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, 1997 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
<PAGE>
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, 1997 AND 1996
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...........3
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...............................................................13
<PAGE>
STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
(Unaudited)
<TABLE>
<CAPTION>
DECEMBER 31,
<S> <C> <C>
1997 1996
Prudential investments, at fair value:
Government Money Market $39,051 $17,183
Equity Fund B 120,009 109,777
Equity Fund A 71,619 --
Equity Income Fund B 44,273 43,734
Equity Income Fund A 33,813 --
Allocation Strategy Fund -- 34,506
Global Genesis Fund B 51,338 57,675
Global Genesis Fund A 18,290 --
Government Income Fund B 18,677 14,950
Government Income Fund A 2,477 --
Nicholas Applegate Fund B 98,020 104,418
Nicholas Applegate Fund A 49,973 --
Diversified Bond Fund B 65,303 51,349
Diversified Bond Fund A 13,130 --
Allocation Balance Fund A 19,294 --
Allocation Balance Fund B 52,432 --
Alliance Growth 771 --
Templeton 857 --
Franklin Age 8,335 --
Putnam Voyager 20,858 --
Standard Management Corporation Stock Fund 427,471 254,877
Participant notes receivable 11,311 9,667
Net assets available for plan benefits $1,212,302 $698,136
</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, 1997
<TABLE>
<CAPTION>
ADDITIONS
<S> <C> <C> <C> <C> <C>
Contributions
Investment Total
Income Employer Participants Total additions
Prudential investments:
Government Money $1,035 $5,734 $10,163 $15,897 $16,932
Market
Equity Fund B 28,818 10,469 24,504 34,973 63,791
Equity Fund A 1,110 10,123 18,446 28,569 29,679
Equity Income Fund B 16,656 2,939 5,752 8,691 25,347
Equity Income Fund A 1,416 2,561 5,036 7,597 9,013
Allocation Strategy 6,081 2,950 37,097 40,047 46,128
Fund
Global Genesis Fund B 2,955 5,328 8,853 14,181 17,136
Global Genesis Fund A (1,056) 3,952 7,071 11,023 9,967
Government Income 1,558 1,323 2,692 4,015 5,573
Fund B
Government Income 73 208 412 620 693
Fund A
Nicholas Applegate 19,636 9,602 21,183 30,785 50,421
Fund B
Nicholas Applegate 1,591 1,117 1,942 3,059 4,650
Fund A
Diversified Bond Fund 4,317 4,538 6,414 10,952 15,269
B
Diversified Bond Fund 32 4,420 7,902 12,322 12,354
A
Special Money Market 1,494 372 3,500 3,872 5,366
Fund
Allocation Balance 292 622 1,036 1,658 1,950
Fund A
Allocation Balance 853 -- -- -- 853
Fund B
Alliance Growth 37 245 489 734 771
Templeton (18) 317 558 875 857
Franklin Age 126 3,144 5,077 8,221 8,347
Putnam Voyager 908 6,155 10,891 17,046 17,954
Standard Management
Corporation Stock Fund 94,481 40,442 101,379 141,821 236,302
Participant notes 1,083 -- -- -- 1,083
receivable
$183,478 $116,561 $280,397 $396,958 $580,436
</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) (continued)
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Net
DEDUCTIONS Net assets at Net assets
Participant Admin. Interfund Total increase beginning of at end of
benefits expenses transfers deductions (decrease) year year
Prudential investments:
Government Money $(2,945) $(162) $8,043 $4,936 $21,868 $17,183 $39,051
Market
Equity Fund B (1,266) (94) (52,198) (53,558) 10,232 109,777 120,009
Equity Fund A (480) (85) 42,504 41,939 71,619 -- 71,619
Equity Income Fund B -- (214) (24,594) (24,808) 539 43,734 44,273
Equity Income Fund A -- (54) 24,853 24,799 33,813 -- 33,813
Allocation Strategy -- -- (80,634) (80,634) (34,506) 34,506 --
Fund
Global Genesis Fund B (1,759) (9) (21,705) (23,473) (6,337) 57,675 51,338
Global Genesis Fund A (421) (59) 8,803 8,323 18,290 -- 18,290
Government Income -- (123) (1,723) (1,846) 3,727 14,950 18,677
Fund B
Government Income -- -- 1,784 1,784 2,477 -- 2,477
Fund A
Nicholas Applegate (877) (64) (55,878) (56,819) (6,398) 104,418 98,020
Fund B
Nicholas Applegate (460) (10) 45,793 45,323 49,973 -- 49,973
Fund A
Diversified Bond Fund -- (48) (1,267) (1,315) 13,954 51,349 65,303
B
Diversified Bond Fund -- (90) 866 776 13,130 -- 13,130
A
Special Money Market (37,722) -- 32,356 (5,366) -- -- --
Fund
Allocation Balance (521) (1) 17,867 17,345 19,294 -- 19,294
Fund A
Allocation Balance (1,222) -- 52,801 51,579 52,432 -- 52,432
Fund B
Alliance Growth -- -- -- -- 771 -- 771
Templeton -- -- -- -- 857 -- 857
Franklin Age (102) -- 91 (11) 8,335 -- 8,335
Putnam Voyager (79) -- 2,983 2,904 20,858 -- 20,858
Standard Management
Corporation Stock Fund (17,464) (82) (1,163) (18,709) 217,594 254,877 472,471
Participant notes -- -- 561 561 1,644 9,667 11,311
receivable
$(65,318) $(1,095) $143 $(66,270) $514,166 $698,136 $1,212,302
</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 Market $5,643 $2,358 $3,098 $5,456 $11,099
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 Fund 2,339 4,962 8,339 13,301 15,640
Global Genesis Fund 2,490 8,953 14,644 23,597 26,087
Government Income Fund 558 2,370 5,577 7,947 8,505
Nicholas Applegate Fund 6,962 16,015 26,578 42,593 49,555
Diversified Bond Fund 2,949 8,152 12,751 20,903 23,852
Guaranteed investment 484 1,745 1,772 3,517 4,001
interest, at contract
value
Standard Management
Corporation Stock Fund 7,683 42,132 75,312 117,444 125,127
Participant notes 231 -- -- -- 231
receivable
$43,851 $110,618 $187,893 $298,511 $342,362
DEDUCTIONS Net Net
assets at assets
Participant Admin. Interfund Total Net beginning at end
benefits expenses transfers deductions increase of year of year
(decrease)
Prudential investments:
Government Money Market $-- $-- $(3,737) $(3,737) $7,362 $9,821 $17,183
Equity Fund (3,413) -- (307) (3,720) 51,115 58,662 109,777
Equity Income Fund (7,336) (9) (1,735) (9,080) 14,350 29,384 43,734
Allocation Strategy -- -- 630 630 16,270 18,236 34,506
Fund
Global Genesis Fund (2,360) (7) 181 (2,186) 23,901 33,774 57,675
Government Income Fund -- -- (1,564) (1,564) 6,941 8,009 14,950
Nicholas Applegate Fund (4,174) (9) 330 (3,853) 45,702 58,716 104,418
Diversified Bond Fund (1,132) (3) 805 (330) 23,522 27,827 51,349
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) 100,110 154,767 254,877
Fund
Participant notes -- -- 8,361 8,361 8,592 1,075 9,667
receivable
$(85,414) $(161) $-- $(85,575) $256,787 $441,349 $698,136
</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 for pre-tax contributions for 1997 and 1996,
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 1997 and 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. 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.
ACCOUNTING METHOD
The 1997 financial statement amounts have been prepared on a payroll date
basis versus a confirmation date basis. The 1996 amounts have been
restated for this change in accounting method.
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.
<PAGE>
STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
Effective August 1, 1997, four new mutual fund choices funds) were
added as investment options and all future purchases were applied to
Class A shares rather than to Class B shares of the mutual funds. As a
result, upon enrollment in the Plan, participants may direct
contributions in any of the ten 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 United States ("U.S.") government, its
agencies or instrumentalities.
Equity Fund A: 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 A: 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.
Global Genesis Fund A: 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.
Diversified Bond Fund A: This is a Prudential mutual fund in
which the funds are invested to seek high current returns by
investing in a diversified portfolio of U.S. government, corporate,
and some foreign bonds.
Allocation Balance Fund A: 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.
Franklin AGE High Income Fund I: This is a Franklin mutual fund
in which the funds are invested primarily in high yield corporate
bonds to maximize current income. Capital appreciation is a
secondary objective.
STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
Alliance Growth Fund A: This is an Alliance mutual fund in which
the funds are invested in a diversified portfolio of common stocks
of major established companies to seek long term growth. Stock
are chosen on a growth basis for their superior growth rates and
strong future earnings expectations.
Putnam Voyager Fund A: This is a Putnam mutual fund in which
funds are invested to seek capital growth by investing primarily
in carefully selected, diversified portfolio stocks in smaller
U.S. companies.
Templeton Foreign Fund I: This is a Templeton mutual fund in which
funds are invested to seek aggressive growth of capital by
investing in common stocks of foreign companies. The fund will
primarily invest in established markets.
Effective August 1, 1997, a participant's contribution in the three
investment options below were replaced by other investment options:
Allocation Strategy Fund B: 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.
Government Income Fund B: This is a Prudential mutual fund in
which the funds are invested to seek 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 B: 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.
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, 1997.
<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 B: 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 B: 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 B: 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 B: This is a Prudential mutual fund in
which the funds are invested to seek 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 B: 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.
<PAGE>
STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
Diversified Bond Fund B: This is a Prudential mutual fund in
which the funds are invested to seek high current returns by
investing in a diversified portfolio of U.S. government, corporate,
and some foreign bonds.
Individual investments representing five (5) percent or more of the
Plan's net assets are as follows:
<TABLE>
<CAPTION>
December 31,
<S> <C> <C>
1997 1996
Investments at fair value as determined
by quoted market price:
Prudential investments:
Equity Fund A $71,619 $--
Equity Fund B 120,009 109,777
Equity Income Fund B -- 43,734
Global Genesis Fund B -- 57,675
Nicholas Applegate B 98,020 104,418
Government Bond Fund B 65,303 51,349
SMC Stock 472,471 254,877
</TABLE>
4. ADMINISTRATIVE EXPENSES
Operating expenses and maintenance fees incurred during the years
ended December 31, 1997 and 1996, 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.
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 26, 1998 __________________________________________
Edward T. Stahl
Executive Vice President of Standard
Management Corporation and Trustee
