ROYALTY AGREEMENT, UNALLOCATED RESERVE AND DISTRIBUTIONS

9 Months Ended

Oct. 31, 2020

UNALLOCATED RESERVE AND DISTRIBUTIONS

ROYALTY AGREEMENT, UNALLOCATED RESERVE AND DISTRIBUTIONS

Note 4.  On October 9, 2020, the Trustees declared a distribution of $0.36 per Unit of Beneficial Interest payable on November 20, 2020 to Mesabi Trust Unitholders of record at the close of business on October 30, 2020.

On October 30, 2020, the Trustees received the quarterly royalty report of iron ore product shipments from Silver Bay, Minnesota during the calendar quarter ended September 30, 2020 from Cliffs, the parent company of Northshore.

Each quarter, as authorized by the Agreement of Trust dated July 18, 1961 (the “Agreement of Trust”), the Trustees evaluate all relevant factors including all costs, expenses, obligations, and present and future liabilities of the Trust (whether fixed or contingent) in determining the prudent level of unallocated reserve in light of the unpredictable nature of the iron ore industry and current economic conditions.

Pursuant to the Agreement of Trust, the Trustees make decisions about cash distributions to Unitholders based on the royalty payments it receives from Northshore when received, rather than as royalty income is recorded in accordance with the Trust’s revenue recognition policy. Refer to Note 3 for further information.

As of October 31, 2020 and January 31, 2020, the unallocated cash and U.S. Government securities portion of the Trust’s Unallocated Reserve was comprised of the following components:

	October 31, 2020 (unaudited)		January 31, 2020
Cash and U.S. Government securities	$	15,402,232	$	23,510,129
Distribution payable		(4,723,204)		(9,184,007)
Unallocated cash and U.S. Government securities	$	10,679,028	$	14,326,122

A reconciliation of the Trust’s Unallocated Reserve and Trust Corpus for the nine and three months ended October 31, 2020 and 2019 is as follows:

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at January 31, 2020	$	11,831,014	$	3	$	11,831,017
Net income		13,414,023		—		13,414,023
Distributions declared - $0.9700 per unit		(12,726,411)		—		(12,726,411)
Balances at October 31, 2020	$	12,518,626	$	3	$	12,518,629

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at July 31, 2020	$	12,115,431	$	3	$	12,115,434
Net income		5,126,399		—		5,126,399
Distributions declared - $0.3600 per unit		(4,723,204)		—		(4,723,204)
Balances at October 31, 2020	$	12,518,626	$	3	$	12,518,629

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at January 31, 2019	$	16,805,689	$	3	$	16,805,692
Net income		24,972,171		—		24,972,171
Distributions declared - $1.9700 per unit		(25,846,419)		—		(25,846,419)
Balances at October 31, 2019	$	15,931,441	$	3	$	15,931,444

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at July 31, 2019	$	21,195,653	$	3	$	21,195,656
Net income		6,150,196		—		6,150,196
Distributions declared - $0.8700 per unit		(11,414,408)		—		(11,414,408)
Balances at October 31, 2019	$	15,931,441	$	3	$	15,931,444