Limited.

5     Investments

      The Company purchased US$20,000,000, nominal value, of the US$250,000,000
      7.125% notes due 15 June 2009 issued by The Chase Manhattan Corporation on
      12 June 1997 (the "Notes"). The Notes were transferred to the Trust as
      collateral for the Series 1998-Chase-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.

--------------------------------------------------------------------------------
                    These financial statements are unaudited

                                                                          Page 7
<PAGE>
 
ELMWOOD FUNDING LIMITED
Notes to the financial statements (continued)
30 September 1998
--------------------------------------------------------------------------------

6     Bond backed investment certificates

      On 9 February 1998, the Company effected an issue on behalf of the Trust
      of US$20,000,000, nominal value, Bond-backed Investment Certificates under
      the Series 1998-Chase-1 series. The underwriters purchased the
      Certificates at 98.65% 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 6.375%. Distributions of
      interest and principal will be made on or about 15 June and 15 December of
      each year commencing 15 June 1998. The holders of the Certificates will
      receive principal distributions as principal is received on the Notes. The
      Certificates are scheduled to mature on 15 June 2009.

7     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.

      In respect of current series of bond-backed investment certificates, in
      accordance with the terms of the Trust and those outlined in the related
      Prospectus Supplemental dated 15 January 1998, the options, rights and
      Retained Interests were immediately sold by the Trust to a third party and
      then transferred to the Company to complete the purchase of the Notes.

--------------------------------------------------------------------------------
                    These financial statements are unaudited

                                                                          Page 8
<PAGE>
 
ELMWOOD FUNDING LIMITED
Notes to the financial statements (continued)
30 September 1998
--------------------------------------------------------------------------------

8     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.

9     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.

10    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 Bank (Cayman) Limited (formerly Deutsche Morgan Grenfell (Cayman)
      Limited). Pursuant to an administration agreement also dated 27 September
      1996, Deutsche Bank (Cayman) Limited provides directors and administrative
      services to the Company.

11    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.

--------------------------------------------------------------------------------
                    These financial statements are unaudited

                                                                          Page 9
<PAGE>
 
ELMWOOD FUNDING LIMITED
Managements discussion and analysis of financial condition and results of
operations as at 30 September 1998
--------------------------------------------------------------------------------

Financial condition

The Company purchased US$20,000,000, nominal value, of the US$250,000,000 7.125%
notes due 15 June 2009 issued by The Chase Manhattan Corporation on 12 June 1997
(the "Notes"). The Notes were transferred to the Trust as collateral for the
Series 1998-Chase-1 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 9 February 1998, the Company effected an issue on behalf of the Trust of
US$20,000,000, nominal value, Bond-backed Investment Certificates under the
Series 1998-Chase-1 series. The underwriters purchased the Certificates at
98.65% 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 6.375%. Distributions of interest and principal will be made
on or about 15 June and 15 December of each year commencing 15 June 1998. The
holders of the Certificates will receive principal distributions as principal is
received on the Notes. The Certificates are scheduled to mature on 15 June 2009.

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.

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.

--------------------------------------------------------------------------------
                    These financial statements are unaudited

                                                                         Page 10
<PAGE>
 
ELMWOOD FUNDING LIMITED
PART II - OTHER INFORMATION
Item 6
as at 30 September 1998
--------------------------------------------------------------------------------

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

            Exhibits

              27        Financial Data Schedule



--------------------------------------------------------------------------------
                    These financial statements are unaudited

                                                                         Page 11
<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.







ELMWOOD FUNDING LIMITED



/s/ David JJ Egglishaw                                   11/16/98
-----------------------------------                      --------
David JJ Egglishaw                                         Date
Director


/s/ Derrie Boggess                                       11/16/98
-----------------------------------                      --------
Derrie Boggess                                             Date
Director


--------------------------------------------------------------------------------
                    These financial statements are unaudited

                                                                         Page 12