10-K405 1 a2046399z10-k405.txt 10-K405 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ FORM 10-K (Mark one) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 31, 2001 / / TRANSITION REPORT PURSUANT TO 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 (Name of Small Business Issuer 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 10008-0318 NEW YORK, NEW YORK (Zip Code) (Address of Principal Executive Offices) (615) 835-2749 (Issuer's telephone number, including area code) Securities registered under Section 12(b) of the Exchange Act: UNITS OF BENEFICIAL INTEREST IN MESABI TRUST Securities registered under Section 12(g) of the Exchange 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 19, 2001, 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 $38,954,647*. As of April 19, 2001, 13,120,010 Units of Beneficial Interest were outstanding. DOCUMENTS INCORPORATED BY REFERENCE 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, 2001, which is annexed hereto and filed herewith as Exhibit 13.1. ------------------------------------------- * Includes approximately $75,049 representing the market value, as of April 19, 2001, of 25,100 Units of Beneficial Interest the beneficial ownership of which is disclaimed by affiliates (see Item 12 herein). 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 9 through 13 of the Annual Report of the Trustees of Mesabi Trust for the fiscal year ended January 31, 2001 (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 40 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 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 2 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's Annual Report stated 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. Except for its May 2000 announcement regarding environmental permitting for the facility (see below), CCI has made no public disclosure regarding the pig iron facility project since CCI's Annual Report. (CCI made no reference to the project in its Annual Report for the year ended December 31, 2000.) 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. Following LTV Steel's decision to close the LTV Steel Mining Company's plant at Hoyt Lakes, Minnesota this year, CCI announced in May 2000 that it has asked the Minnesota Pollution Control Agency to delay a decision on environmental permitting for the possible pig iron facility at CCI's Northshore Mine in order to evaluate whether its iron ore pellet production should be increased to meet CCI's future sales requirements. CCI stated that the requested delay should not be interpreted to mean that CCI has abandoned plans for a possible pig iron facility. CCI reported that it will be supplying LTV with a majority of its iron ore pellets over the next 10 years with most of the pellets expected to come from Minnesota sources that are owned or managed by CCI. Besides potential expansion at CCI's Northshore Mine, CCI announced that it is reviewing ways to increase production levels at other CCI-managed mines. Additionally, in a press release dated January 9, 2001, CCI announced that it intends to reduce iron ore pellet production at the Northshore Mine by approximately 700,000 tons in 2001. CCI stated that one of the pellet production furnaces at the Northshore Mine would be shut down for an estimated nine month period beginning in January. CCI cited the impact on its customers of perceived unfairly traded imports and the general deterioration in overall steel demand in North America as reasons for the production cutback. No forecast of the volume of shipments of iron ore pellets for 2001 was provided. 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 9 of the Annual Report of the Trustees of Mesabi Trust for the fiscal year ended January 31, 2001 is incorporated herein by reference. 3 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 2000 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 the then 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 14 of the Annual Report of the Trustees of Mesabi Trust for the fiscal year ended January 31, 2001 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 14, respectively, of the Annual Report of the Trustees of Mesabi Trust for the fiscal year ended January 31, 2001 is incorporated herein by reference. ITEM 7. TRUSTEE'S 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, 13 and 14, respectively, of the Annual Report of the Trustees of Mesabi Trust for the fiscal year ended January 31, 2001 is incorporated herein by reference. 4 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-3 through F-6 and are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. The information required by Item 304 of Regulation S-K regarding the change in Mesabi Trust's accountants was previously filed as part of Mesabi Trust's Current Report on Form 8-K filed on August 1, 2000. 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:
Trustee Business Experience Name Age Since During Past Five Years ---- --- ----- ---------------------- Bankers Trust Company N/A 1961 Trust Company David J. Hoffman 65 1977 Mining geologist; Until January 1988, President of Towne Mines Exploration Company, Inc., a privately-held mining corporation. Richard G. Lareau 72 1990 Partner in the law firm of Oppenheimer Wolff & Donnelly LLP; Director of Nash Finch Company and Northern Technologies International Corporation. 5 Ira A. Marshall, Jr. 78 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 53 1981 Private investor; Orthopedic surgeon.
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 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, 2001, for services in all capacities as Trustees to Mesabi Trust during the fiscal year ended January 31, 2001. CASH COMPENSATION TABLE
Name Capacity in Which Served Cash Compensation ---- ------------------------ ----------------- Bankers Trust Company Corporate Trustee $ 89,765* David J. Hoffman Individual Trustee $ 27,265 Richard G. Lareau Individual Trustee $ 27,265 Ira A. Marshall, Jr. Individual Trustee $ 27,265 Norman F. Sprague III Individual Trustee $ 27,265
* Does not include $27,333 of fees and disbursements paid to Bankers Trust Company as registrar and transfer agent of the Units. 6 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 2, 2001. 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 2, 2001.
Name and Address Amount of Beneficial Percent of Of Beneficial Owner(s) Ownership of Units Class ---------------------- ------------------ ----- Appaloosa Management L.P., a Delaware Limited Partnership and David A. Tepper 26 Main Street 655,500 (1) 4.99% Chatham, New Jersey 07928
------------------------ (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, 2001 by the Trustees individually and as a group.
Amount of Beneficial Percent of Name Ownership of Units Class ---- ------------------ ----- Bankers Trust Company (1) 3,000 Less than 1% David J. Hoffman (2) 38,100 Less than 1% Richard G. Lareau (3) 27,000 Less than 1% Ira A. Marshall, Jr. (4) 51,000 Less than 1% Norman F. Sprague III 12,700 Less than 1% All Trustees as a group 116,800 Less than 1%
------------------- (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. 7 (3) Includes 10,000 Units owned by Mr. Lareau's wife, over which Mr. Lareau does not have any investment or voting power and as to which Mr. Lareau disclaims any beneficial ownership. (4) 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. 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, 2001: Independent Auditor's Reports - pages F-1 through F-2 Balance Sheets as of January 31, 2001 and 2000 - page F-3 Statements of Income for the years ended January 31, 2001, 2000 and 1999 - page F-4 Statements of Unallocated Reserve and Trust Corpus for the years ended January 31, 2001, 2000 and 1999 - page F-5 Statements of Cash Flows for the years ended January 31, 2001, 2000 and 1999 - page F-6 Notes to Financial Statements - pages F-7 through F-11 3. EXHIBITS:
Item No. Item Filing Method ------- ---- ------------- 3 Agreement of Trust dated as of July 18, 1961...................................... Incorporated by reference from Exhibit 3 to Mesabi Trust's Annual Report on Form 10-K for the fiscal year ended January 31, 1987. 8 3(a) Amendment to the Agreement of Trust dated as of October 25, 1982.................... Incorporated by reference from Exhibit 3(a) to Mesabi Trust's Annual Report on Form 10-K for the fiscal year ended January 31, 1988. 4 Instruments defining the rights of Trust Certificate Holders....................... Incorporated by reference from Exhibit 4 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 Assignment dated as of October 22, 1982... Incorporated by reference from Exhibit 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 Further Assignment of Peters Lease........ Incorporated by reference from Exhibit A to Mesabi Trust's Report on Form 8-K dated August 17, 1989. 9 10(g) Amendment of Assignment, Assumption and Further Assignments of Cloquet Lease...... Incorporated by reference from Exhibit B 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, 2001.................................. Filed herewith. 99 Letter to Mesabi Trust Unitholders regarding uncertainty of market conditions in the steel and iron ore industry and the decrease in iron ore pellet production at Northshore........... Filed herewith.
(b) REPORTS ON FORM 8-K FILED IN THE FOURTH QUARTER: A Form 8-K was filed on January 9, 2001 that reported that CCI intends to reduce iron ore pellet production at Northshore by approximately 700,000 tons in 2001. 10 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 19, 2001 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 19, 2001 ------------------------------- Daniel M. Chipko Associate Bankers Trust Company ------------------------------- David J. Hoffman Individual Trustee /s/ Richard G. Lareau April 19, 2001 ------------------------------- Richard G. Lareau Individual Trustee /s/ Ira A. Marshall, Jr. April 19, 2001 ------------------------------- Ira A. Marshall, Jr. Individual Trustee /s/ Norman F. Sprague III April 19, 2001 ------------------------------- Norman F. Sprague III Individual Trustee 11