<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
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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
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<TABLE>
<CAPTION>
Three months ended Nine months ended Year ended
30 September 30 September 31 December
1998 1998 1997
Note (US$) (US$) (US$)
<S> <C> <C> <C> <C>
Income
- - -
---------- ---------- ----------
- - -
---------- ---------- ----------
Expenditure
- - -
---------- ---------- ----------
- - -
---------- ---------- ----------
========== ========== ==========
Net income for the period - - -
========== ========== ==========
========== ========== ==========
Retained earnings at the
beginning and end of
the period - - -
========== ========== ==========
</TABLE>
See notes to financial statements
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These financial statements are unaudited
Page 3
<PAGE>
ELMWOOD FUNDING LIMITED
Unaudited statement of financial condition
as at 30 September 1998 and 31 December 1997
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30 September 31 December
1998 1997
Note (US$) (US$)
Assets
Cash at bank 4 1,000 -
Sundry debtors and prepayments - 1,000
--------- ---------
1,000 1,000
--------- ---------
Liabilities
--------- ---------
- -
--------- ---------
========= =========
Net assets 1,000 1,000
========= =========
Capital and reserves
Share capital 9 1,000 1,000
Retained earnings - -
========= =========
1,000 1,000
========= =========
See notes to financial statements
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These financial statements are unaudited
Page 4
<PAGE>
ELMWOOD FUNDING LIMITED
Unaudited statement of cash flows
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<TABLE>
<CAPTION>
Nine months Year
ended ended
30 September 31 December
1998 1997
Note (US$) (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
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These financial statements are unaudited
Page 5
<PAGE>
ELMWOOD FUNDING LIMITED
Notes to the financial statements
30 September 1998
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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.
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These financial statements are unaudited
Page 6
<PAGE>
ELMWOOD FUNDING LIMITED
Notes to the financial statements (continued)
30 September 1998
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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.
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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.
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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.
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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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
