SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number: 1-6701
Full title of the Plan: Providian Corporation Thrift Savings Plan
Name of issuer of the securities held pursuant to the Plan
and the address of its principal executive office:
Providian Corporation
Providian Center
400 West Market Street
Louisville, Kentucky 40202
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Plan Administrator has duly caused this annual report to be signed by the
undersigned thereunto duly authorized.
PROVIDIAN CORPORATION
/S/ ROGER L. SMITH
ROGER L. SMITH
PLAN ADMINISTRATOR
June 20, 1997
<PAGE>
Audited Financial Statements and Schedules
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
Years ended December 31, 1996 and 1995
Audited Financial Statements
Report of Independent Auditors 1
Statements of Net Assets Available for Benefits with Fund Information 2
Statements of Changes in Net Assets Available
for Benefits with Fund Information 4
Notes to Financial Statements 6
Schedules
Line 27a - Schedule of Assets Held for Investment Purposes 14
Line 27d - Schedule of Reportable Transactions 16
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Plan Administrator
Providian Corporation Thrift Savings Plan
We have audited the accompanying statements of net assets available for
benefits with fund information of Providian Corporation Thrift Savings Plan as
of December 31, 1996 and 1995, and the related statements of changes in net
assets available for benefits with fund information for the years then ended.
These financial statements are the responsibility of the Plan'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 net assets available for benefits of the Plan at
December 31, 1996 and 1995, and the changes in its net assets available for
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of assets held for investment purposes as of December 31, 1996, and reportable
transactions for the year ended December 31, 1996, are presented for purposes
of complying with the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974, and are not a required part of the basic financial statements. The fund
information in the financial statements is presented for purposes of
additional analysis rather than to present the net assets available for
benefits and changes in net assets available for benefits of each fund. The
supplemental schedules and fund information have been subjected to the
auditing procedures applied in our audit of the basic financial statements
and, in our opinion, are fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
/s/ERNST & YOUNG LLP
Louisville, Kentucky
June 20, 1997
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
December 31, 1996
<CAPTION>
Merrill
Providian Lynch
Short Term Providian Providian Global Corporate
Total Stock Equity Inde Stable Value Allocation Bond
Funds Fund Fund Fund Fund Fund
---------------- ----------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Providian Corporation common stock $114,801,945 $114,801,945
Guaranteed interest contracts 64,995,821 $ 64,995,821
Investments in registered mutual funds 54,979,274 $ 24,428,062 3,199,746 $2,652,475 $2,712,529
Temporary investments 1,087,273 1,087,273
Loans receivable from participants 5,455,885
------------ ------------ ------------ ------------ ------------ ------------
241,320,198 114,801,945 25,515,335 68,195,567 2,652,475 2,712,529
Cash 595,586 318,714 52,676 140,972 5,367 5,367
Accrued income on investments 67,203 32,861 7,258 19,422 739 739
Contributions receivable from
participating employers 1,595,882 780,385 172,355 461,209 17,555 17,555
Miscellaneous receivable 64,537 31,558 6,970 18,651 710 710
============ ============ ============ ============ ============ ============
NET ASSETS AVAILABLE FOR BENEFITS $243,643,406 $115,965,463 $ 25,754,594 $ 68,835,821 $ 2,676,846 $ 2,736,900
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Merrill Merrill Merrill Merrill Fidelity
Lynch Lynch Lynch Lynch Advisor Delaware
Basic Asset Asset Growth Group Templeton
Value Income Growth Opportunities Trend Foreign Loan
Fund Fund Fund Fund Fund Fund Fund
------------ ---------- ---------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Providian Corporation common stock
Guaranteed interest contracts
Investments in registered mutual fund $ 4,354,859 $ 755,730 $ 487,851 $ 8,323,416 $ 3,234,911 $ 4,829,695
Temporary investments
Loans receivable from participants $ 5,455,885
------------ --------- --------- ------------ ----------- ----------- ------------
4,354,859 755,730 487,851 8,323,416 3,234,911 4,829,695 5,455,885
Cash 8,780 1,462 969 17,072 6,829 9,756 27,622
Accrued income on investments 1,210 202 135 2,352 941 1,344
Contributions receivable from
participating employers 28,726 4,788 3,193 55,856 22,342 31,918
Miscellaneous receivable 1,162 194 128 2,259 904 1,291
============ ========= ========= ============ =========== =========== ============
NET ASSETS AVAILABLE FOR BENEFITS $ 4,394,737 $ 762,376 $ 492,276 $ 8,400,955 $ 3,265,927 $ 4,874,004 $ 5,483,507
============ ========= ========= ============ =========== =========== ============
See notes to financial statements.
</TABLE>
<TABLE>
<PAGE>
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
December 31, 1995
<CAPTION>
Merrill Merrill
Lynch Lynch
Providian Providian Providian Global Corporate
Total Stock Equity Index Stable Value Allocation Bond
Funds Fund Fund Fund Fund Fund
------------- ------------- -------------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Providian Corporation common stock $ 98,569,116 $98,569,116
Guaranteed interest contracts 64,679,453 $64,679,453
Investments in registered mutual funds 41,148,644 $18,956,054 4,236,440 $1,280,546 $2,825,679
Temporary investments 791,432 791,432
Loans receivable from participants 5,420,225
------------ ----------- ----------- ----------- ---------- -----------
210,608,870 98,569,116 19,747,486 68,915,893 1,280,546 2,825,679
Cash 115,052 55,068 11,018 38,560 689 1,606
Accrued income on investments 44,211 21,221 4,244 14,855 265 619
Contributions receivable from
participating employers 1,517,015 728,167 145,633 509,717 9,103 21,238
Contributions receivable from
participating employees 326,322 131,826 26,365 92,278 1,648 3,845
Miscellaneous receivable 26,560 12,749 2,550 8,924 159 372
------------ ----------- ----------- ----------- ---------- -----------
212,638,030 99,518,147 19,937,296 69,580,227 1,292,410 2,853,359
LIABILITIES
Miscellaneous payable 309
============ =========== =========== =========== ========== ===========
NET ASSETS AVAILABLE FOR BENEFITS $212,637,721 $99,518,147 $19,937,296 $69,580,227 $1,292,410 $ 2,853,359
============ =========== =========== =========== ========== ===========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Merrill Merrill Merrill Fidelity
Lynch Lynch Lynch Advisor Delaware
Basic Asset Asset Growth Group Templeton
Value Income Growth Opportunities Trend Foreign Loan
Fund Fund Fund Fund Fund Fund Fund
------------ ---------- ------------- ------------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
Providian Corporation common stock
Guaranteed interest contracts
Investments in registered mutual funds $2,424,517 $ 785,950 $ 386,121 $5,240,511 $1,480,781 $3,532,045
Temporary investments
Loans receivable from participants $ 5,420,225
---------- ---------- ---------- ---------- ---------- ---------- ----------
2,424,517 785,950 386,121 5,240,511 1,480,781 3,532,045 5,420,225
Cash 1,378 459 226 2,984 804 1,951 309
Accrued income on investments 531 177 89 1,149 309 752
Contributions receivable from
participating employers 18,204 6,068 3,035 39,442 10,619 25,789
Contributions receivable from
participating employees 3,296 1,099 548 7,141 1,922 4,669 51,685
Miscellaneous receivable 319 106 52 691 186 452
---------- ---------- ---------- ---------- ---------- ---------- ----------
2,448,245 793,859 390,071 5,291,918 1,494,621 3,565,658 5,472,219
LIABILITIES
Miscellaneous payable 309
=========== ========== ========== ========== ========== ========== ==========
NET ASSETS AVAILABLE FOR BENEFITS $2,448,245 $ 793,859 $ 390,071 $5,291,918 $1,494,621 $3,565,658 $5,471,910
=========== ========== ========== ========== ========== ========== ==========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
For the Year Ended December 31, 1996
<CAPTION>
Merrill Merrill
Providian Lynch Lynch
Short Term Providian Providian Global Corporate
Total Stock Equity Index Stable Value Allocation Bond
Funds Fund Fund Fund Fund Fund
-------------- ------------- ------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 3,395,687 $ 1,816,830 $237,414 $ 186,400
Interest and other 4,300,136 (382,255) $ 55,941 $ 4,569,974 3,310 4,247
Net appreciation (depreciation) in
fair value of investments 30,455,459 24,097,398 4,895,143 547 50,133 (132,178)
Contributions from participating employers 5,578,333 4,210,055 140,369 961,648 23,917 24,404
Contributions from participating employees 11,394,281 4,669,158 1,500,174 2,495,203 246,625 215,086
------------- ------------ ------------ ----------- ----------- -----------
55,123,896 34,411,186 6,591,627 8,027,372 561,399 297,959
Distributions from the plan, net (23,982,402) (10,261,475) (2,161,795) (8,622,521) (69,296) (428,758)
Administrative expenses (135,809) (46,379) (6,117) (76,170) (547) (677)
Net participant transfers between funds (7,656,016) 1,393,583 (73,087) 892,880 15,017
------------- ------------ ------------ ----------- ----------- -----------
(24,118,211) (17,963,870) (774,329) (8,771,778) 823,037 (414,418)
NET INCREASE (DECREASE) 31,005,685 16,447,316 5,817,298 (744,406) 1,384,436 (116,459)
Net assets available for
benefits at beginning of year 212,637,721 99,518,147 19,937,296 69,580,227 1,292,410 2,853,359
------------- ------------ ------------ ----------- ----------- -----------
NET ASSETS AVAILABLE FOR
BENEFITS AT END OF YEAR $ 243,643,406 $ 115,965,463 $ 25,754,594 $ 68,835,821 $ 2,676,846 $ 2,736,900
============= ============ ============ =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Merrill Merrill Merrill Fidelity
Lynch Lynch Lynch Advisor Delaware
Basic Asset Asset Growth Group Templeton
Value Income Growth Opportunities Trend Foreign Loan
Fund Fund Fund Fund Fund Fund Fund
----------- ------------ ---------- ------------- ------------------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 252,609 $ 38,808 $ 7,227 $ 445,043 $ 213,352 $ 198,004
Interest and other 6,795 995 2,795 20,789 7,421 10,124
Net appreciation (depreciation) in
fair value of investments 289,190 (7,316) 49,802 713,096 (413) 500,057
Contributions from participating employers 46,593 10,267 9,819 88,739 12,982 49,540
Contributions from participating employees 349,301 53,037 143,276 807,092 406,772 508,557
---------- ----------- ----------- ----------- ---------- ---------- ----------
944,488 95,791 212,919 2,074,759 640,114 1,266,282
Distributions from the plan, net (412,455) (103,454) (29,728) (521,327) (156,699) (425,230) $ (789,664)
Administrative expenses (881) (214) (239) (2,581) (931) (1,073)
Net participant transfers between funds 1,415,340 (23,606) (80,747) 1,558,186 1,288,822 468,367 801,261
--------- ---------- ---------- ----------- ----------- ---------- ----------
1,002,004 (127,274) (110,714) 1,034,278 1,131,192 42,064 11,597
NET INCREASE (DECREASE) 1,946,492 (31,483) 102,205 3,109,037 1,771,306 1,308,346 11,597
Net assets available for
benefits at beginning of year 2,448,245 793,859 390,071 5,291,918 1,494,621 3,565,658 5,471,910
--------- ---------- ---------- ----------- --------- ---------- ----------
NET ASSETS AVAILABLE FOR
BENEFITS AT END OF YEAR $ 4,394,737 $ 762,376 $ 492,276 $ 8,400,955 $ 3,265,927 $ 4,874,004 $5,483,507
========== =========== =========== =========== ========== ========== ==========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
For the Year Ended December 31, 1995
<CAPTION>
Merrill Merrill
Lynch Lynch
Providian Providian Providian Global Corporate
Total Stock Equity Index Stable Value Allocation Bond
Funds Fund Fund Fund Fund Fund
--------------- ----------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 3,004,265 $ 2,219,398 $ 102,584 $ 120,615
Interest and other 5,406,608 236,280 $ 48,343 $ 5,087,591 2,061 3,114
Net appreciation in fair value of investments 31,407,551 24,085,046 5,378,001 134,735 185,607
Contributions from participating employers 5,913,749 5,049,502 151,433 570,192 9,882 21,784
Contributions from participating employees 11,533,139 5,143,847 1,349,290 3,182,621 175,183 143,413
------------- ------------ ----------- ------------ ----------- ----------
57,265,312 36,734,073 6,927,067 8,840,404 424,445 474,533
Distributions from the plan, net (21,793,017) (9,080,653) (1,401,621) (9,294,753) (132,132) (88,092)
Administrative expenses (342,897) (200,237) (6,055) (132,272) (378) (409)
Net participant transfers between fun (5,273,904) 431,765 (1,452,598) (8,726) 1,271,637
------------- ------------ ----------- ------------ ----------- -----------
(22,135,914) (14,554,794) (975,911) (10,879,623) (141,236) 1,183,136
NET INCREASE (DECREASE) 35,129,398 22,179,279 5,951,156 (2,039,219) 283,209 1,657,669
Net assets available for
benefits at beginning of year 177,508,323 77,338,868 13,986,140 71,619,446 1,009,201 1,195,690
------------- ------------ ------------ ----------- ----------- -----------
NET ASSETS AVAILABLE FOR
BENEFITS AT END OF YEAR $ 212,637,721 $ 99,518,147 $ 19,937,296 $ 69,580,227 $ 1,292,410 $ 2,853,359
============= ============ ============ ============ ============ ===========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Merrill Merrill Merrill Fidelity
Lynch Lynch Lynch Advisor Delaware
Basic Asset Asset Growth Group Templeton
Value Income Growth Opportunities Trend Foreign Loan
Fund Fund Fund Fund Fund Fund Fund
--------------- ---------------------------------- ----------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 96,799 $ 41,897 $ 8,775 $ 127,877 $ 67,354 $ 218,966
Interest and other 3,586 1,188 1,459 11,474 2,853 8,659
Net appreciation in fair value of investments 290,431 53,989 18,490 894,030 274,974 92,248
Contributions from participating employers 19,613 6,853 3,393 41,963 11,254 27,880
Contributions from participating employees 181,894 54,142 131,825 557,981 156,930 446,213 9,800
----------- ------- --------- ----------- ---------- ------------ ----------
592,323 158,069 163,942 1,633,325 513,365 793,966 9,800
Distributions from the plan, net (228,485) (36,902) (28,921) (323,452) (200,303) (212,275) (765,428)
Administrative expenses (476) (213) (236) (1,329) (358) (934)
Net participant transfers between fun 1,223,127 172,073 (156,590) 1,436,661 593,013 531,313 1,232,229
----------- ------- --------- ---------- ---------- ------------- ----------
994,166 134,958 (185,747) 1,111,880 392,352 318,104 466,801
NET INCREASE (DECREASE) 1,586,489 293,027 (21,805) 2,745,205 905,717 1,112,070 476,601
Net assets available for
benefits at beginning of year 861,756 500,832 411,876 2,546,713 588,904 2,453,588 4,995,309
----------- -------- --------- ---------- ---------- ------------- ----------
NET ASSETS AVAILABLE FOR
BENEFITS AT END OF YEAR $ 2,448,245 $793,859 $ 390,071 $5,291,918 $1,494,621 3,565,658 $5,471,910
=========== ======== ========= ========== ========== ============= ==========
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
For the Years Ended December 31, 1996 and 1995
NOTE A - DESCRIPTION OF THE PLAN
The following description of the Providian Corporation Thrift Savings Plan (the
Plan) provides only general information. Participants should refer to the Plan
document for a complete description of the Plan's provisions.
GENERAL
The Plan is a defined contribution plan covering each employee of Providian
Corporation (Providian) or a participating subsidiary as soon as
administratively feasible following completion of one year of service. The Plan
is funded on a current basis with contributions from participants and their
employers. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).
On June 10, 1997, Providian completed the Plan and Agreement of Merger and
Reorganization (the "Merger Agreement") with AEGON N.V. ("AEGON") and LT Merger
Corp., a wholly owned subsidiary of AEGON ("Merger Sub"), pursuant to which
Merger Sub was merged with and into Providian. Immediately prior to the closing
of the merger, Providian spun-off its banking operation as a separate company,
Providian Financial Corporation, to Providian shareholders (the "Distribution").
For each share of Providian stock owned, shareholders receive as a dividend one
share of Providian Financial Corporation in the Distribution. Pursuant to the
merger agreement, among other things, (a) Providian is the surviving corporation
in the merger and a wholly owned subsidiary of AEGON, and (b) each shareholder
of Providian receives .434417 of one common share of AEGON in exchange for each
share of Providian's common stock.
In connection with this merger and distribution, an AEGON Stock Fund and a
Providian Financial Corporation Stock Fund were established to receive the
shares exchanged and distributed related to shares held in the Providian Short
Term Stock Fund. Participants will have the option to move funds out of, but not
into, these two new funds. The Providian Financial Corporation Stock Fund will
cease to be an investment fund at a date yet to be determined by the Plan's
management. Any funds remaining in the Providian Financial Corporation Stock
Fund at that time will automatically be converted to other funds.
CONTRIBUTIONS
Participants may elect to contribute an amount not less than 1% nor more than
15% of their earnings. Participants' contributions can be made on a pre-tax or
after-tax basis or a combination of both. Rollovers from other qualified plans
are permitted. The employer match, up to the first 6% of participants'
contributions, was at the following rates for 1996 and 1995:
55% of eligible contributions invested in the Providian Stock Fund
50% of eligible contributions invested in any other investment fund
provided for in the Plan
Effective June 6, 1997, the Plan was amended to provide for an employer match,
up to the first 6% of participants' contributions, of 55% of all eligible
contributions.
In addition to the employer matching contributions noted above, participants in
the Providian Life and Health Insurance Retirement Account are entitled to
receive a contribution based upon a percentage of eligible compensation (4.0% in
1996 and 1995). As a result of this provision, employer contributions of
$1,479,603 and $1,405,584 were recorded in 1996 and 1995, respectively.
Under the Tax Reform Act of 1986, the Plan is subject to a nondiscrimination
test which limits the contribution rate of certain highly compensated employees.
The Plan is operated in compliance with the nondiscrimination limitations.
INVESTMENT OPTIONS
During 1996 and 1995, all employers' contributions were made to an employer
contribution account in the Providian Short Term Stock Fund (the Providian Stock
Fund prior to September 1, 1996), except for participants who are at least 55
years of age, who are eligible to invest the employer contributions in any fund.
Additionally, upon reaching age 55, participants may transfer their account
balance from the Providian Short Term Stock Fund to any other fund. A
proportionate share of the net increase or decrease resulting from investment
income and net appreciation or depreciation in investments in each fund is
allocated to each participant on the valuation date.
Effective June 6, 1997, the Plan was amended and the requirement that a
participant attain the age of 55 to be eligible to invest employer contributions
in any fund was eliminated.
Plan Assets are administered in the following eleven separate funds:
PROVIDIAN SHORT TERM STOCK FUND (FORMERLY THE PROVIDIAN STOCK FUND): Invests
primarily in shares of Providian stock. Effective September 1, 1996, the
former Providian Stock Fund was restructured to include an employee stock
ownership plan (ESOP) holding Providian common stock. Under the ESOP
arrangement, direct cash payments of quarterly dividends are made to
participants on shares of Providian stock in the participant's account
(except in certain limited circumstances).
This fund was renamed the Providian Short Term Stock Fund because investments
are held in cash temporarily pending purchase of Providian common stock under
the Providian ESOP arrangement.
Effective June 6, 1997, the Plan was amended and the ESOP arrangement was
eliminated.
PROVIDIAN EQUITY INDEX FUND: Invests primarily in futures, options,
short-term investments, and other securities with the objective of
closely matching the performance of the Standard & Poor's 500 Common
Stock Index.
PROVIDIAN STABLE VALUE FUND: Invests primarily in a synthetic guaranteed
interest contract (GIC), the underlying assets of which consist of a
portfolio of intermediate-term bonds with an average credit quality of
AA. The fund also invests in intermediate and/or short-term floating
rate GICs and a short-term money market fund.
MERRILL LYNCH GLOBAL ALLOCATION FUND: Invests in a portfolio of U.S. and
foreign equity, debt and money market securities.
MERRILL LYNCH CORPORATE BOND FUND - INVESTMENT GRADE PORTFOLIO: Invests in
long-term corporate bonds rated A or better by a nationally recognized
rating agency.
MERRILL LYNCH BASIC VALUE FUND: Invests solely in high-quality common
stocks that provide high current income and a low level of volatility
relative to the markets.
MERRILL LYNCH ASSET INCOME FUND: Invests approximately 65% of the funds in
fixed-income instruments.
MERRILL LYNCH ASSET GROWTH FUND: Invests a minimum of 65% in equity
instruments. The balance is invested in debt and money market
securities.
FIDELITY ADVISOR GROWTH OPPORTUNITIES FUND: Invests primarily in common
stocks and securities convertible into common stocks inside the United
States.
DELAWARE GROUP TREND FUND: Invests primarily in common stocks and
securities convertible into common stocks of emerging and other
growth-oriented companies.
TEMPLETON FOREIGN FUND: Invests primarily in stocks and debt instruments of
companies and governments outside the United States.
WITHDRAWALS
A participant may withdraw all or part of his or her after tax and/or employer
contribution account in cash once during any calendar year. A participant with
less than 5 years participation in the Plan may not withdraw any amounts
contributed by an employer within the two year period immediately preceding the
date of withdrawal.
LOANS RECEIVABLE FROM PARTICIPANTS
Within certain pre-defined criteria, Plan participants may borrow from $1,000 to
the lesser of (i) $50,000, (ii) 50% of the vested portion of the participant's
individual account, or (iii) 100% of the participant's pre-tax contribution
account from their respective pre-tax accounts. Loan repayment terms cannot
exceed five years. The fixed interest rate on a loan is the prime rate as
published in the WALL STREET JOURNAL on the last business day of the preceding
month plus 1%.
VESTING
A participant or his or her beneficiary is entitled to receive the participant's
full interest in the Plan upon the earlier of the participant's retirement at
age 65 or older, death or medical disability. For any other type of termination,
the participant is entitled to receive the value of his or her contribution
account as of the valuation date coincident with, or next following, termination
of employment and the vested interest in his or her employer contribution
account determined on the basis of years of service with the employer as
follows:
Vested Percentage of
Years of Service Employer Contribution Account
- ----------------------------- --------------------------------------------
Less than 2 0%
2 but less than 3 15%
3 but less than 4 35%
4 but less than 5 65%
5 years or more 100%
At a minimum, the participant is entitled to receive his or her contributions to
the Plan, without interest.
The value of the nonvested portion of the employer contribution account
forfeited by a participant who terminates from the Plan is held until five
consecutive one-year breaks in service have expired or the participant receives,
or is deemed to receive, a lump sum distribution from the participant's
individual account. Any forfeitures attributable to the employer contribution
account shall be used first to pay for any forfeitures which are to be restored
pursuant to a participant being reinstated into the Plan and then to pay Plan
administrative expenses. Remaining forfeitures can be used to reduce future
employer contributions.
PLAN TERMINATION
Although the employers intend to continue the Plan, they have the right to
terminate the Plan or to temporarily suspend or permanently discontinue
contributions at any time. In the event of termination or discontinuance of
contributions, all rights and interests of the participants shall become fully
vested and nonforfeitable. In no event will the assets of the Plan revert to the
employer or be used or applied for any purpose other than the exclusive benefit
of participants and their beneficiaries or costs of administration.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the Plan have been prepared on an
accrual basis in accordance with generally accepted accounting principles
(GAAP). The preparation of financial statements in conformity with GAAP requires
the Plan's management to make estimates and
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
NOTE B - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
assumptions that affect the amounts reported in the financial statements and the
accompanying notes. Actual results could differ from those estimates.
Securities which are traded on a national securities exchange are valued at the
last reported sales price on the last business day of the year. Shares of
registered mutual funds are valued at quoted market prices which represent the
net asset value of shares held by the Plan at year-end. The guaranteed interest
contracts with Commonwealth Life Insurance Company (Commonwealth) and Peoples
Security Life Insurance Company (Peoples Security), subsidiaries of Providian,
are stated at cost plus accrued interest (contract value) which approximates
fair value. Temporary investments are stated at current market value which
approximates cost. Loans receivable from participants are carried at unpaid
principal balances. The Plan presents in the statement of changes in net assets
available for benefits with fund information, the net appreciation
(depreciation) in the fair value of its investments which consists of the
realized gains or losses and the unrealized appreciation (depreciation) on those
investments. The daily change in market value of futures contracts is included
in net appreciation (depreciation) in fair value of investments. Margin
requirements on futures contracts, equal to the change in market value, usually
are settled on a daily basis.
Merrill Lynch Trust Company, Trustee of the Plan (Trustee), in accordance with
the Trust Agreement, has exclusive authority and discretion to manage and
control the trust funds, except Providian Capital Management, Inc., a subsidiary
of Providian, serves as the investment manager for the Providian Equity Index
Fund.
The Trustee accounts for loans receivable as a separate fund. Accordingly, such
loans and related activity are shown as a separate fund (Loan Fund) in the
accompanying financial statements. Distributions from the Loan Fund represent
withdrawals from the Plan which are used to repay a participant's note. All
other normal borrowings and payments, including interest charged on outstanding
loans, are reflected in fund transfers.
The Plan does not report requested distributions from the Plan that have not yet
been paid as a liability in the Statements of Net Assets Available for Benefits
with Fund Information or as a distribution from the Plan in the Statements of
Changes in Net Assets Available for Benefits with Fund Information. Such amounts
are not deducted from the Plan's net assets available for benefits until paid.
However, for presentation in Form 5500, the Department of Labor (DOL) continues
to require such amounts to be included in liabilities and distributions from the
Plan. Using the DOL prescribed method, accounts and other payables in Form 5500
were $531,714 and $105,106 at December 31, 1996 and 1995, respectively, while
distributions from the Plan were $24,409,319 and $21,720,596 in 1996 and 1995,
respectively.
The Plan provides that all costs and expenses incurred in administering the
Plan, including the fees and expenses of the Trustee, are to be paid by the
Plan, unless they are paid by the employer. The Plan incurred administrative
costs totaling $135,809 and $342,897 during 1996 and 1995, respectively.
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
NOTE C - FEDERAL INCOME TAXES
The Internal Revenue Service ruled on February 10, 1987 that the Plan qualifies
under Section 401(a) of the Internal Revenue Code (IRC) and, therefore, the
related trust is not subject to tax under present income tax law. Once
qualified, the Plan is required to operate in conformity with the IRC to
maintain its qualification. The Plan administrator is not aware of any course of
action or series of events that have occurred that might adversely affect the
Plan's qualified status.
Effective January 1, 1990, the Plan was amended to include pre-tax 401(k)
and loan features. Effective September 1, 1996, the plan was amended to include
the ESOP discussed in Note A. Favorable determination letters have been received
by the Plan for these amendments.
NOTE D - TRANSACTIONS WITH PARTIES-IN-INTEREST
Transactions with Providian, Commonwealth, and Peoples Security, all
participating employers in the Plan, and Merrill Lynch are summarized as
follows:
<TABLE>
1996 1995
------------- ------------
<CAPTION>
<S> <C> <C>
Providian common stock:
Shares purchased (1) 304,844 372,986
Cost of purchases $ 13,588,686 $ 13,861,759
Shares sold (1) 457,519 424,475
Proceeds from sales $ 21,351,171 $ 15,768,228
Shares held at December 31 2,234,588 2,418,874
Balance at December 31 $114,801,945 $ 98,569,116
Dividends $ 1,816,830 $ 2,219,398
Guaranteed interest contracts with Commonwealth:
Deposits $ -- $ 33,874,512
Withdrawals $ 21,578,280 $ 37,933,179
Balance at December 31 $ 46,556,255 $ 64,679,453
Interest $ 3,455,082 $ 4,675,284
Guaranteed interest contracts with Peoples Security:
Deposits $ 21,578,280 --
Withdrawals $ 3,963,169 --
Balance at December 31 $ 18,439,566 --
Interest $ 824,455 --
Registered mutual funds with Merrill Lynch:
Cost of purchases $ 38,256,553 $ 32,336,810
Proceeds from sales $ 30,695,681 $ 19,518,440
Balance at December 31 $ 38,591,246 $ 30,895,307
Investment income $ 1,804,993 $ 1,245,145
(1) These shares were traded on a national securities exchange.
</TABLE>
<PAGE>
NOTE E - INVESTMENTS
The current value of individual Plan investments that represent 5% or more of
net assets available for benefits at December 31, 1996 and 1995 is as follows:
1996 1995
-------------- ------------
Providian Stock $114,801,945 $98,569,116
Commonwealth guaranteed interest contract 21,136,689
-
Peoples Security guaranteed interest contract 18,439,566 -
Commonwealth synthetic guaranteed interest contract 46,556,255 43,542,764
Investments in registered mutual funds
- Merrill Lynch Treasury Fund 24,428,062 18,956,054
NOTE F - GUARANTEED INTEREST CONTRACTS
The Plan owns traditional and synthetic guaranteed interest contracts issued by
Commonwealth and Peoples Security. The traditional contracts provide for the
guarantee of principal plus an indexed rate of return on the principal amount
which is adjusted quarterly based on long-term market interest rates. At
December 31, 1995, the Commonwealth contract value was $21,136,689, which
approximates fair value. At December 31, 1996, the Peoples Security contract
value was $18,439,566, which approximates fair value. Contract value represents
contributions made under the contract, plus earnings, less Plan withdrawals and
administrative expenses.
The synthetic interest contract owned by the Plan was issued by Commonwealth. In
connection with this contract, the Plan retains ownership of assets placed in a
trust while Commonwealth provides an insurance wrapper that guarantees benefit
responsiveness to plan participants at contract value. The underlying assets of
the contract primarily consist of U.S. Treasury Notes and mortgage-backed
securities guaranteed by the U.S. government. At December 31, 1996 and 1995, the
contract value was $46,556,255 and $43,542,764, respectively, which equals the
fair value of the underlying assets (1996: $47,295,277 and 1995: $45,833,218)
and of the insurance wrapper (1996: $(739,022) and 1995: $(2,290,454)). The
crediting interest rate is an indexed rate of return adjusted quarterly and was
6.78% and 7.35% at December 31, 1996 and 1995, respectively. The average yield
on the contract was 6.69% and 7.27% during 1996 and 1995, respectively.
NOTE G - FINANCIAL INSTRUMENTS
The Plan utilizes futures contracts with off-balance-sheet market risk in its
investing activities for the Providian Equity Index Fund. Futures are contracts
which call for the delayed delivery of securities in which the seller agrees to
deliver on a specified future date, a specified instrument, at a specified
price. Generally, futures contracts' margin requirements, equal to the change in
market value, are settled daily. These instruments are subject to market risk,
which is the possibility that future changes in market prices may make the
instruments less valuable. The Plan's investment of $1,085,798 in an United
States Treasury Bill has been pledged to meet the margin requirements for these
open futures contracts at December 31, 1996. The Plan had committed to purchase
equity indexes having contract values of $25,313,000 and $19,790,400 at December
31, 1996 and 1995, respectively. The contract amounts of these instruments
reflect the extent of involvement in futures contracts. The Plan had no
off-balance-sheet exposure to credit risk associated with futures contracts at
December 31, 1996 and 1995.
<PAGE>
<TABLE>
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
December 31, 1996
<CAPTION>
Description of Investment
Including Maturity Date,
Identity of Issue, Borrower, Lessor or Rate of Interest, Par, or Current
Similar Party Maturity Value Cost Value
- -------------------------------------------------- --------------------------- ------------------- -------------------
<S> <C> <C> <C>
Providian Short Term Stock Fund -
Providian common stock* 2,234,588 shares $ 60,440,932 $114,801,945
Synthetic guaranteed interest contract-
Commonwealth Life Insurance Company*
(Contract #ADA00110SA)
Underlying assets 46,556,255 47,295,277
Insurance wrapper 6.78% 0 (739,022)
Guaranteed interest contract-
Peoples Security Life Insurance Company*
(Contract #BDA00622FR) 7.13% 14,393,108 14,393,108
Guaranteed interest contract-
Peoples Security Life Insurance Company*
(Contract #BDA00670FR) 6.42% 4,046,458 4,046,458
Registered mutual funds -
Merrill Lynch Global Allocation Fund* 182,301 shares 2,540,618 2,652,475
Merrill Lynch Corporate Bond Fund* 239,623 shares 2,677,061 2,712,529
Merrill Lynch Basic Value Fund* 140,479 shares 3,931,420 4,354,859
Merrill Lynch Asset Income Fund* 71,769 shares 729,282 755,730
Merrill Lynch Asset Growth Fund* 44,471 shares 441,156 487,851
Merrill Lynch Government Fund* 3,199,746 shares 3,199,746 3,199,746
Merrill Lynch Treasury Fund* 24,428,062 shares 24,428,062 24,428,062
Fidelity Advisor Growth
Opportunities Fund 235,791 shares 7,071,735 8,323,416
Delaware Group Trend Fund 202,056 shares 3,071,362 3,234,911
Templeton Foreign Fund 466,187 shares 4,473,217 4,829,695
=================== ===================
Subtotal $178,000,412 $234,777,040
=================== ===================
*Indicates party-in-interest to the Plan.
</TABLE>
<PAGE>
<TABLE>
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES (CONTINUED)
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
December 31, 1996
<CAPTION>
Description of Investment
Including Maturity Date,
Identity of Issue, Borrower, Lessor or Rate of Interest, Par, or
Similar Party Maturity Value Cost Current Value
- ----------------------------------------- ------------------------------ ------------------ ------------------
<S> <C> <C> <C>
Subtotal from previous page $178,000,412 $234,777,040
United States Treasury Bill $1,100,000 par value, 5.164%
effective
rate, matures 3/27/97 1,085,798 1,087,273
Loans receivable from Principal balances from
participants $1,000 to $50,000, bearing
interest at the prime rate
plus 1%, due within 5
years from date of loan
5,455,885 5,455,885
================== ==================
$184,542,095 $241,320,198
================== ==================
</TABLE>
<PAGE>
<TABLE>
Line 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
PROVIDIAN CORPORATION THRIFT SAVINGS PLAN
Year Ended December 31, 1996
<CAPTION>
CURRENT VALUE
OF ASSET ON
COST PROCEEDS TRANSACTION
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSETS OF PURCHASES FROM SALES COST DATE NET GAIN
-------------------------- --------------------- -------------- ------------- ----------- ------------ ----------
CATEGORY (III) - A SERIES OF SECURITIES TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS
<S> <C> <C> <C> <C> <C> <C>
Providian 304,844 shares of common stock $13,588,686 $13,588,686 $13,588,686 N/A
Providian 457,519 shares of common stock $21,351,171 13,849,565 21,351,171 $7,501,606
Commonwealth Life Insurance Guaranteed interest contract 21,578,280 21,578,280 21,578,280 -
Peoples Security Life Insurance Guaranteed interest contract 21,578,280 21,578,280 21,578,280 N/A
Peoples Security Life Insurance Guaranteed interest contract 3,963,169 3,963,169 3,963,169 -
Merrill Lynch Merrill Lynch Government Fund 10,636,247 10,636,247 10,636,247 N/A
(10,636,247 shares)
Merrill Lynch Merrill Lynch Government Fund 11,411,000 11,411,000 11,411,000 -
(11,411,000 shares)
Merrill Lynch Merrill Lynch Treasury Fund 21,763,178 21,763,178 21,763,178 N/A
(21,763,178 shares)
Merrill Lynch Merrill Lynch Treasury Fund 16,451,255 16,451,255 16,451,255 -
(16,451,255 shares)
THERE WERE NO CATEGORY (I), (II), (IV) REPORTABLE TRANSACTIONS DURING 1996
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement No.
33-34655 on Form S-8 dated April 24, 1990, as amended by Post Effective
Amendment No. 1 dated April 16, 1991, and in Registration Statement No. 33-47336
on Form S-8 dated April 21, 1992 (which also serves as Post Effective Amendment
No. 2 to Registration Statement No. 33-34655), as amended by Post Effective
Amendment No. 2 dated July 18, 1994, pertaining to the Providian Corporation
Thrift Savings Plan of our report dated June 20, 1997, with respect to the
financial statements and schedules of the Providian Corporation Thrift Savings
Plan included in this Annual Report (Form 11-K) for the year ended December 31,
1996.
/S/ ERNST & YOUNG LLP
Louisville, Kentucky
June 20, 1997
