<PAGE>
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: Commission File No.
JANUARY 31, 2000 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
incorporation or organization) Identification No.)
C/O BANKERS TRUST COMPANY
CORPORATE TRUST AND AGENCY GROUP
P.O. BOX 318
CHURCH STREET STATION
NEW YORK, NEW YORK
10008-0318
(Address of principal executive offices)
Registrant's telephone number, including area code:
(212) 250-6519
` Securities registered pursuant to Section 12(b) of the Act:
UNITS OF BENEFICIAL INTEREST IN MESABI TRUST
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 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 / /
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/
As of April 20, 2000, the aggregate market value of the Units of
Beneficial Interest held by non-affiliates of the registrant, based on the
closing price as reported on the New York Stock Exchange, aggregated
approximately $36,613,996*. As of April 20, 2000, 13,120,010 Units of Beneficial
Interest were outstanding.
- -------------------------------
* Includes approximately $42,469 representing the market value, as of
April 20, 2000, of 15,100 Units the beneficial ownership of which is
disclaimed by affiliates (see Item 12 herein).
<PAGE>
Certain items in Parts I and II incorporate information by
reference from the Annual Report of the Trustees of Mesabi Trust to the
Holders of Certificates of Beneficial Interest for the fiscal year ended
January 31, 2000, which is annexed hereto and filed herewith as Exhibit 13.1.
PART I
ITEM 1. BUSINESS.
(a) GENERAL DEVELOPMENT OF BUSINESS.
The information under the headings "Mesabi Trust," "The Trust
Estate," "Leasehold Royalties" and "Land Trust and Fee Royalties" set forth
on pages 7 through 11 of the Annual Report of the Trustees of Mesabi Trust
for the fiscal year ended January 31, 2000 (the "Annual Report") is
incorporated herein by reference. Certain capitalized terms used below in
this Part I are defined in the Annual Report.
Mesabi Trust ("Mesabi Trust" or the "Trust"), formed pursuant to
an Agreement of Trust dated July 18, 1961 (the "Agreement of Trust"), is a
trust organized under the laws of the State of New York. Mesabi Trust holds
all of the interests formerly owned by Mesabi Iron Company, including all
right, title and interest in the Amended Assignment of Peters Lease, the
Amended Assignment of Cloquet Lease, the beneficial interest in the Mesabi
Land Trust and all other assets and property identified in the Agreement of
Trust. The Amended Assignment of Peters Lease relates to an Indenture made as
of April 30, 1915 among East Mesaba Iron Company, Dunka River Iron Company
and Claude W. Peters (the "Peters Lease") and the Amended Assignment of
Cloquet Lease relates to an Indenture made May 1, 1916 between Cloquet Lumber
Company and Claude W. Peters (the "Cloquet Lease").
The Trust will terminate twenty-one (21) years after the death of
the survivor of twenty-five (25) persons named in an exhibit to the Agreement
of Trust. The youngest person on this exhibit is now 39 years old.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
Substantially all of the Trust's revenue, operating profits and
assets relate to one business segment--iron ore mining.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
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
conservation 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.
Pursuant to a ruling from the Internal Revenue Service, which
ruling was based on the terms of the Agreement of Trust including the
prohibition against entering into any business, the Trust is not taxable as a
corporation for Federal income tax purposes. Instead, the holders of the
Units of Beneficial Interest (the "Unitholders") are considered as "owners"
of the Trust and the Trust's income is taxable directly to the Unitholders.
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. Until August 17, 1989, the
overriding royalty was based on the quantity and iron content of pellets
shipped by Reserve Mining Company ("Reserve") from Mesabi Trust lands,
although Mesabi Trust did not receive
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any royalty income from May 1986 until July 1990 because Reserve filed a
Chapter 11 bankruptcy petition and suspended its operations. On August 17,
1989, Cyprus Northshore Mining Corporation ("Cyprus NMC") purchased
substantially all of Reserve's assets, including Reserve's interest in the
Mesabi Trust lands. At the same time, Mesabi Trust entered into certain
agreements with Reserve's Chapter 11 Trustee and Cyprus NMC (the "Amended
Assignment Agreements"). The Amended Assignment Agreements modified the
method of calculating overriding royalties payable to Mesabi Trust and
transferred Reserve's interest in the Mesabi Trust lands to Cyprus NMC.
Pursuant to the Amended Assignment Agreements, overriding royalties are
determined by both the volume and selling price of iron ore products shipped.
In 1994, Cyprus NMC was sold by its parent corporation to Cleveland-Cliffs
Inc. ("CCI") and renamed Northshore Mining Corporation ("Northshore"). CCI
now operates Northshore as a wholly-owned subsidiary.
In its Annual Report for the year ended December 31, 1999 ("CCI's
Annual Report"), 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 produce premium grade pig iron. CCI stated in the Report
that while progress has been made in a number of areas on the project, a
decision relative to proceeding with this project has been delayed by
uncertainty about market conditions and timing of state environmental
permitting. These statements were previously included in CCI's Annual Report
for the year ended December 31, 1998. 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 minerals shipped by Northshore from Silver Bay,
Minnesota. As noted above, the information regarding amounts and sales prices
of shipped minerals is used to compute the royalties payable to Mesabi Trust
by Northshore. Bankers Trust Company, one of the Trustees, also performs
certain administrative functions for Mesabi Trust.
ITEM 2. PROPERTIES.
The information under the heading "The Trust Estate" set forth on
page 7 of the Annual Report of the Trustees of Mesabi Trust for the fiscal
year ended January 31, 2000 is incorporated herein by reference.
The Peters Lease provides that each leasehold estate will continue
until the reserves of iron ore, taconite and other minerals or materials on
the land subject to the Peters Lease are exhausted. The Mesabi Lease
terminates when the Peters Lease terminates. The Cloquet Lease, executed in
1916, terminates in the year 2040. If Northshore decides to terminate or
surrender one or more of these leases, it must first give Mesabi Trust at
least six months' notice of its intention to do so and, at Mesabi Trust's
request, reassign all of such leases to Mesabi Trust. If any such
reassignment occurs, Northshore must transfer the lease interests to Mesabi
Trust free and clear of liens, except public highways. In return, Mesabi
Trust must assume Northshore's future obligations as lessee under the
reassigned leases.
The Trustees have neither made nor caused to be made any surveys
or test drillings to ascertain the iron ore reserves on any land subject to
the Peters Lease or the Cloquet Lease. However, initial surveys and test
drillings made by Mesabi Iron Company many years ago indicated that these
lands contained accessible reserves of at least 1-1/2 billion tons of
mineable raw material, capable of yielding approximately 500 million tons of
concentrated product. In CCI's Annual Report, CCI estimated that there
currently remains enough ore reserve in the Peters and Cloquet Lease Lands to
produce
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concentrated product for 81 years of mining at current extraction rates.
Little or no commercial ore deposits exist in the Mesabi Lease Lands.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The information set forth in the section titled "Certificates of
Beneficial Interest" on page 12 of the Annual Report of the Trustees of
Mesabi Trust for the fiscal year ended January 31, 2000 is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information set forth in the sections titled "Selected
Financial Data" and "Reserves and Distributions" on pages 2 and 12,
respectively, of the Annual Report of the Trustees of Mesabi Trust for the
fiscal year ended January 31, 2000 is incorporated herein by reference.
ITEM 7. TRUSTEES' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
The information set forth in the sections titled "Trustees'
Discussion and Analysis of Financial Condition and Results of Operations,"
"Income and Expense" and "Reserves and Distributions" on pages 2-6, 11-12 and
12, respectively, of the Annual Report of the Trustees of Mesabi Trust for
the fiscal year ended January 31, 2000 is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements, including the independent auditor's
report thereon, filed as a part of this report, are presented on pages F-1
through F-10 and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
There are no directors or executive officers of the registrant.
The Agreement of Trust provides for a Corporate Trustee and four Individual
Trustees (collectively, the "Trustees"). Generally, Trustees continue in
office until their resignation or removal. Any Trustee may be removed at any
time, with or without cause, by the holders of two-thirds in interest of the
Trust Certificates then outstanding. In the case of an Individual Trustee, a
successor is also appointed if the Individual Trustee dies, becomes incapable
of acting or is adjudged bankrupt or insolvent. In the case of the Corporate
Trustee, a successor is also appointed if a receiver of the Corporate Trustee
or of its property is appointed, or if any public officer takes charge or
control of the Corporate Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation.
The present Trustees of Mesabi Trust and their respective ages,
terms in office as Trustees, and business experience during the past five
years are set forth in the following table:
<TABLE>
<CAPTION>
Trustee Business Experience
Name Age Since During Past Five Years
---- --- ------- ----------------------
<S> <C> <C> <C>
Bankers Trust Company N/A 1961 Trust Company
David J. Hoffman 64 1977 Mining geologist; Until January 1988,
President of Towne Mines Exploration
Company, Inc., a privately-held mining
corporation.
Richard G. Lareau 71 1990 Partner in the law firm of Oppenheimer
Wolff & Donnelly LLP; Director of
Ceridian Corporation, Nash Finch
Company and Northern Technologies
International Corporation.
Ira A. Marshall, Jr. 77 1976 Private investor and self-employed
petroleum engineer; Until February
1986, Director and Vice President
of New American Fund, Inc., a
closed-end investment trust.
Norman F. Sprague III 52 1981 Private investor; Orthopedic surgeon.
</TABLE>
ITEM 11. TRUSTEES' COMPENSATION.
The Agreement of Trust was amended October 25, 1982 (the
"Amendment"). Pursuant to the Amendment, each Individual Trustee receives at
least $20,000 in annual compensation for services as Trustee. Each year,
annual Trustee compensation is adjusted up or down (but not below $20,000) in
accordance with changes from the November 1981 level of 295.5 (the "1981
Escalation Level") in the All Commodities Producer Price Index (with 1967 =
100 as a base). The All Commodities Producer Price Index is published by the
U.S. Department of Labor. The adjustment is made at the end of each fiscal
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year and is calculated on the basis of the proportion between (a) the level
of such index for the November preceding the end of such fiscal year and (b)
the 1981 Escalation Level.
Also pursuant to the Amendment, Bankers Trust Company, as the
Corporate Trustee, receives annual compensation in an amount equal to the
greater of (i) $20,000, or such other amount determined in accordance with
the adjustments described in the preceding paragraph, or (ii) one quarter of
one percent (1/4 of 1%) of the Trust Moneys, exclusive of proceeds of sale of
any part of the Trust Estate (as such terms are defined in the Trust
Agreement), received by the Trustees and distributed to Trust Certificate
Holders.
Additionally, each year the Corporate Trustee receives $62,500 (or
more, if unanimously approved by the Individual Trustees) to cover clerical
and administrative services to Mesabi Trust other than services customarily
performed by a registrar or transfer agent.
The following table sets forth the cash compensation paid to the
Trustees through January 31, 2000, for services in all capacities as Trustees
to Mesabi Trust during the fiscal year ended January 31, 2000.
<TABLE>
<CAPTION>
CASH COMPENSATION TABLE
(A) (B) (C)
Name Capacity in which served Cash Compensation
---- ------------------------ -----------------
<S> <C> <C>
Bankers Trust Company Corporate Trustee $88,100*
David J. Hoffman Individual Trustee $25,600
Richard G. Lareau Individual Trustee $25,600
Ira A. Marshall, Jr. Individual Trustee $25,600
Norman F. Sprague III Individual Trustee $25,600
</TABLE>
* Does not include $19,958 of fees and disbursements paid to Bankers Trust
Company as registrar and transfer agent of the Units.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND TRUSTEES.
The following table sets forth information concerning each person
known to Mesabi Trust to own beneficially more than 5% of the Trust's Units
outstanding as of April 3, 2000. Such information has been obtained from
Mesabi Trust's records and a review of statements filed with Mesabi Trust
pursuant to Section 13(d)-102 of the Securities Exchange Act of 1934 through
April 3, 2000.
<TABLE>
<CAPTION>
Name and Address Amount of Beneficial Percent of
of Beneficial Owner(s) Ownership of Units Class
---------------------- -------------------- ----------
<S> <C> <C>
Appaloosa Management L.P.,
a Delaware Limited Partnership
and
David A. Tepper
26 Main Street
Chatham, New Jersey 07928 655,500(1) 4.99%
</TABLE>
6
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- ------------------------
(1) According to a Schedule 13G dated May 4, 1998, filed by such
persons, which indicates that each of such persons has sole
voting power and sole dispositive power with respect to such
units. Appaloosa Management L.P. is general partner of
Appaloosa Investment Limited Partnership I. The general
partner of Appaloosa Management L.P. is Appaloosa Partners,
Inc., of which David Tepper is the sole shareholder and
President. Appaloosa Management L.P. acts as an investment
advisor to Palomino Fund Ltd. ("PLF"). Of the 655,500 Units
reported, 327,750 are owned by Appaloosa Investment Limited
Partnership I and 327,750 are owned by PLF.
The table below sets forth information as to the Units of Beneficial
Interest in Mesabi Trust beneficially owned as of March 15, 2000 by the Trustees
individually and as a group.
<TABLE>
<CAPTION>
Amount of Beneficial Percent of
Name Ownership of Units Class
---- -------------------- ------------
<S> <C> <C>
Bankers Trust Company(1) 3,000 Less than 1%
David J. Hoffman(2) 38,100 Less than 1%
Richard G. Lareau 15,000 Less than 1%
Ira A. Marshall, Jr.(3) 51,000 Less than 1%
Norman F. Sprague III 12,700 Less than 1%
All Trustees as a group 116,800 Less than 1%
</TABLE>
- -------------------
(1) In addition to the Units indicated above, Bankers Trust Company holds,
on behalf of various customers, Units in its Fiduciary Department in
so-called "directed" accounts. Bankers Trust Company has no voting or
investment power over, and thus no beneficial interest in, such Units.
(2) Includes 15,100 Units owned by Mr. Hoffman's wife, over which Mr.
Hoffman does not have any investment or voting power and as to which
Mr. Hoffman disclaims any beneficial ownership.
(3) These Units consist of (a) 50,000 Units owned indirectly by Mr.
Marshall through a family trust of which Mr. Marshall is the sole
trustee and (b) 1,000 Units over which Mr. Marshall has joint voting
and investment power.
ITEM 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS.
Mr. Richard G. Lareau, who became a Trustee on March 7, 1990, is a
senior partner in the law firm of Oppenheimer Wolff & Donnelly LLP, of
Minneapolis, Minnesota. That firm has been retained by Mesabi Trust since 1961
to act with respect to matters of Minnesota law, and was retained in 1991 by the
Trustees other than Mr. Lareau to act as general counsel.
7
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a) 1. FINANCIAL STATEMENTS:
The following Financial Statements are incorporated in this reporting
reference from the pages noted in our Annual Agreement of Trustees for
the Year Ended January 31, 2000:
Independent Auditor's Report - page F-1
Balance Sheets as of January 31, 2000 and 1999 - page F-2
Statements of Income for the years ended January 31, 2000, 1999
and 1998 - page F-3
Statements of Unallocated Reserve and Trust Corpus for the years
ended January 31, 2000, 1999 and 1998 - page F-4
Statements of Cash Flows for the years ended January 31, 2000,
1999 and 1998 - page F-5
Notes to Financial Statements - pages F-6 through F-10
2. FINANCIAL STATEMENT SCHEDULES:
None required.
Schedules other than those listed above have been omitted because they
are not applicable or the required information is included in the financial
statements or notes thereto.
3. EXHIBITS:
<TABLE>
<CAPTION>
Item No. Item Filing Method
-------- ---- -------------
<S> <C> <C>
3 Agreement of Trust dated as of July 18, Incorporated by reference from Exhibit 3
1961.................................. to Mesabi Trust's Annual Report on Form
10-K for the fiscal year ended
January 31, 1987.
3(a) Amendment to the Agreement of Trust Incorporated by reference from Exhibit
dated as of October 25, 1982 3(a) to Mesabi Trust's Annual Report on
Form 10-K for the fiscal year ended
January 31, 1988.
</TABLE>
8
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<TABLE>
<CAPTION>
Item No. Item Filing Method
-------- ---- -------------
<S> <C> <C>
4 Instruments defining the rights of Trust Incorporated by reference from Exhibit 4
Certificate Holders to Mesabi Trust's Annual Report on Form
10-K for the fiscal year ended
January 31, 1987.
10(a) Peters Lease.......................... Incorporated by reference from Exhibits 10(a)
- 10(d) to Mesabi Trust's Annual Report on
Form 10-K for the fiscal year ended January
31, 1987.
10(b) Amendment Assignment of Peters Lease.. Incorporated by reference from Exhibits 10(a)
- 10(d) to Mesabi Trust's Annual Report on
Form 10-K for the fiscal year ended January
31, 1987.
10(c) Cloquet Lease......................... Incorporated by reference from Exhibits 10(a)
- 10(d) to Mesabi Trust's Annual Report on
Form 10-K for the fiscal year ended January
31, 1987.
10(d) Assignment of Cloquet Lease........... Incorporated by reference from Exhibits 10(a)
- 10(d) to Mesabi Trust's Annual Report on
Form 10-K for the fiscal year ended January
31, 1987.
10(e) Modification of Lease and Consent to Incorporated by reference from Exhibit
Assignment dated as of October 22, 1982 10(e) to Mesabi Trust's Annual Report on
Form 10-K for the fiscal year ended
January 31, 1988.
10(f) Amendment of Assignment, Assumption and Incorporated by reference from Exhibit A
Further Assignment of Peters Lease.... to Mesabi Trust's Report on Form 8-K
dated August 17, 1989.
10(g) Amendment of Assignment, Assumption and Incorporated by reference from Exhibit B
Further Assignments of Cloquet Lease.. to Mesabi Trust's Report on Form 8-K
dated August 17, 1989.
13.1 Annual Report of the Trustees of Mesabi
Trust for the fiscal year ended January
31, 2000.............................. Filed herewith.
27.1 Financial Data Schedule............... Filed herewith.
</TABLE>
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(b) REPORTS ON FORM 8-K FILED IN THE FOURTH
QUARTER:
None.
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.
Dated: April 4, 2000
MESABI TRUST
By: Bankers Trust Company
Corporate Trustee
By: /s/ Daniel M. Chipko
-----------------------
Daniel M. Chipko
Associate
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/ Daniel M. Chipko April 4, 2000
- --------------------------------------------
Daniel M. Chipko
Associate
Bankers Trust Company
/s/ David J. Hoffman April 4, 2000
- --------------------------------------------
David J. Hoffman
Individual Trustee
/s/ Richard G. Lareau April 4, 2000
- --------------------------------------------
Richard G. Lareau
Individual Trustee
/s/ Ira A. Marshall, Jr. April 4, 2000
- --------------------------------------------
Ira A. Marshall, Jr.
Individual Trustee
/s/ Norman F. Sprague III April 4, 2000
- --------------------------------------------
Norman F. Sprague III
Individual Trustee
10
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Exhibit 13.1
ANNUAL REPORT
OF THE TRUSTEES OF
MESABI TRUST
For the Year Ended January 31, 2000
ADDRESS
Mesabi Trust
c/o Bankers Trust Company
Corporate Trust and Agency Group
P.O. Box 318
Church Street Station
New York, NY 10015
Telephone - (212) 250-6519
COUNSEL
Oppenheimer Wolff & Donnelly LLP, General Counsel
TRANSFER AGENT
Bankers Trust Company
REGISTRAR
Bankers Trust Company
Mesabi Trust will provide, upon the written request of any
certificate holder addressed to the Trustees at the above address and without
charge to such certificate holder, a copy of Mesabi Trust's Annual Report on
Form 10-K for the fiscal year ended January 31, 2000 as filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended.
FORWARD-LOOKING INFORMATION
Certain statements contained in this document are forward-looking,
including specifically those statements estimating 2000 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. For important factors that could cause actual results to differ
materially, see "Important Factors Affecting Mesabi Trust," below.
1
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31 2000 1999 1998 1997 1996
- ---------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Royalty and interest
income $5,359,893 $5,988,143 $6,860,369 $6,001,143 $4,061,228
Trust expenses 389,465 353,386 362,373 381,534 387,180
---------- ---------- ---------- ---------- ----------
Net income(a) $4,970,428 $5,634,757 $6,497,996 $5,619,609 $3,674,048
========== ========== ========== ========== ==========
Net income per Unit(b) $ .38 $ .43 $ .50 .43 $ .28
========== ========== ========== ========== ==========
Distributions declared
per unit(b)(c) $ .38 $ .43 $ .49 $ .42 $ .275
========== ========== ========== ========== ==========
AT JANUARY 31
- -------------
Total Assets $3,179,863 $2,790,042 $4,286,758 $2,603,167 $2,286,131
========== ========== ========== ========== ==========
</TABLE>
- -----------------
(a) The Trust, as a grantor trust, is exempt from federal and state income
taxes.
(b) Based on 13,120,010 Units of Beneficial Interest outstanding during all
years.
(c) During the fiscal year ended January 31, 2000, the Trustees
distributed $.35 per Unit (including $.155 per Unit declared in fiscal
1999 and distributed in February 1999) and declared an additional
distribution of $.18 per Unit, payable in February 2000. During the
fiscal year ended January 31, 1999, the Trustees distributed $.54 per
Unit (including $.265 per Unit declared in fiscal 1998 and distributed in
February 1998) and declared an additional distribution of $.155 per Unit,
payable in February 1999. During the fiscal year ended January 31, 1998,
the Trustees distributed $.37 per Unit (including $.145 per Unit declared
in fiscal 1997 and distributed in February 1997) and declared an
additional distribution of $.265 per Unit, payable in February 1998.
During the fiscal year ended January 31, 1997, the Trustees distributed
$.395 per Unit (including $.12 per Unit declared in fiscal 1996 and
distributed in February 1996) and declared an additional distribution of
$.145 per Unit, payable in February 1997. See "Reserves and
Distributions" on page 12 of this Annual Report.
TRUSTEES' DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Mesabi Trust ("Mesabi Trust" or the "Trust"), formed pursuant to an
Agreement of Trust dated July 18, 1961 (the "Agreement of Trust"), is a trust
organized under the laws of the State of New York. Mesabi Trust holds all of
the interests formerly owned by Mesabi Iron Company, including all right,
title and interest in the Amended Assignment of Peters Lease, the Amended
Assignment of Cloquet Lease, the beneficial interest in the Mesabi Land Trust
and all other assets and property identified in the Agreement of Trust. The
Amended Assignment of Peters Lease relates to an Indenture made as of April
30, 1915 among East Mesaba Iron Company, Dunka River Iron Company and Claude
W. Peters (the "Peters Lease") and the Amended Assignment of Cloquet Lease
relates to an Indenture made May 1, 1916 between Cloquet Lumber Company and
Claude W. Peters (the "Cloquet Lease").
The Trust will terminate twenty-one (21) years after the death of
the survivor of twenty-five (25) persons named in an exhibit to the Agreement
of Trust. The youngest person on this exhibit is now 39 years old.
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<PAGE>
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.
Pursuant to a ruling from the Internal Revenue Service, which ruling
was based on the terms of the Agreement of Trust including the prohibition
against entering into any business, the Trust is not taxable as a corporation
for Federal income tax purposes. Instead, the holders of the Units of
Beneficial Interest (the "Unitholders") are considered as "owners" of the
Trust and the Trust's income is taxable directly to the Unitholders.
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.
Until August 17, 1989, the overriding royalty was based on the
quantity and iron content of pellets shipped by Reserve Mining Company
("Reserve") from Mesabi Trust lands, although Mesabi Trust did not receive
any royalty income from May 1986 until July 1990 because Reserve filed a
Chapter 11 bankruptcy petition suspended its operations.
On August 17, 1989, Cyprus Northshore Mining Corporation ("Cyprus
NMC") purchased substantially all of Reserve's assets, including Reserve's
interest in the Mesabi Trust lands. In connection with the purchase, Mesabi
Trust, Reserve's Chapter 11 trustee and Cyprus NMC entered into the Amendment
of Assignment, Assumption and Further Assignment of Peters Lease (the
"Amended Assignment of Peters Lease"), the Amendment of Assignment,
Assumption and Further Assignment of Cloquet Lease (the "Amended Assignment
of Cloquet Lease") and the Assumption and Assignment of Mesabi Lease
(together with the Amended Assignment of Peters Lease and the Amended
Assignment of Cloquet Lease Assignment, the "Amended Assignment Agreements").
The Amended Assignment Agreements modified the method of calculating
overriding royalties payable to Mesabi Trust and transferred Reserve's
interest in the Mesabi Trust lands to Cyprus NMC.
In 1994, Cyprus NMC was sold by its parent corporation to
Cleveland-Cliffs Inc. ("CCI") and renamed Northshore Mining Corporation
("Northshore"). CCI operates Northshore as a wholly-owned subsidiary.
Fee royalties payable to Mesabi Land Trust, a Minnesota land trust
of which Mesabi Trust is the sole beneficiary ("Mesabi Land Trust"), are
based on the amount of crude ore mined. Crude ore is used to produce iron ore
pellets and other products. Under the Amended Assignment Agreements,
overriding royalties are determined by both the volume and selling price of
iron ore products sold.
3
<PAGE>
With respect to the volume component of royalty calculation,
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 $38.21 for calendar year 1998, was $38.22
for calendar year 1999, and is $38.22 for calendar year 2000. 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. 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 $636,935 for calendar year 1998, were
$637,044 for calendar year 1999 and are $647,282 for calendar year 2000.
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.
Northshore has advised the trustees that total calendar year 2000
shipments may be approximately 4.2 million tons. However, it is not known
what percentage of these estimated shipments will be from Mesabi Trust lands.
During calendar years 1999, 1998, 1997, 1996 and 1995, the percentage of
shipments of iron ore products from Mesabi Trust lands was approximately
98.9%, 99.3%, 98.3%, 98.4% and 90.6%, respectively, of total shipments.
Northshore has not advised the Trust what the percentage of iron ore products
it anticipates shipping from Mesabi Trust lands.
4
<PAGE>
In its Annual Report for the year ended December 31, 1999 ("CCI's
Annual Report"), 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 produce premium grade pig iron. CCI stated in the Report
that while progress has been made in a number of areas on the project, a
decision relative to proceeding with this project has been delayed by
uncertainty about market conditions and timing of state environmental
permitting. Such statements were previously included in CCI's Annual Report
for the year ended December 31, 1998. 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.
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 a public announcement
last summer, CCI announced that it was shutting down operations at
the Northshore mine from October 30 to November 24 in order to
reduce iron ore pellet output for the year. However, because of an
increase in customer orders, only one pelletizing furnace was
closed. This furnace, which is the plant's smallest pelletizing
furnace, was closed from July 22 through the end of the year. The
Trustees have not been advised of any plans of CCI to shut down any
further operations at Northshore.
5
<PAGE>
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. 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 98.9%, 99.3%,
98.3%, 98.4% and 90.6% in calendar years 1999, 1998, 1997, 1996 and
1995, respectively.
COMPARISON OF FISCAL YEARS ENDED JANUARY 31, 2000 AND JANUARY 31, 1999
Mesabi Trust's gross income for the fiscal year ended January 31,
2000 was $5,359,893, a decrease of $628,250 (or approximately 10.5% ) from
the gross income of $5,988,143 for the fiscal year ended January 31, 1999.
The decrease in gross income primarily was due to decreased pellet shipments
plus a lower average sales price per ton. Mesabi Trust's expenses of $389,465
for the fiscal year ended January 31, 2000 increased $36,079 (or
approximately 10.2%) from expenses of $353,386 for the fiscal year ended
January 31, 1999. Total expenses, by category, for each of the last three
fiscal years is set forth under "Income and Expense" on pages 11 and 12 of
this report. Decreased income and increased expenses resulted in net income
of $4,970,428 for the fiscal year ended January 31, 2000, a decrease of
$664,329 from the net income of $5,634,757 for the fiscal year ended January
31, 1999.
Mesabi Trust's Unallocated Reserve aggregated $763,377 at January
31, 2000, as compared with an Unallocated Reserve of $712,952 at January 31,
1999. During the fiscal year ended January 31, 2000, the Trustees distributed
$.35 per Unit of Beneficial Interest. These distributions to Unitholders
totaled $4,592,003.
The following chart summarizes Mesabi Trust's royalty income for the
fiscal years ended January 31, 2000 and January 31, 1999, respectively:
<TABLE>
<CAPTION>
Fiscal Years Ended January 31,
2000 1999
---------- ----------
<S> <C> <C>
Base overriding royalties $5,005,190 $5,607,420
Bonus royalties -- --
Minimum advance -- --
royalty paid (recouped)
Fee royalties 311,016 331,826
---------- ----------
Total royalty income $5,316,206 $5,939,246
========== ----------
</TABLE>
6
<PAGE>
COMPARISON OF FISCAL YEARS ENDED JANUARY 31, 1999 AND JANUARY 31, 1998
Mesabi Trust's gross income for the fiscal year ended January 31,
1999 was $5,988,143, a decrease of $872,226 (or approximately 12.7%) from the
gross income of $6,860,369 for the fiscal year ended January 31, 1998. The
decrease in gross income primarily was due to decreased pellet shipments plus
a lower average sales price per ton. Mesabi Trust's expenses of $353,386 for
the fiscal year ended January 31, 1999 decreased $8,987 (or approximately
2.4%) from expenses of $362,373 for the fiscal year ended January 31, 1998.
Total expenses, by category, for each of the last three fiscal years is set
forth under "Income and Expense" on pages 11 and 12 of this report. Decreased
income and decreased expenses resulted in net income of $5,634,757 for the
fiscal year ended January 31, 1999, a decrease of $863,239 from the net
income of $6,497,996 for the fiscal year ended January 31, 1998.
Mesabi Trust's Unallocated Reserve aggregated $712,952 at January
31, 1999, as compared with an Unallocated Reserve of $719,799 at January 31,
1998. During the fiscal year ended January 31, 1999, the Trustees distributed
$.54 per Unit of Beneficial Interest. These distributions to Unitholders
totaled $7,084,805.
TO THE HOLDERS OF
CERTIFICATES OF BENEFICIAL INTEREST IN
MESABI TRUST
MESABI TRUST
Mesabi Trust was created in 1961 upon the liquidation of Mesabi Iron
Company. The sole purpose of the Trust, as set forth in the Agreement of
Trust dated as of July 18, 1961 (the "Agreement of Trust"), is to conserve
and protect the Trust Estate and to collect and distribute the income and
proceeds therefrom to the Trust's Certificate Holders after the payment of,
or provision for, expenses and liabilities. The Agreement of Trust prohibits
the Trust from engaging in any business.
THE TRUST ESTATE
The principal assets of Mesabi Trust consist of two different
interests in certain properties in the Mesabi Iron Range: (i) Mesabi Trust's
interest as assignor in the Amended Assignment of Peters and the Amended
Assignment of Cloquet Lease, which together cover properties aggregating
approximately 9,750 contiguous acres in St. Louis County, Minnesota (the
"Peters Lease Lands" and the "Cloquet Lease Lands," respectively, and
collectively, the "Peters and Cloquet Lease Lands"), and (ii) Mesabi Trust's
ownership of the entire beneficial interest in Mesabi Land Trust, which has a
20% interest as fee owner in the Peters Lease Lands and a 100% fee ownership
in certain non-mineral-bearing lands adjacent to the Peters and Cloquet Lease
Lands (the "Mesabi Lease Lands").
The Peters and Cloquet Lease Lands are located at the eastern end of
the Mesabi Iron Range and contain low-grade iron ore known as taconite,
approximately three tons of which must be beneficiated to produce one ton of
high-grade pellets. The Trustees have not had any surveys or test drillings
performed to ascertain the iron ore reserves on the Peters and Cloquet Lease
Lands. However, initial surveys and test drillings made by Mesabi Iron
Company many years ago indicated that these lands contained accessible
taconite reserves capable of yielding approximately 500 million tons of high
grade iron ore pellets. In CCI's Annual Report, CCI estimated that there
currently remains enough ore reserve in the Peters and Cloquet Lease Lands to
produce concentrated product for 81 years of mining at current extraction
rates. The Mesabi Lease Lands provide an area for location of service roads,
supporting plants and equipment and dump sites for overburden.
7
<PAGE>
Under the Amended Assignment Agreements, Northshore produces iron
ore from the Peters and Cloquet Lease Lands for the manufacture of pellets to
be sold to various users, and Mesabi Trust receives royalties on the crude
ore extracted from such Lands and the pellets produced from such crude ore.
LEASEHOLD ROYALTIES
Northshore is obligated to pay to Mesabi Trust base overriding
royalties and royalty bonuses on all pellets (and other iron ore products)
produced from the Peters and Cloquet Lease Lands ("Mesabi Ore") and shipped
from Silver Bay, Minnesota in each calendar year. The royalties are based on
prices per unit of product, volumes of product shipped and where on the
escalating scale of royalties -- 2% on the first million tons to 6% on
shipments above four million tons per year -- each shipment falls.
Base overriding royalties are calculated on the basis of an
escalating scale of percentages of gross sales proceeds of iron ore shipped.
The applicable percentage is determined by reference to the tonnage of
pellets previously shipped in the then current calendar year, as follows:
<TABLE>
<CAPTION>
Applicable royalty
Tons of iron ore products (expressed as a percentage
shipped in calendar of gross sales proceeds
year within each tranche)
------------------------- --------------------------
<S> <C>
one million or less 2-1/2%
more than one but not more than two million 3-1/2%
more than two but not more than three million 5%
more than three but not more than four million 5-1/2%
more than four million 6%
</TABLE>
For example, assume that no shipments of iron ore products were made
during the first calendar quarter of 2000 and further assume that pellets
were shipped from Silver Bay, Minnesota in the second and third calendar
quarters of 2000 in the following tonnage quantities and rendering the
following gross proceeds:
<TABLE>
<CAPTION>
Tonnage Gross Proceeds
--------- --------------
<S> <C> <C>
2nd Quarter: 500,000 $14,000,000
3rd Quarter: 500,000 $14,000,000
1,000,000 $27,000,000
1,000,000 $26,000,000
1,000,000 $25,000,000
1,500,000 $37,500,000
</TABLE>
In this example, the base overriding royalties payable in respect of the
second and third calendar quarters of 2000 would be as follows:
<TABLE>
<S> <C> <C>
2nd Quarter: $14,000,000 x 2-1/2% ($ 350,000)
3rd Quarter: $14,000,000 x 2-1/2% ($ 350,000)
$27,000,000 x 3-1/2% ($ 945,000)
$26,000,000 x 5% ($1,300,000)
$25,000,000 x 5-1/2% ($1,375,000)
$37,500,000 x 6% ($2,250,000)
</TABLE>
8
<PAGE>
Based on the same example, the percentage applicable for all iron ore
products shipped in the fourth calendar quarter of 2000 would be 6%, because
more than four million tons were shipped during the first three quarters.
The above figures are provided only to illustrate the method for
calculating base overriding royalties and do NOT indicate the amount of base
overriding royalties the Trustees expect Mesabi Trust to earn calendar 2000
or any other calendar or fiscal year. Accordingly, the foregoing example
illustrating the calculation of base overriding royalties should not be
considered a prediction of the amount of base overriding royalties Mesabi
Trust will receive.
Royalty bonuses are payable on all iron ore products sold at prices
above a threshold price (the "Adjusted Threshold Price"). The Adjusted
Threshold Price was $38.21 per ton for calendar year 1998, $38.22 per ton for
calendar year 1999, and will be $38.22 per ton for calendar year 2000. The
Adjusted Threshold Price is subject to adjustment (but not below $30 per ton)
for inflation and deflation and is determined each year on the basis of the
change in a broad based index of inflation and deflation published quarterly
by the U.S. Department of Commerce.
The amount of royalty bonuses payable for any period is calculated
on the basis of an escalating scale of percentages of the gross sales
proceeds to Northshore of pellets sold at prices above the Adjusted Threshold
Price. The applicable percentage is determined by reference to the amount by
which the sales prices for a particular quantity of pellets exceeds the
Adjusted Threshold Price, as follows:
<TABLE>
<CAPTION>
Amount by which
sales price per ton
exceeds Adjusted Applicable
Threshold Price Percentage
------------------- ----------
<S> <C>
$2 or less 1/2 of 1%
more than $2 but not more than $4 1%
more than $4 but not more than $6 1-1/2%
more than $6 but not more than $8 2%
more than $8 but not more than $10 2-1/2%
more than $10 3%
</TABLE>
For example, assume an Adjusted Threshold Price of $38.22 is assumed
for calendar year 2000 and that two million tons of iron ore products were
shipped in the second calendar quarter of 2000 at the following prices:
1,000,000 tons @ $29.00/ton
300,000 tons @ $31.00/ton
300,000 tons @ $34.00/ton
100,000 tons @ $36.00/ton
100,000 tons @ $38.00/ton
100,000 tons @ $40.00/ton
50,000 tons @ $42.00/ton
50,000 tons @ $46.00/ton
In this example, the following royalty bonuses would be payable on shipments
of iron ore products on the second calendar quarter of 2000 as follows:
9
<PAGE>
1,000,000 tons @ $29.00/ton No bonus
300,000 tons @ $31.00/ton No bonus
300,000 tons @ $34.00/ton No bonus
100,000 tons @ $36.00/ton No bonus
100,000 tons @ $38.00/ton No bonus
100,000 tons @ $40.00/ton 1/2%
50,000 tons @ $42.00/ton 1%
50,000 tons @ $46.00/ton 2%
The above figures are provided only to illustrate the method for
calculating royalty bonuses and do not indicate the amount of royalty
bonuses, if any, the Trustees expect Mesabi Trust to earn in calendar 2000 or
any other calendar or fiscal year. Accordingly, the foregoing example
illustrating the calculation of royalty bonuses should not be considered a
prediction of the amount, if any, of royalty bonuses Mesabi Trust will
receive. In fact, no royalty bonus has been paid to the Trust for several
years.
Northshore also must pay base overriding royalties and royalty
bonuses on pellets produced from lands other than Mesabi Lease Lands ("Other
Ore") to the extent necessary to assure payment of base overriding royalties
and royalty bonuses on at least 90% of the first four million tons of pellets
shipped from Silver Bay in each calendar year, at least 85% of the next two
million tons of pellets shipped therefrom in each calendar year, and at least
25% of all tonnage of pellets shipped therefrom in each calendar year in
excess of six million tons. Base overriding royalties and royalty bonuses
payable on Other Ore can be recouped by Northshore out of base overriding
royalties and royalty bonuses paid on Mesabi Ore. The amount of Other Ore
royalties and Other Ore royalty bonuses which can be recouped on any payment
date cannot, however, exceed 20% of the amount of Mesabi Ore royalties and
royalty bonuses which are otherwise payable on that payment date.
Northshore is obligated to pay to Mesabi Trust advance royalties in
equal quarterly installments. The advance royalty was $636,935 per annum for
the calendar year ended December 31, 1998, $637,044 for calendar year 1999
and is $647,282 for the calendar year 2000. The amount of advance royalties
payable is subject to adjustment (but not below $500,000 per annum) for
inflation and deflation and is determined each year in the same manner as the
Adjusted Threshold Price. All payments of advance royalties are credited
against payments of base overriding royalties and royalty bonuses payable on
Mesabi Ore until fully recouped. The amount of advance royalties payable in
respect of each calendar quarter constitutes the minimum overriding royalty
amount payable by Northshore in respect of that calendar quarter.
Base overriding royalties and royalty bonuses are payable quarterly
and accrue upon shipment, whether or not the actual sales proceeds for any
shipment are received by Northshore. The amount of base overriding royalties
and royalty bonuses payable with respect to the first three quarters in any
calendar year are determined on the basis of tonnage shipped during each such
calendar quarter and the actual sales proceeds of such shipments, with an
adjustment made to the royalties payable with respect to the last quarter in
any calendar year to account for errors, adjustments and returns.
In addition, in the event that Northshore commences mining and
production of quarry stone for shipment, Northshore must pay base overriding
royalties on all quarry stone so shipped on the basis of the same scale of
percentages used in calculating base overriding royalties payable on pellets
and other iron ore product. Northshore has not informed Mesabi Trust of any
present intention to commence mining and production of quarry stone.
10
<PAGE>
LAND TRUST AND FEE ROYALTIES
Mesabi Land Trust holds a 20% interest as fee owner in the Peters
Lease Lands and a 100% interest as fee owner in the Mesabi Lease Lands as
lessor of the Mesabi Lease. Mesabi Trust holds the entire beneficial interest
in Mesabi Land Trust and is entitled to receive the net income of Mesabi Land
Trust after payment of expenses. Northshore is not obligated to pay royalties
or rental to Mesabi Land Trust as fee owner of the non-mineral bearing Mesabi
Lease Lands, a consideration having been paid in that respect at the
inception of the Mesabi Lease.
Northshore is required to pay a base royalty to the fee owners in an
amount which, at its option, is either (a) 11-2/3(cent) per gross ton of
crude ore it mines from the Peters Lease Lands or (b) $.0056 for each 1% of
metallic iron ore natural contained in each gross ton of pellets it produces
from the Peters Lease Lands and ships. The base fee royalty rate is adjusted
up or down each quarter (but not below the base royalty specified above) by
addition or subtraction of an amount to be determined by reference to changes
in Lower Lake Mesabi Range pellet prices and the All Commodities Producer
Price Index. The adjustment factor is computed by multiplying the base fee
royalty rate specified above by a percentage that is the sum of (a) one-half
of the percentage change, if any, by which the then prevailing price per iron
unit of Mesabi Range taconite pellets delivered by rail or vessel at Lower
Lake Erie ports exceeds 80.5(cent) (the price per iron unit in effect in
January 1982) plus (b) one-half of the percentage change, if any, by which
the All Commodities Producer Price Index exceeds 295.8 (the level of the
Index for December 1981).
Fee royalties aggregating $311,016 with respect to crude ore mined
by Northshore were earned by Mesabi Land Trust during the fiscal year ended
January 31, 2000.
INCOME AND EXPENSE
Total income for Mesabi Trust for the fiscal year ended January 31,
2000 was $5,359,893, consisting of $43,687 in interest earned on the
investment of the Unallocated Reserve, $311,016 in fee income, $637,044 in
minimum advance royalty income, and $4,368,146 in overriding royalty income
compared with $5,988,143 in total income for the previous fiscal year. Total
expenses for the fiscal year were $389,465, compared with $353,386 in total
expenses for the previous fiscal year. There were distributions paid per Unit
of Beneficial Interest totaling 35(cent) for the fiscal year ended January
31, 2000, compared with distributions paid for the fiscal year ended January
31, 1999 of 54(cent) per Unit.
Total expenses by categories were as follows:
<TABLE>
<CAPTION>
Fiscal Years ended
January 31,
--------------------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Compensation of Trustees $130,046 $125,083 $129,438
Fees and Disbursements
Administrative 65,983 62,500 62,500
Accounting 34,629 36,302 35,734
Inspection trips, travel and
other expenses of Trustees 31,138 38,677 31,995
Legal 42,038 19,707 25,802
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Fiscal Years ended
January 31,
--------------------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Mining consultant and field
representatives 16,194 16,548 15,695
Printing of annual and quarterly
reports, and letters to
certificate holders 31,168 22,421 26,726
Securities and Exchange Commission --- --- ---
Transfer Agent and Registrar 23,537 22,689 24,848
Transfer Agent miscellaneous
disbursements 10,586 9,458 9,628
Other miscellaneous expenses 4,146 1 7
-------- -------- ------
$389,465 $353,386 $362,373
======== ======== ========
</TABLE>
Pursuant to an Amendment to the Agreement of Trust (the "Amendment")
dated October 25, 1982, each Individual Trustee receives annual compensation
for services as Trustee of $20,000, adjusted up or down (but not below
$20,000) in accordance with changes from the November 1981 level of 295.5
(the "1981 Escalation Level") in the All Commodities Producer Price Index
(with 1967 = 100 as a base), which is published by the U.S. Department of
Labor. The adjustment is made at the end of each fiscal year and is
calculated on the basis of the proportion between (a) the level of such index
for the November preceding the end of such fiscal year and (b) the 1981
Escalation Level.
RESERVES AND DISTRIBUTIONS
Mesabi Trust's Unallocated Reserve aggregated $763,377 at January
31, 2000, compared with an Unallocated Reserve of $712,952 at January 31,
1999. The Trustees have determined that the Unallocated Reserve should be
maintained at a prudent level. Accordingly, although the actual amount of the
Unallocated Reserve will fluctuate from time to time, and may increase or
decrease from its current level, it is currently intended that future
distributions will be highly dependent upon royalty income as it is received
and the level of Trust expenses. The amount of future royalty income
available for distribution will be subject to the volume of iron ore product
shipments and the dollar level of sales by Northshore. Shipping activity is
greatly reduced during the winter months and economic conditions,
particularly those affecting the steel industry, may adversely affect the
amount and timing of such future shipments and sales.
The Trustees will continue to monitor the economic circumstances of
the Trust to strike a responsible balance between distributions to
Unitholders and the need to maintain adequate reserves at a prudent level,
given the unpredictable nature of the iron ore industry, the Trust's
dependence on the actions of the lessee/operator, and the fact the Trust
essentially has no other liquid assets.
Payments to Unitholders during the fiscal year ended January 31,
1999 totaled $7,084,805 and payments to Unitholders during the fiscal year
ended January 31, 2000 totaled $4,592,003.
CERTIFICATES OF BENEFICIAL INTEREST
The Certificates of Beneficial Interest are traded on the New York
Stock Exchange. During the past two fiscal years, the market ranges of the
certificates for each quarterly period and the distributions declared for
such quarterly periods were as follows:
<TABLE>
<CAPTION>
Amount
Fiscal Quarter Ended High Low Declared Per Unit
- -------------------- ---- --- -------- --------
<S> <C> <C> <C> <C>
April 30, 1998 4 3/8 3 7/8 $ -- $ --
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Amount
Fiscal Quarter Ended High Low Declared Per Unit
- -------------------- ---- --- --------- --------
<S> <C> <C> <C> <C>
July 31, 1998 4 3/8 3 15/16 1,443,201 0.110
October 31, 1998 4 3 5/8 2,164,801 0.165
January 31, 1999 3 5/8 2 3/4 2,033,602 0.155
----------- ------
$5,641,604 $0.430
=========== ======
Amount
Fiscal Quarter Ended High Low Declared Per Unit
- -------------------- ---- --- ---------- --------
<S> <C> <C> <C> <C>
April 30, 1999 3 3/16 3 1/8 $ -- $ --
July 31, 1999 3 2 15/16 1,049,600 0.080
October 31, 1999 2 9/16 2 7/16 1,508,801 0.115
January 31, 2000 2 15/16 2 3/4 2,361,602 0.180
---------- ------
$4,920,003 $0.375
========== ======
</TABLE>
As of the close of business on April 20, 2000, the beneficial
interest in Mesabi Trust was represented by 13,120,010 Units registered in
the names of approximately 2,591 individuals holding of record approximately
1,653,664 Units, and in the names of approximately 526 brokers, nominees, or
fiduciaries holding of record approximately 11,466,346 Units.
THE TRUSTEES
The name and address of each Trustee and the principal occupation of
each individual Trustee are as follows:
<TABLE>
<CAPTION>
Name and Address
of Trustee Principal Occupation
---------------- --------------------
<S> <C>
Bankers Trust Company Trust Company
Corporate Trustee
Four Albany Street
New York, New York 10015
David J. Hoffman Mining geologist
Individual Trustee
P.O. Box 10444
Sedona, Arizona 86339
Richard G. Lareau Partner in the law firm of
Individual Trustee Oppenheimer Wolff & Donnelly LLP
Oppenheimer Wolff & Donnelly LLP
3400 Plaza VII
45 South Seventh Street
Minneapolis, Minnesota 55402
Ira A. Marshall, Jr. Private investor; Self-employed
Individual Trustee petroleum engineer
12 Fincher Way
Rancho Mirage, California
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Name and Address
of Trustee Principal Occupation
---------------- --------------------
<S> <C>
Norman F. Sprague III Private investor; Orthopedic surgeon
Individual Trustee
11600 Wilshire Boulevard
Los Angeles, California 90025
</TABLE>
Respectfully submitted,
BANKERS TRUST COMPANY
DAVID J. HOFFMAN
RICHARD G. LAREAU
New York, New York IRA A. MARSHALL, JR.
April 4, 2000 NORMAN F. SPRAGUE III
14
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Trustees
Mesabi Trust
New York, New York
We have audited the accompanying balance sheets of Mesabi Trust as
of January 31, 2000 and 1999, and the related statements of income,
unallocated reserve and trust corpus and cash flows for each of the three
years in the period ended January 31, 2000. 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 Mesabi Trust as
of January 31, 2000 and 1999, and the results of its operations and its cash
flows for each of the three years in the period ended January 31, 2000, in
conformity with generally accepted accounting principles.
McGLADREY & PULLEN, LLP
New York, New York /s/ McGladrey & Pullen, LLP
March 8, 2000
F-1
<PAGE>
MESABI TRUST
BALANCE SHEETS
<TABLE>
<CAPTION>
January 31,
--------------------------
2000 1999
---- ----
<S> <C> <C>
ASSETS
Cash $ 51,082 $ 2,115,273
U.S. Government securities,
at amortized cost (which approximates market) 2,888,947 534,914
Accrued income 235,056 134,991
Prepaid insurance 4,775 4,861
---------- -----------
$3,179,860 $ 2,790,039
---------- -----------
Fixed property, including
intangibles, at nominal values:
Assignments of leased property:
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
---------- -----------
$3,179,863 $ 2,790,042
========== ===========
LIABILITIES, UNALLOCATED RESERVE AND TRUST CORPUS
Liabilities:
Distribution payable $2,361,602 $ 2,033,602
Accrued expenses 54,881 43,485
---------- -----------
2,416,483 2,077,087
Unallocated reserve 763,377 712,952
Trust Corpus 3 3
---------- -----------
$3,179,863 $ 2,790,042
========== ===========
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE>
MESABI TRUST
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended January 31,
---------------------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
REVENUE
Royalties under amended
lease agreements $ 5,005,190 $ 5,607,420 $ 6,491,575
Royalties under Peters
Lease fee 311,016 331,826 326,378
Interest 43,687 48,897 42,416
----------- ----------- -----------
Total revenue $ 5,359,893 $ 5,988,143 $ 6,860,369
----------- ----------- -----------
EXPENSES
Compensation of Trustees $ 130,046 $ 125,083 $ 129,438
Corporate Trustee's administrative fees 65,983 62,500 62,500
Professional fees and expenses:
Legal and accounting 76,667 56,009 61,536
Mining consultant and field
representatives 16,194 16,548 15,695
Transfer agent's and registrar's fees 23,537 22,689 24,848
Other Trust expenses 77,038 70,557 68,356
----------- ----------- -----------
Total expenses $ 389,465 $ 353,386 $ 362,373
----------- ----------- -----------
Net income $ 4,970,428 $ 5,634,757 $ 6,497,996
=========== =========== ===========
Weighted average number
of units outstanding $13,120,010 $13,120,010 $13,120,010
Net income per unit $ .38 $ .43 $ .50
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
MESABI TRUST
STATEMENTS OF UNALLOCATED RESERVE AND TRUST CORPUS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
<TABLE>
<CAPTION>
Unallocated Reserve
-------------------------------------------------
Number of Trust
Units Amount Corpus
---------- ----------- ----------
<S> <C> <C> <C>
Balance, January 31, 1997 13,120,010 $ 650,608 $ 3
---------- ----------- ----------
Net income -- 6,497,996 --
Distribution paid August 20, 1997,
$.065 per unit -- (852,801) --
Distribution paid November 20, 1997,
$.16 per unit -- (2,099,201) --
Distribution declared January 16, 1997,
paid February 20, 1998,
$.265 per unit -- (3,476,803) --
---------- ----------- ----------
Balance, January 31, 1998 13,120,010 $ 719,799 $ 3
---------- ----------- ----------
Net income -- 5,634,757 --
Distribution paid August 20, 1998,
$.11 per unit -- (1,443,201) --
Distribution paid November 20, 1998,
$.165 per unit -- (2,164,801) --
Distribution declared January 16, 1998,
paid February 20, 1999,
$.155 per unit -- (2,033,602) --
---------- ----------- ----------
Balance, January 31, 1999 13,120,010 $ 712,952 $ 3
---------- ----------- ----------
Net income -- 4,970,428 --
Distribution paid August 20, 1999,
$.08 per unit -- (1,049,600) --
Distribution paid November 20, 1999,
$.115 per unit -- (1,508,801) --
Distribution declared January 20, 2000,
paid February 20, 2000,
$.18 per unit -- (2,361,602) --
---------- ----------- ----------
Balance, January 31, 2000 13,120,010 $ 763,377 $ 3
---------- ----------- ----------
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
MESABI TRUST
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended January 31,
-------------------------------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Royalties received $ 5,216,513 $ 5,967,132 $ 6,769,021
Interest received 43,315 48,241 42,745
Expenses paid (377,983) (386,675) (336,971)
Net cash provided by operating ----------- ----------- ------------
activities $ 4,881,845 $ 5,628,698 $ 6,474,795
----------- ----------- ------------
Cash flows from investing activities:
Maturities of U.S. Government
securities $ 6,191,645 $ 9,009,983 $ 6,439,490
Purchases of U.S. Government
securities (8,545,678) (9,045,824) (4,453,578)
----------- ----------- ------------
Net cash (used in) provided by
investing activities $(2,354,033) $ (35,841) $ 1,985,912
----------- ----------- ------------
Cash flows from financing activities:
Net cash (used in) financing
activities, distributions
to unitholders $(4,592,003) $(7,084,805) $ (4,854,404)
----------- ----------- ------------
Net increase (decrease) in cash $(2,064,191) $(1,491,948) $ 3,606,303
Cash, beginning of year 2,115,273 3,607,221 918
----------- ----------- ------------
Cash, end of year $ 51,082 $ 2,115,273 $ 3,607,221
=========== =========== ============
Reconciliation of net income
to net cash provided by
operating activities:
Net income $ 4,970,428 $ 5,634,757 $ 6,497,996
Decrease (increase) in
accrued income (100,065) 41,650 (63,024)
Decrease (increase) in prepaid
insurance 86 (1,041) (175)
(Decrease) increase in
accrued expenses $ 11,396 $ (46,668) $ 39,998
----------- ----------- ------------
Net cash provided by
operating activities $ 4,881,845 $ 5,628,698 $ 6,474,795
=========== =========== ============
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
MESABI TRUST
NOTES TO FINANCIAL STATEMENTS
Note 1. Nature of Business, Organization and Significant Accounting
Policies
Nature of business:
Mesabi Trust was created in 1961 upon the
liquidation of Mesabi Iron Company. The sole purpose
of the Trust, as set forth in the Agreement of Trust
dated as of July 18, 1961, is to conserve and
protect the Trust Estate and to collect and
distribute the income and proceeds therefrom to the
Trust's certificate holders after the payment of, or
provision for, expenses and liabilities. The
Agreement of Trust prohibits the Trust from engaging
in any business.
The lessee/operator of Mesabi Trust's mineral
interests is Northshore Mining Corporation (NMC), a
subsidiary of Cleveland-Cliffs Inc. (CCI). CCI is
among the world's largest producers of iron ore
products. Prior to September 30, 1994, the
lessee/operator had been a subsidiary of Cyprus Amax
Minerals Company and was named Cyprus Northshore
Mining Corporation (Cyprus NMC).
Organization:
The beneficial interest in Mesabi Trust is
represented by 13,120,010 transferable units
distributed on July 27, 1961 to shareholders of
Mesabi Iron Company.
The Trust's status as a grantor trust was confirmed
by letter ruling addressed to Mesabi Iron Company
from the Internal Revenue Service in 1961. As a
grantor trust, Mesabi is exempt from Federal income
taxes and its income is taxable directly to the
Unitholders.
A summary of Mesabi Trust's significant accounting policies follows:
Investments:
The Trust invests solely in U.S. Government
securities. Management determines the appropriate
classifications of the securities at the time they
are acquired and evaluates the appropriateness of
such classifications as of each balance sheet date.
The U.S. government securities are classified as
held-to-maturity securities as the Trust has the
positive intent and ability to hold to maturity and
are stated at amortized cost.
Revenue recognition:
Royalty income under the amended lease agreements
with NMC (Cyprus NMC through September 30, 1994) is
recognized as it is earned. Under such agreements,
royalties are earned upon shipment, regardless of
whether the actual sales proceeds for any shipment
are received by NMC.
F-6
<PAGE>
Royalty income under the Peters Lease fee
agreement also is recognized as it is earned.
Under such agreement, however, royalties are
earned (at the option of NMC (Cyprus NMC through
September 30, 1994)) either upon mining of crude
ore from Peters Lease lands or upon shipment of
iron ore product produced from Peters Lease lands.
Fixed property, including intangibles:
The Trust's fixed property, including intangibles,
is recorded at nominal values and includes the
following:
(1) The entire beneficial interest as
assignor in the Amended Peters
Lease Assignment and the Amended
Cloquet Lease Assignment covering
taconite properties in Minnesota
which are leased to NMC (Cyprus
NMC through September 30, 1994).
(2) The entire beneficial interest in
Mesabi Land Trust which owns a 20%
fee interest in the lands subject
to the Peters Lease and the entire
fee interest in other properties
in Minnesota.
Accounting estimates:
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial
statements and the reported amounts of revenues and
expenses during the reporting period. Actual results
could differ from those estimates.
Fair value of financial instruments:
The carrying amounts of financial instruments
including cash, U.S. government securities,
distributions payable and accrued expenses
approximated fair value as of January 31, 2000 and
1999 because of the relative short maturity of these
instruments.
Note 2. U.S. Government Securities
The amortized cost approximates market value as of January 31,
2000 and 1999. The securities are classified as
held-to-maturity and mature as follows:
<TABLE>
<CAPTION>
JANUARY 31, 2000 JANUARY 31, 1999
---------------- ----------------
<S> <C> <C>
Due within one year $2,487,132 $132,817
Due after one year through
four years 401,815 402,097
---------- --------
$2,888,947 $534,914
========== ========
</TABLE>
F-7
<PAGE>
Note 3. Unallocated Reserve
Leasehold royalty income constitutes the principal source of
revenue to Mesabi Trust. Prior to August 17, 1989, royalties
were based on the quantity and iron content of pellets shipped
by the then lessee, Reserve Mining Company ("Reserve"), from
Mesabi Trust properties. From May 1986 until July 1990,
however, Mesabi Trust did not have any royalty income, due
principally to the filing of a Chapter 11 bankruptcy petition
by Reserve and the suspension of Reserve's operations in 1986.
On August 17, 1989, Cyprus NMC purchased substantially all of
Reserve's assets, including Reserve's interest in the Mesabi
Trust lands, and Mesabi Trust entered into agreements with
Reserve's Chapter 11 Trustee and Cyprus NMC, which modified
the method of calculating royalties payable to Mesabi Trust
and transferred the interest of Reserve in the Mesabi Trust
lands to Cyprus NMC. Royalties are now determined by both the
volume and selling price of iron ore pellets and other
products sold.
On September 30, 1994, Cyprus Amax Minerals Company sold its
iron ore operations, including Cyprus NMC, to Cleveland-Cliffs
Inc. (CCI). CCI renamed the operation Northshore Mining
Corporation (NMC). CCI is among the world's largest producers
of iron ore products.
Pursuant to the amended assignment agreements, NMC (Cyprus NMC
through September 30, 1994) is obligated to pay Mesabi Trust
base overriding royalties, in varying amounts constituting a
percentage of the gross proceeds of shipments, from Silver
Bay, Minnesota, of iron ore product produced from Mesabi Trust
lands or, to a limited extent, other lands. NMC (Cyprus NMC
through September 30, 1994) is obligated to make payments of
overriding royalties on product shipments within 30 days
following the calendar quarter in which such shipments occur.
NMC (Cyprus NMC through September 30, 1994) resumed mining
operations and shipping product from Silver Bay in the second
calendar quarter of 1990, and the first payment of overriding
royalties was made in July 1990.
NMC (Cyprus NMC through September 30, 1994) also is obligated
to pay to Mesabi Trust a minimum advance royalty of $500,000
per annum, subject to adjustment for inflation and deflation
(but not below $500,000), which is credited against base
overriding royalties and royalty bonuses. NMC (Cyprus NMC
through September 30, 1994) is obligated to make quarterly
payments of the minimum advance royalty in January, April,
July and October of each year. For the calendar year ending
December 31, 2000, the minimum advance royalty is $647,282.
The minimum annual advance royalty was $637,044, $636,935 and
$621,606 for the calendar years ended December 31, 1999; 1998;
and 1997; respectively.
The unallocated reserve aggregated $763,377 at January 31,
2000, as compared with an unallocated reserve of $712,952 and
$719,799 at January 31, 1999 and 1998, respectively. During
the fiscal years ended January 31, 2000, 1999 and 1998, the
Trustees distributed cash payments totaling 4,592,003 (of $.35
per Unit), $7,084,805 (of $.54 per Unit), and $4,854,404 (of
$.37 per Unit), respectively, of beneficial interest in Mesabi
Trust. In addition, in January 2000 the Trustees declared a
distribution of $.18 per unit of beneficial interest which was
paid in February 2000.
F-8
<PAGE>
Note 4. Summary of Quarterly Earnings (Unaudited)
The quarterly results of operations for the two years ended January 31, 2000 and
1999 are presented below:
<TABLE>
<CAPTION>
Year ended January 31, 2000
-----------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue $455,960 $1,126,492 $1,711,061 $2,066,380
Expenses 85,917 112,781 79,273 111,494
-------- ---------- ---------- ----------
Net income $370,043 $1,013,711 $1,631,788 $1,954,886
======== ========== ========== ==========
Net income per unit $ 0.03 $ 0.08 $ 0.12 $ 0.15
======== ========== ========== ========
Year ended January 31, 2000
-----------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- ---------- ---------- ----------
Revenue $499,451 $1,481,240 $2,609,768 $1,397,684
Expenses 69,718 97,172 72,098 114,398
-------- ---------- ---------- ----------
Net income $429,733 $1,384,068 $2,537,670 $1,283,286
======== ========== ========== ==========
Net income per unit $ 0.03 $ 0.11 $ 0.19 $ 0.10
======== ========== ========== ==========
</TABLE>
F-9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY 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> YEAR
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 51,082
<SECURITIES> 2,888,947
<RECEIVABLES> 4,775
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,179,863
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,179,863
<CURRENT-LIABILITIES> 2,416,483
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,179,863
<SALES> 5,005,190
<TOTAL-REVENUES> 5,359,893
<CGS> 0
<TOTAL-COSTS> 389,386
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,970,428
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,970,428
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,970,428
<EPS-BASIC> 0.38
<EPS-DILUTED> 0.38
</TABLE>
