UNALLOCATED RESERVE AND DISTRIBUTIONS

6 Months Ended

Jul. 31, 2011

UNALLOCATED RESERVE AND DISTRIBUTIONS

UNALLOCATED RESERVE AND DISTRIBUTIONS

Note 5. The Trustees have determined that the unallocated cash and U.S. Government securities portion of the Unallocated Reserve should be maintained at a prudent level, usually within the range of $500,000 to $1,000,000, to meet present or future liabilities of the Trust.  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 payments received quarterly and the level of Trust expenses that the Trustees anticipate the Trust will incur in subsequent quarters.

As of July 31, 2011, the Unallocated Reserve consisted of $621,317 in unallocated cash and U.S. Government securities and $6,025,023 of accrued income receivable primarily representing royalties not yet received by the Trust but anticipated to be received in future periods based primarily on shipments during July 2011, less the estimated deferred royalty revenue of $991,000. See Note 4 for further information regarding the deferred royalty revenue.  Pursuant to the Agreement of Trust, the Trust makes decisions on cash distributions to Unitholders based on the royalty payments actually received from Northshore after considering any historical and potential future pricing adjustments, rather than as royalty income is recorded in accordance with the Trust’s revenue recognition policy.

As of July 31, 2011 and January 31, 2011, the Trust’s Unallocated Reserve was comprised of the following components:

	July 31, 2011			January 31, 2011
	(unaudited)
Cash and U.S. Government securities	$	621,317		$	755,016
Accrued income receivable	6,025,023			232,786
Deferred royalty revenue	(991,000		)
Unallocated Reserve	$	5,655,340		$	987,802

A reconciliation of the Trust’s Unallocated Reserve from January 31, 2011 to July 31, 2011 is as follows:

Unallocated Reserve, January 31, 2011	$	987,802
Net income	13,195,545
Distributions declared	(8,528,007		)
Unallocated Reserve, July 31, 2011	$	5,655,340