<PAGE>

                                                                   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.

                                       2

<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