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, 1999 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
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Table of Contents
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<CAPTION> PAGE
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INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Statement of net assets available for benefits 2
Statement of changes in net assets available for benefits 3
Notes to financial statements 4
SUPPLEMENTAL SCHEDULES
Schedule H, line 4i-Schedule of assets held
for investment purposes at end of year 8
Schedule G, part III-Financial transaction schedules 9
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INDEPENDENT AUDITOR'S REPORT
Plan Administrator
Standard Management Corporation Savings Plan
Indianapolis, Indiana
We have audited the accompanying statement of net assets available
for benefits of Standard Management Corporation Savings Plan as of
December 31, 1999, and the related statement of changes in net
assets available for benefits for the year 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 audit.
We conducted our audit 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 audit
provides 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 Standard Management Corporation Savings Plan at
December 31, 1999, and the changes in its net assets available for
benefits for the year then ended, in conformity with generally
accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on
the basic financial statements taken as a whole. The supplemental
information included in Schedule G, "Financial Transaction
Schedules," (IRS Form 5500) and the supplemental schedule of assets
held for investment purposes at end of year, together referred to
as "supplemental information," are presented for the purpose of
additional analysis and are not a required part of the basic
financial statements but are supplementary information required by
the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of
1974. This supplemental information is the responsibility of the
Plan's management. The supplemental information has been subjected
to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements
taken as a whole.
OLIVE, LLP
Indianapolis, Indiana
June 15, 2000
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Standard Management Corporation Savings Plan
Statement of Net Assets Available for Benefits
DECEMBER 31 1999
ASSETS
Investments $2,885,368
Employee contributions receivable 45,631
Total assets $2,930,999
LIABILITY-net employer forfeitures available 21,836
NET ASSETS AVAILABLE FOR BENEFITS $2,909,163
See notes to financial statements.
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Standard Management Corporation Savings Plan
Statement of Changes in Net Assets Available for Benefits
YEAR ENDED DECEMBER 31 1999
ADDITIONS
Investment income
Net depreciation in fair value of investments $(266,120)
Interest and dividends 170,703
Net investment loss (95,417)
Employee contributions 353,884
Transfers from another plan 571,138
Employer contributions 165,240
Total additions $ 994,845
DEDUCTIONS
Benefits paid to participants 461,926
Administrative expenses 1,632
Total deductions 463,558
NET INCREASE 531,287
NET ASSETS AVAILABLE FOR BENEFITS,
BEGINNING OF YEAR 2,377,876
NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $2,909,163
See notes to financial statements.
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STANDARD MANAGEMENT CORPORATION
SAVINGS PLAN
Notes to Financial Statements
NOTE 1 - DESCRIPTION OF PLAN
The following description of Standard
Management Corporation (Company) Savings
Plan (Plan) provides only general
information. Participants should refer to
the Plan document for a more complete
description of the Plan's provisions.
GENERAL
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
restated effective December 31, 1998, the
Plan covers all employees of the Company
and its subsidiaries. Participation is
voluntary. Employees age twenty-one or
older are eligible to become a participant
on the first day of the month following
the initial six-month period of
employment. A member of management of the
Company serves as Plan trustee.
CONTRIBUTIONS
Employee contributions to the Plan are
made through salary reduction agreements
in increments of 1.0 percent of the
participants 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 for pre-tax contributions for
1999). The Company provides a 401(k) safe
harbor matching contribution equal to 100%
of each participant's contribution not
exceeding 4% of the participant's
compensation for the year. 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.
On October 31, 1998, the Company acquired
Midwestern Life Insurance Company of Ohio.
In March 1999, funds from the Midwestern
Life Insurance Company of Ohio Tax
Deferred Savings Plan (Midwestern Life
Plan) of $571,138 were transferred into
the Plan.
PARTICIPANT INVESTMENT ACCOUNT OPTIONS
Investment account options available
include various funds. Each participant
has the option of directing his
contributions into any of the separate
investment accounts and may change the
allocation daily.
PARTICIPANT ACCOUNTS
Each participant's account is credited
with the participant's contribution and
allocation of the Company's contribution
and Plan earnings. Allocations are based
on participant earnings or account
balances, as defined. The benefit to
which a participant is entitled is the
benefit that can be provided from the
participant's account.
VESTING
Participants are immediately vested in
their voluntary contributions plus actual
earnings thereon. As of January 1, 1999,
the Company 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 Company matching
contributions made after this date are
immediately vested. Company matching
contributions prior to January 1, 1999
will continue to vest under the former
service schedule, which is a gradual
vesting schedule based upon length of
service. Participants become fully vested
in these Company contributions after six
years of service. The non-vested
interests of withdrawn participants are
used to reduce future Company
contributions.
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STANDARD MANAGEMENT CORPORATION
SAVINGS PLAN
Notes to Financial Statements
PAYMENT OF BENEFITS
Upon termination of service, participants
receive a qualified joint survivor
annuity. However, participants may
decline this form of payment and elect to
receive a lump-sum amount equal to the
value of their accounts. A participant
may make withdrawals after age 59 1/2 ,
and under certain circumstances provided
by the Plan, hardship withdrawals.
LOANS
The plan agreement includes provisions
authorizing loans from the Plan to active
eligible participants. Participants may
obtain loans up to 50 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 through payroll withholdings or a
lump sum.
PLAN TERMINATION
The Plan is administered by the Plan
Administrator, who is appointed by the
Company'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, the Company 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.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
METHOD OF ACCOUNTING
The accompanying financial statements have
been prepared on the accrual method of
accounting.
INVESTMENTS
Plan investments are stated at quoted
market prices or prices established by the
custodian, Prudential Investment
Management Services (Prudential).
Purchases and sales of securities are
recorded on a trade-date basis.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
ADMINISTRATIVE EXPENSES
Administrative expenses may be paid by the
Company or the Plan, at the Company's
discretion.
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STANDARD MANAGEMENT CORPORATION
SAVINGS PLAN
Notes to Financial Statements
NOTE 3 - INVESTMENTS
The Plan's investments, except for the
Company Stock Fund which is held by the
trustee of the Plan, are maintained by
Prudential. The Plan's investments
(including investments bought, sold, and
held during the year) appreciated
(depreciated) in fair value as follows:
1999
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Net
Appreciation
(Depreciation) Fair Value
in Fair Value at End
YEAR ENDED DECEMBER 31 During Year of Year
<S> <C> <C>
Investments at fair value as
determined by quoted prices
in an active market
Mutual funds $165,221 $1,966,670
Common stock (431,341) 864,875
Participant loans 53,823
$(266,120) $2,885,368
</TABLE>
The fair value of individual investments
that represented 5% or more of the Plan's
assets were as follows:
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DECEMBER 31 1999
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Government Money Market $230,337
Equity Fund A 283,524
Equity Income Fund A 154,227
Franklin Age 181,472
Putnam Voyager 248,833
Standard Management Corporation Stock Fund 864,875
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NOTE 4 - FORFEITURES
Forfeitures amounted to $28,233 for 1999.
Forfeitures will be used to reduce future
employer contributions.
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STANDARD MANAGEMENT CORPORATION
SAVINGS PLAN
Notes to Financial Statements
NOTE 5 - PARTY-IN-INTEREST TRANSACTIONS
Party-in-interest transactions include
those with fiduciaries or employees of the
Plan, any person who provides services to
the Plan, an employer whose employees are
covered by the Plan, an employee
organization whose members are covered by
the Plan, a person who owns 50 percent or
more of such an employer or employee
association, or relatives of such persons.
Participants in the Plan may contribute to
the Company Stock Fund, which invests
exclusively in common stock of the
Company.
The Company provides certain
administrative services at no cost to the
Plan.
NOTE 6 - TAX STATUS
The Plan operates under a standardized
adoption agreement in connection with a
prototype 401 (k) profit-sharing plan and
trust sponsored by Prudential Mutual Fund
Management, Inc. This prototype plan
document has been filed with the
appropriate agency and has obtained a
determination letter from the Internal
Revenue Service stating that the prototype
constitutes a qualified plan under section
401 of the Internal revenue Code and that
the related trust was tax-exempt as of the
financial statement date.
NOTE 7 - NONEXEMPT TRANSACTION
Defined contribution plans are required to
remit employee contributions to the Plan
as soon as they can be reasonably
segregated from the employer's general
assets, but no later than the 15{th}
business day of the month following the
month in which the participant
contributions were withheld by the
employer. While the Company remitted all
employee contributions to the Plan,
contributions of $22,109 were not remitted
within the required time period for the
year ended December 31, 1999. The
nonexempt transaction was a result of a
transition in recordkeeper for the Plan
during the fourth quarter of 1999.
NOTE 8 - SUBSEQUENT EVENTS
The Plan terminated its contract with
Prudential Investments Management
Retirement Services and entered into
Investment and Administrative arrangements
with Redwood Investment Advisors, LTD.
effective January 1, 2000. All Plan
assets were transferred to Charles Schwab
& Co., Inc. on January 13, 2000.
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Supplemental Schedules
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Standard management corporation savings plan
Schedule H, line 4i-Schedule of Assets Held for Investment Purposes
at End of Year
December 31, 1999
Employer Identification Number: 35-1773567 Plan Number: 001
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(A) (B) (c) (d) (e)
Description of
Identity of Issue, Investment
Borrower, Lessor, or Including Maturity Current
Similar Party Date, Cost Value
Rate of Interest,
Collateral,
Par or Maturity Value
<S> <C> <C> <C>
Mutual Funds
Prudential Investments
Government Money Market 230,337 shares $230,337 $ 230,337
Government Money Market
Private 50,575 shares 50,575
Special Government Money
Market 11,467 shares 11,467
Equity Fund B 3,739 shares 72,007
Equity Fund A 14,698 shares 283,524
Equity Income Fund B 1,641 shares 28,033
Equity Income Fund A 8,998 shares 154,227
Global Genesis Fund B 2,187 shares 35,774
Global Genesis Fund A 4,778 shares 86,861
Government Income Fund B 1,778 shares 14,989
Government Income Fund A 3,569 shares 30,051
Nicholas Applegate Fund B 3,676 shares 83,186
Nicholas Applegate Fund A 5,066 shares 130,700
Diversified Bond Fund B 4,666 shares 57,630
Diversified Bond Fund A 6,436 shares 79,487
Allocation Balance Fund A 1,487 shares 18,434
Allocation Balance Fund B 1,347 shares 16,651
Alliance Growth A 1,846 shares 104,053
Templeton Foreign A 4,312 shares 48,381
Franklin Age High Income A 72,300 shares 181,472
Putnam Voyager A 8,037 shares 248,833
1,966,670
Common Stocks
*Standard Management
Corporation Stock 182,079 shares 864,875
Loans
Participants loans 7.75% - 8.75% 53,823
918,698
$2,885,368
</TABLE>
*Party-in-interest
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation in a Registration Statement on Form
S-8 (File Number 333-41117) of our report dated June 15, 2000, on
the audit of the financial statements of the Standard Management
Corporation Savings Plan for the year ended December 31, 1999.
Olive LLP
Olive LLP
Indianapolis, Indiana
June 26, 2000
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SCHEDULE G (FORM 5500)
FINANCIAL TRANSACTION SCHEDULES
1999
A.Name of Plan:
Standard Management Corporation Savings Plan
B.Three-digit number:
001
C.Name of Plan as shown on line 2a of Form 5500:
Standard Management Corporation
D.Employer Identification Number:
35-1773567
PART III - NONEXEMPT TRANSACTIONS
If nonexempt prohibited transaction occurred with respect to a
disqualified person, file for, 5330 with the IRS to pay the excise
tax on the trasaction.
a) Identity of party involved:
Standard Management Corporation
b) Relationship to plan, employer, or other party-in-interest:
Employer
c) Description to transactions including maturity date, rate of
interest, collateral, par or maturity value:
Employee withholdings for the month of November 1999 were not
remitted to the Plan within the required timeframe established
by the DOL.
d) Purchase Price:
N/A
e) Selling Price:
N/A
f) Lease Rental:
N/A
g) Expenses incurred in connection with transaction:
N/A
h) Cost of Asset:
$22,109
