<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For The Quarterly Period Ended July 31, 1999 or
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________________ to ________________
Commission File Number: 1-4488
MESABI TRUST
(Exact name of registrant as specified in its charter)
NEW YORK 13-6022277
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
IN CARE OF BANKERS TRUST COMPANY,
CORPORATE TRUST & AGENCY GROUP
P.O. BOX 318
CHURCH STREET STATION
NEW YORK, NEW YORK 10008-0318
(Address of principal executive offices)
(212) 250-6519
(Registrant's telephone number, including area code)
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 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
As of August 31, 1999, there were 13,120,010 Units of Beneficial Interest in
Mesabi Trust outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (NOTE 1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31, JULY 31,
----------------------------------- -----------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
A. Condensed Statements of Income
Revenues:
Royalty income $1,118,114 $1,473,022 $1,562,045 $1,957,281
Interest income 8,378 8,218 20,407 23,410
---------- ---------- ---------- ----------
$1,126,492 $1,481,240 $1,582,452 $1,980,691
Expenses 112,781 97,172 198,698 166,889
---------- ---------- ---------- ----------
Net income $1,013,711 $1,384,068 $1,383,754 $1,813,802
========== ========== ========== ==========
Weighted average number
of units outstanding 13,120,010 13,120,010 13,120,010 13,120,010
Net income per unit (Note 2) $0.077265 $0.105493 $0.105469 $0.138247
Distributions declared
per unit $ 0.080 $ 0.110 $ 0.080 $ 0.110
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
B. Condensed Balance Sheets
<TABLE>
<CAPTION>
Assets: July 31, 1999 January 31, 1999
------------- ----------------
<S> <C> <C>
Cash $ 192 $ 2,115,273
U.S. Government securities,
at amortized cost (which approximates
market) 1,660,361 534,914
Accrued income 470,391 134,991
Prepaid insurance 0 4,861
------------- -------------
$ 2,130,944 $ 2,790,039
------------- -------------
Fixed property, including
intangibles, at nominal values:
Amended Assignment of
Peters Lease $ 1 $ 1
Assignment of Cloquet Lease 1 1
Certificate of beneficial
interest for 13,120,010
units of Land Trust 1 1
------------- -------------
$ 3 $ 3
------------- -------------
$ 2,130,947 $ 2,790,042
============= =============
</TABLE>
Liabilities, Unallocated
Reserve and Trust Corpus:
<TABLE>
<S> <C> <C>
Liabilities:
Distribution payable $ 1,049,601 $ 2,033,602
Accrued expenses 34,238 43,485
------------- -------------
$ 1,083,839 $ 2,077,087
Unallocated reserve (Note 3) 1,047,105 712,952
Trust Corpus 3 3
------------- -------------
$ 2,130,947 $ 2,790,042
============= =============
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
C. Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JULY 31,
-------------------------------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Royalties received $ 1,226,826 $ 1,651,461
Interest received 20,226 22,960
Expenses paid (203,084) (204,293)
------------- -------------
Net cash provided by
operating activities $ 1,043,968 $ 1,470,128
------------- -------------
Cash flows from investing activities:
Maturities of
U.S. Government
securities $ 2,792,546 $ 4,364,263
Purchases of U.S.
Government securities (3,917,993) (5,929,922)
------------- -------------
Net cash provided by (used in)
investing activities $ (1,125,447) $ (1,565,659)
------------- -------------
Cash flows from financing activities:
Net cash (used in) financing
activities, distributions
to Unitholders $ (2,033,602) $ (3,476,803)
------------- -------------
Net increase/(decrease) in cash $ (2,115,081) $ (3,572,334)
Cash, beginning of year 2,115,273 3,607,221
------------- -------------
Cash, end of quarter $ 192 $ 34,887
============= =============
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 1,383,754 $ 1,813,802
(Increase) in accrued income (335,400) (306,269)
Decrease in prepaid insurance 4,861 3,820
(Decrease) in accrued expenses (9,247) (41,225)
------------- -------------
Net cash provided by
operating activities $ 1,043,968 $ 1,470,128
============= =============
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
MESABI TRUST
NOTES TO FINANCIAL STATEMENTS
Note 1. The financial statements included herein have been prepared
without audit (except for the balance sheet at January 31, 1999)
in accordance with the instructions to Form 10-Q pursuant to the
rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of the
Trustees, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of (a) the results of
operations for the six months ended July 31, 1999 and 1998, (b)
the financial positions at July 31, 1999 and January 31, 1999, and
(c) the cash flows for the six months ended July 31, 1999 and
1998, have been made.
Note 2. Earnings per unit are based on weighted average number of units
outstanding during the period (13,120,010 units).
Note 3. The Trustees attempt to maintain $500,000 of liquid assets as part
of an Unallocated Reserve. The Unallocated Reserve consists of
these liquid assets and accrued revenue (primarily royalties not
yet received). At July 31, 1999, the Unallocated Reserve was
represented by $576,714 in unallocated cash and U.S. Government
securities, and $470,391 of accrued revenue primarily representing
royalties not yet received by the Trust but anticipated to be
received in October 1999 from Northshore as part of the royalty
due with respect to the third fiscal quarter, based upon reported
lessee shipping activity for the month of July 1999.
5
<PAGE>
ITEM 2. TRUSTEES' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
FORWARD-LOOKING INFORMATION
Certain statements contained in this document are forward-looking,
including specifically those statements estimating calendar year 1999 production
or shipments. All such forward-looking statements are based on input from the
lessee/operator. The Trust has no control over the operations and activities of
the lessee/operator except within the framework of current agreements. Actual
results could differ materially from those indicated in such statements.
Important factors that could cause actual results to differ materially include
those listed in "Important Factors Affecting Mesabi Trust" below.
BACKGROUND
Leasehold royalty income constitutes the principal source of the
Trust's revenue. Royalty rates are determined in accordance with the terms of
Mesabi Trust's leases and assignments of leases. Three types of royalties
comprise the Trust's leasehold royalty income:
- Overriding royalties, which constitute the majority of
Mesabi Trust's royalty income, are determined by both
the volume and selling price of iron ore products
shipped.
- Fee royalties, historically a smaller component of the
Trust's royalty income, are payable to Mesabi Land
Trust, a Minnesota land trust of which Mesabi Trust is
the sole beneficiary ("Mesabi Land Trust"), and are
based on the amount of crude ore mined. Currently, the
fee royalty on crude ore is based on an agreed price
per ton, subject to certain indexing. Crude ore is used
to produce iron ore pellets and other products.
- Minimum advance royalties, the third type of royalty,
are discussed below.
With respect to the volume component of royalty calculation,
Northshore Mining Company ("Northshore") is obligated to pay Mesabi Trust base
overriding royalties in varying amounts. The volume component of overriding
royalties constitutes a percentage of the gross proceeds of iron ore products
produced at Mesabi Trust lands (and to a limited extent other lands) and shipped
from Silver Bay, Minnesota. The percentage ranges from 2-1/2% of the gross
proceeds for the first one million tons of iron ore products so shipped annually
to 6% of the gross proceeds for all iron ore products in excess of 4 million
tons so shipped annually.
With respect to the selling price component of overriding royalty
calculation, Northshore is obligated to pay to Mesabi Trust royalty bonuses. The
royalty bonus is a percentage of the gross proceeds of product shipped from
Silver Bay and sold at prices above a threshold price. The threshold price is
adjusted on an annual basis for inflation and deflation (but not below $30). The
threshold price was $37.29 for calendar year 1997, was $38.21 for calendar year
1998 and is $38.22 for calendar year 1999. The royalty bonus percentage ranges
from 1/2 of 1% of the gross proceeds (on all tonnage shipped for sale at prices
between the threshold price and $2.00 above the threshold price) to 3% of the
gross proceeds on all tonnage shipped for sale at prices $10.00 or more above
the threshold price. No royalty bonus has been paid to date.
Generally, Northshore's obligation to pay base overriding
royalties and royalty bonuses with respect to the sale of iron ore products
accrues upon the shipment of those products from Silver Bay.
6
<PAGE>
However, regardless of whether any shipment has occurred, Northshore is
obligated to pay to Mesabi Trust a minimum advance royalty. Each year, the
amount of the minimum advance royalty is adjusted for inflation and deflation
(but not below $500,000 per annum). Advance royalties payable were $621,606
for calendar year 1997, were $636,935 for calendar year 1998 and are $637,044
for calendar year 1999. Until overriding royalties (and royalty bonuses, if
any) for a particular year equal or exceed the minimum advance royalty for
the YEAR, Northshore must make quarterly payments of up to 25% of the minimum
advance royalty for the year. Because advance minimum royalties are
essentially prepayments of base overriding and bonus royalties earned EACH
year, any advance minimum royalties paid in a fiscal quarter are recouped by
credits against base overriding and bonus royalties earned in later fiscal
quarters during the year. Historically, advance minimum royalties have been
paid in the first fiscal quarter and recouped in the second fiscal quarter.
Northshore is obligated to make quarterly royalty payments in
January, April, July and October of each year. In the case of base overriding
royalties and royalty bonuses, these quarterly royalty payments are to be made
whether or not the related proceeds of sale have been received by Northshore by
the time such payments become due.
Under the relevant documents, Northshore may mine and ship iron
ore products from lands other than Mesabi Trust lands. To encourage the use of
iron ore products from Mesabi Trust lands, Mesabi Trust receives royalties on
stated percentages of iron ore shipped from Silver Bay, whether or not the iron
ore products are from Mesabi Trust lands. Mesabi Trust receives royalties at the
greater of (i) the aggregate quantity of iron ore products shipped that were
from Mesabi Trust lands, and (ii) a portion of the aggregate quantity of all
iron ore products shipped that were from any lands, such portion being 90% of
the first four million tons shipped during such year, 85% of the next two
million tons shipped during such year, and 25% of all tonnage shipped during
such year in excess of six million tons.
In its annual report for the fiscal year ended December 31, 1998
("Report"), Cleveland Cliffs, Inc. ("CCI"), parent company of Northshore, the
lessee/operator of Mesabi Trust iron ore interests, stated that it was
continuing to evaluate whether to build a facility to produce pig iron at CCI's
Northshore Mine in Minnesota that would annually produce 700,000 metric tons of
premium grade pig iron. In the Report, it was stated that good progress has been
made in a number of areas on the project, but that a decision relative to
proceeding with this project has been delayed by uncertainty about market
conditions and timing of state environmental permitting. In its most recently
released quarterly report on Form 10-Q for the quarter ended June 30, 1999, CCI
did not provide an update regarding its plans, if any, for a pig iron facility,
but did state that prevailing market conditions have rendered "[i]mported pig
iron . . . available at very low prices." Because of the preliminary nature of
this information, the Mesabi Trustees are unable to determine at this time how
the addition of a pig iron facility (if the project proceeds) would impact
overall revenues of Mesabi Trust. As indicated elsewhere in this report, the
Trust's revenues are currently derived almost entirely from iron ore pellet
production and sales.
Mesabi Trust has no employees, but it engages independent
consultants to assist the Trustees in monitoring, among other things, the amount
and sales prices of iron ore products shipped by Northshore from Silver Bay,
Minnesota. As noted above, the information regarding amounts and sales prices of
shipped iron ore products is used to compute the royalties payable to Mesabi
Trust by Northshore. Bankers Trust Company, the Corporate Trustee, also performs
certain administrative functions for Mesabi Trust.
7
<PAGE>
IMPORTANT FACTORS AFFECTING MESABI TRUST
The Agreement of Trust specifically prohibits the Trustees from
entering into or engaging in any business. This prohibition applies even to
business activities the Trustees deem necessary or proper for the preservation
and protection of the Trust Estate. Accordingly, the Trustees' activities in
connection with the administration of Trust assets are limited to collecting
income, paying expenses and liabilities, distributing net income and protecting
and conserving the assets held.
Accordingly, the income of the Trust is highly dependent upon the
activities and operations of Northshore, and the terms and conditions of the
Amended Assignment Agreements. The Trust and the Trustees have no control over
the operations and activities of Northshore, except within the framework of the
Amended Assignment Agreements.
Due to winter weather, and the increasing royalty percentages
based on tonnage shipped in a calendar year, results for a particular calendar
quarter are typically not indicative of results for future quarters or the year
as a whole. Factors which can impact the results of the Trust in any quarter or
year include:
1. SHIPPING CONDITIONS IN THE GREAT LAKES. Shipping activity by Northshore
is dependent upon when the Great Lakes shipping lanes freeze for the
winter months (typically in January) and when they re-open in the spring
(typically late-March or April). Base overriding royalties to Mesabi
Trust are based on shipments made in a calendar quarter. Because there
typically is little or no shipping activity in the first calendar
quarter, the Trust typically receives only the minimum royalty for that
period.
2. OPERATIONS OF NORTHSHORE. Because the primary portion of the Trust's
revenues derive from iron ore product shipped by Northshore from Silver
Bay, Northshore's processing and shipping activities directly impact the
Trust's revenues in each quarter and for each year. In turn, a myriad of
factors affect Northshore shipment volume. These factors include
economic conditions in the iron ore industry, pricing by competitors,
long-term customer contracts or arrangements by Northshore or its
competitors, availability of ore boats, production at Northshore's
mining operations, and production at the pelletizing/processing
facility. If any pelletizing line becomes idle for any reason,
production and shipments (and, consequently, Trust income) could be
adversely impacted. In fact, CCI recently reported that it expects
ore prices in 1999 to be 6% to 7% below last year's prices. CCI also
announced that Northshore shut down its smallest pelletizing furnace
on July 22, that this is expected to be closed through November 24,
1999 and that it tentatively plans to shut down the entire plant at
Northshore from October 30 through November 24, 1999. Although it is
not possible to know with certainty the extent or duration of such
shutdowns of properties, it is reasonable to expect that Trust
royalties will be lower than last year's royalties during comparable
periods.
3. INCREASING ROYALTIES. As described elsewhere in this Report, the royalty
percentage paid to the Trust increases as the aggregate tonnage of iron
ore products shipped, attributable to the Trust, in any calendar year
increases. Assuming a consistent sales price per ton throughout a
calendar year, shipments of iron ore product attributable to the Trust
later in the year generate a higher royalty to the Trust.
4. PERCENTAGE OF MESABI TRUST ORE. As described elsewhere in this Report,
Northshore has the ability to process and ship iron ore product from
lands other than Mesabi Trust lands. In certain circumstances, the Trust
may be entitled to royalties on those other shipments, but not in all
cases.
8
<PAGE>
In general, the Trust will receive higher royalties (assuming all
other factors are equal) if a higher percentage of shipments are from
Mesabi Trust lands. The percentages of shipments that came from Mesabi
Trust lands were 99.3%, 98.3%, 98.4%, 90.6% and 88.3% in calendar years
1998, 1997, 1996, 1995 and 1994, respectively.
COMPARISON OF THREE MONTHS ENDED JULY 31, 1999 AND JULY 31, 1998
Mesabi Trust's net income decreased to $1,013,711 for the fiscal
quarter ended July 31, 1999, as compared to net income of $1,384,068 for the
fiscal quarter ended July 31, 1998. Mesabi Trust's gross income for the fiscal
quarter ended July 31, 1999 was $1,126,492 consisting of $0 in minimum advance
royalty income, $1,041,130 in overriding royalty income, $76,984 in fee royalty
income and $8,378 in interest income, as compared to gross income of $1,481,240
consisting of $0 in minimum advance royalty income, $1,385,157 in overriding
royalty income, $87,865 in fee royalty income and $8,218 in interest income, for
the fiscal quarter ended July 31, 1998. The decrease in royalty income was
primarily due to decreased pellet shipments as compared to the comparable prior
period. Mesabi Trust's expenses for the fiscal quarter ended July 31, 1999 were
$112,781, compared to expenses of $97,172 for the fiscal quarter ended July 31,
1998.
COMPARISON OF SIX MONTHS ENDED JULY 31, 1999 AND JULY 31, 1998
Mesabi Trust's net income decreased to $1,383,754 for the six months
ended July 31, 1999, as compared to net income of $1,813,802 for the six months
ended July 31, 1998. Mesabi Trust's gross income for the six months ended July
31, 1999 was $1,582,452, consisting of $0 in minimum advance royalty income,
$1,395,597 in overriding royalty income, $166,448 in fee royalty income and
$20,407 in interest income, as compared to gross income of $1,980,691 consisting
of $0 in minimum advance royalty income, $1,780,711 in overriding royalty
income, $176,570 in fee royalty income and $23,410 in interest income, for the
six months ended July 31, 1998. The decrease in royalty income was primarily due
to decreased pellet shipments as compared to the comparable prior period. Mesabi
Trust's expenses for the six months ended July 31, 1999 were $198,698, compared
to expenses of $166,889 for the six months ended July 31, 1998.
Mesabi Trust's Unallocated Reserve aggregated $1,047,105 at July 31,
1999, as compared with an Unallocated Reserve of $1,090,400 at July 31, 1998.
The decrease of $43,295 was due to the net effect of: (a) the decrease in net
income of $430,048 during the six months ended July 31, 1999 as compared with
the six months ended July 31, 1998 and (b) the January 31, 1999 unallocated
reserve balance of $712,952 was $6,847 lower than the January 31, 1998
unallocated reserve balance of $719,799. The Trustees anticipate that the amount
of Unallocated Reserve will fluctuate from time to time, depending upon a number
of factors, including but not limited to the income for a particular period, the
amount and timing of distributions, uncertainty about future royalty income and
the uncertainty of future expenses.
9
<PAGE>
ROYALTY COMPARISONS
The following chart summarizes Mesabi Trust's royalty income for the
six months ended July 31, 1999 and July 31, 1998, respectively:
Six months Ended July 31,
1999 1998
---- ----
Base overriding royalties $1,395,597 $1,780,711
Bonus royalties 0 0
Minimum advance
royalty paid (recouped) 0 0
Fee royalties 166,448 176,570
---------- ----------
Total royalty income $1,562,045 $1,957,281
========== ==========
RECENT DEVELOPMENTS
The Trustees of Mesabi Trust have learned through a public
announcement by CCI, the corporate parent of Northshore, that CCI will
implement cutbacks in production at Cliffs-managed mines in order to reduce
iron ore pellet output for the year by approximately 2.7 million tons. This
production cutback may include reductions of up to 600,000 tons at the
Northshore plant which produces iron ore pellets from iron ore mined from the
Mesabi Trust lands, representing an annual iron ore pellet reduction of
approximately 14% compared to 1998. Northshore shut down its smallest
pelletizing furnace on July 22 and it is expected to be closed through
November 24. CCI previously announced tentative plans to shut down the
entire plant at Northshore from October 30 to November 24.
These production cutbacks and anticipated sales reductions indicate
to the Mesabi Trustees that pellet shipments and pellet pricing will likely
decrease during the current quarter and during the second half of the current
year, which would accordingly result in lower distributions to Unitholders in
comparison to similar periods in prior years.
The volume of shipments of iron ore pellets by Northshore and pellet
sales prices vary from quarter to quarter and year to year based on a number of
factors including weather conditions on the Great Lakes, the requested delivery
schedules of customers and general economic conditions in the iron ore industry.
The resulting royalties to the Trust are dependent on the volume of shipments
for the quarter and the year to date, the pricing of the iron ore product sales
and the percentage of iron ore shipments which is from Mesabi Trust lands rather
than other lands. Currently, unusually high levels of steel imports have
significantly reduced demand for domestic steel production.
The Trustees received a letter dated August 5, 1999 from the New York
Stock Exchange, Inc. ("NYSE") indicating that under new rule changes that
increase the NYSE's continued listing criteria, the Trust is considered below
criteria by the NYSE because it has failed to maintain a total market
capitalization of at least $50 million. As of September 10, 1999, the Company's
current market capitalization (the closing sale price of one Unit of Beneficial
Interest reported on the NYSE multiplied by the number of outstanding Units of
Beneficial Interest) was approximately $33.6 million, based on the price per
Unit of Beneficial Interest of $2.5625 on that date. The letter further
explained that the Trust is subject to procedural rules governing suspension and
delisting, but these rules are presently under review by the Securities and
Exchange Commission. The Trustees have not been advised of any intentions on the
part of the NYSE with respect to delisting the Units of Beneficial Interest.
10
<PAGE>
IMPACT OF YEAR 2000
Computer programs have historically been written to abbreviate dates
by using two digits instead of four digits to identify a particular year. The
so-called "Year 2000 problem" is the inability of computer software or hardware
to recognize or properly process dates ending in "00" and dates after the Year
2000. Significant attention is being focused as the Year 2000 approaches on
updating or replacing such software and hardware in order to avoid system
failures, miscalculations or business interruptions that might otherwise result.
The Trustees of Mesabi Trust are taking steps we believe are necessary to insure
that this potential problem does not adversely affect the Trust. We are
continuing our as-yet incomplete assessment of the impact of the Year 2000
problem.
Because it is a trust entity and has no operations of its own, Mesabi
Trust believes that the costs and efforts it may incur to address the Year 2000
problem will not be material. The Year 2000 problem may, however, adversely
impact Mesabi Trust indirectly by affecting the businesses and operations of
parties with which the Trustees interact in the normal course of administering
the Trust (which activities, as noted elsewhere in this report, are limited to
collecting income, paying expenses and liabilities, distributing net income and
protecting and conserving the assets held). There can be no assurance that
Mesabi Trust will be able to effectively address Year 2000 issues in a
cost-efficient manner and without interruption, or that Year 2000 problems
encountered by parties with which the Trustees interact in the normal course of
administering the Trust will not adversely affect the Trust.
Mesabi Trust's state of readiness for the Year 2000, our estimated
costs associated with Year 2000 issues, the risks we face associated with Year
2000 issues and our Year 2000 contingency plans are summarized below.
STATE OF READINESS -- Mesabi Trust has no internal computer programs
or systems. Externally, Mesabi Trust has implemented a three-phase process to
assess Year 2000 compliance of systems used by parties with which the Trustees
interact in the normal course of administering the Trust, and remediate any
material non-compliance. The phases are (1) to identify the parties with which
the Trustees interact in the course of operating the Trust and determine whether
they are significant to the operation and performance of the Trust (so-called
"core parties"); (2) to contact the core parties by, among other methods,
sending them letters and questionnaires designed to solicit information relating
to the Year 2000 problem; and (3) to evaluate the responses received from the
core parties. We have completed the first two phases of this external process.
We have received and evaluated responses to our inquiries from most of the core
parties and do not believe such responding core parties face Year 2000
compliance problems that would have a material effect on the Trust. We have been
following up, and plan to continue to follow up during 1999, with those core
parties who have not yet responded to our inquiries as well as those who have
indicated that their compliance efforts are not yet entirely complete.
COSTS ASSOCIATED WITH YEAR 2000 ISSUES -- We estimate that the future
costs associated with implementing all phases of our Year 2000 assessment and
resolving any Year 2000 problems will be between $5,000 and $20,000. We believe
that these costs, assuming this estimate is accurate, would not have a material
effect on the Trust's performance. We estimate our costs to date associated with
Year 2000 issues to be less than $5,000. We anticipate that cash flow from Trust
income will be used to pay the costs to address Year 2000 issues. All Year 2000
costs are expensed as incurred.
RISKS ASSOCIATED WITH YEAR 2000 ISSUES -- We are unaware of any
material risk to Mesabi Trust associated with Year 2000 issues at the present
time. We believe that the reasonably likely worst case Year 2000 scenario is a
decrease in the efficiency with which the Trust collects income and pays
11
<PAGE>
expenses and liabilities, and a decrease in the efficiency with which the Trust
receives payments from Northshore. A decrease in efficiency would not
necessarily result in a decrease in the performance of the Trust, however,
because we believe that alternative collection methods could be arranged within
a relatively short period of time. Any disruption, however, could result in
delayed or lost revenue.
CONTINGENCY PLANS -- The Trustees' contingency plan, if one or more
of the core parties suffers a significant Year 2000 problem, is to identify
alternative vendors and service providers where practicable in an effort to
decrease the impact on Mesabi Trust. The Trustees have not yet identified such
alternative vendors and service providers. Because there is no practical
alternative to Northshore's role as lessee/operator of Mesabi Trust iron ore
interests, the contingency plan if royalty payments by Northshore are adversely
affected by a Year 2000 problem would likely include delays of distributions to
Unit holders.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not applicable.
PART II - OTHER INFORMATION
ITEM 2. LEGAL PROCEEDINGS.
None.
ITEM 3. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 4. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 6. OTHER INFORMATION.
None.
ITEM 7. EXHIBITS AND REPORTS ON FORM 8-K.
27.1 Financial Data Schedule.........................Filed herewith.
12
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
MESABI TRUST
--------------------------------------
(Registrant)
By: BANKERS TRUST COMPANY
Corporate Trustee
Principal Administrative Officer and duly
authorized signatory:*
Date: September 14, 1999 By: /s/ Ednora Linares
--------------------------------------
Name: Ednora Linares
Title: Assistant Vice President
* There are no directors
or executive officers of
the registrant.
13
<PAGE>
EXHIBIT INDEX
Item No. Description
-------- -----------
27.1 Financial Data Schedule..............Filed herewith.
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED
STATEMENTS OF EARNINGS AND THE CONSOLIDATED BALANCE SHEET AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> JUL-31-1999
<CASH> 192
<SECURITIES> 1,660,361
<RECEIVABLES> 470,391
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,130,944
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,130,947
<CURRENT-LIABILITIES> 1,083,839
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0
0
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<NET-INCOME> 1,383,754
<EPS-BASIC> .105
<EPS-DILUTED> .105
</TABLE>
