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5. Retirement Plans
The Company provides retirement benefits for its employees under a non-contributory qualified defined benefit pension plan. The benefits are based on years of service and compensation during the last 36 months of employment. The Company's current funding policy is to contribute annually to the plan only those amounts that can be deducted for federal income tax purposes. The plan assets consist primarily of investments in mutual funds.
The actuarially computed net pension cost credit for the year ended December 31, 1996 was $435,513, and consisted of service expense of $175,115, interest expense of $300,549, expected return on plan assets of $705,383, and a net amortization credit of $205,794.
In determining the actuarial present value of the projected benefit obligation, the interest rate used for the weighted-average discount rate and the expected rate of annual salary increases was 7.0%, and the expected long-term rate of return on plan assets was 8.0%.
On January 1, 1996, the accumulated benefit obligation, including vested benefits, was $3,553,626. The fair value of the plan assets was $8,912,506 and the projected benefit obligation for service rendered to date was $4,388,767, which resulted in excess plan assets of $4,523,739. The remaining components of prepaid pension cost at January 1, 1996 included $1,700,630 in unrecognized net gain, $585,217 in unrecognized prior service cost and $747,869 in the remaining portion of the unrecognized net asset existing at January 1, 1987 which is being amortized over 15 years. Prepaid pension cost included in other assets at December 31, 1996 was $3,095,970.
In addition, the Company has a nonqualified unfunded benefit plan which provides employees with defined retirement benefits to supplement the qualified plan. The Company does not provide postretirement medical benefits.
6. Expenses
The cumulative amount of accrued expenses at December 31, 1996 for employees and former employees of the Company was $1,697,427. Aggregate remuneration paid or accrued during the year ended December 31, 1996 to officers and directors amounted to $1,721,708.
Research, accounting and other office services provided to and reimbursed by the Company's non-controlled affiliate, Petroleum & Resources Corporation, amounted to $539,508 for the year ended December 31, 1996.
7. Portfolio Securities Loaned
The Company makes loans of securities to brokers, secured by cash deposits, U.S. Government securities, or bank letters of credit, the value of which exceeds the market value of such loaned securities. The Company receives compensation for lending securities in the form of fees. The Company continues to receive dividends on the securities loaned. At December 31, 1996, the value of security loans outstanding was $31,231,200.
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