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, 1998 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
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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, 1998 AND 1997
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 7
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 14
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STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
(Unaudited)
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DECEMBER 31,
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1998 1997
Prudential investments, at fair value:
Government Money Market $ 61,471 $ 39,051
Equity Fund B 105,336 120,009
Equity Fund A 134,311 71,619
Equity Income Fund B 42,741 44,273
Equity Income Fund A 86,787 33,813
Global Genesis Fund B 30,026 51,338
Global Genesis Fund A 49,792 18,290
Government Income Fund B 17,044 18,677
Government Income Fund A 4,002 2,477
Nicholas Applegate Fund B 78,565 98,020
Nicholas Applegate Fund A 50,129 49,973
Diversified Bond Fund B 55,425 65,303
Diversified Bond Fund A 49,457 13,130
Allocation Balance Fund A 21,576 19,294
Allocation Balance Fund B 43,922 52,432
Alliance Growth 51,998 771
Templeton 15,713 857
Franklin Age 27,673 8,335
Putnam Voyager 116,881 20,858
Standard Management Corporation Stock Fund 1,324,429 472,471
Participant notes receivable 10,598 11,311
Net assets available for plan benefits $ 2,377,876 $ 1,212,302
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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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, 1998
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ADDITIONS
Contributions
Investment Savers Total
income transfer (a) Employer Participants Total additions
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Prudential investments:
Government Money Market $ 1,290 $ 8,377 $ 5,375 $ 8,915 $ 14,290 $ 23,957
Special Government Money Market 94 -- -- -- -- 94
Equity Fund B 8,424 -- (12) (18) (30) 8,394
Equity Fund A 7,345 7,692 21,392 41,226 62,618 77,655
Equity Income Fund B (1,517) -- (10) (14) (24) (1,541)
Equity Income Fund A (3,311) 13,025 11,916 22,095 34,011 43,725
Global Genesis Fund B 88 -- (13) (19) (32) 56
Global Genesis Fund A (4,928) -- 7,861 11,487 19,348 14,420
Government Income Fund B 1,426 -- -- -- -- 1,426
Government Income Fund A 266 -- -- -- -- 266
Nicholas Applegate Fund B 9,108 -- (11) (16) (27) 9,081
Nicholas Applegate Fund A 5,873 -- 139 139 278 6,151
Diversified Bond Fund B 2,846 -- -- -- -- 2,846
Diversified Bond Fund A 1,394 272 9,928 18,185 28,113 29,779
Allocation Balance Fund A 1,579 -- 85 171 256 1,835
Allocation Balance Fund B 3,336 -- -- -- -- 3,336
Alliance Growth 5,554 8,617 6,606 12,214 18,820 32,991
Templeton (769) 2,672 2,501 5,805 8,306 10,209
Franklin Age 43 2,211 7,556 11,364 18,920 21,174
Putnam Voyager 17,545 15,197 21,639 46,806 68,445 101,187
Standard Management
Corporation Stock Fund 79,735 642,660 69,917 87,148 157,065 879,460
Participant notes receivable 1,437 2,333 -- -- -- 3,770
$ 136,858 $ 703,056 $ 164,869 $ 265,488 $ 430,357 $ 1,270,271
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(a) Refer to note 1 to the financial statements
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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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, 1998
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DEDUCTIONS Net Net Assets Net assets
Participant Admin. Interfund Total increase at beginning at end of
benefits expenses transfers deductions (decrease) of year year
Prudential investments:
Government Money Market $ (1,834) $ (135) $ 432 $ (1,537) $ 22,420 $ 39,051 $ 61,471
Special Govt Money Market -- -- (94) (94) -- -- --
Equity Fund B (12,626) (45) (10,396) (23,067) (14,673) 120,009 105,336
Equity Fund A (9,977) (177) (4,809) (14,963) 62,692 71,619 134,311
Equity Income Fund B (990) (32) 1,031 9 (1,532) 44,273 42,741
Equity Income Fund A (2,008) (51) 11,308 9,249 52,974 33,813 86,787
Global Genesis Fund B (874) (11) (20,483) (21,368) (21,312) 51,338 30,026
Global Genesis Fund A (700) (49) 17,831 17,082 31,502 18,290 49,792
Government Income Fund B (930) (55) (2,074) (3,059) (1,633) 18,677 17,044
Government Income Fund A (78) -- 1,337 1,259 1,525 2,477 4,002
Nicholas Applegate Fund B (11,143) (26) (17,367) (28,536) (19,455) 98,020 78,565
Nicholas Applegate Fund A (5,387) (1) (607) (5,995) 156 49,973 50,129
Diversified Bond Fund B (3,033) (35) (9,656) (12,724) (9,878) 65,303 55,425
Diversified Bond Fund A (1,912) (70) 8,530 6,548 36,327 13,130 49,457
Allocation Balance Fund A (1,319) (1) 1,767 447 2,282 19,294 21,576
Allocation Balance Fund B (2,359) -- (9,487) (11,846) (8,510) 52,432 43,922
Alliance Growth (164) -- 18,400 18,236 51,227 771 51,998
Templeton -- -- 4,647 4,647 14,856 857 15,713
Franklin Age (1,119) -- (717) (1,836) 19,338 8,335 27,673
Putnam Voyager (6,431) -- 1,267 (5,164) 96,023 20,858 116,881
Standard Management
Corporation Stock Fund (35,309) (106) 7,913 (27,502) 851,958 472,471 1,324,429
Participant notes receivable (10,895) -- 6,412 (4,483) (713) 11,311 10,598
$ (109,088) $ (794) $ 5,185 $ (104,697) $ 1,165,574 $ 1,212,302 $ 2,377,876
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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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
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ADDITIONS
Contributions
Investment Total
income Employer Participants Total additions
Prudential investments:
Government Money Market $ 1,035 $ 5,734 $ 10,163 $ 15,897 $ 16,932
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 Fund 6,081 2,950 37,097 40,047 46,128
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 Fund B 1,558 1,323 2,692 4,015 5,573
Government Income Fund A 73 208 412 620 693
Nicholas Applegate Fund B 19,636 9,602 21,183 30,785 50,421
Nicholas Applegate Fund A 1,591 1,117 1,942 3,059 4,650
Diversified Bond Fund B 4,317 4,538 6,414 10,952 15,269
Diversified Bond Fund A 32 4,420 7,902 12,322 12,354
Special Money Market Fund 1,494 372 3,500 3,872 5,366
Allocation Balance Fund A 292 622 1,036 1,658 1,950
Allocation Balance Fund B 853 -- -- -- 853
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 receivable 1,083 -- -- -- 1,083
$ 183,478 $ 116,561 $ 280,397 $ 396,958 $ 580,436
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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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
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DEDUCTIONS Net Net assets
Participant Admin. Interfund Total increase at Net assets
benefits expenses transfers deductions (decrease) beginning of at end of
year year
Prudential investments:
Government Money Market $(2,945) $ (162) $ 8,043 $ 4,936 $ 21,868 $ 17,183 $ 39,051
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 Fund -- -- (80,634) (80,634) (34,506) 34,506 --
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 Fund B -- (123) (1,723) (1,846) 3,727 14,950 18,677
Government Income Fund A -- -- 1,784 1,784 2,477 -- 2,477
Nicholas Applegate Fund B (877) (64) (55,878) (56,819) (6,398) 104,418 98,020
Nicholas Applegate Fund A (460) (10) 45,793 45,323 49,973 -- 49,973
Diversified Bond Fund B -- (48) (1,267) (1,315) 13,954 51,349 65,303
Diversified Bond Fund A -- (90) 866 776 13,130 -- 13,130
Special Money Market Fund (37,722) -- 32,356 (5,366) -- -- --
Allocation Balance Fund A (521) (1) 17,867 17,345 19,294 -- 19,294
Allocation Balance Fund B (1,222) -- 52,801 51,579 52,432 -- 52,432
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 receivable -- -- 561 561 1,644 9,667 11,311
$ (65,318) $ (1,095) $ 143 $(66,270) $ 514,166 $ 698,136 $1,212,302
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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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 April 1, 1998, the Plan includes all employees of SMC and its
subsidiaries. Participation is voluntary. Employees age twenty-
one or older are eligible to become a participant following the
initial six-month period of employment. 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 ($10,000 and $9,500 for pre-tax
contributions for 1998 and 1997, respectively). 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 1998 and 1997, 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.
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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.
On March 12, 1998, SMC acquired Savers Life Insurance Company. Subsequent
to this transaction, funds from the Savers Life Insurance Company Employee
Retirement Plan ("Savers Life Plan") of $703,056 were transferred into the
SMC Plan on December 31, 1998. For the former participants in the Savers
Life Plan, the following optional forms of benefits have been accrued and
cannot be rescinded under Section 411(d)(6) of the Internal Revenue Code of
1986, as amended.
The normal form of benefit for a married individual is a qualified joint
and 50% survivor annuity.
The normal retirement age is the attainment of age 65.
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STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
1.PLAN DESCRIPTION (CONTINUED)
If a participant or beneficiary defaults on a loan, the Plan treats the
default as a distributable event. The Trustee, at the time of default,
will reduce the participant's nonforfeitable accrued benefit by the lesser
of the amount in default (plus accrued interest) or the Plan's security
interest in the nonforfeitable accrued benefit. To the extent the loan is
attributable to the partcipant's deferral contributions account, qualified
matching contributions account or qualified nonelective contributions
account, the trustee will not reduce the participant's nonforfeitable
accrued benefit unless the participant has separated from service or unless
the participant has attained age 59 1/2 .
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 at the beginning of
the year. 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.
INVESTMENTS
Plan investments are stated at fair value. The Company stock is valued at
its quoted market price. Individual funds are valued at net asset
value representing the value at which units of the account may be purchased
or redeemed.
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.
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STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING METHOD
The 1998 and 1997 financial statement amounts have been prepared on a
payroll date basis versus a confirmation date basis.
3.INVESTMENTS
The Plan's investments, except for the SMC Stock Fund which is held by
the Trustee of the Plan, are maintained under a group annuity contract in
a separate account of Prudential Securities ("Prudential") effective
January 1, 1996.
Effective August 1, 1997, four new mutual fund choices 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 in 1998 and 1997:
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.
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STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
3.INVESTMENTS (CONTINUED)
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.
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.
The SMC Stock Fund invests in common stock of SMC only. The return, which is
reinvested in the stock, is based on changes in the market value of SMC common
stock. The SMC common stock is valued at its closing market price on NASDAQ at
December 31, 1998 and 1997.
Effective August 1, 1997, a participant's contribution in the three
investment options below were replaced by other investment options:
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STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
3.INVESTMENTS (CONTINUED)
Allocation Balance 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.
Individual investments representing five (5) percent or more of the Plan's
net assets are as follows:
December 31,
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1998 1997
Investments at fair value as determined
by quoted market price:
Prudential investments:
Equity Fund A $134,311 $71,619
Equity Fund B -- 120,009
Nicholas Applegate B -- 98,020
Diversified Bond Fund B -- 65,303
SMC Stock 1,324,429 472,471
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STANDARD MANAGEMENT CORPORATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
4.ADMINISTRATIVE EXPENSES
Operating expenses and maintenance fees incurred during the years ended
December 31, 1998 and 1997, 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.
6.SUBSEQUENT EVENT
As of January 1, 1999, the Company has elected to make matching contributions to
the Plan in accordance with the safe harbor provisions outlined in Section 401(k)(12)(B)
of the Internal Revenue Code. Under these safe harbor provisions, all matching
Company contributions will be fully vested. Company matching contributions prior
to January 1, 1999 will continue to vest under the former service schedule.
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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 29, 1999__________________________________________
Edward T. Stahl
Executive Vice President of Standard Management
Corporation and Trustee
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