UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
 
FORM 11-K
     
þ
  
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2011
 
or
     
o
  
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                      to                     .
 
Commission file number 1-33926
 
TEXAS OIL AND CHEMICAL CO. II, INC. 401(K) PLAN
P. O. Box 1636
Silsbee, Texas 77656
(Full title of the plan and the address of the plan)
 
ARABIAN AMERICAN DEVELOPMENT COMPANY
(Name of issuer of the securities held pursuant to the plan)
 

1600 Hwy 6 South, Suite 240
 Sugar Land, Texas 77478
 (Address of issuer’s principal executive office)

 
 
 
 


 
 
 


REQUIRED INFORMATION
Pursuant to the section of the General Instructions to Form 11-K entitled “Required Information”, this Annual Report on Form 11-K for the year ended December 31, 2011, consists of the audited financial statements of the Texas Oil and Chemical Co. II, Inc. 401(K) Plan (the “Plan”) for the year ended December 31, 2011 and the related schedules thereto. The Plan is subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and in accordance with Item 4 of the section of the General Instructions to Form 11-K entitled “Required Information”, the financial statements and schedules furnished herewith have been prepared in accordance with the financial reporting requirements of ERISA in lieu of the requirements of Items 1-3 of that section of the General Instructions. Schedules I, II, and III are not submitted because they are either not applicable, the required information is included in the financial statements or notes thereto, or they are not required under ERISA.
 
 

 


 


TEXAS OIL AND CHEMICAL CO. II, INC.
401(K) PLAN

 
Index
      
   
Page
  
Report of Independent Registered Public Accounting Firm
    
1
  
         
Statements of Net Assets Available for Benefits as of December 31, 2011 and 2010
    
2
  
         
Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2011
    
3
  
         
Notes to Financial Statements
    
4-15
  
         
Supplementary Information
        
         
  Schedule H, line 4i - Schedule of Assets Held at End of Year (December 31, 2011)
    
16
  
         
Signature
    
17
  
         
         





 
 
 


Report of Independent Registered Public Accounting Firm

To the Participants and Administrative Committee
Texas Oil and Chemical Co. II, Inc. 401(k) Plan

We have audited the accompanying statements of net assets available for benefits of Texas Oil & Chemical Co. II, Inc. Employee 401(k) Plan (the Plan) as of December 31, 2011, and 2010, and the related statement of changes in net assets available for benefits for the year ended December 31, 2011.  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 audits.

We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States).  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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting.  Accordingly, we express no such opinion.  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 audits provide 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 the Plan as of December 31, 2011, and 2010, and the changes in net assets available for benefits for the year ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.

Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole.  The accompanying supplemental schedule of assets held at end of year is presented for purposes of additional analysis and is not a required part of the basic financial statements but is 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.  Such information is the responsibility of the Plan’s management.  The information has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.


/s/ BKM Sowan Horan LLP


Addison, Texas
June 22, 2012
 

 
-1-
 
 
 
 
TEXAS OIL AND CHEMICAL CO. II, INC. 401(K) PLAN
  
Statements of Net Assets Available for Benefits
  
December 31, 2011 and 2010
  
             
             
             
             
   
2011
    
2010
  
Assets:
            
Investments - at fair value (Notes 3 and 5)
  
$
12,317,771
    
$
9,442,522
  
                 
                 
           Notes receivable from participants
    
    570,120
      
  497,110
  
           Total assets
    
12,887,891
      
9,939,632
  
                 
Liabilities:
                
Excess deferred compensation contributions
    
                -
      
     16,859
  
                 
Net assets available for benefits
  
$
12,887,891
    
$
9,922,773
  
                 


See accompanying notes to the financial statements.
 
 

 

 
-2-
 

 
TEXAS OIL AND CHEMICAL CO. II, INC. 401(K) PLAN
  
Statement of Changes in Net Assets Available for Benefits
  
Year Ended December 31, 2011
  
       
       
       
       
Additions to net assets attributed to:
      
Investment income :
      
Net appreciation in fair value of investments (Note 3)
  
$
1,901,121
 
Dividend and interest income
    
38,219
  
Other investment income
    
      12,461
  
     
1,951,801
  
         
Contributions:
        
Participant contributions
    
653,857
  
Employer contributions
    
471,558
  
                  Rollover contributions
    
          558
  
     
1,125,973
  
         
Total additions
    
3,077,774
  
         
         
Deductions from net assets attributed to:
        
Benefits paid to participants
    
103,430
  
Administrative expenses
    
       9,226
  
Total deductions
    
   112,656
  
         
Net increase
    
2,965,118
  
         
Net assets available for benefits:
        
Beginning of year
    
9,922,773
  
         
End of year
  
$
12,887,891
  
         

See accompanying notes to the financial statements.
 
 
 
 
-3-
 

 
TEXAS OIL AND CHEMICAL CO. II, INC. 401(K) PLAN
Notes to Financial Statements

 
Note 1 - Description of Plan

The Plan is a defined contribution plan sponsored by Texas Oil & Chemical Co. II, Inc. (the “Company”).  The Company is a wholly owned subsidiary of Arabian American Development Company which is traded on the New York Stock Exchange under ticker symbol ARSD.  The following provides only general information and participants should refer to the plan agreement for a more complete description of the Plan's provisions.

General

The Plan, which became effective on September 1, 1978, as amended and restated effective November 1, 2008, is a defined contribution plan subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”) and the Internal Revenue Code (“IRC”).   New employees shall become a participant on the entry date coincident with or following the completion of six months of service.

Employee Contributions

Participants may contribute up to 100% of their compensation, as defined.  Participants may also contribute amounts representing rollover distributions from other qualified defined benefit or defined contribution plans.  Participants’ salary deferral contributions are subject to IRC limitations, which was $16,500 in 2011.  The Plan allows catch-up contributions (within the meaning of Section 414(v) of the IRC) for participants who have reached age 50 by the end of the plan year.  Participants are only permitted to make catch-up contributions if they have made their maximum salary deferral contribution for the year.

Employer Contributions

The Company makes matching contributions equal to 100% of the participant’s deferral up to the first 6% of the participant’s eligible compensation.  In addition, each year the Company may at its discretion, make a profit-sharing contribution for the plan year not to exceed certain limitations prescribed by the IRC.  The Company did not make a profit-sharing contribution for the year ended December 31, 2011.

Participant Accounts

Each participant’s account reflects the participant’s contribution, the Company’s matching contribution, Plan earnings or losses on the account, an allocation of the Company’s discretionary contribution, if any, based on participant compensation and a charge for any distributions and direct expenses.  The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.




 
-4-
 

 
 
TEXAS OIL AND CHEMICAL CO. II, INC. 401(K) PLAN
Notes to Financial Statements


Note 1 - Description of Plan (Continued)

Vesting

Participants are immediately vested in their contributions and rollover accounts, plus actual earnings thereon.  Vesting in the Company's matching contributions and profit-sharing contributions, if any, is based on years of service according to the following schedule:

Years of
Service
  
Vested
Percentage
  
       
Less than 2
    
0
%
 
2
    
20
%
 
3
    
40
%
 
4
    
60
%
 
5
    
80
%
6 or more
    
100
%

Administrative Expenses

In accordance with the Plan, all administrative expenses may be paid out of the Plan unless paid by the Company.  During the year ended December 31, 2011, substantially all of the Plan's administrative expenses were paid by the Company.

Participant Investment Options

Upon enrollment in the Plan, a participant may direct employee and employer contributions in 1% increments in various investment options offered by the Plan.  The Plan currently offers shares of pooled separate accounts, guaranteed interest accounts, and common stock of Arabian American Development Company as investment options for participants.  Participants can change their investment options daily.

Notes Receivable from Participants

Participants may borrow from their accounts a minimum of $1,000 up to a maximum equal to the lesser of 50% of their vested account balance or $50,000, minus the highest outstanding note receivable balance during the immediate preceding twelve months.  The notes receivable are secured by the balance in the participant's account.  Each loan shall bear a reasonable fixed rate of interest to be determined by the Administrator.  Interest rates ranged from 5.25% to 10.25% as of December 31, 2011.  Notes receivable are to be repaid within five years.  Principal and interest is paid ratably through periodic payroll deductions.

Notes receivable are measured at their unpaid principal balance plus accrued but unpaid interest.  Delinquent participant loans are reclassified as distributions based on the terms of the Plan document.  Participant loans are considered delinquent if any payment or principal and interest, or any portion thereof, remains unpaid for more than 90 days after due.

 
-5-
 

 
TEXAS OIL AND CHEMICAL CO. II, INC. 401(K) PLAN
Notes to Financial Statements


Note 1 - Description of Plan (Continued)

Payment of Benefits

Upon termination of service, the participant or their beneficiary has the option to choose a lump sum payment, installment payment, or to purchase an annuity equal to the value of the participant’s vested interest in his or her account.  Participants that reach the age of 70 ½ are required to take a minimum distribution from their account.
Forfeitures

Forfeitures can be used to reduce future employer contributions or to pay administrative expenses.  The Plan used $5,876 of nonvested amounts to pay administrative expenses in the current year.  See Note 4.

Voting Rights

Each participant is entitled to exercise voting rights attributable to Arabian American Development Company shares allocated to his or her account and is notified by the Trustee prior to the time that such rights are to be exercised.  The Trustee is permitted to vote in the best interest of plan participants’ shares for which instructions have not been given by a participant.


Note 2 - Summary of Significant Accounting Policies

Basis of Accounting

The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America and are presented on the accrual basis of accounting.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and changes therein, and disclosure of contingent assets and liabilities.  Actual results could differ from those estimates. See Note 5 for discussion of significant estimates used to measure fair value of investments.

Investment Valuation and Income Recognition

Investments held by the Plan are stated at fair value.  Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price).  See Note 5 for further discussion of fair value measurements.

Purchases and sales of securities are recorded on a trade-date basis.  Interest income is recorded on the accrual basis.  Dividends are recorded on the ex-dividend date.  Net appreciation (depreciation) includes the Plan’s gains and losses on investments bought and sold, as well as, held during the year.


 
 
-6-
 

 
TEXAS OIL & CHEMICAL CO. II, INC. EMPLOYEE 401(K) PLAN
Notes to Financial Statements


Note 2 - Summary of Significant Accounting Policies (Continued)

Payments of benefits are recorded when paid.

Risks and Uncertainties

The Plan and its participants invest in various investment securities.  Investment securities, in general, are exposed to various risks such as interest rate, market and credit.  Due to the level of risk associated with certain investment securities, it is possible that changes in the value of investment securities will occur at any given time and that such changes could materially affect participants' account balances and the amounts reported in the statements of net assets available for benefits.

Subsequent Events

For the year ended December 31, 2011, the Company has evaluated subsequent events for potential recognition and disclosure through the issuance date of the financials.  No items requiring disclosure were noted.

New Accounting Pronouncements

In January 2010 the Financial Accounting Standards Board (“FASB’) issued guidance which expanded the required disclosures about fair value measurements. This guidance requires information about purchases, sales, issuances and settlements to be presented separately in the reconciliation for Level 3 fair value measurements and is effective for fiscal years beginning after December 15, 2010. This guidance for the Level 3 reconciliation was applied in Note 5 but net assets available for benefits and changes in net assets available for benefits of the Plan were not affected by the adoption of the new guidance.

In May 2011 the FASB issued guidance which amends Accounting Standards Codification (“ASC”) 820. This guidance requires the categorization by level for items that are only required to be disclosed at fair value and information about transfers between Level 1 and Level 2. In addition, it provides guidance on measuring the fair value of financial instruments managed within a portfolio and the application of premiums and discounts on fair value measurements. The guidance requires additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable inputs and any interrelationships between those inputs. The new guidance is effective for reporting periods beginning after December 15, 2011. Plan management is currently evaluating the impact that this guidance will have on the Plan’s financial statement disclosures.


 

 
-7-
 


TEXAS OIL AND CHEMICAL CO. II, INC. 401(K) PLAN
Notes to Financial Statements

Note 3 - Investments

All of the Plan's investments except the forfeiture account are participant directed.  As of December 31, 2011, and 2010, the Plan's investments that represent 5% or more of the net assets available for benefits are as follows:

   
2011
    
2010
  
Arabian American Development Co.
  
$
4,308,169
      
33.4
%
  
$
1,750,781
      
17.6
%
Principal Large Capital  S&P 500 Index Separate Account
    
1,069,500
      
8.3
      
683,661
      
6.9
  
Principal Money Market Separate Account
    
838,036
      
6.5
      
540,382
      
5.4
  
Principal Mid Capital Value I Separate Account
    
799,030
      
6.2
      
826,791
      
8.3
  
Principal Small Capital Blend Separate Account
    
*
      
*
      
1,108,655
      
11.1
  
Principal Diversified International Separate Account
    
*
      
*
      
595,531
      
6.0
  
Guaranteed Interest Contract: Maturity 12/31/2014
    
               *
      
             *
      
   593,369
      
         6.0
  
    $
7,014,735
      
        54.4
 %
   $
6,099,170
      
        61.3
 %
*Represents less than 5% of net assets

During 2011 the Plan's investments (including gains and losses on investments bought and sold, as well as, held during the year) appreciated in value as follows:

   
2011
  
Employer security
  
$
2,040,558
  
Separate accounts
    
(126,219)
  
Mutual funds
    
(52,586)
  
Investment contract
    
     39,368
  
Net appreciation in fair value of investments
  
$
1,901,121
  

The market volatility of equity-based investments can substantially impact the value of such investments at any given time.  It is possible that the value of the Plan's investments, both in total and in individual participant accounts, has changed substantially since December 31, 2011.

Note 4 – Nonparticipant-Directed Investments

Information about the net assets and the significant components of the changes in net assets relating to the nonparticipant-directed investments is as follows:

   
December 31,
  
   
2011
    
2010
  
Net assets:
            
  Forfeiture account
   $ -     $ 5,521  

   
Year Ended
  
   
December 31, 2011
  
Changes in net assets:
      
  Forfeitures relating to current year activities
   $ 162  
  Forfeitures used to pay administrative expenses
     (5,876 )
  Earnings
     193  
    $ (5,521 )
 
 
 
-8-
 

TEXAS OIL AND CHEMICAL CO. II, INC. 401(K) PLAN
Notes to Financial Statements


Note 5 - Fair Value Measurements

Financial Accounting Standards Board Statement Accounting Standards Codification Topic 820 “Fair Value Measurements and Disclosures” (“ASC 820”) establishes a framework for measuring fair value.  This framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy under ASC 820 are described below:

Level 1
Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.

Level 2
Inputs to the valuation methodology include:
 
·
Quoted prices for similar assets or liabilities in active markets;
  
·
Quoted prices for identical or similar assets or liabilities in inactive markets;
  
·
Inputs other than quoted prices that are observable for the asset or liability; or
  
·
Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
 
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.  Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Following is a description of the valuation methodologies used for assets measured at fair value.

Employer security:  Valued at the closing price reported on the active market on which the individual security is traded.

Guaranteed interest contracts:  Valued at the amount plan participants or plan sponsors would receive currently if they were to withdraw or transfer funds within the Plan prior to their maturity.

Mutual funds: Valued at the closing price reported on the active market on which the Fund is traded.

Separate accounts :  Valued at the net asset value (“NAV”) of shares held by the Plan at year end.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.  Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
 

 
-9-
 


TEXAS OIL AND CHEMICAL CO. II, INC. 401(K) PLAN
Notes to Financial Statements

Note 5 - Fair Value Measurements (Continued)

The following table sets forth by level within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2011:
 
   
Level 1
  
Level 2
  
Level 3
  
Total
  
                   
Employer security – petrochemical manufacturing (Note 7)
  
$
4,308,169
  
$
-
  
$
-
  
$
4,308,169
  
Guaranteed interest contracts
    
-
    
-
    
1,422,861
    
1,422,861
  
Separate accounts
                          
   Fixed Income
       -    
425,031
    
-
    
425,031
  
   Balanced
       -    
1,129,083
    
-
    
1,129,083
  
   Large U.S. Equity
       -    
1,250,846
    
-
    
1,250,846
  
   Small/Mid U.S. Equity
       -    
1,810,561
    
-
    
1,810,561
  
   International Equity
       -    
511,471
    
-
    
511,471
  
   Short-Term Fixed Income
       -    
838,036
    
-
    
838,036
  
Mutual funds
                          
   Fixed Income
    
279,907
    
-
    
-
    
279,907
  
   Large U.S. Equity
    
189,250
    
-
    
-
    
189,250
  
   Small/Mid U.S. Equity
    
77,491
    
-
    
-
    
77,491
  
   International Equity
    
     75,065
    
               -
    
                               -
    
      75,065
  
 Total assets at fair value    $ 4,929,882     $ 5,965,028     $ 1,422,861     $ 12,317,771   

The following table sets forth by level within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2010:
 
   
Level 1
    
Level 2
    
Level 3
    
Total
  
                         
Employer security – petrochemical manufacturing (Note 7)
   $ 1,750,781     $ -     $ -     $ 1,750,781  
Guaranteed interest contracts
     -       -       1,364,128       1,364,128  
Separate accounts
                                
   Fixed Income
     -       216,440       80,111-       296,551  
   Balanced
     -       1,220,049       -       1,220,049  
   Large U.S. Equity
     -       1,090,423       -       1,090,423  
   Small/Mid U.S. Equity
     -       2,237,504       -       2,237,504  
   International Equity
     -       595,531       -       595,531  
   Short-Term Fixed Income
     -       540,382       -       540,382  
Mutual funds
                                
   Fixed Income
     88,812       -       -       88,812  
   Large U.S. Equity
     209,740       -       -       209,740  
   Small/Mid U.S. Equity
     43,516       -       -       43,516  
   International Equity
     5,105       -       -       5,105  
 Total assets at fair value   $ 2,097,954     $ 5,900,329     $ 1,444,239     $ 9,442,522  



 
-10-
 


TEXAS OIL AND CHEMICAL CO. II, INC. 401(K) PLAN
Notes to Financial Statements


Note 5 - Fair Value Measurements (Continued)

The table below sets forth a summary of changes in the fair value of the Plan’s Level 3 assets for the year ended December 31, 2011.
 
   
Guaranteed
Interest
    
Separate
  
   
Contracts
    
Account
  
Balance, beginning of year
  
$
1,364,128
    
$
80,111
  
Total gains/(losses)
    
12,846
      
2,174
  
Interest credited
    
26,450
      
-
  
Purchases
    
372,158
      
4,601
  
Issuances, Settlements
    
(352,721)
      
(5,480)
  
Transfer in or out of Level 3
    
               -
      
   (81,406)
  
                 
Balance, end of year
  
$
1,422,861
    
$
                  -
  

The fair value inputs for the Principal U.S. Property Separate Account investment were transferred from significant unobservable inputs (Level 3) to significant observable inputs (Level 2) on or about March 25, 2011, as a result of identifying observable market data for the underlying investments that make up the Principal U.S. Property Separate Account.

Note 6 - Plan Termination

Although it has not expressed any intent to do so, the Company has the right under the Plan document to terminate the Plan at any time subject to the provisions of ERISA, as amended.  In the event of plan termination, participants will become 100% vested in their accounts.  Any unallocated assets of the Plan shall be allocated to participant accounts and distributed in such a manner as the Company may determine.

Note 7 - Related-Party Transactions

The Plan owned 508,039 and 396,104 shares of Arabian American Development Company (Note 1) common stock valued at $4,308,169 and $1,750,781 at December 31, 2011, and 2010, respectively.  
 
Certain plan investments in shares of pooled separate accounts and guaranteed interest contracts are managed by Principal Insurance Company and qualifying employer securities are held by Principal Trust Company. Principal Insurance Company and Principal Trust Company are also the trustees, custodians and record keepers as defined by the Plan, and, therefore, these transactions qualify as party-in-interest transactions. Purchases and sales of these accounts and the underlying investments comprising these accounts are open market transactions at fair market value. Such transactions are permitted under the provisions of the Plan and are exempt from the prohibition of party-in-interest transactions under ERISA and applicable exemptions promulgated thereunder.

Note 8 - Tax Status

The Internal Revenue Service has determined and informed the Company by a letter dated February 7, 2011, that the Plan and related trust are designed in accordance with applicable sections of the IRC.  There have been no amendments to the Plan since the determination date.

 
-11-
 


 
TEXAS OIL AND CHEMICAL CO. II, INC. 401(K) PLAN
Notes to Financial Statements


Note 8 - Tax Status (Continued)

Accounting principles generally accepted in the United States of America require plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain tax position that more likely than not, would not be sustained upon examination by the IRS.  The plan administrator has analyzed the tax positions taken by the Plan and has concluded that as of December 31, 2011, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements.  The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.  The plan administrator believes it is no longer subject to income tax examinations for years 2007 and prior.

Note 9 - Excess Deferred Compensation Contributions

  Excess contributions to the Plan for the year ended December 31, 2010, of $16,859 were paid in 2011.  Excess contributions to the Plan for the year ended December 31, 2011, were insignificant.

 
 

 
-12-
 


 
TEXAS OIL AND CHEMICAL CO. II, INC. 401(K) PLAN
Notes to Financial Statements


Note 10 – Net Asset Value (NAV) Per Share

Investment
  
Fair Value - December 31, 2011*
    
Fair Value - December 31, 2010*
  
Redemption Frequency
Other Redemption Restrictions
Redemption Notice Period
                   
Principal Money Market Separate Account (a)
   $ 838,036     $ 540,382  
Daily
None
None
Principal Bond and Mortgage Separate Account (b)
     143,282       141,905  
Daily
None
None
Principal Government & HQ Bond Separate Account (c)
     174,550       74,535  
Daily
None
None
Principal Lifetime 2010 Separate Account (d)
     20,261       130,693  
Daily
None
None
Principal Lifetime 2020 Separate Account (d)
     422,516       466,027  
Daily
None
None
Principal Lifetime 2030 Separate Account (d)
     397,568       347,215  
Daily
None
None
Principal Lifetime 2040 Separate Account (d)
     124,298       135,101  
Daily
None
None
Principal Lifetime 2050 Separate Account (d)
     163,775       140,368  
Daily
None
None
Principal Lifetime Str Inc Separate Account (e)
     665       645  
Daily
None
None
Principal Large Capital Value I Separate Account (f)
     43,398       52,673  
Daily
None
None
Principal Large Capital Growth Separate Account (g)
     137,948       136,574  
Daily
None
None
Principal Large Capital Blend I Separate Account (h)
     -       217,515  
Daily
None
None
Principal Large Capital S&P 500 Index Separate Account (i)
     1,069,500       683,661  
Daily
None
None
Principal Mid Capital Value I Separate Account (j)
     799,030       826,791  
Daily
None
None
Principal Mid Capital S&P 400 Index Separate Account (k)
     167,369       51,572  
Daily
None
None
Principal Small Capital Blend Separate Account (l)
     587,523       1,108,655  
Daily
None
None
Principal Small Capital Value Separate Account (m)
     256,639       250,486  
Daily
None
None
Principal Diversified International Separate Account (n)
     511,471       595,531  
Daily
None
None
Principal U.S. Property Separate Account (o)
     107,199       80,111  
(o)
(o)
(o)
    $ 5,965,028     $ 5,980,440        

        *The fair values of the investments have been estimated using the net asset value of the investment.
(a)  
This pooled separate account invests mainly in short-term securities such as commercial paper.
(b)  
The investment seeks current income.  The fund normally invests at least 80% of net assets in intermediate maturity fixed-income or debt securities rated BBB or higher by Standard & Poor’s Rating Service or Baa3 or higher by Moody’s Investor Service, Inc.  It may invest up to 20% of assets in non-investment grade securities.
 

 
-13-
 


 
TEXAS OIL AND CHEMICAL CO. II, INC. 401(K) PLAN
Notes to Financial Statements

Note 10 – Net Asset Value (NAV) Per Share (Continued)

(c)  
The investment seeks to provide a high level of current income consistent with safety and liquidity.  The fund invests primarily in securities issued by the U.S. government, its agencies or instrumentalities or securities that are rated AAA by S&P, AAA by Fitch, or Aaa by Moody’s.
(d)  
The investment seeks a total return consisting of long-term growth of capital and current income.  The fund invests in underlying Principal domestic and foreign equity, real estate investments, and fixed-income funds according to an asset allocation strategy designed for investors having an investment time horizon comparable to that of the fund.  It allocates the assets more conservatively over time.
(e)  
The investment seeks current income and, as a secondary objective, capital appreciation.  The fund invests in underlying Principal domestic and foreign equity, real estate investments, and fixed-income funds according to an asset allocation strategy designed for investors primarily seeking current income and secondarily capital appreciation.  Its asset allocation is designed for investors who are approximately 15 years beyond the normal retirement age of 65.
(f)  
The investment seeks long-term growth of capital.  The fund normally invests at least 80% of net assets in common stocks of companies with large market capitalizations at the time of purchase.  It invests in value equity securities; the value orientation selection emphasizes buying equity securities that appear to be undervalued.
(g)  
The investment seeks long-term growth of capital.  The fund normally invests at least 80% of net assets in equity securities of companies with market capitalizations within the range of companies in the Russell 1000 Growth Index at the time of purchase.  It may also invest in initial public offerings and foreign securities.  It invests in growth equity securities; growth orientation emphasizes buying equity securities of companies whose potential for growth of capital and earnings is expected to be above average.
(h)  
The investment seeks long-term growth of capital.  The fund normally invests at least 80% of net assets in common stocks of companies with large market capitalizations similar to companies in Standard & Poor’s 500 Index at the time of purchase.  In selecting securities, management looks at stocks with value and /or growth characteristics and constructs an investment portfolio that has a “blend” of stocks with these characteristics
(i)  
The investment seeks long-term growth of capital.  The fund invests at least 80% of net assets in common stocks of companies that compose the S&P 500 Index.  It uses an indexing strategy or a passive investment approach designed to track the performance of the S&P 500.
(j)  
The investment seeks long-term growth of capital.  The fund invests at least 80% of net assets in equity securities of companies with medium market capitalizations (those with market capitalizations similar to companies in the Russell Midcap Value Index) at the time of purchase.  It invests in value equity securities; the value orientation selection emphasizes buying securities that appear to be undervalued.
(k)  
This investment normally invests the majority of assets in common stocks of companies that compose the S&P MidCap 400 Index.  Management attempts to mirror the investment performance of the index by allocating assets in approximately the same weightings as the S&P MidCap 400 Index.  Over the long-term, management seeks a very close correlation between the performance of the Separate Account before expenses and that of the S&P MidCap 400 Index.
(l)  
The investment seeks long-term growth of capital.  The fund normally invests at least 80% of net assets in equity securities of companies with small market capitalizations (those with market capitalizations similar to companies in the Russell 2000 Index) at the time of purchase.  It invests in equity securities with value and /or growth characteristics and constructs an investment portfolio that has a “blend” of equity securities with these characteristics
(m)  
The investment seeks long-term growth of capital.  The fund normally invests at least 80% of net assets in equity securities of companies with small market capitalizations (those with market capitalizations similar to companies in the Russell 2000 Index)  or in securities with market capitalizations of $3.5 billion or less at the time of purchase.    It invests in value equity securities; the value orientation selection emphasizes buying equity securities that appear to be undervalued.  The fund also invests in real estate investment trusts.

 
-14-
 

TEXAS OIL AND CHEMICAL CO. II, INC. 401(K) PLAN
Notes to Financial Statements

Note 10 – Net Asset Value (NAV) Per Share (Continued)

(n)  
The investment seeks long-term growth of capital.  The fund invests primarily in equity securities of companies domiciled in any of the nations of the world including those in countries with emerging markets.  It has no limitation on the percentage of assets that are invested in any one country or denominated in any one currency, but the fund typically invests in at least 30 countries.
(o)  
 This pooled separate account invests mainly in commercial real estate and includes mortgage loans which are backed by the associated properties.  Until March 25, 2011, this separate account had a temporary withdrawal limitation.  Certain high need payments, such as death, disability, certain eligible retirements, and hardship withdrawals were not subject to the withdrawal limitation.  Other withdrawal requests were subject to the limitation until certain liquidity levels were achieved.






 
 
-15-
 



SUPPLEMENTARY INFORMATION

 
 
 


 
TEXAS OIL AND CHEMICAL CO. II, INC. 401(K) PLAN
(Supplementary Information)
Schedule H, line 4i - Schedule of Assets Held at End of Year
(December 31, 2011)
           
EIN: 74-2001879
           
Plan No.  001
               
(a)
  
(b) Identity of issue, borrower, lessor or similar party
  
(c) Description of investment including maturity date, rate of interest, collateral, par or maturity value
  
(d) Cost
(e) Current value
   
Investments at fair value:
          
 
*
  
Guaranteed Interest Contract
  
Maturity date: 12/31/2011
    
$
165,797
 
*
  
Guaranteed Interest Contract
  
Maturity date: 12/31/2012
      
111,328
 
*
  
Guaranteed Interest Contract
  
Maturity date: 12/31/2013
      
278,431
 
*
  
Guaranteed Interest Contract
  
Maturity date: 12/31/2014
      
544,551
 
*
  
Guaranteed Interest Contract
  
Maturity date: 12/31/2015
      
322,754
 
*
  
Principal Money Market Separate Account
    
16,427.08
      
838,036
 
*
  
Principal Bond and Mortgage Separate Account
    
142.75
      
143,282
 
*
  
Principal Government & HQ Bond Separate Account
    
7,319.94
      
174,550
 
*
  
Principal U.S. Property Separate Account
    
186.93
      
107,199
 
*
  
Principal Lifetime 2010 Separate Account
    
1,271.49
      
20,261
 
*
  
Principal Lifetime 2020 Separate Account
    
26,096.22
      
422,516
 
*
  
Principal Lifetime 2030 Separate Account
    
25,176.38
      
397,568
 
*
  
Principal Lifetime 2040 Separate Account
    
7,952.84
      
124,298
 
*
  
Principal Lifetime 2050 Separate Account
    
10,977.71
      
163,775
 
*
  
Principal Lifetime Str Inc Separate Account
    
42.17
      
665
 
*
  
Principal Large Capital Value I Separate Account
    
3,691.58
      
43,398
 
*
  
Principal Large Capital Growth Separate Account
    
5,678.91
      
137,948
 
*
  
Principal Large Capital  S&P 500 Index Separate Account
    
20,199.59
      
1,069,500
 
*
  
Principal Mid Capital Value I Separate Account
    
22,593.02
      
799,030
 
*
  
Principal Mid Capital S&P 400 Index Separate Account
    
6,813.32
      
167,369
 
*
  
Principal Small Capital Blend Separate Account
    
7,822.39
      
587,523
 
*
  
Principal Small Capital Value Separate Account
    
6,556.06
      
256,639
 
*
  
Principal Diversified International Separate Account
    
9,923.94
      
511,471
 
*
  
Arabian American Development Co.
    
508,038.83
      
4,308,169
     
PIMCO Total Return A Fund
    
25,750.44
      
279,907
     
American Century Equity Income A Fund
    
6,551.61
      
47,630
     
Oppenheimer Rising Div A Fund
    
9,031.90
      
141,620
     
Fidelity Adv Small Capital T Fund
    
3,073.96
      
63,692
     
Columbia Newp Grt China A Fund
    
283.75
      
11,702
     
AIM Asia Pacific Growth A Fund
  
2,475.12
      
63,363
     
Heritage  Mid Cap Stock A Fund
  
551.09
      
13,799
     
Participant loans
  
(Interest rates range from 5.25% to 10.25%)
  
$      0
  
   570,120
     
Total investments
          
 $
12,887,891
       
 
*
  
Parties-in-interest
            
     
Column (d) cost is not required since all investments are directed by participants
      
See Report of Independent Registered Public Accounting Firm
 
 
-16-
 
SIGNATURE
 
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on their behalf by the undersigned hereunto duly authorized.
         
 
Texas Oil and Chemical Co. II, Inc. 401(K) Plan  
  
Date: 06/22/12
  /s/ Nicholas Carter
  
 
Nicholas Carter 
  
 
Plan Administrator 
  
 


 
 
 
-17-