UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission File Number 0-20882
STANDARD MANAGEMENT CORPORATION SAVINGS
PLAN
(Full title of the plan)
Standard Management Corporation
9100 Keystone Crossing
Indianapolis, Indiana 46240
(Name of issuer of the securities held pursuant to the plan
and the address of its principal executive offices)
Registrant's Telephone Number, including Area Code: (317) 574-6200
STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
FINANCIAL STATEMENTS AND SCHEDULES
(Prepared in accordance with the financial reporting requirements of the
Employee Retirement Income Security Act of 1974, as amended)
YEARS ENDED DECEMBER 31, 1996 AND 1995
INDEX
Report of Independent Auditors (Not required-See Note 2)
Financial Statements:
Statements of Net Assets Available for Plan Benefits............2
Statements of Changes in Net Assets Available for Plan Benefits.4
Notes to Financial Statements...................................6
Schedules:
Item 27a - Schedule of Assets Held for Investment (Not required - See Note
2)
Item 27d - Schedule of Reportable Transactions (Not required-See Note 2)
Signatures 12
<PAGE>
STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
(Unaudited)
<TABLE>
<CAPTION>
DECEMBER 31,
<S> <C>
1996
Prudential investments, at fair value:
Government Money Market $28,826
Equity Fund 107,118
Equity Income Fund 43,395
Allocation Strategy Fund 34,049
Global Genesis Fund 56,862
Government Income Fund 14,796
Nicholas Applegate Fund 102,756
Diversified Bond Fund 50,913
Standard Management Corporation Stock Fund 251,676
Participant notes receivable 9,669
Net assets available for plan benefits $700,060
DECEMBER 31,
1995
Principal investments:
Pooled separate accounts, at fair value:
U.S. Stock Account $97,889
Money Market Account 31,740
Real Estate Account 6,370
Bond and Mortgage Account 82,402
International Stock Account 43,077
Government Securities Account 7,588
Stock Index Account 57,396
Value Stock Account 16,944
Small Company Stock Account 20,690
Growth Stock Account 24,893
Bond Emphasis Balanced Account 2,376
Stock Emphasis Balanced Account 9,753
Guaranteed investment contract, at contract value 41,078
Standard Management Corporation Stock Fund -
Participant notes receivable 1,077
Net assets available for plan benefits $443,273
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE
FOR PLAN BENEFITS WITH FUND INFORMATION (Unaudited)
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
ADDITIONS
<S> <C> <C> <C> <C> <C> <C> <C>
Contributions
Investment Total
Income Employer Participants Total additions
Prudential investments:
Government Money $5,643 $2,358 $3,098 $5,456 $11,099
Market
Equity Fund 9,588 16,351 28,896 45,247 54,835
Equity Income Fund 4,924 7,580 10,926 18,506 23,430
Allocation Strategy 2,339 4,962 8,339 13,301 15,640
Fund
Global Genesis Fund 2,490 8,953 14,644 23,597 26,087
Government Income 558 2,370 5,577 7,947 8,505
Fund
Nicholas Applegate 6,962 16,015 26,578 42,593 49,555
Fund
Diversified Bond 2,949 8,152 12,751 20,903 23,852
Fund
Guaranteed 484 1,745 1,772 3,517 4,001
investment interest
at contract value
Standard Management 7,683 42,132 75,312 117,444 125,127
Corporation Stock Fund
Participant notes 231 - - - 231
receivable
$43,851 $110,618 $187,893 $298,511 $342,362
Net
DEDUCTIONS assets at Net
assets
Participant Admin. Interfund Total Net at end
benefits expenses transfers deductions increase beginning of year
(decrease) of year
Prudential investments:
Government Money $ $- $(3,737) $(3,737) $7,362 $21,464 $28,826
Market -
Equity Fund (3,413) - (307) (3,720) 51,115 56,003 107,118
Equity Income Fund (7,336) (9) (1,735) (9,080) 14,350 29,045 43,395
Allocation Strategy - - 630 630 16,270 17,779 34,049
Fund
Global Genesis Fund (2,360) (7) 181 (2,186) 23,901 32,961 56,862
Government Income - - (1,564) (1,564) 6,941 7,855 14,796
Fund
Nicholas Applegate (4,174) (9) 330 (3,853) 45,702 57,054 102,756
Fund
Diversified Bond (1,132) (3) 805 (330) 23,522 27,391 50,913
Fund
Guaranteed investment
contract, at (44,946) (133) - (45,079) (41,078) 41,078 -
contract value
Standard Management
Corporation Stock (22,053) - (2,964) (25,017) 100,110 151,566 251,676
Fund
Participant notes - - 8,361 8,361 8,592 1,077 9,669
receivable
$(85,414) $(161) $- $(85,575) $256,787 $443,273 $700,060
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE
FOR PLAN BENEFITS WITH FUND INFORMATION (Unaudited)
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
ADDITIONS
<S> <C> <C> <C> <C> <C> <C> <C>
Contributions
Investment Total
Income Employer Participants Total additions
Principal investments
U.S. Stock Account $20,948 $8,611 $20,974 $29,585 $50,533
Money Market Account 1,234 2,937 11,803 14,740 15,974
Real Estate Account 337 749 2,592 3,341 3,678
Bond and Mortgage Account 10,986 5,927 17,302 23,229 34,215
International 3,940 5,283 18,887 24,170 28,110
Government Securities 759 - 4,538 4,538 5,297
Account
Stock Index Account 12,861 4,753 12,852 17,605 30,466
Value Stock Account 3,564 2,093 6,653 8,746 12,310
Small Company Stock Account2,437 4,764 9,837 14,601 17,038
Growth Stock Account 3,211 2,768 13,865 16,633 19,844
Bond Emphasis Balanced 333 303 718 1,021 1,354
Account
Stock Emphasis Balanced 338 626 8,696 9,322 9,660
Account
Guaranteed investment 2,164 5,188 14,592 19,780 21,944
contract, at contract
value
Standard Management
Corporation Stock Fund - - - - -
Participant notes receivable - 233 844 1,077 1,077
$63,112 $44,235 $144,153 $188,388 $251,500
Net
DEDUCTIONS assets at Net
assets
Participant Admin. Interfund Total Net beginning at end
benefits expenses transfers deductions increase of year of year
(decrease)
Principal investments:
U.S. Stock Account $(5,496) $(37) $(5,366) $(10,899) $39,634 $ 58,255 $ 97,889
Money Market Account (443) - 8,401 7,958 23,932 7,808 31,740
Real Estate Account - - - - 3,678 2,692 6,370
Bond and Mortgage Account (4,417) (14) (461) (4,892) 29,323 53,079 82,402
International Stock Account(535) (16) (642) (1,193) 26,917 16,160 43,077
Government Securities (204) - (204) 5,093 2,495 7,588
Account
Stock Index Account (468) - (4,477) (4,943) 25,521 31,875 57,396
Value Stock Account (498) (14) (467) (979) 11,331 5,613 16,944
Small Company Stock Account(605) (20) (559) (1,184) 15,854 4,836 20,690
Growth Stock Account - - (278) (278) 19,566 5,327 24,893
Bond Emphasis Balanced (162) - (74) (236) 1,118 1,258 2,376
Account
Stock Emphasis Balanced (28) - (15) (43) 9,617 136 9,753
Account
Guaranteed investment (2,666) (22) - (2,688) 19,256 21,822 41,078
contract, at contract
value
Standard Management
Corporation Stock Fund - - - - - - -
Participant notes receivable - - - - 1,077 - 1,077
$(15,522) $(123) $(3,938) $(19,583) $231,917 $ 211,356 $ 443,273
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. PLAN DESCRIPTION
The Standard Management Corporation ("SMC" and the "Company") Savings
Plan (the "Plan") is a defined contribution plan pursuant to Section
401(k) of the Internal Revenue Code. It is subject to the provisions
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Established June 1, 1987, and amended on January 1, 1996,
the Plan includes all employees of SMC and its subsidiaries.
Participation is voluntary. Employees are eligible to become a
participant following the employee's initial six-month period of
employment and are age twenty-one or older. The entry dates are
January 1 and July 1 of each year.
Employee contributions to the Plan are made through periodic payroll
deductions in increments of 1.0 percent of the participant's annual
earnings, not to exceed the lesser of 15.0 percent of the
participant's annual earnings or the maximum amount specified by
federal tax law ($9,500 and $9,240 for pre-tax contributions for 1996
and 1995, respectfully). Participants designate the portfolios to
which their contributions are made and have the opportunity to change
the options previously elected. Participants may also contribute
amounts representing distributions from other qualified defined
benefit or defined contribution plans.
During 1996, SMC matched 100.0 percent of each participant's pre-tax
contributions up to a maximum of 4.0 percent of the participant's
annual earnings. During 1995, SMC matched 50.0 percent of each
participant's pre-tax contributions up to a maximum of 4.0 percent of
the participant's annual earnings. Additional amounts may be
contributed by SMC at the discretion of its Board of Directors.
Participants are immediately vested in their voluntary contributions
plus actual earnings thereon. Participants have a gradual vesting
schedule based upon length of service and are fully vested in SMC's
contributions after six years of service. The non-vested interests
of withdrawn participants are used to reduce SMC's future
contributions.
All benefits under the Plan are paid in cash in a lump sum or a
series of installments. A participant may make withdrawals after
age 59 1/2 , and under certain circumstances, hardship withdrawals.
<PAGE>
STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
1. PLAN DESCRIPTION (CONTINUED)
Participants may obtain loans up to 50.0 percent of the vested
portion of their account balances, a minimum of $1,000 to a maximum
of $50,000. Loan terms shall not exceed 5 years except in the case
of the purchase of a primary residence. The loans are secured by the
balance in the participant's account and bear interest at a rate
commensurate with local prevailing rates. Repayment of both
principal and interest is made to the participant's account via
payroll deduction or a lump sum.
The Plan is administered by the Plan Administrator, who is appointed
by SMC's Board of Directors, and who establishes the rules and
procedures necessary for the Plan's operations. Although it has not
expressed any intent to do so, SMC has the discretionary right to
terminate the Plan, subject to the provisions of ERISA. In the event
the Plan is terminated, each participant's account shall be
nonforfeitable with respect to both the participant's and employer's
contributions and the net assets shall be set aside for payment to
the participants. Distribution shall be made by the Trustee in a
lump sum or in substantially equal installments during a period not
exceeding one year following such termination.
The foregoing description of the Plan provides only limited
information. Participants should refer to the Summary Plan
Description for a more complete description of the Plan's provisions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Under the Department of Labor Rules and Regulations for Reporting and
Disclosure under ERISA, the Plan files Form 5500-C/R which is
required for employee benefit plans with fewer than 100 participants.
Employee benefit plans with 100 or more participants are required to
file Form 5500. Those plans filing Form 5500 are required to prepare
audited financial statements as well as all applicable schedules
required by Section 2520.103-10 of the Department of Labor's Rules
and Regulations for Reporting and Disclosure under ERISA. Such
requirements are not mandated for those plans filing Form 5500-C/R.
Accordingly, the attached financial statements are unaudited and the
above mentioned schedules are not presented.
<PAGE>
STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS
Plan investments, other than the guaranteed investment contract
("GIC"), are stated at fair value. The Company stock is valued at
its quoted market price. Separate pooled accounts are valued at net
asset value representing the value at which units of the account may
be purchased or redeemed.
The Plan's GIC's are valued at contract value. Contract value
represents contributions made under the contract plus interest at the
guaranteed rate.
CONTRIBUTIONS
Participant contributions are recorded in the period during which the
Company makes payroll deductions from the Plan participants'
earnings. Matching Company contributions are recorded in the same
period.
3. INVESTMENTS
The Plan's investments, except for the affiliated stocks which are
held by the Trustees of the Plan, are maintained under a group
annuity contract in a separate account of Prudential Securities
("Prudential") effective January 1, 1996 and Principal Mutual Life
Insurance Company ("Principal") prior to January 1, 1996.
<PAGE>
STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
Effective January 1, 1996, upon enrollment in the Plan, a participant
may direct contributions in any of eight investment options as
follows:
Government Money Market: This is a Prudential mutual fund in which
the funds are invested to provide high current income and liquidity
consistent with preservation of capital and invests in obligations
issued by the U.S. government, its agencies or instrumentalities.
Equity Fund: This is a Prudential mutual fund in which the funds are
invested to seek long term growth of capital by investing in a
diversified portfolio of common stocks of major, established
companies.
Equity Income Fund: This is a Prudential mutual fund in which the
funds are invested to seek long term growth of capital by investing
in a diversified portfolio of common stocks, preferred stocks, and
convertible securities of major, established companies.
Allocation Strategy Fund: This is a Prudential mutual fund in which
the funds are invested to seek high total return consistent with
relatively higher risk by investing primarily in common stocks of
major, established companies and smaller, faster growing companies as
well as bonds and money market instruments.
Global Genesis Fund: This is a Prudential mutual fund in which the
funds are invested to seek long term growth of capital by investing
primarily in securities of smaller foreign companies traded on
exchanges around the world.
Government Income Fund: This is a Prudential mutual fund in which
the funds are invested to seek to achieve high current returns by
investing in intermediate and long term U.S. government securities
including U.S. treasuries, U.S. government agencies and mortgage
backed securities.
Nicholas Applegate Fund: This is a Prudential mutual fund in which
the funds are invested to seek capital growth by investing primarily
in carefully selected, diversified portfolio of stock in smaller U.S.
companies.
Diversified Bond Fund: This is a Prudential mutual fund in which the
funds are invested to seek to achieve high current returns by
investing in a diversified portfolio of U.S. government, corporate,
and some foreign bonds.
STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
Prior to, January 1, 1996, upon enrollment in the Plan, a participant
may direct contributions in any of fourteen investment options as
follows:
Guaranteed Interest Account - Funds are invested in a GIC with
Principal.
U.S. Stock Account - This is a separate pooled account with
Principal in which the funds are invested in various stocks of
U.S. companies with the intent to earn higher long-term rates of
return.
Money Market Account - This is a separate pooled account with
Principal in which the funds are invested in high quality
commercial paper with average maturities kept under 30 days to
ensure current money market rates.
Real Estate Account - This is a separate pooled account with
Principal in which the funds are invested in equity investments in
modern, developed, income-producing warehouses, office buildings
and retail centers in major U.S. metropolitan areas. Earnings
consist of property value changes and net rental income.
Bond and Mortgage Account - This is a separate pooled account with
Principal in which the funds are invested in investment grade
private placement bonds, commercial mortgages, public corporate
bonds and mortgage-backed securities, all generally mature within
five to 10 years.
International Stock Account - This is a separate pooled account
with Principal in which the funds are invested in stocks of non-
U.S. companies located primarily in Europe and Southeast Asia.
Government Securities Account - This is a separate pooled account
with Principal in which the funds are invested primarily in very
high quality government mortgage-backed securities.
Stock Index Account - This is a separate pooled account with
Principal in which the funds are invested in the same stocks and
in the same proportions as those stocks included in the Standard &
Poor's 500 Stock Index.
Value Stock Account - This is a separate pool account with
Principal in which the funds are invested in primarily income-
producing common stocks that are undervalued in the marketplace
according to traditional measures of value.
STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
Small Company Stock Account - This is a separate pooled account
with Principal in which funds are invested in stocks of smaller,
fast-growing companies.
Growth Stock Account - This is a separate pooled account with
Principal in which funds are invested in stocks of major,
established companies whose earnings are expected to grow faster
than the average company.
Bond Emphasis Balanced Account - This is a separate pooled account
with Principal in which funds are invested in many asset classes,
but emphasize fixed income. This account invests 50 to 100
percent of the funds in Principal fixed-income separate pooled
accounts, with the remainder in principal equity separate pooled
accounts.
Stock Emphasis Balanced Account - This is a separate pooled
account with Principal in which funds are invested in many asset
classes, but emphasize equities. This account invests 50 to 100
percent of the funds in Principal equity separate pooled accounts,
with the remainder in Principal fixed-income separate pooled
accounts.
The SMC Stock Fund invests in common stock of SMC only. The return
is based on changes in the market value of SMC common stock and
dividends received, which are reinvested in SMC common stock. The
SMC common stock is valued at its closing market price on Nasdaq at
December 31, 1996.
<PAGE>
STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
Individual investments representing five (5) percent or more of the
Plan's net assets are as follows:
<TABLE>
<CAPTION>
December 31,
<S> <C> <C>
1996 1995
Investments at fair value as determined
by quoted market price:
Prudential investments:
Equity Fund $107,118 $-
Equity Income Fund 43,395 -
Global Genesis Fund 56,862 -
Nicholas Applegate 102,756 -
Government Bond Fund 50,913 -
SMC Stock 251,676 -
Principal Investments:
U.S. Stock Account - 97,889
Money Market Account - 31,740
Bond and Mortgage Account - 82,402
International Stock Account - 43,077
Stock Index Account - 57,396
Small Company Stock Account - 20,690
Growth Stock Account - 24,893
Investments at contract value:
Guaranteed Investment Contracts with - 41,078
Principal
</TABLE>
4. ADMINISTRATIVE EXPENSES
Operating expenses and maintenance fees incurred during the years
ended December 31, 1996 and 1995, except for investment custodial
fees, were paid by the Company on behalf of the Plan. Future payment
of such expenses is at the Company's discretion.
5. INCOME TAXES
The Company received a favorable determination letter August 1994
from the Internal Revenue Service stating that the Plan qualifies
under the provisions of Section 401(a) of the Internal Revenue
Code. Accordingly, the accompanying financial statements do not
reflect any provision for federal income taxes.
STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STANDARD MANAGEMENT CORPORATION
SAVINGS PLAN
Date: June 30, 1997 __________________________________________
Edward T. Stahl
Executive Vice President of Standard
Management
Corporation and Trustee
