ROYALTY AGREEMENT, UNALLOCATED RESERVE AND DISTRIBUTIONS

6 Months Ended

Jul. 31, 2020

UNALLOCATED RESERVE AND DISTRIBUTIONS

ROYALTY AGREEMENT, UNALLOCATED RESERVE AND DISTRIBUTIONS

Note 4.  On July 13, 2020, the Trustees declared a distribution of $0.05 per Unit of Beneficial Interest payable on August 20, 2020 to Mesabi Trust Unitholders of record at the close of business on July 30, 2020.

On July 30, 2020, the Trustees received the quarterly royalty report of iron ore product shipments from Silver Bay, Minnesota during the calendar quarter ended June 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 July 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:

	July 31, 2020 (unaudited)		January 31, 2020
Cash and U.S. Government securities	$	10,600,605	$	23,510,129
Distribution payable		(656,001)		(9,184,007)
Unallocated cash and U.S. Government securities	$	9,944,604	$	14,326,122

A reconciliation of the Trust’s Unallocated Reserve and Trust Corpus for the six and three months ended July 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		8,287,624		—		8,287,624
Distributions declared - $0.6100 per share		(8,003,207)		—		(8,003,207)
Balances at July 31, 2020	$	12,115,431	$	3	$	12,115,434

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at April 30, 2020	$	6,095,429	$	3	$	6,095,432
Net income		6,676,003		—		6,676,003
Distributions declared - $0.0500 per share		(656,001)		—		(656,001)
Balances at July 31, 2020	$	12,115,431	$	3	$	12,115,434

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at January 31, 2019	$	16,805,689	$	3	$	16,805,692
Net income		18,821,975		—		18,821,975
Distributions declared - $1.1000 per share		(14,432,011)		—		(14,432,011)
Balances at July 31, 2019	$	21,195,653	$	3	$	21,195,656

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at April 30, 2019	$	10,039,168	$	3	$	10,039,171
Net income		13,911,687		—		13,911,687
Distributions declared - $0.2100 per share		(2,755,202)		—		(2,755,202)
Balances at July 31, 2019	$	21,195,653	$	3	$	21,195,656