ITEM 1. BUSINESS
GENERAL
Encore is a low-cost manufacturer of copper electrical building wire and cable. The Company is a significant supplier of residential wire for interior wiring in homes, apartments and manufactured housing. In 1994, the Company completed a major plant expansion and began manufacturing commercial wire for commercial and industrial buildings. This expansion allows Encore to offer a broad line of copper electrical building wire and cable to its customers.
The Company began operations in 1990. Through four plant expansions (including the commercial wire plant expansion described above) and the addition in 1994 of new manufacturing equipment, the Company estimates that its production capacity is 600,000 pounds of residential wire per day and 400,000 pounds of commercial wire per day. The Company's net sales have grown from $10.7 million in 1990 to $179.1 million in 1996. As a result, based upon the latest available U.S. Department of Commerce data, the Company increased its share of the market for residential wire from less than 2% in 1990 to approximately 12% in 1995. Based on the same information, the Company's share of the market for the commercial wire that it manufactures was approximately 5% in 1995. According to this same Department of Commerce data, the total dollar value of all 1995 U.S. shipments of the types of residential and commercial wire that the Company manufactures amounted to approximately $729.5 million and $1.5 billion, respectively.
The principal customers for Encore's wire are wholesale electrical distributors, which serve both the residential and commercial wire markets. The Company sells its products primarily through manufacturers' representatives located throughout the United States and, to a lesser extent, through its own direct marketing efforts.
Encore's strategy is to further expand its share of the markets for residential wire and for commercial wire by emphasizing a high level of customer service and low-cost production. The Company maintains product inventory levels sufficient to meet anticipated customer demand and believes that the speed and completeness with which it fills customer orders are key competitive advantages critical to marketing its products. Encore's low-cost production capability features an efficient plant design incorporating highly automated manufacturing equipment, an integrated production process and a small, incentivized work force.
The Company was founded in 1989 as a Delaware corporation by Vincent A. Rego and Donald M. Spurgin, who have been colleagues in the wire and cable business since the mid-1950s. The Company's principal executive offices and plant are located at 1410 Millwood Road, McKinney, Texas 75069 and its telephone number is (972) 562-9473. As used in this Annual Report, unless otherwise required by the context, the terms "Company" and "Encore" refer to Encore Wire Corporation and its consolidated subsidiary.
RECENT EVENTS
The Company's Board of Directors recently authorized a new project whereby the Company would construct and equip a copper rod fabrication facility. Although plans have not been finalized, the Company intends for the new facility to include additional warehouse space. The new facility will be located adjacent to the Company's existing plant on property which the Company has contracted to purchase. The total cost of the project is estimated to be approximately $19 million. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations."
The Company presently uses copper rod purchased from others to manufacture its wire and cable products. If the new facility is completed, the Company will produce its own copper rod from copper cathodes. The Company would also be able to reprocess copper scrap generated by its operations and copper scrap purchased from others.
STRATEGY
Encore's strategy for expanding its share of the residential wire and commercial wire markets emphasizes customer service coupled with low-cost production.
Customer Service. Responsiveness to customers is a primary focus of Encore, with an emphasis on building and maintaining strong customer relationships. Encore seeks to establish customer loyalty by achieving a high order fill rate and rapidly handling customer inquiries, orders, shipments and returns. The Company maintains product inventories sufficient to meet anticipated customer demand and believes that the speed and completeness with which it fills orders are key competitive advantages critical to marketing its products.
Low-Cost Production. Encore's low-cost production capability features an efficient plant design and a small, incentivized work force.
o Efficient Plant Design. Encore's highly automated wire manufacturing equipment is integrated in an efficient design that reduces materials handling, including labor, and in-process inventory.
o Incentivized Work Force. Encore's hourly manufacturing employees are eligible to receive incentive pay tied to productivity and quality standards. The Company believes that this compensation program enables the plant's manufacturing lines to attain high output and motivates manufacturing employees to continually maintain product quality. The Company also believes that its stock option plan enhances the motivation of its salaried manufacturing supervisors. The Company has coupled these incentives with a comprehensive safety program that emphasizes employee participation.
PRODUCTS
Encore offers a residential wire product line that consists of NM cable and UF cable and, in 1994, began offering a line of THHN cable, the most widely used type of commercial wire. NM, UF and THHN cable are all manufactured with copper as the conductor. The Company also purchases small quantities of other types of wire to re-sell to the customers that buy the products it manufactures. The Company maintains between 100 and 150 stock keeping units (SKUs) of residential wire and between 450 and 500 SKUs of commercial wire. The principal bases for differentiation among SKUs are product diameter, insulation, color and packaging.
Residential Wire
o NM Cable. Non-metallic sheathed cable is used primarily as interior wiring in homes, apartments and manufactured housing. NM cable is composed of either two or three insulated copper wire conductors, with or without an uninsulated ground wire, all sheathed in a polyvinyl chloride ("PVC") jacket.
o UF Cable. Underground feeder cable is used to conduct power underground to outside lighting and other applications remote from residential buildings. UF cable is composed of two or three PVC insulated copper wire conductors, with or without an uninsulated ground wire, all jacketed in PVC.
Commercial Wire
o THHN Cable. THHN cable is used primarily as feeder, circuit and branch wiring in commercial and industrial buildings. It is composed of a single conductor, either stranded or solid, and insulated with PVC, which is further coated with nylon. Users typically enclose THHN cable in protective pipe or conduit.
MANUFACTURING
The efficiency of Encore's highly automated manufacturing facility is a key element of its low-cost production capability. Encore's methods for manufacturing residential wire differ from batch processing in traditional mills, in which manufacturing is broken into several steps requiring materials handlers to move product between steps on reels. Encore's residential wire manufacturing lines have been integrated so that handling of product is substantially reduced. At the few points remaining where handling between manufacturing steps is necessary, reels for the most part have been replaced with large baskets, each capable of handling approximately four times the capacity of a reel. Encore's commercial wire plant is designed to reduce product handling by integrating steps within production stages and, again, by using baskets instead of reels where feasible.
The manufacturing process for the Company's products involves up to four steps: drawing, stranding, insulating and jacketing.
Drawing. Drawing is the process of reducing 5/16 inch copper rod through converging dies until the specified wire diameter is attained. The wire is then heated with electrical current to soften or "anneal" the wire to make it easier to handle.
Stranding. Stranding is the process of twisting together from seven to 61 individual wire strands to form a single cable. The purpose of stranding is to improve the flexibility of wire while maintaining its electrical current carrying capacity.
Insulating. Insulating is the process of extruding first PVC and then nylon over the solid or stranded wire.
Jacketing. Jacketing is the process of extruding PVC over two or more insulated conductor wires, with or without an uninsulated ground wire, to form a finished product. The Company's jacketing lines are integrated with packaging lines that cut the wire and coil it onto reels or package it in boxes or shrink wrap.
Encore manufactures and tests all of its products in accordance with the standards of Underwriters Laboratories, Inc. ("U/L"), a nationally recognized testing and standards agency. Encore's machine operators and quality control inspectors conduct frequent product tests. At three separate manufacturing stages, the Company spark tests insulated wire for defects. The Company tests finished products for electrical continuity to insure compliance with its own quality standards and those of U/L. Encore's manufacturing lines are equipped with laser micrometers to measure wire diameters and insulation thicknesses while the lines are in operation. During each shift, operators take physical measurements of products, which Company inspectors randomly verify on a daily basis. Although suppliers pretest PVC and nylon compounds, the Company tests products for aging and for cracking and brittleness of insulation and jacketing. Encore sells all of its products with a one year replacement warranty.
CUSTOMERS
Encore sells its wire principally to wholesale electrical distributors throughout the United States and, to a lesser extent, to retail home improvement centers. Most distributors supply products to electrical contractors. The Company now sells its products to more than 50% of the top 250 wholesale electrical distributors (by volume) in the United States according to information reported in the June 1996 issue of Electrical Wholesaling magazine. No customer accounted for more than seven percent of net sales in 1996.
Encore believes that the speed and completeness with which it fills customers' orders are crucial to its ability to expand the market share for its products. The Company also believes that in order to reduce costs many customers no longer maintain their own substantial warehouse inventories. Because of this trend, the Company seeks to maintain sufficient inventories to satisfy customers' prompt delivery requirements.
MARKETING AND DISTRIBUTION
Encore markets its products throughout the United States primarily through manufacturers' representatives and, to a lesser extent, through its own direct marketing efforts.
Encore maintains most of its product inventory at its plant in McKinney, Texas. At December 31, 1996, it held approximately 84% of its finished goods inventory at that location. In order to provide flexibility in handling customer requests for immediate delivery of the Company's products, additional product inventories are maintained at the warehouses owned and operated by independent manufacturers' representatives located throughout the United States. At December 31, 1996, additional product inventories are maintained at the warehouses of independent manufacturers' representatives located in Chattanooga, Tennessee; Detroit, Michigan; Edison, New Jersey; Houston, Texas; Louisville, Kentucky; Norcross, Georgia; Orlando, Florida; Pittsburgh, Pennsylvania; Portland, Oregon; Salt Lake City, Utah; and San Francisco, California. Some of these manufacturers' representatives, as well as the Company's other manufacturers' representatives, maintain offices without warehouses in numerous locations throughout the United States.
Finished goods are typically delivered to warehouses and customers by trucks operated by common carriers, including a related third party. See "Item 13. Certain Relationships and Related Party Transactions." The decision regarding the carrier to be used is based primarily on cost and availability.
The Company invoices its customers directly for products purchased and, if an order has been obtained through a manufacturers' representative, pays the representative a commission based on pre-established rates. Customers' credit limits are determined by the Company. The Company's bad debt experience was .09%, .09% and .16% of net sales in 1996, 1995 and 1994, respectively. The manufacturers' representatives have no discretion to increase customers' credit limits or to determine prices charged for the Company's products, and all sales are subject to approval by the Company.
EMPLOYEES
Encore believes that its hourly employees are highly motivated and that their motivation contributes significantly to the plant's operating efficiency. The Company attributes the motivation of these employees largely to the fact that a significant portion of their compensation can be incentive pay tied to productivity and quality standards. The Company believes that its incentive program focuses the employees on maintaining product quality.
Encore emphasizes safety to its manufacturing employees through its safety program. On a weekly basis, each team of employees meets to review safety standards and, on a monthly basis, a group of participants from each team discusses safety issues and inspects each area of the plant for compliance. In addition, the Company awards incentive bonuses to employees who achieve certain safety goals. The Company's safety program is an integral part of its general attention to cost control.
As of December 31, 1996, Encore had 262 employees, of whom 221 were paid hourly wages and were primarily engaged in the operation and maintenance of the Company's manufacturing and warehouse facility. The remainder of the Company's employees were executive, supervisory, administrative, sales and clerical personnel. The Company considers its relations with its employees to be good. The Company has no collective bargaining agreements with any of its employees.
RAW MATERIALS
The principal raw materials used by Encore in manufacturing its products are copper rod, PVC thermoplastic compounds, paper and nylon, all of which are readily available from a number of suppliers. The Company purchases copper rod from three major producers at prices determined each month primarily based on the average daily closing prices for copper for that month, plus a negotiated premium.
COMPETITION
The electrical wire and cable industry is highly competitive. The Company competes with several manufacturers of wire and cable products which have substantially greater resources than the Company and offer more complete lines of electrical wire and cable products. Some of these competitors are owned and operated by large, diversified companies. The Company's competitors include Southwire Corporation, Essex Group, Inc. and General Cable Corporation, an indirect wholly-owned subsidiary of Wassall PLC. These competitors are also vertically integrated insofar as they possess rod fabrication facilities and plastic compounding operations.
The principal elements of competition in the electrical wire and cable industry are, in the opinion of the Company, pricing, order fill rate and, in some instances, breadth of product line. The Company believes that it is competitive with respect to all these factors.
Competition in the electrical wire and cable industry, although intense, has been primarily from U.S. manufacturers. The Company has encountered no significant foreign competition in the production of residential or commercial wire. The Company believes this is because direct labor costs generally account for a relatively small percentage of the cost of goods sold for these products.
PATENT MATTERS
Encore neither has nor is seeking any patents, believing instead that the success of its manufacturing operations is dependent on its marketing abilities, technical competence and customer service.
ITEM 2.

ITEM 2. PROPERTIES
Encore maintains its corporate office and manufacturing plant in McKinney, Texas, approximately 35 miles north of Dallas. The Company's facilities are located on an eighteen acre site and consist of a building containing approximately 384,000 square feet of floor space, of which approximately 17,000 square feet are used for office space and 367,000 square feet are used for manufacturing and warehouse operations. The plant and equipment are owned by the Company and are not mortgaged to secure any of the Company's existing indebtedness. Encore believes that its plant and equipment are suited to its present needs, comply with applicable federal, state and local laws and regulations and are properly maintained and adequately insured.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending or threatened to which the Company is a party or of which any of the Company's property is subject.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE COMPANY
Information regarding Encore's executive officers including their respective ages at March 19, 1997, is set forth below.
Mr. Rego has been Chairman of the Board of Directors of Encore since 1989. In October 1996, Mr. Rego was named President and Chief Executive Officer. From 1978 until 1988, Mr. Rego served as President, Chief Executive Officer and Chairman of the Board of Directors of Capital Wire and Cable Corporation ("Capital Wire"), which was then, and is now (as General Cable Corporation, an indirect wholly owned subsidiary of Wassall PLC), engaged in the manufacture of electrical wire and cable products. Prior thereto, Mr. Rego was associated with predecessors of Capital Wire in various executive capacities.
Mr. Spurgin was President, Chief Executive Officer and a director of Encore from 1989 until October 1996, and was Secretary of the Company from 1989 until 1992. In October 1996, Mr. Spurgin, for health reasons, resigned as President and Chief Executive Officers of the Company and was named Vice Chairman of the Board of Directors. From 1979 to 1988, Mr. Spurgin was Executive Vice President, Chief Operating Officer and a director of Capital Wire. Prior thereto, Mr. Spurgin was associated with predecessors of Capital Wire in various executive capacities.
Mr. Jones has been Vice President -- Sales and Marketing of Encore since 1992. From 1985 to 1988, Mr. Jones attended college while working on a part time basis for Capital Wire. From 1988 until joining the Company in 1989, he was employed as a sales representative by Lone Star Transportation Inc., a freight brokerage firm. Mr. Jones is the son-in-law of Mr. Spurgin.
Mr. Smith has been Vice President -- Operations of Encore since 1992. From 1984 until joining the Company in 1990, Mr. Smith was employed as a Department Manager by General Cable Company, a manufacturer of telecommunications cable.
Mr. Weaver has been Vice President -- Finance, Treasurer and Secretary of Encore since 1993. From 1990 until joining the Company in 1993, Mr. Weaver was employed by the Federal Depository Insurance Corporation and was responsible for the financial oversight of assisted acquisitions of certain failed savings and loan institutions. From 1984 until 1989, Mr. Weaver was Vice President -- Finance of 2M Companies, a Dallas area investment company. From 1980 until 1984, Mr. Weaver was with the public accounting firm of Ernst & Whinney (now known as Ernst & Young LLP).
Ms. Wright has been employed by Encore since its inception and has been its Vice President -- Credit and Assistant Secretary since 1992. From 1970 until 1989, Ms. Wright was employed in various capacities by Capital Wire, most recently as Vice President -- Credit/Administration.
All executive officers are elected annually by the Board of Directors to serve until the next annual meeting of the Board and until their respective successors are chosen and qualified.
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is quoted in the Nasdaq Stock Market's National Market under the symbol "WIRE." Public trading of the Common Stock commenced on July 16, 1992, the date of the Company's initial public offering. Prior to that date, there was no public market for the Common Stock.
The following table sets forth the high and low closing sales prices per share for the Common Stock as reported in the Nasdaq Stock Market's National Market for the periods indicated.
On March 10, 1997, the last reported sale price of the Common Stock was $22.75 per share. As of March 10, 1997, there ere 89 record holders of the Common Stock.
The Company has never paid cash dividends. Management intends to retain any future earnings for the operation and expansion of the Company's business and does not anticipate paying any cash dividends in the foreseeable future. The Company's present credit arrangements restrict the Company's ability to pay cash dividends. See Note 4 of Notes to Consolidated Financial Statements.
ITEM 6.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company was incorporated in 1989 and during the remainder of that year used its resources to acquire, equip and test its manufacturing facility. In 1990, the Company began to manufacture and sell residential wire. In 1994, the Company completed a plant expansion for the production of commercial wire.
Price competition for electrical wire and cable is intense, and the Company sells its products in accordance with prevailing market prices. Copper rod, a commodity product, is the principal raw material used by the Company in manufacturing its products. Copper accounted for approximately 77.4%, 76.8%, 67.9%, 70.0% and 73.9% of the Company's cost of goods sold during fiscal 1996, 1995, 1994, 1993 and 1992 respectively. The price of copper fluctuates, depending on general economic conditions and in relation to supply and demand and other factors, and has caused monthly variations in the cost of copper purchased by the Company. The Company cannot predict copper prices in the future or the effect of fluctuations in the cost of copper on the Company's future operating results.
RESULTS OF OPERATIONS
The following table presents certain items of income and expense as a percentage of net sales for the periods indicated.
The following discussion and analysis relates to factors that have affected the operating results of the Company for the years ended December 31, 1996, 1995 and 1994. Reference should also be made to the consolidated financial statements and the related notes included elsewhere in this Annual Report.
Net sales were $179.1 million in 1996, compared to $151.3 million in 1995 and $122.7 million in 1994. The increase from 1995 to 1996 was due to a 33% increase in sales volume offset by a lower average cost of copper, which resulted in a decrease in the average sales price per copper pound of the Company's products. The increase from 1994 to 1995 was due primarily to the combination of an increase in sales volume and an increase in the average cost of copper, which resulted in an increase in the average sales price per copper pound of the Company's products. Sales volume increased due to several factors, including increases in customer acceptance and product availability and the introduction of the Company's new commercial product line in 1994. The sales volume of this product line increased in 1996 and 1995 as compared to the previous year. In 1996, the Company continued to expand sales to some existing customers and increased the number of customers to which it sold its
products. The Company currently sells its products to more than 50% of the top 250 wholesale electrical distributors (by volume) in the United States, as reported in the June 1996 issue of Electrical Wholesaling magazine. The average sales price per copper pound of product sold was $1.79 in 1996, compared to $2.01 in 1995 and $1.88 in 1994. The changes each year are primarily a result of changing price competition and changing copper raw material prices. The average price per copper pound the Company paid in 1996, 1995 and 1994 was $1.12, $1.42 and $1.12, respectively.
Cost of goods sold was $153.4 million in 1996, compared to $140.3 million in 1995 and $102.2 million in 1994. Copper costs increased to $118.7 million in 1996 from $107.8 million in 1995 and $69.4 million in 1994. The average cost per copper pound purchased was $1.12 in 1996, $1.42 in 1995 and $1.12 in 1994. Copper costs as a percentage of net sales decreased to 66.3% in 1996 from 71.3% in 1995, which was an increase from 56.6% in 1994. The decrease as a percentage of net sales in 1996 from 1995 was due primarily to a significantly larger differential between what the Company pays per pound of copper purchased and the Company's net sales price per copper pound sold. The increase as a percentage of net sales in 1995 from 1994 was due primarily to the differential being significantly smaller. This differential increased during 1996 primarily because of improved pricing for the Company's products. It decreased in 1995, compared to 1994, primarily because of extreme price competition for the Company's products, the effect of which was magnified by the increase in sales volume of the Company's commercial wire product, which contains a higher percentage of copper. Other raw material costs as a percentage of net sales were 13.6%, 12.8% and 14.6% in 1996, 1995 and 1994, respectively. The increase from 1995 to 1996 was due primarily to the Company's sales price per copper pound sold decreasing (as discussed above) while the cost of other raw materials per pound of copper sold remaining relatively constant. The decrease from 1994 to 1995 was due primarily to the Company's sales price per copper pound sold increasing as well as the introduction of the Company's commercial wire product line in 1994, which, compared to residential wire, requires fewer raw materials (other than copper). Depreciation, labor and overhead costs as a percentage of net sales were 9.1% in 1996 compared to 8.0% in 1995 and 7.4% in 1994. This increase was due primarily to expenses relating to increasing the Company's production capacity.
Inventories are stated at the lower of cost, using the last in, first out (LIFO) method, or market. The Company changed its method of accounting for inventories to the LIFO method on January 1, 1992. The Company believes that the LIFO method more fairly presents its results of operations by matching current costs with current revenues. As permitted by generally accepted accounting principles, the Company maintains its inventory costs and cost of goods sold on a first in, first out (FIFO) basis and makes a quarterly LIFO adjustment to adjust total inventory and cost of goods sold to LIFO. As a result of increases in the cost of copper during 1994, the value of all inventory at December 31, 1994 using the LIFO method was less than its FIFO value by approximately $5,097,000, resulting in a corresponding increase in the cost of goods sold of $6,028,000, including the reversal of a $931,000 difference at December 31, 1993. At December 31, 1994, LIFO value did not exceed the market value of the inventory, therefore, no lower or cost adjustment was necessary, resulting in a reversal of a $289,000 adjustment from the previous year with a corresponding decrease to cost of goods sold. The net effect of these two adjustments increased cost of goods sold in 1994 by $5,739,000. As a result of further increases in the cost of copper during 1995, the value of all inventory at December 31, 1995 using the LIFO method was less than its FIFO value by approximately $6,147,000. The difference between the LIFO value of inventory and the FIFO value of inventory increased $1,050,000, resulting in a corresponding $1,050,000 increase in the cost of goods sold. At December 31, 1995, LIFO value did not exceed the market value of the inventory, therefore, no lower or cost adjustment was necessary. As a result of decreases in the cost of copper during 1996, the value of all inventory at December 31, 1996 using the LIFO method was less than its FIFO value by approximately $122,000, resulting in a corresponding decrease in the cost of goods sold of $6,025,000, including the reversal of the $6,147,000 difference at December 31, 1995. At December 31, 1996, LIFO value did not exceed the market value of the inventory, therefore, no lower of cost or market adjustment was necessary. Future reductions in the price of copper could require the Company to record a lower of cost or market adjustment against the related inventory balance. Additionally, a reduction in the quantity of inventory could cause copper that is carried in inventory at costs different from the cost of copper in the period in which the reduction occurs to be included in cost of goods sold for that period at the different price.
Gross profit increased to $25.7 million , or 14.3% of net sales, in 1996 from $11.0 million, or 7.2% of net sales, in 1995 and $20.5 million, or 16.7% of net sales, in 1994. The changes in gross profit were due to the factors discussed above.
General and administrative expenses were $2.9 million in 1996, $2.7 million in 1995 and $2.5 million in 1994. As a percentage of net sales, general and administrative expenses were 1.6% in 1996, 1.8% in 1995 and 2.0% in 1994. Selling expenses, which include freight and sales commissions, were $9.5 million in 1996, $7.6 million in 1995 and $6.6 million in 1994. As a percentage of net sales, selling expenses were 5.3% in 1996, 5.0% in 1995 and 5.4% in 1994. The decrease from 1994 to 1995 was due primarily to freight charges remaining relatively constant per copper pound of product shipped while the sales price per copper pound sold increased. The increase in 1996 was due primarily to freight charges remaining relatively constant per copper pound of product shipped while the sales price per copper pound sold decreased.
Interest expense remained relatively constant at $1,722,000 in 1996 compared to $1,724,000 in 1995, which increased from $598,000 in 1994. Interest remained relatively constant from 1995 to 1996 due to the average balance of the Company's debt remaining relatively constant. The balance of the Company's debt at the end of 1996 decreased from the balance at the end of 1995 due to the Company's cash flow (see discussion in Liquidity and Capital Resources section below). The increase in 1995 was due to an increased average debt balance during 1995 compared to 1994 caused by increased working capital requirements related to an increase in accounts receivable, the build up of inventories in connection with the commencement of sales of commercial wire products, increased sales volumes, increased capital expenditures and the increased cost of copper. The debt incurred to build the Company's commercial wire plant was retired from the proceeds of the Company's secondary offering of Common Stock in April 1994. Interest in the amount of $178,000 incurred in 1994 on debt relating to the construction of the Company's commercial wire plant was capitalized in 1994.
The Company's effective tax rate remained constant in 1996, 1995 and 1994 at 38.5%.
As a result of the foregoing factors, the Company had net income of $7.2 million in 1996 compared to a loss of $545,000 in 1995 and net income of $6.7 million in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes the Company's cash flow activities.
The Company maintains a substantial inventory of finished products to satisfy customers' prompt delivery requirements. As is customary in the industry, the Company provides to most of its customers 60-day payment terms, although the Company's suppliers typically require more immediate payment, generally within 30 days. Therefore, the Company's liquidity needs have generally consisted of operating capital necessary to finance these receivables and inventory. Capital expenditures have historically been necessary to expand the production capacity of the Company's manufacturing operations. The Company has satisfied its liquidity and capital expenditure needs with cash generated from operations, borrowings under its revolving credit facilities and sales of its Common Stock.
Effective June 15, 1994, the Company completed an unsecured loan facility with a bank (the "Financing Agreement"). The Financing Agreement initially provided for maximum borrowings of the lesser of $25.0 million or the amount of eligible accounts receivable plus the amount of eligible finished goods and raw materials, less any available reserves established by the bank. The maximum borrowing amount was increased to the lesser of a calculated amount or $35.0 million effective August 31, 1995. The calculated maximum borrowing amount available at December 31, 1996, as computed in the Financing Agreement, was $34.9 million. The Financing Agreement is unsecured and contains customary covenants and events of default. Because of the net loss incurred in 1995, the Company was in default at December 31, 1995 under certain of the covenants contained in the Financing Agreement. However, the bank waived the Company's default as of December 31, 1995, and the bank and the Company amended the Financing Agreement, effective as of March 19, 1996, so that it contains less restrictive covenants. The Company was in compliance with these new covenants as of December 31, 1996. At December 31, 1996, the balance outstanding under the Financing Agreement was $18.5 million. The Financing Agreement was amended September 17, 1996 to extend the term of the agreement and to make other minor changes.
Amounts outstanding under the Financing Agreement are payable on July 15, 1998 with interest due quarterly based on the bank's prime rate, LIBOR or CD Rate options, at the Company's election. Each of the interest rate options includes a premium dependent upon the Company's financial performance, which is computed quarterly. The Agreement was amended again on December 11, 1996 to clarify certain provisions relating to the repurchase of the Company's stock. Effective October 1, 1996, and continuing into 1997, the Company's financial performance earned it the lowest interest rate option offered by the Financing Agreement.
In the first quarter of 1995, the Board of Directors of the Company authorized the Company to purchase up to 400,000 shares, or approximately 5.6%, of its outstanding Common Stock dependent upon market conditions. Common Stock purchased under the authorization will be made from time to time on the open market or through privately negotiated transactions at prices determined by the Chairman of the Board or the President of the Company. Cash provided by operations and borrowings under the Financing Agreement will be used to fund any repurchase of shares by the Company. The repurchase program permits the Company to purchase shares of its Common Stock whenever management believes that the stock price is undervalued relative to the performance and future prospects of the Company. The Financing Agreement has been amended to permit the proposed purchase of these shares not to exceed 400,000 shares or $5.5 million. Purchases of common stock under the repurchase program will be carried out in accordance with applicable rules and regulations of the Securities and Exchange Commission. As of December 31, 1996, the Company had repurchased 128,500 shares of its common stock in the open market at a weighted average price of $11.74 per share.
Cash provided by operations increased to $8.2 million 1996, compared to cash used by operations of $322,000 in 1995 and $11.9 million in 1994. This increase in cash provided by operations from 1995 to 1996 was due primarily to the Company's increase in 1996 net income compared to a loss in 1995. The decrease in use of cash from 1994 to 1995 was primarily a result of a smaller increase in accounts receivable and inventory in 1995 compared to the increase in 1994. Inventory was increased significantly in 1994 due to the Company's commencement of commercial wire product sales and manufacturing during that year. Cash used in investing activities decreased to $2.8 million in 1996 from $5.3 million in 1995 and $7.7 million in 1994. These funds were used primarily to increase the Company's production capacity, including the construction of the Company's new commercial wire plant in 1994. The cash used in/provided by financing activities was primarily due to an increases and decreases in the amount of indebtedness provided by additional borrowings and repayments on the Company's loan facility. Cash used in/provided by financing activities was reduced by $671,000 and $838,000 in 1996 and 1995 respectively, as a result of the purchase of treasury stock.
During 1997, the Company expects its capital expenditures will consist of additional manufacturing equipment for its residential and wire operations. In addition, the Company plans to construct and equip a copper rod fabrication facility. See "Item 1. Business." The total capital expenditures associated with the fabrication facility and the additional manufacturing equipment are estimated to be approximately $19.0 million. The Company also expects its working capital requirements to increase during 1997 as a result of continued increases in sales. Moreover, the Company expects that the inventory levels necessary to support sales of commercial wire will continue to be greater than the levels necessary to support comparable sales of residential wire. The Company is currently negotiating with its bank to provide additional financing for the capital expenditures and working capital requirements. The Company believes that the cash flow from operations and the financing that it expects to receive from its bank will satisfy working capital and capital expenditure requirements for the next twelve months.
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This report contains various forward-looking statements and information that are based on management's belief as well as assumptions made by and information currently available to management. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expected. Among the key factors that may have a direct bearing on the Company's operating results are fluctuations in the economy and in the level of activity in the building and construction industry, demand for the Company's products, the impact of price competition and fluctuations in the price of copper.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Report of Independent Auditors, and the consolidated financial statements of the Company and the notes thereto appear on the following pages.
Report of Independent Auditors
Board of Directors Encore Wire Corporation
We have audited the accompanying consolidated balance sheets of Encore Wire Corporation (the Company) as of December 31, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1996. 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 audit 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 Encore Wire Corporation at December 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
January 22, 1997 Dallas, Texas
ENCORE WIRE CORPORATION
CONSOLIDATED BALANCE SHEETS
See accompanying notes.
ENCORE WIRE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
See accompanying notes.
ENCORE WIRE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SEE ACCOMPANYING NOTES.
ENCORE WIRE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SEE ACCOMPANYING NOTES.
ENCORE WIRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Encore Wire Corporation (the Company) conducts its business in one segment - the manufacture of copper electrical wire, principally NM cable, for use as interior wiring in homes, apartments, and manufactured housing, and THHN cable, for use as wiring in commercial and industrial buildings. The Company sells its products primarily through approximately 30 manufacturers' representatives located throughout the United States and, to a lesser extent, through its own direct marketing efforts. The principal customers for Encore's commercial and residential wire are wholesale electrical distributors.
Copper rod, a commodity product, is the principal raw material used in the Company's manufacturing operations. Copper rod accounted for approximately 77.4%, 76.8%, and 67.9% of its cost of goods sold during 1996, 1995, and 1994, respectively. The price of copper fluctuates, depending on general economic conditions and in relation to supply and demand and other factors, and has caused monthly variations in the cost of copper purchased by the Company. The Company cannot predict copper prices in the future or the effect of fluctuations on the cost of copper on the Company's future operating results. Future reductions in the price of copper could require the Company to record a lower of cost or market adjustment against the related inventory balance.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. Significant intercompany accounts and transactions have been eliminated upon consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
Cash, accounts receivable, trade accounts payable, accrued liabilities, and notes payable are stated at expected settlement amounts which approximate fair value.
Accounts receivable represent amounts due from customers (primarily wholesale electrical distributors, manufactured housing suppliers, and retail home improvement centers) related to the sale of the Company's products. Such receivables are uncollateralized and are generally due from a diverse group of customers located throughout the United States. The Company charged off accounts receivable of $177,183, $151,164, and $198,810 in 1996, 1995, and 1994, respectively.
INVENTORIES
Inventories are stated at the lower of cost using the last-in, first-out (LIFO) method or market.
ENCORE WIRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT, AND EQUIPMENT
Depreciation of property, plant, and equipment for financial reporting is provided on the straight-line method over the estimated useful lives of the respective assets as follows: buildings and improvements, 15 to 30 years; machinery and equipment, 3 to 10 years; and furniture and fixtures, 3 to 5 years. Accelerated cost recovery methods are used for tax purposes.
INCOME (LOSS) PER SHARE
Income (loss) per common and common equivalent share is computed using the weighted average number of shares of common stock and common stock equivalents outstanding during each period. The dilutive effects of stock options and common stock warrants, which are common stock equivalents, are calculated using the treasury stock method.
INCOME TAXES
Income taxes are provided based on the deferred method, resulting in income tax assets and liabilities due to temporary differences. Temporary differences are differences between the tax bases of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years.
2. INVENTORIES
Inventories consist of the following at December 31:
3. ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31:
ENCORE WIRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM NOTE PAYABLE
The Company amended its unsecured loan facility (Facility) with a bank as of August 31, 1995 to provide for a maximum borrowings of the lesser of $35.0 million or the amount of eligible accounts receivable plus the amount of eligible finished goods and raw materials as defined in the Financing Agreement (approximately $34.9 million at December 31, 1996). The Facility is unsecured and contains customary covenants and conditions providing for events of default.
The Company is prohibited from declaring, paying, or issuing dividends in excess of an amount greater than 50% of the Company's net income for the preceding year. At December 31, 1996, the balance outstanding under the revolving credit facility was $18.5 million. Amounts outstanding under the facility are payable on July 15, 1998, with interest due quarterly based on the bank's prime rate, LIBOR or CD Rate options, at the Company's election (average interest rate at December 31, 1996 was 6.62%). Each of the interest rate options includes a premium dependent upon the Company's financial performance.
The Company paid interest totaling $1,730,525, $1,688,266, and $757,778 in 1996, 1995, and 1994, respectively. The Company capitalized $177,903 of interest in 1994 relating to the construction of the plant expansion.
5. INCOME TAXES
The provisions for income tax (benefit) expense are summarized as follows:
ENCORE WIRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
The differences between the provision for income taxes and income taxes computed using the federal income tax rate are as follows:
The tax effect of each type of temporary difference and carryforward giving rise to the deferred tax asset and liability at December 31, 1996 and 1995, is as follows:
The Company made income tax payments of $1,151,000 in 1996, $1,028,000 in 1995 and $3,090,000 in 1994.
ENCORE WIRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. STOCK OPTIONS
The Company has a stock option plan for employees that provides for the granting of stock options and authorizes the issuance of common stock upon the exercise of such options for up to 674,000 shares of common stock. The following summarizes activity in the stock option plan for the years ended December 31, 1996, 1995, and 1994:
At December 31, 1996, 330,200 options are currently exercisable and 463,250 common shares are reserved for future issuance.
The Company has elected to continue to follow the expense recognition criteria in Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees". Therefore, Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation" will have no effect on the Company's financial statements. The pro forma disclosures mandated by SFAS 123 are not provided as the effect of adopting the expense recognition criteria of SFAS 123 for stock options granted subsequent to January 1, 1995 would not be material to the Company.
7. RELATED PARTY TRANSACTIONS
The Company paid a related party common carrier $1,905,188 in 1996, $1,370,104 in 1995 and $1,051,551 in 1994. The Company believes that rates charged by this carrier compare favorably with rates charged by other carriers.
ENCORE WIRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of the unaudited quarterly financial information for the two years ended December 31, 1996 and 1995 (in thousands, except per share amounts):
ITEM 9.

ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The section entitled "Election of Directors" appearing in the Company's proxy statement for the annual meeting of stockholders to be held on May 2, 1997 sets forth certain information with respect to the directors of the Company and is incorporated herein by reference. Certain information with respect to persons who are or may be deemed to be executive officers of the Company is set forth under the caption "Executive Officers of the Company" in Part I of this report.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation" appearing in the Company's proxy statement for the annual meeting of stockholders to be held on May 2, 1997 sets forth certain information with respect to the compensation of management of the Company and is incorporated herein by reference.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Security Ownership of Certain Beneficial Owners and Management" appearing in the Company's proxy statement for the annual meeting of stockholders to be held on May 2, 1997 sets forth certain information with respect to the ownership of the Company's Common Stock and is incorporated herein by reference.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The section entitled "Certain Transactions" appearing in the Company's proxy statement for the annual meeting of stockholders to be held on May 2, 1997 sets forth certain information with respect to certain business relationships and transactions between the Company and its directors and officers and is incorporated herein by reference.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
(1) Financial Statements included in Item 8 herein:
Report of Independent Auditors Consolidated Balance Sheets as of December 31, 1996 and 1995 Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1995 and 1994 Consolidated Statements of Cash Flows for years ended December 31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements
(2) Financial Statement Schedules included in Item 8 herein:
All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.
(3) Exhibits:
The information required by this Item 14(a)(3) is set forth in the Index to Exhibits accompanying this Annual Report on Form 10-K.
(b) No Current Reports on Form 8-K were filed during the quarter ended December 31, 1996.
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, Encore Wire Corporation has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
ENCORE WIRE CORPORATION Date: March 26, 1997
By: /s/ VINCENT A. REGO ---------------------------------------- Vincent A. Rego President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed by the following persons in the capacities and on the dates indicated.
INDEX TO EXHIBITS


ITEM 1.	Business.
	The trust fund relating to Southern Pacific Secured Assets Corp. Mortgage Pass-Through Certificates, Series 1996-2 (the "Certificates"), was established pursuant to a Pooling and Servicing Agreement dated as of May 8, 1996 among Southern Pacific Secured Assets Corp., as company, (the "Company"), Advanta Mortgage Corp. USA, as master servicer, (the "Master Servicer"), and Bankers Trust Company of California, N.A., as trustee (the "Trustee"). (The Pooling and Servicing Agreement is hereby incorporated herein by reference as Exhibit 4 of the Registrant's Current Report on Form 8-K filed with Securities and Exchange Commission on May 31, 1996.)
	The Series 1996-2 will represent in the aggregate the entire beneficial ownership interest in a trust fund (the "Trust Fund"). The Trust Fund will consist primarily of a segregated pool (a "Mortgage Pool") of one- to four-family and/or multifamily residential first and/or junior mortgage loans or manufactured housing conditional sales contracts and installment loan agreements (collectively, the "Mortgage Loans") or interests therein (which may include Mortgage Securities as defined herein), acquired by the Company from one or more affiliated or unaffiliated institutions (the "Sellers"). The Mortgage Loans and other assets in the Trust Fund will be held in trust for the benefit of the holders of the related series of Certificates (the "Certificateholders").
	Information with respect to the business of the Trust would not be meaningful because the only "business" of the Trust is the collection on the Mortgage Loans and distribution of payments on the Certificates to Certificateholders. This information is accurately summarized in the Monthly Reports to Certificateholders, which are filed on Form 8-K. There is no additional relevant information to report in response to Item 101 of Regulation S-K.
ITEM 2.

ITEM 2.	Properties.
	The Sponsor owns no property. The Series 1996-2 Certificates, in the aggregate, represent the beneficial ownership in a Trust consisting primarily of the Mortgage Loans. The Trust will acquire title to real estate only upon default of the mortgagors under the Mortgage Loan. Therefore, this item is inapplicable.
ITEM 3.

ITEM 3.	Legal Proceedings.
	None.
ITEM 4.

ITEM 4.	Submission of Matters to a Vote of 		Security Holders.
	No matters were submitted to a vote of Certificateholders during the fiscal year covered by this report.
PART II
ITEM 5.

ITEM 5.	Market for Registrant's Common Equity 		and Related Stockholder Matters.
	The Series 1996-2 Certificates represent, in the aggregate, the beneficial ownership in a trust fund consisting primarily of the Mortgage Loans. The Certificates are owned by Certificateholders as trust beneficiaries. Strictly speaking, Registrant has no "common equity," but for purposes of this Item only, Registrant's Mortgage Pass-Through Certificates are treated as "common equity."
(a)	Market Information. There is no established public trading market for Registrant's Certificates. Registrant believes the Certificates are traded primarily in intra-dealer markets and non-centralized inter-dealer markets.
(b)	Holders. The number of registered holders of all classes of Certificates on December 31, 1996 was 21.
(c)	Dividends. Not applicable. The information regarding dividends required by sub-paragraph (c) of Item 201 of Regulation S-K is inapplicable because the Trust does not pay dividends. However, information as to distribution to Certificateholders is provided in the Monthly Reports to Certificateholders for each month of the fiscal year in which a distribution to Certificateholders was made.
ITEM 6.

ITEM 6.	Selected Financial Data.
	Not Applicable. Because of the limited activities of the Trust, the Selected Financial Data required by Item 301 of Regulation S-K does not add relevant information to that provided by the Monthly Reports to Certificateholders, which are filed on a monthly basis on Form 8-K.
ITEM 7.

ITEM 7.	Management's Discussion and Analysis of 		Financial Condition and Results of 		Operations.
	Not Applicable. The information required by Item 303 of Regulation S-K is inapplicable because the Trust does not have management per se, but rather the Trust has a Trustee who causes the preparation of the Monthly Reports to Certificateholders. The information provided by the Monthly Reports to Certificateholders, which are filed on a monthly basis on Form 8-K, does provide the relevant financial information regarding the financial status of the Trust.
ITEM 8.

ITEM 8.	Financial Statements and Supplementary 		Data.
Monthly Report to Certificateholders as to distributions made on June 25, 1996 (to be filed on Form 8-K with the Securities and Exchange Commission).
Monthly Report to Certificateholders as to distributions made on July 25, 1996 (to be filed on Form 8-K with the Securities and Exchange Commission).
Monthly Report to Certificateholders as to distributions made on August 26, 1996 (to be filed on Form 8-K with the Securities and Exchange Commission).
Monthly Report to Certificateholders as to distributions made on September 25, 1996 (to be filed on Form 8-K with the Securities and Exchange Commission).
Monthly Report to Certificateholders as to distributions made on October 25, 1996 (to be filed on Form 8-K with the Securities and Exchange Commission).
Monthly Report to Certificateholders as to distributions made on November 25, 1996 (to be filed on Form 8-K with the Securities and Exchange Commission).
Monthly Report to Certificateholders as to distributions made on December 26, 1996 (to be filed on Form 8-K with the Securities and Exchange Commission).
Monthly Report to Certificateholders as to distributions made on January 27, 1997 (to be filed on Form 8-K with the Securities and Exchange Commission).
Monthly Report to Certificateholders as to distributions made on February 25, 1997 (to be filed on Form 8-K with the Securities and Exchange Commission).
Annual Statement of Compliance by the Master Servicer is not currently available and will be subsequently filed on Form 8.
Independent Accountant's Report on Servicer's servicing activities is not currently available and will be subsequently filed on Form 8.
ITEM 9.

ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
	None.
PART III
ITEM 10.

ITEM 10.	Directors and Executive Officers of 		Registrant.
	Not Applicable. The Trust does not have officers or directors. Therefore, the information required by items 401 and 405 of Regulation S-K are inapplicable.
ITEM 11.

ITEM 11.	Executive Compensation. 	 	Not Applicable. The Trust does not have officers or directors to whom compensation needs to be paid. Therefore, the information required by item 402 of regulation S-K is inapplicable.
ITEM 12.

ITEM 12.	Security Ownership of Certain 		Beneficial Owners and Management.
	(a)	Security ownership of certain beneficial owners. Under the Pooling and Servicing Agreement governing the Trust, the holders of the Certificates generally do not have the right to vote and are prohibited from taking part in management of the Trust. For purposes of this Item and Item 13

ITEM 13.	Certain Relationships and Related 		Transactions.
	(a)	Transactions with management and others. Registrant knows of no transaction or series of transactions during the fiscal year ended December 31, 1996, or any currently proposed transaction or series of transactions, in an amount exceeding $60,000 involving the Registrant in which the Certificateholders identified in Item 12(a) had or will have a direct or indirect material interest. There are no persons of the types described in Item 404(a)(1),(2) and (4) of Regulation S-K, however, the information required by Item 404(a)(3) of Regulation S-K is hereby incorporated by reference in Item 12 herein.
	(b)	Certain business relationships. None.
	(c)	Indebtedness of management. Not Applicable. The Trust does not have management consisting of any officers or directors. Therefore, the information required by item 404 of Regulation S-K is inapplicable.
	(d)	Transactions with promoters. Not Applicable. The Trust does not use promoters. Therefore, the information required by item 404 of Regulation S-K is inapplicable.
PART IV
ITEM 14.

ITEM 14.	Exhibits, Financial Statement Schedules, 		and Reports on Form 8-K.
	(a)	The following is a list of documents filed as part of this report:
	EXHIBITS
	Monthly Report to Certificateholders as to distributions made on June 25, 1996 (to be filed on Form 8-K with the Securities and Exchange Commission).
	Monthly Report to Certificateholders as to distributions made on July 25, 1996 (to be filed on Form 8-K with the Securities and Exchange Commission).
	Monthly Report to Certificateholders as to distributions made on August 26, 1996 (to be filed on Form 8-K with the Securities and Exchange Commission).
	Monthly Report to Certificateholders as to distributions made on September 25, 1996 (to be filed on Form 8-K with the Securities and Exchange Commission).
	Monthly Report to Certificateholders as to distributions made on October 25, 1996 (to be filed on Form 8-K with the Securities and Exchange Commission).
	Monthly Report to Certificateholders as to distributions made on November 25, 1996 (to be filed on Form 8-K with the Securities and Exchange Commission).
	Monthly Report to Certificateholders as to distributions made on December 26, 1996 (to be filed on Form 8-K with the Securities and Exchange Commission).
	Monthly Report to Certificateholders as to distributions made on January 27, 1997 (to be filed on Form 8-K with the Securities and Exchange Commission).
	Monthly Report to Certificateholders as to distributions made on February 25, 1997 (to be filed on Form 8-K with the Securities and Exchange Commission).
	Annual Statement of Compliance by the Master Servicer is not currently available and will be subsequently filed on Form 8.
	Independent Accountant's Report on Servicer's servicing activities is not currently available and will be subsequently filed on Form 8.
	(b)	The following Reports on Form 8-K were filed during the last quarter of the period covered by this Report:
	None
	(c)	The exhibits required to be filed by Registrant pursuant to Item 601 of Regulation S-K are listed above and in the Exhibit Index that immediately follows the signature page hereof.
	(d)	Not Applicable. The Trust does not have any subsidiaries or affiliates. Therefore, no financial statements are filed with respect to subsidiaries or affiliates.
Supplemental information to be furnished with reports filed pursuant to Section 15(d) by registrants which have not registered securities pursuant to Section 12 of the Act.
	No annual report, proxy statement, form of proxy or other soliciting material has been sent to Certificateholders, and the Registrant does not contemplate sending any such materials subsequent to the filing of this report.
	SIGNATURE
	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.
			By:	Bankers Trust Company of 				California, N.A. 				not in its individual 				capacity but solely as a 				duly authorized agent of the 				Registrant pursuant to the 				Pooling and Servicing 				Agreement, dated as of 				May 8, 1996.
			By:	/s/Judy L. Gomez 				Judy L. Gomez 				Assistant Vice President
Date: March 26, 1997
EXHIBIT INDEX
Exhibit	Document
1.1		Monthly Report to Certificateholders as 		to distributions made on June 25, 		1996 (to be filed on Form 8-K with the 		Securities and Exchange Commission).
1.2		Monthly Report to Certificateholders as 		to distributions made on July 25, 		1996 (to be filed on Form 8-K with the 		Securities and Exchange Commission).
1.3		Monthly Report to Certificateholders as 		to distributions made on August 26, 		1996 (to be filed on Form 8-K with the 		Securities and Exchange Commission).
1.4		Monthly Report to Certificateholders as 		to distributions made on September 25, 		1996 (to be filed on Form 8-K with the 		Securities and Exchange Commission).
1.5		Monthly Report to Certificateholders as 		to distributions made on October 25, 		1996 (to be filed on Form 8-K with the 		Securities and Exchange Commission).
1.6		Monthly Report to Certificateholders as 		to distributions made on November 25, 		1996 (to be filed on Form 8-K with the 		Securities and Exchange Commission).
1.7		Monthly Report to Certificateholders as 		to distributions made on December 26, 		1996 (to be filed on Form 8-K with the 		Securities and Exchange Commission).
1.8		Monthly Report to Certificateholders as 		to distributions made on January 27, 		1997 (to be filed on Form 8-K with the 		Securities and Exchange Commission).
1.9		Monthly Report to Certificateholders as 		to distributions made on February 25, 		1997 (to be filed on Form 8-K with the 		Securities and Exchange Commission).
2.0		Pooling and Servicing Agreement of 		Registrant dated as of May 8, 1996 		(hereby incorporated herein by reference 		as Exhibit 4 of Registrant's Current 		Report on Form 8-K filed with Securities 		and Exchange Commission on May 31, 		1996).