ANNUAL REPORT ON FORM 10-K
GREAT NORTHERN IRON ORE PROPERTIES
DECEMBER 31, 1995
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995 Commission File Number 1-701
GREAT NORTHERN IRON ORE PROPERTIES
(Exact name of registrant as specified in its charter)
Minnesota 41-0788355
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
W-1290 First National Bank Building
332 Minnesota Street
Saint Paul, Minnesota 55101-1361
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 612 / 224-2385
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on Which
Title of Each Class Registered
Trustees' Certificates of Beneficial Interest New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act--None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months and (2) has been subject to such filing requirements
for the past 90 days. Yes __X__ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. __X__
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of January 31, 1996 - None
The number of shares of beneficial interest outstanding as of the close of the
period covered by this report:
Trustees' Certificates of Beneficial Interest--1,500,000
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual report to certificate holders for the year ended December
31, 1995 are incorporated by reference into Part II.
PART I
Item 1. BUSINESS
The Registrant ("Trust") owns in fee, mineral and non-mineral lands on
the Mesabi Iron Range of Minnesota. Income is derived through royalties
on iron ore minerals (principally taconite) taken from these properties
by lessees. The Registrant is presently involved solely with the
leasing and care of these properties. There have been no significant
changes in these functions since the beginning of the fiscal year.
The raw materials essential to the business of the Registrant are the
minerals contained in properties owned and leased by the Registrant.
Since the Registrant leases its properties to mining interests which
control the amount of ore production, the Registrant itself has no
control over the tonnage mined from its properties but is solely
involved with administering the leases on the properties. Since
operating companies insist on freedom to move from property to property
as mining requirements dictate, such changes in production cannot be
reduced to financial forecasts.
Registrant owns mineral interests in 12,033 acres on the Mesabi Iron
Formation, including approximately 7,443 acres which are wholly-owned,
1,080 acres in which Registrant is a tenant in common with a 91%
interest, 3,350 acres in tenancy in common with a 50% interest and 160
acres in tenancy in common with other fractional interests. Of said
total, 7,112 acres are under lease and 4,921 acres are unleased.
Registrant cannot estimate at this time any tonnages for non-magnetic
taconite because of lack of drilling, testing and of any established
commercial treatment method for Mesabi Iron Range non-magnetic
taconite. To give a better perspective on magnetic taconite,
Registrant's engineers estimate that the magnetic taconite under lease
as of January 1, 1996 was equivalent, with respect to the Registrant's
share, to 401,000,000 tons of pellets.
Present leases provide for minimum payments aggregating approximately
$1,676,000 for the year 1996 even if no taconite is mined. Practically
all of this amount is attributable to long-term taconite leases.
None of the Registrant's leases provide for any right of renewal by the
lessees upon expiration, even though unmined minerals might remain. Any
extension of any such terminating lease would have to be negotiated in
the same manner as unleased properties.
All leases granted by the Registrant in the past forty years, except
some covering remnants of natural ore, have provisions for escalation
of royalty rates. Most of the taconite royalty rates are escalated on
the basis of the price of pellets, the iron content, the Producers
Price Index (PPI) (All Commodities), the PPI (Iron and Steel subgroup),
or certain combinations of the above.
Firm data on competitive conditions in the iron ore industry are not
available. Iron ore is also available from a number of other sources.
The Registrant's non-taconite shipments have ceased as a source of
income because the ore deposits have, for practical purposes, been
exhausted. The mining of taconite by lessees is the most important part
of the Registrant's business. Future development depends, to a large
part, on the demand for taconite from the Registrant's properties by
mining companies.
The Registrant's royalty income is dependent on the number of tons of
taconite shipped from its properties by the lessees, royalty rates,
advance royalties collected and liquidation of advanced royalties
collected. Following is a summary of shipments by lessees during 1995,
1994 and 1993:
<TABLE>
<CAPTION>
FULL TONS SHIPPED
-----------------------------------------------------
1995 1994 1993
-----------------------------------------------------
<S> <C> <C> <C>
Hibbing Taconite Company 3,381,057 2,953,027 2,044,280
United States Steel Corporation
(USX) 1,637,165 1,118,136 1,511,157
National Steel Corporation 979,125 115,581 584,823
LTV Steel Mining Company - 22,807 -
-----------------------------------------------------
5,997,347 4,209,551 4,140,260
=====================================================
</TABLE>
At December 31, 1995, the Registrant employed 12 persons. The
Registrant has been engaged in only one line of business, namely the
leasing and maintenance of its mineral properties. The business of the
Registrant is not seasonal, but income depends upon production by
mining companies which lease its properties. The Registrant has no
operations in foreign countries and has no customers or lessees in
foreign countries.
As previously reported, Section 646 of the Tax Reform Act of 1986, as
amended, provided a special elective provision under which the Trust
was allowed to convert from taxation as a corporation to that of a
grantor trust. Pursuant to an order of the Ramsey County District
Court, the Trustees filed the Section 646 election with the Internal
Revenue Service on December 30, 1988. On January 1, 1989, the Trust
became exempt from federal and Minnesota corporate income taxes. For
years 1989 and thereafter, certificate holders are taxed on their
allocable share of the Trust's income whether or not the income is
distributed. For certificate holder tax purposes, the Trust's income is
determined on an annual basis, one-fourth then being allocated to each
quarterly record date.
The Trustees provided annual tax information in January 1996 to
certificate holders of record with holdings on any of the four
quarterly record dates during 1995. This information included a:
Substitute Form 1099-MISC - This form reported one's 1995 allocable
share of income from the Trust, distributions declared and any taxes
withheld. (Foreign certificate holders received a Form 1042S.)
Trust Supplemental Statement - This statement reported the number of
units (shares) held on any of the four quarterly record dates in 1995.
Tax Return Guide - This guide instructed the certificate holder as to
the preparation of their income tax returns with respect to income
allocated from the Trust and various deductions allowable.
The following is a listing of the Registrant's current leases:
<TABLE>
<CAPTION>
LESSEE
NUMBER OF LEASED GNIOP TERMINATION
LEASE ACRES INTEREST COUNTY LOCATION TERM PROVISION
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bennett Annex 237 100% St. Louis 1/1/1965 to 12/31/2039 1 year
Campbell Group 1,597 100 St. Louis 7/1/1959 to 12/31/2010 1 year
Enterprise 776 100 St. Louis and Itasca 1/1/1961 to 12/31/2010 6 months
Hanna Taconite #1 40 100 Itasca 4/1/1962 to 12/31/2010 6 months
Gray Annex 40 50 St. Louis 1/1/1974 to 1/1/2049 1 year
Ontario 1,397 50 St. Louis and Itasca 7/1/1978 to 12/31/2016 1 year
Ontario 360 100 St. Louis and Itasca 7/1/1978 to 12/31/2016 1 year
Ontario #3 80 25 St. Louis 1/2/1993 to 12/31/2016 1 year
Mahoning 980 100 St. Louis and Itasca 1/1/1979 to 12/31/2026 1 year
Russell Annex 120 50 Itasca 1/1/1966 to 12/31/2040 1 year
South Stevenson 180 100 St. Louis 4/1/1966 to 4/1/2041 1 year
Minntac 1,725 100 St. Louis 1/1/1959 to 12/31/2057 6 months
Wentworth 160 100 St. Louis 7/1/1965 to 6/30/2040 1 year
Atkins 160 91 St. Louis 8/1/1984 to 7/31/2009 6 months
</TABLE>
Item 2. PROPERTIES
The Registrant owns in fee, mineral and non-mineral lands on the Mesabi
Iron Range of Minnesota, most of which are leased to mining companies
who extract taconite. Taconite deposits are substantial.
Item 3. LEGAL PROCEEDINGS
In proceedings commenced in 1972, the Minnesota Supreme Court
determined that while by the terms of the Trust, the Trustees are given
discretionary powers to convert Trust assets to cash and to distribute
the proceeds to certificate holders, they are limited in their exercise
of those powers by the legal duty imposed by well established law of
trusts to serve the interests of both term beneficiaries and the
reversionary beneficiary with impartiality. Thus, the Trustees have no
duty to exercise the powers of sale and distribution unless required to
do so to serve both term and reversionary interests; and if the need
arises, the Trustees may petition the District Court of Ramsey County,
Minnesota for further instructions defining what is required in a
particular case to balance the interests of certificate holders and
reversioner. Also, the Court, in effect, held that the Trust is a
conventional trust, rather than a business trust, and must operate
within the framework of well established trust law.
By a letter dated April 3, 1995, Certificate Holders of Record as of
March 31, 1995 and the Reversioner were notified of a hearing on April
24, 1995 in Ramsey County Courthouse, Saint Paul, Minnesota for the
purpose of settling and allowing the Trust accounts for the year 1994.
By Court Order signed and dated April 24, 1995, the said accounts were
settled and allowed in all respects. By previous Orders, the Court
settled and allowed the accounts of the Trustees for preceding years of
the Trust.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF CERTIFICATE HOLDERS
None.
PART II
Item 5. MARKET FOR THE REGISTRANT'S SHARES OF BENEFICIAL INTEREST AND
RELATED SECURITY HOLDER MATTERS
Shares of Beneficial Interest, Market Prices and Distributions on pages
3 and 4 of the annual report to certificate holders for the year ended
December 31, 1995, are incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
Selected Financial Data on page 2 of the annual report to certificate
holders for the year ended December 31, 1995, is incorporated herein by
reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results
of Operations on page 2 of the annual report to certificate holders for
the year ended December 31, 1995, are incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of the Registrant, included in the
annual report to certificate holders for the year ended December 31,
1995, are incorporated herein by reference:
Balance Sheets--December 31, 1995 and 1994.
Statements of Income--Years ended December 31, 1995, 1994 and 1993.
Statements of Beneficiaries' Equity--Years ended December 31, 1995,
1994 and 1993.
Statements of Cash Flows--Years ended December 31, 1995, 1994 and 1993.
Notes to Financial Statements--December 31, 1995.
Quarterly Results of Operations on page 4 of the annual report to
certificate holders for the year ended December 31, 1995, are
incorporated herein by reference.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Registrant, being a trust, has no directors as such. The management
of the Trust is vested in the following trustees and officers whose
terms of office are not fixed for a specified time:
YEARS OF
NAME AND POSITION AGE SERVICE
- -------------------------------------------------------------------------------
Harry L. Holtz President of the Trustees 77 24 years
Joseph S. Micallef Trustee 62 20
Roger W. Staehle Trustee 62 14
Robert A. Stein Trustee 57 14
Thomas A. Janochoski Vice President and Secretary 37 4
Principal occupations of Trustees and officers during the last five
years:
HARRY L. HOLTZ
President and Chief Executive Officer, Great Northern Iron Ore
Properties.
JOSEPH S. MICALLEF
Consultant and Director, Fiduciary Counselling, Inc., St. Paul,
Minnesota; Advisory Director, First Trust National Association;
President and Chief Executive Officer, Fiduciary Counselling, Inc., St.
Paul, Minnesota until December 31, 1995.
ROGER W. STAEHLE
Adjunct Professor, Institute of Technology, University of Minnesota;
Industrial Consultant.
ROBERT A. STEIN
Executive Director and Chief Operating Officer, American Bar
Association; Dean of the Law School, University of Minnesota until
December 31, 1994.
THOMAS A. JANOCHOSKI
Vice President and Secretary, Chief Financial Officer, Great Northern
Iron Ore Properties.
Executive employees in addition to those listed above include Roger P.
Johnson, Manager of Mines and Chief Engineer.
There are no family relationships among any of the above persons.
Item 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS
----------------------------------------------------------------------------
<S> <C> <C> <C>
Harry L. Holtz, CEO and President
of the Trustees 1995 $80,000 $35,000
1994 80,000 25,746
1993 80,000 18,662
</TABLE>
The Trust Agreement (as modified by Court Orders) currently provides
for annual compensation to the President of the Trustees of $80,000
and, in addition, a sum equal to one percent of the excess of the gross
income of the Trust over $5,000,000 for that year until his annual
compensation shall reach $115,000. No other executive's compensation
exceeds $100,000. The Trustees, including the President, are not
eligible to receive retirement benefits based on their services as
Trustees. There are no options, SARs, long-term performance-based
incentive plans or retirement benefits applicable to the CEO or the
Trustees and, accordingly, disclosure tables with respect to such
benefits have been omitted.
COMPENSATION OF TRUSTEES
The Trust Agreement (as modified by Court Orders) currently provides
for annual compensation for Trustees (other than the President) of
$30,000, without any additional amounts payable for committee
participation or special assignments. There are no other arrangements
pursuant to which any Trustee was compensated for any services provided
as a Trustee during the year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Because the compensation of the Trustees and the Chief Executive
Officer is established by the Trust Agreement (as modified by Court
Orders), there is no compensation committee of the Trustees and there
is no Trustee compensation committee report on executive compensation.
The Board of Trustees, as a whole, determines the compensation of
executive officers other than the President and Chief Executive
Officer.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) The only authorized securities of the Registrant are Trustees'
Certificates of Beneficial Interest, and the holders of these
securities do not have voting rights. Entities holding more
than 5% of the Certificates of Beneficial Interest
outstanding, of record and/or beneficially, include:
NAME SECURITIES HELD % OF CLASS
--------------------------------------------------------------
Appaloosa Management L.P. and David
A. Tepper 88,200 5.88%
Oglebay Norton Company 79,700 5.31%
First Bank System, Inc. 77,816 5.19%
(b) There were no securities owned by the Trustees or officers as
of December 31, 1995.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2)--The response to this portion of Item 14 is
submitted as a separate section of this report.
(3) Listing of Exhibits:
Exhibit 13--Annual Report to Certificate Holders
Exhibit 23--Consent of Independent Auditors
Exhibit 27--Financial Data Schedule (only filed
electronically via EDGAR)
Exhibit 99--1995 Tax Return Guide
(b) Report on Form 8-K--None.
(c) Exhibits--The response to this portion of Item 14 is submitted
as a separate section of this report.
(d) Financial Statement Schedules--The response to this portion of
Item 14 is submitted as a separate section of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GREAT NORTHERN IRON ORE PROPERTIES
(Registrant)
/s/ Harry L. Holtz February 12, 1996
Harry L. Holtz, Chief Executive Officer, Date
Trustee and President of the Trustees
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ Joseph S. Micallef February 12, 1996
Joseph S. Micallef, Trustee Date
/s/ Roger W. Staehle February 12, 1996
Roger W. Staehle, Trustee Date
/s/ Robert A. Stein February 12, 1996
Robert A. Stein, Trustee Date
/s/ Thomas A. Janochoski February 12, 1996
Thomas A. Janochoski, Date
Vice President and Secretary,
Chief Financial Officer
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) and (2) and ITEM 14(d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1995
GREAT NORTHERN IRON ORE PROPERTIES
W-1290 First National Bank Building
332 Minnesota Street
Saint Paul, Minnesota 55101-1361
FORM 10-K--Item 14(a)(1) and (2)
GREAT NORTHERN IRON ORE PROPERTIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following financial statements of Great Northern Iron Ore Properties,
included in the annual report of the Registrant to its certificate holders for
the year ended December 31, 1995, are incorporated by reference in Item 8:
Balance Sheets--December 31, 1995 and 1994
Statements of Beneficiaries' Equity--Years ended December 31, 1995,
1994 and 1993
Statements of Income--Years ended December 31, 1995, 1994 and 1993
Statements of Cash Flows--Years ended December 31, 1995, l994 and l993
Notes to Financial Statements--December 31, l995
All Item 14(d) schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.
GREAT NORTHERN IRON
ORE PROPERTIES
EIGHTY-NINTH
ANNUAL REPORT OF THE TRUSTEES
TO CERTIFICATE HOLDERS
FOR
YEAR ENDED DECEMBER 31, 1995
GREAT NORTHERN IRON ORE PROPERTIES
W-1290 First National Bank Building
332 Minnesota Street
Saint Paul, Minnesota 55101-1361
(612) 224-2385
Fax (612) 224-2387
TRUSTEES
HARRY L. HOLTZ
President of the Trustees
*JOSEPH S. MICALLEF
Consultant and Director
Fiduciary Counselling, Inc.
*ROGER W. STAEHLE
Adjunct Professor
University of Minnesota
*ROBERT A. STEIN
Executive Director
American Bar Association
OFFICERS
HARRY L. HOLTZ
Chief Executive Officer
THOMAS A. JANOCHOSKI
Vice President and Secretary
Chief Financial Officer
ROGER P. JOHNSON
Manager of Mines
Chief Engineer
*Audit Committee
SHAREHOLDER RELATIONS DEPARTMENT, TRANSFER OFFICE
AND REGISTRAR
Norwest Bank Minnesota, N.A.
Stock Transfer Department
161 North Concord Exchange
P.O. Box 738
South Saint Paul, Minnesota 55075-0738
Toll-free: 1-800-468-9716
MESABI IRON RANGE OFFICE
801 East Howard Street
Hibbing, Minnesota 55746-0429
(218) 262-3886
Fax (218) 262-4295
GREAT NORTHERN IRON ORE PROPERTIES
SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Shipments from our mines (tons) 5,997,347 4,209,551 4,140,260 5,721,426 6,026,950
Royalty income $ 9,160,966 $ 7,113,730 $ 6,467,389 $ 9,295,830 $ 9,921,858
Other income 495,338 460,891 398,810 530,143 709,181
Net income 8,149,287 6,203,645 5,485,051 8,380,697 9,102,273
Total assets 16,335,426 15,304,722 14,489,943 15,373,081 15,936,814
Average shares outstanding 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000
Net income per share, based on
average shares outstanding
during year $ 5.43 $ 4.14 $ 3.66 $ 5.59 $ 6.07
Declared distributions per share $ 5.00(1) $ 4.00(2) $ 3.65(3) $ 5.75(4) $ 5.90(5)
</TABLE>
(1) $1.15 pd 4/28/95; $1.15 pd 7/31/95; $1.30 pd 10/31/95; $1.40 pd 1/31/96
(2) $.80 pd 4/29/94; $.90 pd 7/29/94; $1.15 pd 10/31/94; $1.15 pd 1/31/95
(3) $1.10 pd 4/30/93; $1.10 pd 7/30/93; $.70 pd 10/29/93; $.75 pd 1/31/94
(4) $1.55 pd 4/30/92; $1.45 pd 7/31/92; $1.40 pd 10/30/92; $1.35 pd 1/29/93
(5) $1.45 pd 4/30/91; $1.45 pd 7/31/91; $1.45 pd 10/31/91; $1.55 pd 1/31/92
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations: "Royalty income" for 1995 was greater than that of
1994 primarily due to overall improved taconite production, reflective of the
relatively strong demand experienced in the taconite industry during the
year. Similarly, "Royalty income" for 1994 was greater than that of 1993
primarily due to overall improved taconite production, which was in part due
to improved demand for steel and the August 1994 reopening of the National
Steel Pellet Company taconite plant, one of our primary lessees. "Other
income" for 1995 exceeded that of 1994 due mainly to increased interest
income resulting from improved yields on funds available for investment.
"Other income" for 1994 exceeded that of 1993 due mainly to increased
interest income resulting from a higher return on a greater amount of funds
available for investment. Please refer to Note A of the Financial Statements
which provides general information about Great Northern Iron Ore Properties.
Liquidity: In the interest of preservation of principal of Court-approved
reserves and guided by the restrictive provisions of Section 646 of the Tax
Reform Act of 1986, as amended, monies are invested primarily in U.S.
government securities with maturity dates not to exceed three years and,
along with cash flows from operations, are deemed adequate to meet currently
foreseeable liquidity needs.
To Certificate Holders:
The Trustees of Great Northern Iron Ore Properties (Trust) own fee title to
certain mineral and non-mineral lands situated on the Mesabi Iron Range of
Minnesota. Many of these properties are leased to companies that mine the
ores. The Trust has no subsidiaries.
During 1995, the major source of income to the Trust was royalty derived from
taconite production and minimum royalties. Accumulated advance royalties
received and taken into income on ore not yet mined amounted to $600,027 on
December 31, 1995. These advance royalties collected involve no liabilities
on the part of the Trust except to permit the mining of the ore from leases
on which the advance royalties have been paid.
Strong taconite production throughout the year resulted in 1995 being a very
good year for the Trust, significantly exceeding last year's earnings. All of
the Trust's primary lessees operated at or near capacity during the year. A
Summary of Shipments is tabulated on the last page of this report.
The Trustees declared four quarterly distributions in 1995 totaling $5.00 per
share. The first, in the amount of $1.15 per share, was paid on April 28,
1995, to certificate holders of record on March 31, 1995; the second, in the
amount of $1.15 per share, was paid on July 31, 1995, to certificate holders
of record on June 30, 1995; the third, in the amount of $1.30 per share, was
paid on October 31, 1995, to certificate holders of record on September 29,
1995; and the fourth, in the amount of $1.40 per share, was paid on January
31, 1996, to certificate holders of record on December 29, 1995. Earnings
exceeded distributions in 1995 due mainly to significant nondistributable
surface land purchases required during the year. See Notes C and D.
The Trustees declared four quarterly distributions in 1994 totaling $4.00 per
share. The first, in the amount of $.80 per share, was paid on April 29,
1994, to certificate holders of record on March 31, 1994; the second, in the
amount of $.90 per share, was paid on July 29, 1994, to certificate holders
of record on June 30, 1994; the third, in the amount of $1.15 per share, was
paid on October 31, 1994, to certificate holders of record on September 30,
1994; and the fourth, in the amount of $1.15 per share, was paid on January
31, 1995, to certificate holders of record on December 30, 1994.
The Trustees intend to continue quarterly distributions and set the record
date as of the last business day of each quarter. The next distribution will
be paid in late April 1996 to certificate holders of record on March 29,
1996.
Shares of beneficial interest in the Trust are traded on the New York Stock
Exchange under the ticker symbol "GNI." There were 2,974 certificate holders
of record on December 29, 1995. The high and low prices for the quarterly
periods commencing January 1, 1994 through December 31, 1995, were as
follows:
1995 1994
QUARTER HIGH LOW HIGH LOW
First $45 1/2 $41 1/2 $43 1/4 $36 5/8
Second 44 1/2 39 7/8 42 7/8 35
Third 49 1/4 42 1/4 50 37
Fourth 48 1/2 44 1/2 47 3/4 40
The following is a summary of quarterly results of operations for the years
ended December 31, 1995 and 1994 (in thousands of dollars, except per share
amounts), which were not audited on a quarterly basis, but the years 1995 and
1994, which included the quarterly results, were audited:
QUARTER ENDED
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
1995
Royalty income $1,935 $2,264 $2,647 $2,315
Interest and other
income 132 111 122 130
Gross income 2,067 2,375 2,769 2,445
Expenses 384 384 362 377
Net income $1,683 $1,991 $2,407 $2,068
Net income per share $1.12 $1.33 $1.60 $1.38
1994
Royalty income $1,307 $2,048 $1,801 $1,958
Interest and other
income 123 101 113 124
Gross income 1,430 2,149 1,914 2,082
Expenses 366 332 322 351
Net income $1,064 $1,817 $1,592 $1,731
Net income per share $.71 $1.21 $1.06 $1.16
In a press release dated April 7, 1995, we informed the public of the death
of Louis W. Hill, Jr. on April 6, 1995. By the terms of the Great Northern
Iron Ore Properties' Trust Agreement created December 7, 1906, the Trust
shall continue for twenty (20) years after the death of the last surviving of
eighteen named in the Trust Agreement. Louis W. Hill, Jr. was the last
survivor of the eighteen named in the Trust Agreement. According to the terms
of the Trust, the Trust now terminates twenty (20) years from April 6, 1995.
At that time, all monies remaining in the hands of the Trustees (after paying
and providing for all expenses and obligations of the Trust) shall be
distributed ratably among the certificate holders, while all property other
than monies shall be conveyed and transferred to the reversioner.
Louis W. Hill, Jr. served with distinction as a Trustee from 1934 to 1981. He
would have been 93 years old on May 19, 1995.
As previously reported, Section 646 of the Tax Reform Act of 1986, as
amended, provided a special elective provision under which the Trust was
allowed to convert from taxation as a corporation to taxation as a grantor
trust. Pursuant to an order of the Ramsey County District Court, the Trustees
filed the Section 646 election with the Internal Revenue Service on December
30, 1988. For years 1989 and thereafter, certificate holders are taxed on
their allocable share of the Trust's income whether or not the income is
distributed.
A Tax Return Guide was mailed in January 1996 to all "record date"
certificate holders shown on our stock transfer agent's records during 1995.
This Guide was intended to assist the investor in addressing many of the
issues that arise in reporting the Trust operations for federal and state
income tax purposes due to Section 646. If you were a certificate holder in
1995 and want a Tax Return Guide, please call (612) 224-2385.
We will, upon request, be happy to furnish certificate holders an Annual
Report on Form 10-K for any recent year.
Respectfully submitted,
Harry L. Holtz Joseph S. Micallef
Roger W. Staehle Robert A. Stein
Saint Paul, Minnesota
March 8, 1996
GREAT NORTHERN IRON ORE PROPERTIES
STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31
1995 1994 1993
INCOME
Royalties $9,160,966 $7,113,730 $6,467,389
Interest earned 455,939 383,967 354,489
Rent and other 39,399 76,924 44,321
9,656,304 7,574,621 6,866,199
EXPENSES
Royalties 4,623 4,623 4,623
Real estate and payroll taxes 135,363 127,482 122,573
Inspection and care of
property 387,140 355,043 341,223
Administrative and general 847,187 768,039 793,410
Provision for depreciation
and amortization 132,704 115,789 119,319
1,507,017 1,370,976 1,381,148
NET INCOME $8,149,287 $6,203,645 $5,485,051
NET INCOME PER SHARE $5.43 $4.14 $3.66
See accompanying notes.
STATEMENTS OF BENEFICIARIES' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
<S> <C> <C> <C>
Balance at beginning of year $13,393,620 $13,189,975 $13,179,924
Net income for the year 8,149,287 6,203,645 5,485,051
21,542,907 19,393,620 18,664,975
Deduct declaration of distributions on
shares of beneficial interest, per
share: 1995 - $5.00; 1994 - $4.00;
1993 - $3.65 7,500,000 6,000,000 5,475,000
Balance at end of year $14,042,907 $13,393,620 $13,189,975
</TABLE>
See accompanying notes.
GREAT NORTHERN IRON ORE PROPERTIES
BALANCE SHEETS
ASSETS
DECEMBER 31
1995 1994
CURRENT ASSETS
Cash and cash equivalents $ 262,525 $ 111,862
United States Treasury and other government
securities (Note B) 4,603,942 3,001,889
Royalties receivable 2,314,340 1,952,622
Prepaid expenses 4,394 15,662
TOTAL CURRENT ASSETS 7,185,201 5,082,035
NONCURRENT ASSETS
United States Treasury Notes (Note B) 3,773,396 5,315,635
Prepaid pension expense (Note E) 255,317 244,652
4,028,713 5,560,287
PROPERTIES
Mineral lands (Notes B and C) 37,625,536 37,067,036
Less allowances for depletion and amortization 32,587,321 32,469,652
5,038,215 4,597,384
Building and equipment - at cost, less
allowances for accumulated depreciation
(1995 - $128,734; 1994 - $134,653) 83,297 65,016
5,121,512 4,662,400
$16,335,426 $15,304,722
LIABILITIES AND BENEFICIARIES' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 112,519 $ 96,102
Distributions 2,180,000 1,815,000
TOTAL CURRENT LIABILITIES 2,292,519 1,911,102
BENEFICIARIES' EQUITY, including certificate
holders' equity, represented by 1,500,000 shares
of beneficial interest authorized and
outstanding, and reversionary interest (Notes A
and D) 14,042,907 13,393,620
$16,335,426 $15,304,722
See accompanying notes.
GREAT NORTHERN IRON ORE PROPERTIES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Cash received from royalties and rents $ 8,280,147 $ 6,574,142 $ 7,264,863
Cash paid to suppliers and employees (1,357,293) (1,270,552) (1,288,087)
Interest received 471,125 380,860 334,011
NET CASH PROVIDED BY
OPERATING ACTIVITIES 7,393,979 5,684,450 6,310,787
INVESTING ACTIVITIES
U.S. government securities purchased (3,025,000) (5,943,604) (5,250,000)
U.S. government securities matured 2,950,000 5,627,745 5,473,553
Net expenditures for building
and equipment (33,316) (41,736) (13,879)
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (108,316) (357,595) 209,674
FINANCING ACTIVITIES
Distributions paid (7,135,000) (5,407,000) (6,378,000)
NET CASH USED IN FINANCING ACTIVITIES (7,135,000) (5,407,000) (6,378,000)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 150,663 (80,145) 142,461
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 111,862 192,007 49,546
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 262,525 $ 111,862 $ 192,007
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Net income $ 8,149,287 $ 6,203,645 $ 5,485,051
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 132,704 115,789 119,319
Net (increase) decrease in assets:
Accrued interest 15,186 (3,107) (20,478)
Royalties receivable (361,718) (503,012) 813,153
Prepaid expenses 603 (33,499) (36,069)
Surface lands (558,500) (113,500) (60,000)
Net increase in liabilities:
Accrued liabilities 16,417 18,134 9,811
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 7,393,979 $ 5,684,450 $ 6,310,787
</TABLE>
See accompanying notes.
GREAT NORTHERN IRON ORE PROPERTIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE A - BUSINESS AND TERMINATION OF THE TRUST
AND LEGAL PROCEEDINGS
The Trust is presently involved solely with the leasing and maintenance of
mineral lands owned by the Trust on the Mesabi Iron Range of Minnesota.
Royalty income is derived from taconite production and minimums. Royalty
income (which is not in direct ratio to tonnage shipped) from significant
operating lessees was as follows: 1995 - $5,279,000, $2,862,000 and $968,000;
1994 - $4,949,000 and $1,840,000; and 1993 - $3,227,000, $2,335,000 and
$826,000.
The Trust Agreement dated December 7, 1906 provides that upon expiration of
twenty years next following the death of the last survivor of the persons by
whose lives the term of the Trust is determined, unless sooner terminated,
all monies remaining in the hands of the Trustees (after paying and providing
for all expenses and obligations of the Trust) shall be distributed ratably
among the certificate holders (term beneficiaries), while all property other
than monies shall be conveyed and transferred to the Lake Superior Company,
Limited, or its successors or assigns (reversionary beneficiary). The last
survivor of the persons named in the Trust Agreement died April 6, 1995.
According to the terms of the Trust Agreement, the Trust now terminates
twenty (20) years from April 6, 1995.
In proceedings commenced in 1972, the Minnesota Supreme Court determined that
while by the terms of the Trust, the Trustees are given discretionary powers
to convert Trust assets to cash and to distribute the proceeds to certificate
holders, they are limited in their exercise of those powers by the legal duty
imposed by well established law of trusts to serve the interests of both term
beneficiaries and the reversionary beneficiary with impartiality. Thus, the
Trustees have no duty to exercise the powers of sale and distribution unless
required to do so to serve both term and reversionary interests; and if the
need arises, the Trustees may petition the District Court of Ramsey County,
Minnesota, for further instructions defining what is required in a particular
case to balance the interests of certificate holders and reversioner. Also,
the Court, in effect, held that the Trust is a conventional trust, rather
than a business trust, and must operate within the framework of well
established trust law.
By a letter dated April 3, 1995, Certificate Holders of Record as of March
31, 1995 and the Reversioner were notified of a hearing on April 24, 1995 in
Ramsey County Courthouse, Saint Paul, Minnesota for the purpose of settling
and allowing the Trust accounts for the year 1994. By Court Order signed and
dated April 24, 1995, the said accounts were settled and allowed in all
respects. By previous Orders, the Court settled and allowed the accounts of
the Trustees for preceding years of the Trust.
As previously reported, Section 646 of the Tax Reform Act of 1986, as
amended, provided a special elective provision under which the Trust was
allowed to convert from taxation as a corporation to that of a grantor trust.
Pursuant to an order of the Ramsey County District Court, the Trustees filed
the Section 646 election with the Internal Revenue Service on December 30,
1988. On January 1, 1989, the Trust became exempt from federal and Minnesota
corporate income taxes. For years 1989 and thereafter, certificate holders
are taxed on their allocable share of the Trust's income whether or not the
income is distributed. For certificate holder tax purposes, the Trust's
income is determined on an annual basis, one-fourth then being allocated to
each quarterly record date.
The Trustees provided annual income tax information in January 1996 to
certificate holders of record with holdings on any of the four quarterly
record dates during 1995. This information included a:
Substitute Form 1099 - MISC - This form reported one's 1995 allocable
share of income from the Trust, distributions declared and any taxes
withheld. (Foreign certificate holders received a Form 1042S.)
Trust Supplemental Statement - This statement reported the number of
units (shares) held on any of the four quarterly record dates in 1995.
Tax Return Guide - This guide instructed the certificate holder as to
the preparation of their income tax returns with respect to income
allocated from the Trust and various deductions allowable.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS:
For purposes of the statements of cash flows, the Trust considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
SECURITIES:
United States Treasury and other government securities are classified as
"held-to-maturity" securities and are carried at cost, adjusted for amortization
of premium and accrued interest. Securities listed as noncurrent assets will
mature in 1997 and 1998.
Following is an analysis of the securities as of December 31:
CURRENT NONCURRENT
1995 1994 1995 1994
Aggregate fair value $4,548,742 $2,924,453 $3,755,554 $5,085,648
Gross unrealized
holding gains (22,367) -- (51,809) --
Gross unrealized
holding losses 5,645 41,522 -- 134,232
Amortized cost
basis 4,532,020 2,965,975 3,703,745 5,219,880
Accrued interest 71,922 35,914 69,651 95,755
$4,603,942 $3,001,889 $3,773,396 $5,315,635
MINERAL LANDS:
Mineral lands, including surface lands, are carried at amounts which represent,
principally, either cost at acquisition or values on March 1, 1913. The value of
the merchantable ore deposits was established on March 1, 1913 for federal
income tax purposes. No value has been estimated or recorded for taconite
deposits held on March 1, 1913, since they were not then thought to be
merchantable. The cost of surface lands acquired to facilitate mining operations
was amortized (non-cash expense) in the amounts of $117,669, $102,684 and
$103,200 for the years 1995, 1994 and 1993, respectively (see Note C).
ROYALTY INCOME:
Royalties from mineral leases are taken into income as earned. Accumulated
advance royalties received and taken into income on ore not yet mined amounted
to $600,027 on December 31, 1995 and $627,394 on December 31, 1994. The advance
royalties collected involve no liabilities on the part of the Trust except to
permit the mining of ore from leases on which the advance royalties have been
paid.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from the estimates.
NET INCOME PER SHARE:
Net income per share is determined by dividing net income for the year by the
1,500,000 shares of beneficial interest outstanding.
NOTE C - LAND ACQUISITION
A mining agreement dated January 1, 1959 with United States Steel Corporation
provides that one-half of annual earned royalty income, after satisfaction of
minimum royalty payments, shall be applied to reimburse the lessee for its
cost of acquisition of surface lands overlying the leased mineral deposits,
which surface lands are then conveyed to the Trustees (see Note B). There are
surface lands yet to be purchased, the costs of which are yet unknown and
will not be known until the actual purchases are made.
NOTE D - PRINCIPAL CHARGES ACCOUNT
Pursuant to the court order of November 29, 1982, the Trustees were directed
to create and maintain an account designated as "Principal Charges." This
account constitutes a first and prior lien between the certificate holders
and the reversioner, and reflects an allocation of beneficiaries' equity
between the certificate holders and the reversioner. The balance in this
account consists of attorneys' fees and expenses of counsel for adverse
parties pursuant to court order in connection with litigation commenced in
1972 relating to the Trustees' powers and duties under the Trust Instrument
and the cost of surface lands acquired in accordance with provisions of a
lease with United States Steel Corporation, net of an allowance to amortize
the cost of the land based on actual shipments of taconite and net of a
credit for disposition of tangible assets.
Following is an analysis of this account as of December 31:
1995 1994
Attorneys' fees and expenses $1,024,834 $1,024,834
Cost of surface lands 4,751,794 4,193,294
Shipment credits
(cumulative) (395,159) (319,487)
Asset disposition credits (18,500) (18,500)
Principal Charges account $5,362,969 $4,880,141
Upon termination of the Trust, the Trustees shall either sell tangible assets
or obtain a loan with tangible assets as security to provide monies for
distribution to the certificate holders in the amount of the Principal
Charges account balance.
NOTE E - PENSION PLAN
The Trust has a non-contributory defined benefit plan which covers all
employees. The Trustees are not eligible for pension benefits under the plan
based on services as Trustees. A pension benefit under the plan is based on
an employee's years of service, compensation and the type of benefit payment
option selected. Plan assets, as managed by the pension plan trustee, are
comprised mostly of fixed income and common stock investments. The Trust's
funding policy is to make annual contributions of not less than the minimum
required by Internal Revenue Service regulations.
A summary of the components of net periodic pension cost (benefit), a
non-cash item, for 1995, 1994 and 1993 is as follows:
1995 1994 1993
Service cost - benefits earned
during the year $ 41,691 $ 47,488 $ 35,479
Interest cost on projected benefit
obligation 182,570 163,112 165,489
Actual return on plan assets (702,080) 38,791 (238,229)
Net amortization and deferral 484,929 (279,749) 435
Net pension cost (benefit) $ 7,110 $ (30,358) $ (36,826)
Assumptions used in accounting for the defined benefit plan were:
1995 1994
Weighted average discount rate 7.00% 8.00%
Rate of increase in compensation levels 3.50% 3.50%
The expected long-term rate of return on assets was 8.00% in each of the
three years presented.
The following table sets forth the plan's funded status and amounts
recognized in the balance sheets at December 31, 1995 and 1994:
1995 1994
Actuarial present value of benefit
obligations:
Vested benefit obligation $2,646,090 $2,153,778
Non-vested benefit obligation 12,348 8,427
Accumulated benefit obligation 2,658,438 2,162,205
Effect of estimated future salary increases 226,951 123,190
Projected benefit obligation 2,885,389 2,285,395
Plan assets at fair value 3,093,404 2,571,145
Plan assets in excess of projected benefit
obligation 208,015 285,750
Unrecognized net loss 114,624 155,006
Prior service cost 207,015 123,957
Remaining net obligation at transition (274,337) (320,061)
Net pension asset in balance sheet $ 255,317 $ 244,652
NOTE F - INCOME TAXES
The Trustees filed an election under Section 646 of the Tax Reform Act of
1986, as amended. As discussed in Note A, beginning in 1989, the Trust is no
longer subject to federal or Minnesota corporate income taxes provided the
requirements of Section 646 are met. The principal requirements are:
The Trust must be exclusively engaged in the leasing of mineral
properties and activities incidental thereto.
The Trust must not acquire any additional property other than
permissible acquisitions as provided by Section 646.
If these requirements are violated, the Trust will be treated as a
corporation for the taxable year in which the violation occurs and for all
subsequent taxable years. Since the election of Section 646, the Trust has
remained in compliance with these requirements.
NOTE G - LEASE COMMITMENTS
The Trust leases office facilities in Saint Paul, Minnesota. These leases
include various renewal options and exclude any contingent rental provisions.
Rental expense for all operating leases amounted to $52,956, $51,416 and
$51,416 for the years 1995, 1994 and 1993, respectively.
At December 31, 1995, future minimum lease commitments for noncancelable
operating leases that have initial or remaining lease terms in excess of one
year are $51,248 and $34,165 for the years 1996 and 1997, respectively.
NOTE H - RELATED PARTY
Trustee Joseph S. Micallef is an advisory director of the First Trust
National Association located in Saint Paul, Minnesota, which is owned by
First Bank System, Inc. which also owns First Bank of Saint Paul in which the
Trust has demand deposit accounts. First Trust National Association manages
the Trust's pension plan funds.
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Trustees
Great Northern Iron Ore Properties
We have audited the accompanying balance sheets of Great Northern Iron Ore
Properties as of December 31, 1995 and 1994, and the related statements of
income, beneficiaries' equity and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Great Northern Iron Ore
Properties at December 31, 1995 and 1994, and the results of its operations
and its cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Minneapolis, Minnesota
January 26, 1996
GREAT NORTHERN IRON ORE PROPERTIES
SUMMARY OF SHIPMENTS
<TABLE>
<CAPTION>
FULL TONS SHIPPED
TOTAL TO
OWNERSHIP JANUARY 1,
NO. MINE INTEREST 1995 1994 1993 1996
<S> <C> <C> <C> <C> <C> <C>
1. Mahoning 100% 945,130 819,159 646,143 142,771,668
2. Ontario do. 809,320 925,832 418,695 7,485,204
3. Ontario 50% 1,626,607 1,208,036 979,442 14,572,320
4. Mississippi No. 3 100% -- -- -- 3,744,411
5. Section 18 do. 40,073 -- -- 27,897,939
6. Bennett Annex do. -- -- -- 1,437,373
7. South Stevenson do. 241,961 -- 151,055 4,819,621
8. Stevenson do. 104,648 311 328,436 34,535,312
9. Russell Annex 50% 592,443 115,270 105,332 835,474
10. Mahoning No. 6 100% -- -- -- 23,286
11. Campbell-Carmi do. -- -- -- 2,953,240
12. Wentworth do. -- 22,807 -- 5,854,394
13. Minntac do. 1,637,165 1,118,136 1,511,157 19,527,002
14. Atkins 91% -- -- -- 1,962,091
5,997,347 4,209,551 4,140,260 268,419,335
Shipments from inactive
mines and those
exhausted, surrendered
or sold prior to this year -- -- -- 308,017,376
TOTAL 5,997,347 4,209,551 4,140,260 576,436,711
</TABLE>
NO. OPERATING INTEREST
1-3 Hibbing Taconite Company
4 Hanna Ore Mining Company
5-9 National Steel Corporation
10-11 M. A. Hanna Company
12 LTV Steel Mining Company
13-14 United States Steel Corporation (USX)
GREAT NORTHERN IRON ORE PROPERTIES
W-1290 FIRST NATIONAL BANK BUILDING
332 MINNESOTA STREET
SAINT PAUL, MINNESOTA 55101-1361
FIRST CLASS MAIL
FIRST CLASS
U.S. POSTAGE
PAID
PERMIT #43
MINNEAPOLIS, MN
Exhibit 23 -- Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Great Northern Iron Ore Properties of our report dated January 26, 1996,
included in the 1995 Annual Report to Certificate Holders of Great Northern Iron
Ore Properties.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
January 26, 1996
GREAT NORTHERN IRON ORE PROPERTIES
W-1290 FIRST NATIONAL BANK BUILDING
332 MINNESOTA STREET
SAINT PAUL, MN 55101-1361
(612) 224-2385
FAX (612) 224-2387
1995 TAX RETURN GUIDE
Dear Unit Holder:
This "Tax Return Guide" has been prepared to assist the certificate holder in
reporting the taxable income from Great Northern Iron Ore Properties (the
"Trust") as summarized on the Substitute Form 1099-MISC (or Form 1042S for
foreign investors) and the Trust Supplemental Statement. This information is
being mailed to all certificate holders shown on the record dates during 1995,
as maintained by our transfer agent. If you use a professional tax advisor, it
is essential that they have this Guide to prepare your income tax return.
This Guide is merely intended to assist the investor in addressing many of the
issues that arise in reporting the Trust operations for federal and state income
tax purposes. It is not intended to be all-inclusive or to render specific
professional tax advice. If you are a foreign investor, we recommend you consult
your tax advisor for proper income tax reporting due to the complexity of
taxation of foreign investors. Should you have any questions about the
information in this Guide or need further assistance in income tax return
preparation, please consult your tax advisor.
"Street name" holders may also use this Guide to calculate their allocable share
of Trust income and deductions if they know the number of units (shares) held on
the record dates during the year. Nominees and brokers should refer to the
section in this Guide entitled "Nominee Reporting Requirements" which provides
guidance as to the preparation of Trust income tax information for their
clients. Please contact the Trust office if you need a bulk supply of these
Guides.
At the time this Guide was printed, Congress was considering various tax law
changes which could impact the proper recording of your allocable share of Trust
income and deductions as presented in this Guide. We suggest you consult your
tax advisor for the most current tax revisions prior to filing your income tax
return.
Finally, please note that this Guide provides information for both domestic and
foreign investors. Certain sections in this Guide pertain only to a specific
class of investors and are labeled as such. Please read this Guide thoroughly
and complete the worksheets carefully.
Sincerely yours and for the Trustees,
/s/ Harry L. Holtz
President of the Trustees
January 1996
Page 2
TAX RETURN GUIDE
TABLE OF CONTENTS
Page
Tax Matters Relating to Great Northern Iron Ore Properties
General Information 3-4
Information for Foreign Investors 4-5
Trust Income and Allocation 5
Presentation of Tax Data 5
Classification of Trust Income 5
Depletion 6
Basis 6
Certificate Amortization 6
Alternative Minimum Tax 6
Minnesota Taxation and Adjustments 7
Instruction Outline 8-9
Worksheet A - Unit Holders with a constant
interest throughout the year
Schedule I Individual Taxpayers 10
Schedule II Corporate Taxpayers 10
Worksheet B - Unit Holders that purchased or
sold units during the year
Schedule I Individual Taxpayers 11-12
Schedule II Corporate Taxpayers 13-14
Worksheet C - Year End Basis and Certificate
Amortization Computations 15
Nominee Reporting Requirements 16
Attachment for Income Tax Return to Reconcile
Form 1099-MISC or Form 1042S
Schedule for Individual Foreign Investors - Form 1042S S-F
Schedule for Individual Domestic Investors - Form 1099-MISC S-D
Page 3
TAX MATTERS RELATING TO GREAT NORTHERN IRON ORE PROPERTIES
General Information
Pursuant to an Election filed under Section 646 of the Tax Reform Act of 1986,
as amended, the Trust is taxable as a grantor trust for the years after 1988. As
an investor in a grantor trust, you are required to report your proportionate
share of the Trust's taxable income on your federal and state income tax
returns.
This Tax Return Guide is used to calculate the various components of Trust
income and deductions allocable to you. For the benefit of "street name"
holders, this Guide is universal in that if you know the number of shares
(units) held on the record dates during the year, you can calculate the proper
amount of Trust income and deductions allocable to you, regardless of whether or
not you received a Form 1099-MISC or Form 1042S from your broker.
This Guide is generally designed to instruct unit holders who utilize Individual
Income Tax Return Form 1040 or Corporate Income Tax Return Form 1120, which
represents a vast majority of our certificate holders. Foreign investors
generally would utilize Nonresident Alien Income Tax Return Form 1040NR
(Individuals) or Foreign Corporation Income Tax Return Form 1120F
(Corporations). Please note that the tax return line instructions within this
Guide do not apply to foreign investors. Because the reporting of income or
deductions for foreign investors is dependent upon whether or not they are
effectively connected with a U.S. trade or business, we strongly recommend
foreign investors consult with their tax advisors for proper income tax return
preparation.
The Substitute Form 1099-MISC has been prepared only for domestic certificate
holders of record during the year (not "street name" holders). It is used to
report the income allocable to the domestic investor (as reported to the
Internal Revenue Service and the Minnesota Department of Revenue), distributions
declared (not necessarily received within the year) and any taxes withheld. It
should be emphasized that Box 1 on Substitute Form 1099-MISC contains
distributions declared during the calendar year, not necessarily those actually
received during the year. The following table is provided to help clarify the
timing differences:
Distributions
- --------------------------------------------------------------------------------
Declared Paid Reported on (if applicable)
12/94 1/95 1994 Form 1099-MISC
3/95 4/95 1995 Form 1099-MISC
6/95 7/95 1995 Form 1099-MISC
9/95 10/95 1995 Form 1099-MISC
12/95 1/96 1995 Form 1099-MISC
- --------------------------------------------------------------------------------
Page 4
Regardless of when distributions were declared or paid, taxable income is
determined based upon your allocable share of the income of the Trust, not the
distributions. Distributions need not normally be reported anywhere on your
income tax return. If you are a "street name" holder and received a Form
1099-DIV from your broker, you should have the Form 1099-DIV voided and replaced
with a Form 1099-MISC as prepared by the broker in accordance with the "Nominee
Reporting Requirements" section of this Guide. Should your broker not void the
Form 1099-DIV, it is suggested you list the distributions reported by your
broker as nontaxable distributions on Schedule B, Part II of Form 1040
(Individuals) and report your proportionate share of the Trust's income on your
income tax return as computed by this Guide.
The Form 1042S has been prepared only for foreign certificate holders of record
during the year (not "street name" holders). It is used to report the income
allocable to the foreign investor (as reported to the Internal Revenue Service
and the Minnesota Department of Revenue) and any taxes withheld. Regardless of
when distributions were declared or paid, taxable income is determined based
upon your allocable share of the income of the Trust, not the distributions.
Distributions need not normally be reported anywhere on your income tax return.
The Trust Supplemental Statement shows only the shares (units) held on the
various record dates during the year. It accompanies the Substitute Form
1099-MISC or Form 1042S and may be helpful as a reference in completing this
Guide.
If you utilize professional assistance in preparing your income tax return, it
is essential that you provide your preparer with this Tax Return Guide, your
Substitute Form 1099-MISC or Form 1042S (if applicable) and your Trust
Supplemental Statement (if applicable).
Information for Foreign Investors
Nonresident alien individuals or foreign corporations are generally subject to
federal income tax at the rate of 30% (or lower treaty rate) on certain items of
gross income, including royalties, from sources within the United States. All of
the income of the Trust for this year was from sources within the United States.
The income reported on Form 1042S includes interest income, rental income and
gain from the sale of domestic iron ore. The enclosed worksheets will assist you
in the proper breakdown and reporting of the income. Because the taxation of
foreign investors is a complex area, we recommend you consult your tax advisor.
The income tax withheld from your distributions is also shown on Form 1042S. You
must file a United States federal income tax return if the tax was underwithheld
or to claim a refund for any overwithheld tax.
If a nonresident alien individual or foreign corporation is engaged in a trade
or business in the United States and the income from the Trust is effectively
connected therewith, in general, the Trust income is taxable at the graduated
tax rates applicable to individuals or corporations. Furthermore, a unit holder
may elect to treat the income (which constitutes income from real property) as
effectively connected with the conduct of a trade or business in the United
States under Sections 871(d) or 882(d) of the Internal Revenue Code, or pursuant
to any similar provisions of applicable treaties. A unit holder whose Trust
income is effectively connected with a United States trade or business or who
elects to treat it as such is entitled to claim a depletion deduction, to the
extent allowed by law, and a certificate amortization deduction with respect to
such income. A United States federal income tax return must be filed to claim
these deductions.
Page 5
A unit holder whose Trust income is effectively connected with a United States
trade or business, or who elects to treat it as such, is entitled to claim
exemption from the 30% (or lower treaty rate) withholding tax. Such exemption is
claimed for a calendar year by filing, in duplicate, with the Trust, Form 4224
"Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States" (or a substitute statement
containing the information required by Income Tax Regulation Section 1.1441-4).
The exemption statement must be received by the Trust sufficiently in advance of
the distribution to which it is intended to apply. A separate Form 4224 (or
substitute statement) must be filed with the Trust for each calendar year in
order to claim an exemption from withholding for that year's income.
Under the Foreign Investment in Real Property Tax Act (FIRPTA), the units are
treated as United States real property interests. Thus, gain or loss from the
sale or exchange of the units will be regarded as arising from the sale or
exchange of property effectively connected with the conduct of a United States
trade or business. Therefore, any sale of units during the year must be reported
in the United States and the appropriate taxes paid, if any. The gain or loss on
the sale of a unit is calculated by deducting the adjusted basis of the unit
from the unit selling price. The format of Worksheet C may be used to calculate
your adjusted basis. Include only those record dates before the sale date and
ignore the certificate amortization calculation.
Trust Income and Allocation
The Trust determines and reports its taxable income on a calendar basis
utilizing the accrual method of accounting. Shareholders (unit holders) of
record at the end of each quarter are allocated a share of the Trust's quarterly
income. There were four equal income allocations during the year to holders of
record as of the last business day of each calendar quarter. If you are an
investor with a taxable year other than a calendar year, you should report your
share of income for those record dates which coincide with your taxable year
using Worksheet B.
Presentation of Tax Data
Worksheets are provided to assist the investor in calculating their allocable
share of Trust income and deductions. You should prepare either Worksheet A if
you held the same number of units on each of the four quarterly record dates
during the year OR Worksheet B if you purchased or sold any units during the
year. If you own units in several blocks or the number of units which you own
changed during the year, you need to reproduce the necessary copies of these
worksheets and complete a separate worksheet for each block of units acquired on
a different date, at a different price or held for a different time period in
order to maintain your basis individually.
Classification of Trust Income
By a provision of the Internal Revenue Code, the iron ore royalty income earned
by the Trust is treated as gain from the sale or exchange of assets used in a
trade or business under Code Section 1231, thereby qualifying for capital gain
treatment. With respect to the Tax Reform Act of 1986, the Trustees believe that
the Trust income is portfolio income. Accordingly, such portfolio income may not
be used to offset a unit holder's losses from other passive activities.
Page 6
Depletion
There was no income derived from ore properties having a cost basis during the
year. Consequently, a cost depletion deduction is not allowable.
A percentage depletion deduction is only allowable under Section 631 for any tax
year in which the capital gain tax rate equals or exceeds the maximum ordinary
income tax rate. Accordingly, the percentage depletion deduction is not
available for individuals since the maximum ordinary income tax rate exceeds the
capital gain tax rate. Pending tax law changes may eliminate the corporate
percentage depletion deduction as well. Please consult your tax advisor prior to
claiming this deduction. As of this writing, the percentage depletion deduction
continues to remain available to domestic corporate taxpayers. It also remains
available to foreign corporate taxpayers if the income from the Trust is
effectively connected with your trade or business in the United States or if you
elect to treat the income as effectively connected. The corporate tax worksheets
provide the factor to calculate the percentage depletion deduction which is
already reduced 20% as provided by Section 291.
Basis
Basis is increased by your allocable share of Trust income and is reduced by
distributions and certificate amortization (if any). Investors should use the
format of Worksheet C to compute their year end basis annually. Basis should
never be less than zero. To the extent that distributions exceed your basis, the
excess distribution should be treated as capital gain. Certificate amortization
would no longer be available. This computation worksheet is also included to
assist the investor in computing gain or loss upon the sale of any portion of
the investor's interest. If you sold some or all of your shares prior to the end
of the year, you should to use the format of Worksheet C to calculate your
adjusted basis through the date of certificate disposition, ignoring the
certificate amortization deduction calculation as it becomes irrelevant for the
shares sold.
Certificate Amortization
Certificate holders were previously informed that amortizing the cost of Trust
certificates is allowable beginning October 2, 1978, or date of purchase,
whichever is later. Certificate amortization is a deduction for income tax
purposes for domestic investors. If you are a foreign investor and the income
from the Trust is effectively connected with your trade or business in the
United States or if you elect to treat the income as effectively connected, you
are also entitled to a certificate amortization deduction. The rate of
amortization is based on the expected life of the Trust. Certificate
amortization is calculated on one's basis (vs. a per unit amount) using the
percentage provided in Basis Worksheet C. If you did not hold any units at the
end of the year, ignore the certificate amortization deduction calculation.
Alternative Minimum Tax
Alternative minimum tax (AMT) is only applicable to our corporate investors
since the percentage depletion deduction is not available for individuals. The
entire corporate percentage depletion deduction is considered a tax preference
item and should be included on the AMT return form. Please follow the form's
instructions to determine if an additional tax liability is generated.
Page 7
Minnesota Taxation and Adjustments
Unit holders who meet Minnesota's minimum filing requirements will have to
report their allocable share of the Trust's income to the State of Minnesota.
Minnesota resident's federal income will include their share of the Trust's
income. Nonresident unit holders will have to file a Minnesota income tax return
to report Minnesota source income if their total Minnesota source income,
including their allocable share of the Trust's income, was at least $6,400
(minimum threshold for a single taxpayer under age 65).
Individual taxpayers are allowed a subtraction for their allocable share of the
Trust's U.S. interest income on their Minnesota income tax return. Use the
worksheets to calculate this amount and include with any other subtractions on
the Minnesota Individual Income Tax Return.
Corporate taxpayers are not allowed a percentage depletion deduction for
Minnesota. Therefore, the calculated percentage depletion deduction (if claimed
on the federal return) must be shown as an addition to Minnesota income.
If you are not required to file a Minnesota income tax return, you may ignore
the "Minnesota Adjustment" lines in the worksheets. However, to the extent that
other states have similar adjustments as explained above, the worksheets may be
helpful in calculating these amounts.
Page 8
INSTRUCTION OUTLINE
Your Substitute Form 1099-MISC or Form 1042S (if applicable) provides your
aggregate share of the Trust's taxable income before deductions for the calendar
year. For tax reporting purposes, the income should be separated into its
various components. If you are a "street name" holder and did not receive a Form
1099-MISC or Form 1042S, you should request such a form from your broker (not
Great Northern Iron Ore Properties); however this Guide can be used to calculate
your allocable share of income without having these forms if you know the number
of shares held on the various record dates. The worksheets which follow will
assist you in completing your income tax return with respect to the Trust's
income and deductions.
Please note that if you own units in several blocks or the number of units which
you own changed during the year, you need to reproduce the necessary copies of
these worksheets and complete a separate worksheet for each block of units
acquired on a different date, at a different price or held for a different time
period in order to maintain your basis individually.
STEP 1 Before you begin, you will likely need a minimum of the following
federal income tax return forms:
Individual Domestic Investors
Form 1040-U.S. Individual Income Tax Return
Schedule B (Form 1040)-Interest and Dividend Income
Schedule D (Form 1040)-Capital Gains and Losses
Schedule E (Form 1040)-Supplemental Income and Loss
Form 4797-Sales of Business Property
Corporate Domestic Investors
Form 1120-U.S. Corporate Income Tax Return
Schedule D (Form 1120)-Capital Gains and Losses
Form 4797-Sales of Business Property
Form 4626-Alternative Minimum Tax-Corporations
Individual Foreign Investors
Form 1040NR-Nonresident Alien Income Tax Return
Corporate Foreign Investors
Form 1120F-Foreign Corporation Income Tax Return
Various state income tax return forms may also be required depending on
the investor's tax status and domicile.
STEP 2 Determine which worksheet to use. Investors who held a constant
number of units throughout the year should use Worksheet A. All others
should use Worksheet B.
STEP 3 Complete Worksheet A or B (but not both). The Trust Supplemental
Statement received (if applicable) will provide the shares (units) held
on the various record dates during the year. The worksheet is designed
to reconcile to your Form 1099-MISC or Form 1042S for calendar year
taxpayers.
Page 9
STEP 4 If you held units of interest at the end of the year, complete
Worksheet C. If you did not hold units of interest at the end of the
year, you need not complete Worksheet C as your basis should be zero
and certificate amortization is irrelevant. However, you may wish to
use the format of Worksheet C to calculate your basis through the
date of certificate disposition.
STEP 5 If you are a domestic investor, enter the amounts calculated on
Worksheet A or Worksheet B onto the appropriate income tax return lines
as indicated on the worksheets. If you are a foreign investor,
reporting of the calculated amounts is dependent upon whether the
income is effectively or not effectively connected with a U.S. trade or
business. As this determination is dependent upon your specific
activities in the U.S., we recommend you consult your tax advisor for
proper reporting before entering the amounts calculated on Worksheet A
or Worksheet B onto your income tax return.
STEP 6 Individual domestic investors should complete Schedule S-D with the
amounts calculated from Worksheet A or Worksheet B (lines 1, 2 & 3).
This schedule provides a reconciliation of the reported income to Form
1099-MISC (which was sent to the Internal Revenue Service and the
Minnesota Department of Revenue).
Individual foreign investors should complete Schedule S-F with the
amounts calculated from Worksheet A or Worksheet B (lines 1, 2, & 3).
This schedule provides a reconciliation of the reported income to Form
1042S (which was sent to the Internal Revenue Service and the Minnesota
Department of Revenue). Foreign investors must also indicate where the
income was listed on their income tax return as determined in Step 5
above.
STEP 7 Attach either Schedule S-D or S-F, as appropriate, to your income tax
return.
STEP 8 Retain this Guide, Substitute Form 1099-MISC or Form 1042S (if
applicable) and the Trust Supplemental Statement (if applicable) with
your permanent records as it contains basis and other important
information which may be needed in future years.
Page 10
WORKSHEET A
CALCULATION OF TAXABLE INCOME FOR UNIT HOLDERS
HOLDING A CONSTANT NUMBER OF UNITS THROUGHOUT THE YEAR
*Please note that the income tax return lines referenced below pertain
only to domestic investors. If you are a foreign investor, the
reporting of this income is dependent upon whether the income is
effectively or not effectively connected with a U.S. trade or business.
As this determination is dependent upon your specific activities in the
U.S., we recommend you consult your tax advisor for the proper
reporting of this income before entering the amounts calculated onto
your income tax return Form 1040NR (Individuals) or Form 1120F
(Corporations).
<TABLE>
<CAPTION>
SCHEDULE I: INDIVIDUAL TAXPAYERS: YEAR: 1995
Where to Report
Income or Deduction Per Unit No. of Units Total on Form 1040*
------------------- -------- ------------ ----- -------------
<S> <C> <C> <C> <C>
1) Interest Income 0.303960 X = $ Schedule B, Part I, Line 1
------------------ ------------------
2) Rental Income 0.026264 X = $ Schedule E, Part I, Line 3
------------------ ------------------
3) Gain from Sale of Iron Form 4797, Part I, Line 2,
Ore, Section 1231 5.070508 X = $ Column d
------------------ ------------------
Proof Reconciliation:
Sum of lines 1, 2 & 3
should equal Form 1099-MISC Box 2
or Form 1042S (if applicable): $
==================
4) Certificate Amortization Deduction Schedule D, Part II, Line 9,
as calculated from Worksheet C: $ Columns e and f (negative)
------------------
(For filing a
MINNESOTA ADJUSTMENT: State of Minnesota
Subtract U.S. Interest 0.291264 X = $ ( ) Line 6 Tax Return)
------------------ ------------------
SCHEDULE II: CORPORATE TAXPAYERS:
Where to Report
Income or Deduction Per Unit No. of Units Total on Form 1120*
------------------- -------- ------------ ----- -------------
1) Interest Income 0.303960 X = $ Line 5
------------------ ------------------
2) Rental Income 0.026264 X = $ Line 6
------------------ ------------------
3) Gain from Sale of Iron Form 4797, Part I, Line 2,
Ore, Section 1231 5.070508 X = $ Column d
------------------ ------------------
Proof Reconciliation:
Sum of lines 1, 2 & 3
should equal Form 1099-MISC Box 2
or Form 1042S (if applicable): $
==================
Form 4797, Part I, Line 2,
4) Percentage Depletion Deduction 0.732876 X = $ Column f
------------------ ------------------
5) AMT Preference Item:
Percentage Depletion 0.732876 X = $ Form 4626, Line 2(m)
------------------ ------------------
6) Certificate Amortization Deduction Schedule D, Part II, Line 6
as calculated from Worksheet C: $ Columns e and f (negative)
------------------
(For filing a
MINNESOTA ADJUSTMENT: State of Minnesota
Add Percentage Depletion 0.732876 X = $ Line 2 Tax Return)
------------------ ------------------
</TABLE>
Page 11
WORKSHEET B
CALCULATION OF TAXABLE INCOME FOR UNIT HOLDERS
THAT PURCHASED OR DISPOSED OF UNITS DURING THE YEAR
*Please note that the income tax return lines referenced below pertain
only to domestic investors. If you are a foreign investor, the
reporting of this income is dependent upon whether the income is
effectively or not effectively connected with a U.S. trade or business.
As this determination is dependent upon your specific activities in the
U.S., we recommend you consult your tax advisor for the proper
reporting of this income before entering the amounts calculated onto
your income tax return Form 1040NR (Individuals) or Form 1120F
(Corporations).
<TABLE>
<CAPTION>
SCHEDULE I: INDIVIDUAL TAXPAYERS: YEAR: 1995
FIRST QUARTER - MARCH 31, 1995
Where to Report
Income or Deduction Per Unit No. of Units Total on Form 1040*
------------------- -------- ------------ ----- -------------
<S> <C> <C> <C> <C>
1) Interest Income 0.075990 X = $
------------------ ------------------
2) Rental Income 0.006566 X = $
------------------ ------------------
3) Gain from Sale of Iron NOTE:
Ore, Section 1231 1.267627 X = $ SEE GRAND TOTAL
------------------ ------------------
RECONCILIATION
MINNESOTA ADJUSTMENT: NEXT PAGE
Subtract U.S. Interest 0.072816 X = $ ( )
------------------ ------------------
SECOND QUARTER - JUNE 30, 1995
Where to Report
Income or Deduction Per Unit No. of Units Total on Form 1040*
------------------- -------- ------------ ----- -------------
1) Interest Income 0.075990 X = $
------------------ ------------------
2) Rental Income 0.006566 X = $
------------------ ------------------
3) Gain from Sale of Iron
Ore, Section 1231 1.267627 X = $ NOTE:
------------------ ------------------ SEE GRAND TOTAL
MINNESOTA ADJUSTMENT: RECONCILIATION
Subtract U.S. Interest 0.072816 X = $ ( ) NEXT PAGE
------------------ ------------------
Page 12
THIRD QUARTER - SEPTEMBER 29, 1995
Where to Report
Income or Deduction Per Unit No. of Units Total on Form 1040*
------------------- -------- ------------ ----- -------------
1) Interest Income 0.075990 X = $
------------------ ------------------
2) Rental Income 0.006566 X = $
------------------ ------------------
3) Gain from Sale of Iron
Ore, Section 1231 1.267627 X = $
------------------ ------------------ NOTE:
SEE GRAND TOTAL
MINNESOTA ADJUSTMENT:
Subtract U.S. Interest 0.072816 X = $ ( ) RECONCILIATION
------------------ ------------------ BELOW
FOURTH QUARTER - DECEMBER 29, 1995 Where to Report
Income or Deduction Per Unit No. of Units Total on Form 1040*
------------------- -------- ------------ ----- -------------
1) Interest Income 0.075990 X = $
------------------ ------------------
2) Rental Income 0.006566 X = $
------------------ ------------------
3) Gain from Sale of Iron
Ore, Section 1231 1.267627 X = $
------------------ ------------------ NOTE:
SEE GRAND TOTAL
MINNESOTA ADJUSTMENT:
Subtract U.S. Interest 0.072816 X = $ ( ) RECONCILIATION
------------------ ------------------ BELOW
</TABLE>
<TABLE>
<CAPTION>
GRAND TOTAL RECONCILIATION OF ABOVE RECORD DATES FOR
WORKSHEET B (SUM OF RESPECTIVE TOTAL LINES ABOVE):
Where to Report
Total on Form 1040*
----- -------------
<S> <C> <C>
1) Interest Income $ Schedule B, Part I, Line 1
------------------
2) Rental Income $ Schedule E, Part I, Line 3
------------------
3) Gain from Sale of Iron Form 4797, Part I, Line 2,
Ore, Section 1231 $ Column d
------------------
Proof Reconciliation: Sum of lines 1, 2 & 3 should equal
Form 1099-MISC Box 2 or Form 1042S (if applicable) $
==================
4) Certificate Amortization Deduction Schedule D, Part II, Line 9,
as calculated from Worksheet C: $ Columns e and f (negative)
------------------
MINNESOTA ADJUSTMENT: (For filing a
Subtract U.S. Interest $ ( )Line 6 State of Minnesota
------------------ Tax Return)
</TABLE>
Page 13
<TABLE>
<CAPTION>
SCHEDULE II: CORPORATE TAXPAYERS: YEAR: 1995
FIRST QUARTER - MARCH 31, 1995
Where to Report
Income or Deduction Per Unit No. of Units Total on Form 1120*
------------------- -------- ------------ ----- -------------
<S> <C> <C> <C> <C>
1) Interest Income 0.075990 X = $
------------------ ------------------
2) Rental Income 0.006566 X = $
------------------ ------------------
3) Gain from Sale of Iron NOTE:
Ore, Section 1231 1.267627 X = $ SEE GRAND TOTAL
------------------ ------------------
4) Percentage Depletion Deduction 0.183219 X = $ RECONCILIATION
------------------ ------------------ NEXT PAGE
5) AMT Preference Item:
Percentage Depletion 0.183219 X = $
------------------ ------------------
MINNESOTA ADJUSTMENT:
Add Percentage Depletion 0.183219 X = $
------------------ ------------------
SECOND QUARTER - JUNE 30, 1995
Where to Report
Income or Deduction Per Unit No. of Units Total on Form 1120*
------------------- -------- ------------ ----- -------------
1) Interest Income 0.075990 X = $
------------------ ------------------
2) Rental Income 0.006566 X = $
------------------ ------------------
3) Gain from Sale of Iron NOTE:
Ore, Section 1231 1.267627 X = $ SEE GRAND TOTAL
------------------ ------------------
4) Percentage Depletion Deduction 0.183219 X = $ RECONCILIATION
------------------ ------------------ NEXT PAGE
5) AMT Preference Item:
Percentage Depletion 0.183219 X = $
------------------ ------------------
MINNESOTA ADJUSTMENT:
Add Percentage Depletion 0.183219 X = $
------------------ ------------------
Page 14
THIRD QUARTER - SEPTEMBER 29, 1995
Where to Report
Income or Deduction Per Unit No. of Units Total on Form 1120*
------------------- -------- ------------ ----- -------------
1) Interest Income 0.075990 X = $
------------------ ------------------
2) Rental Income 0.006566 X = $
------------------ ------------------
3) Gain from Sale of Iron
Ore, Section 1231 1.267627 X = $ NOTE:
------------------ ------------------ SEE GRAND TOTAL
4) Percentage Depletion Deduction 0.183219 X = $
------------------ ------------------ RECONCILIATION
5) AMT Preference Item: BELOW
Percentage Depletion 0.183219 X = $
------------------ ------------------
MINNESOTA ADJUSTMENT:
Add Percentage Depletion 0.183219 X = $
------------------ ------------------
FOURTH QUARTER - DECEMBER 29, 1995
Where to Report
Income or Deduction Per Unit No. of Units Total on Form 1120*
------------------- -------- ------------ ----- -------------
1) Interest Income 0.075990 X = $
------------------ ------------------
2) Rental Income 0.006566 X = $
------------------ ------------------
3) Gain from Sale of Iron
Ore, Section 1231 1.267627 X = $ NOTE:
------------------ ------------------ SEE GRAND TOTAL
4) Percentage Depletion Deduction 0.183219 X = $
------------------ ------------------ RECONCILIATION
5) AMT Preference Item: BELOW
Percentage Depletion 0.183219 X = $
------------------ ------------------
MINNESOTA ADJUSTMENT:
Add Percentage Depletion 0.183219 X = $
------------------ ------------------
GRAND TOTAL RECONCILIATION OF ABOVE RECORD DATES FOR
WORKSHEET B (SUM OF RESPECTIVE TOTAL LINES ABOVE):
Where to Report
Total on Form 1120*
----- -------------
1) Interest Income $ Line 5
------------------
2) Rental Income $ Line 6
------------------
3) Gain from Sale of Iron Form 4797, Part I, Line 2,
Ore, Section 1231 $ Column d
------------------
Proof Reconciliation: Sum of lines 1, 2 & 3
should equal Form 1099-MISC Box 2 or Form 1042S (if applicable) $
==================
Form 4797, Part I, Line 2,
4) Percentage Depletion Deduction $ Column f
------------------
5) AMT Preference Item: Percentage Depletion $ Form 4626, Line 2(m)
------------------
Schedule D, Part II, Line 6,
6) Certificate Amortization Deduction from Worksheet C $ Columns e and f (negative)
------------------
MINNESOTA ADJUSTMENT: (For filing a State of
Add Percentage Depletion $ Line 2 Minnesota Tax Return)
------------------
</TABLE>
Page 15
<TABLE>
<CAPTION>
WORKSHEET C
YEAR END BASIS AND CERTIFICATE AMORTIZATION COMPUTATIONS
<S> <C> <C> <C>
Cost Basis
Items Affecting Basis Per Unit No. of Units Total
--------------------- -------- ------------ -----
Basis: Beginning of the year or date of $ X = $
-------------- -------------- --------------
purchase, as applicable (from Form 1099-MISC Box 2 or
Form 1042S or Worksheet A or B
Plus: Income $ as calculated)
--------------
Less: Distributions received pertaining to -
First Quarter - March 31, 1995 1.15 X = $ ( ) ( if applicable)
-------------- --------------
Second Quarter - June 30, 1995 1.15 X = $ ( ) ( if applicable)
-------------- --------------
Third Quarter - September 29, 1995 1.30 X = $ ( ) ( if applicable)
-------------- --------------
Fourth Quarter - December 29, 1995 1.40 X = $ ( ) ( if applicable)
-------------- --------------
Subtotal: (Beginning Basis plus Income less Distributions): $
--------------
Certificate Amortization % Rate: X 0.05
(to Worksheet A or B,
Certificate Amortization Deduction (Subtotal times Rate): = $ ( ) as appropriate)
--------------
Adjusted Basis at year end (Subtotal less Certificate Amortization Deduction): $ (needed for next year)
==============
Units (Shares) held at year end: 1995 (needed for next year)
--------------
Adjusted Basis per Unit (Share) at year end (Adjusted Basis divided by Units): $ (needed for next year)
==============
</TABLE>
Page 16
NOMINEE REPORTING REQUIREMENTS: YEAR: 1995
If your federal ID number is shown on Form 1099-MISC or Form 1042S, and two or
more recipients are shown or the form includes amounts belonging to another
person, you are considered a nominee recipient. You must file Form 1099-MISC or
Form 1042S, as appropriate, for each of the other owners showing the income
allocable to each. File Form(s) 1099-MISC with Form 1096 (Annual Summary and
Transmittal of U.S. Information Returns) at the Internal Revenue Service Center
for your area. On Forms 1099-MISC and 1042S, you should be listed as the payer
and the other owner(s) should be listed as the recipient. A husband or wife is
not required to file a nominee return to show payments for the other. To prepare
a Form 1099-MISC or Form 1042S for each recipient, you must know the number of
units (shares) held by the recipient on each of the Trust's four record dates.
The record dates and income factors needed to calculate income allocable to each
recipient are listed below. You should multiply the units held on each record
date times the applicable income factor, adding the results together and
reporting the grand total on Form 1099-MISC Box 2 or Form 1042S to each
recipient. When completed, all income in the Nominee's Form 1099-MISC or Form
1042S should be accounted for and each recipient should receive a Form 1099-MISC
or Form 1042S, a copy of this Guide and a summary of the recipient's holdings on
each of the record dates below. These same instructions apply to brokerage firms
as to their preparation of a Form 1099-MISC or Form 1042S for their clients
holding interests in the Trust in "street name".
RECORD DATES: INCOME FACTORS: TAXPAYER ID NUMBER:
- ------------- --------------- -------------------
First Quarter - March 31, 1995 1.350183 41-0788355
Second Quarter - June 30, 1995 1.350183
Third Quarter - September 29, 1995 1.350183
Fourth Quarter - December 29, 1995 1.350183
--------
5.400732
========
S-F
NAME SOCIAL SECURITY #
---------------------------------------- ------------------
Attachment - Schedule Reconciling Form 1042S to Individual Income Tax Return
<TABLE>
<CAPTION>
Where found on Form 1040NR
--------------------------
<S> <C> <C>
1) Interest Income + $ on
---------------- -------------------------------------
2) Rental Income + on
---------------- -------------------------------------
3) Gain from Sale of Iron Ore,
Section 1231 + on
---------------- -------------------------------------
EQUALS: Form 1042S = $
================
GREAT NORTHERN IRON ORE PROPERTIES
</TABLE>
S-D
NAME SOCIAL SECURITY #
---------------------------------------- ------------------
Attachment - Schedule Reconciling Form 1099-MISC to Individual Income Tax Return
<TABLE>
<CAPTION>
Where found on Form 1040
------------------------
<S> <C> <C>
1) Interest Income + $ Schedule B, Part I, Line 1
-----------------
2) Rental Income + Schedule E, Part I, Line 3
-----------------
3) Gain from Sale of Iron Ore, Form 4797, Part I, Line 2,
Section 1231 + Column d
-----------------
EQUALS: Form 1099-MISC Box 2 = $
=================
GREAT NORTHERN IRON ORE PROPERTIES
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM GREAT NORTHERN
IRON ORE PROPERTIES' BALANCE SHEET AS OF
DECEMBER 31, 1995 AND INCOME STATEMENT FOR
THE YEAR ENDED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 262,525
<SECURITIES> 8,377,338
<RECEIVABLES> 2,314,340
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,185,201
<PP&E> 37,837,567
<DEPRECIATION> 32,716,055
<TOTAL-ASSETS> 16,335,426
<CURRENT-LIABILITIES> 2,292,519
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 14,042,907
<TOTAL-LIABILITY-AND-EQUITY> 16,335,426
<SALES> 9,160,966
<TOTAL-REVENUES> 9,656,304
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,507,017
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,149,287
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,149,287
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,149,287
<EPS-PRIMARY> 5.43
<EPS-DILUTED> 0
</TABLE>
