**Exhibit 13**

 

ANNUAL REPORTOF THE TRUSTEES OFMESABI TRUSTFor The Year Ended January 31, 2008

 

ADDRESS

 

Mesabi Trust

c/o Deutsche Bank Trust Company Americas

Trust & Securities Services — GDS

60 Wall Street, 27th Floor

New York, NY 10005

(615) 835-2749 (telephone)

 

REGISTRAR AND TRANSFER AGENT

 

Deutsche Bank Trust Company Americas

 

LEGAL COUNSEL

 

Oppenheimer Wolff & Donnelly LLP, General Counsel

 

REGISTRANTINFORMATION

 

Mesabi Trust does notmaintain a website and therefore does not make available through a website theannual, quarterly, or other reports it files with the Securities and ExchangeCommission.  Mesabi Trust will provide,however, upon the written request of any Unitholder addressed to the Trusteesat the above address and without charge to such Unitholder, (i) a papercopy of Mesabi Trust’s Annual Report on Form 10-K for the fiscal yearended January 31, 2008 as filed with the Securities and ExchangeCommission pursuant to the Securities Exchange Act of 1934, as amended, and (ii) theTrustees Code of Ethics.

 

Special Note Regarding Forward-Looking Statements

 

Certain statements containedin this document are considered “forward-looking statements” within the meaningof the Private Securities Litigation Reform Act of 1995.  All such forward-looking statements,including those statements estimating calendar year 2008 production orshipments, are based on input from the lessee/operator (and its parentcorporation) of the mine located on the lands owned and held in trust for thebenefit of the holders of units of beneficial interest of Mesabi Trust.  These statements may be identified by the useof forward-looking words, such as “may,” “will,” “could,” “project,” “believe,”“anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “forecast”and other similar words.  Suchforward-looking statements are inherently subject to known and unknown risksand uncertainties.  Actual results andfuture developments could differ materially from the results or developmentsexpressed in or implied by these forward-looking statements.  Factors that may cause actual results todiffer materially from those contemplated by such forward-looking statementsinclude, but are not limited to, those described under the caption “RiskFactors” in this annual report.  MesabiTrust undertakes no obligation to make any revisions to the forward-lookingstatements contained in this filing or to update them to reflect circumstancesoccurring after the date of this filing.

 

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**OVERVIEW**

 

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 theState of New York.  Mesabi Trust holdsall of the interests formerly owned by Mesabi Iron Company (“MIC”), includingall right, title and interest in the Amendment of Assignment, Assumption andFurther 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 together with the AmendedAssignment of Peters Lease, the “Amended Assignment Agreements”), thebeneficial interest in the Mesabi Land Trust (as such term is defined below)and all other assets and property identified in the Agreement of Trust. TheAmended Assignment of Peters Lease relates to an Indenture made as of April 30,1915 among East Mesaba Iron Company (“East Mesaba”), Dunka River Iron Company (“DunkaRiver”) and Claude W. Peters (the “Peters Lease”) and the Amended Assignment ofCloquet Lease relates to an Indenture made May 1, 1916 between CloquetLumber Company and Claude W. Peters (the “Cloquet Lease”).

 

The Agreement of Trustspecifically prohibits the Trustees from entering into or engaging in anybusiness.  This prohibition seeminglyapplies even to business activities the Trustees may deem necessary or properfor the preservation and protection of the Trust Estate.  Accordingly, the Trustees’ activities inconnection with the administration of Trust assets are limited to collectingincome, paying expenses and liabilities, distributing net income to the holdersof Certificates of Beneficial Interest in Mesabi Trust (“Unitholders”) afterthe payment of, or provision for, such expenses and liabilities, and protectingand conserving the assets held.  Becausethe Units of the Trust are registered pursuant to Section 12(b) ofthe Securities Exchange Act of 1934 and are listed on the New York StockExchange, the Trustees are also responsible for ensuring that the Trustmaintains compliance with all applicable laws, rules and regulations.  Deutsche Bank Trust Company Americas, theCorporate Trustee, performs certain administrative functions for the Trust.

 

The Trustees do not intendto expand their responsibilities beyond those permitted or required by theAgreement of Trust, the Amendment to the Agreement of Trust dated October 25,1982 (the “Amendment”), and those required under applicable law.  The Trust has no employees, but it engagesindependent consultants to assist the Trustees in, among other things,monitoring the amount and sales prices of iron ore products shipped from SilverBay, Minnesota, based on information supplied to the Trustees by NorthshoreMining Company (“Northshore”), the lessee/operator of the Mesabi Trust lands,and its parent company Cleveland-Cliffs Inc (“CCI”).  References to Northshore in this annualreport, unless the context requires otherwise, are applicable to CCI as well.

 

The informationregarding amounts and sales prices of shipped iron ore products is used tocompute the royalties payable to the Trust by Northshore.  The Trustees request material information,from time to time, for use in the Trust’s periodic reports and as part of theirevaluation of the Trust’s disclosure controls and procedures.  The Trustees rely on Northshore to provideaccurate and timely information for use in the Trust’s periodic and annualreports filed with the Securities and Exchange Commission.

 

Pursuant to aruling from the Internal Revenue Service, which ruling was based on the termsof the Agreement of Trust including the prohibition against entering into anybusiness, the Trust is not taxable as a corporation for Federal income taxpurposes.  Instead, the Unitholders areconsidered “owners” of the Trust and the Trust’s income is taxable directly tothe Unitholders.  In accordance with theAgreement of Trust, the Trust will terminate twenty-one years after the deathof the survivor of twenty-five persons named in an exhibit to the Agreement ofTrust, the youngest of whom is believed to be forty-seven years old.

 

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**RISKFACTORS**

 

The results of operations and financial condition ofthe Trust are subject to various risks. Some of these risks are describedbelow, and you should take such risks into account in evaluating the Trust orany investment decision involving the Trust. This section does not describe all risks that may be applicable to theTrust and it is intended only as a summary of certain material riskfactors.  More detailed informationconcerning the risk factors described below is contained in other sections ofthis Annual Report.

 

***The Trustees have no control overthe operations and activities of CCI or Northshore.***

 

Except withinthe framework of the Amended Assignment Agreements, neither the Trust nor theTrustees have any control over the operations and activities of CCI or itswholly-owned subsidiary, Northshore. Accordingly, the income of the Trust is highly dependent upon theactivities and operations of Northshore, and the terms and conditions of theAmended Assignment Agreements. Northshore alone controls: (i) historical operating data, includingiron ore production volumes, marketing of iron ore products, operating andcapital expenditures as they relate to Northshore, environmental and otherliabilities and the effects of regulatory changes; (ii) plans forNorthshore’s future operating and capital expenditures; (iii) geologicaldata relating to iron ore reserves; and (iv) projected production of ironore products.  Any substantial alterationof CCI’s business or the operations, production and shipments of Northshorecould adversely affect the income of the Trust.

 

***The Trust does not control theportion of Northshore’s shipments that will come from ore mined from MesabiTrust lands.***

 

The Trustees donot exert any influence over mining operational decisions and Northshore alonedetermines whether to mine from lands owned by the Trust or state-owned lands,based on its current production estimates and engineering plan.  Northshore’s mining operations (the PeterMitchell Mine) include mineral-producing land owned by the Trust and the Stateof Minnesota.  Ore mined from state-ownedlands by Northshore is processed, along with ore mined from Trust-owned lands,in Northshore-owned crushing, concentrating and pelletizing facilities and isseparately accounted for on a periodic basis. Northshore also has the ability to process and ship iron ore productsfrom lands other than Mesabi Trust lands. In certain circumstances, the Trust may be entitled to royalties onthose other shipments, but not in all cases. In general, the Trust will receive higher royalties (assuming all otherfactors are equal) if a higher percentage of shipments are from Mesabi Trustlands.  The percentages of shipments fromMesabi Trust lands were 88.2%, 90.9%, 90.1%, 92.0% and 95.5% in calendar years2007, 2006, 2005, 2004, and 2003, respectively. If Northshore decides to materially reduce the percentage of ore mined,or pellets shipped, from Mesabi Trust lands, the income of the Trust could beadversely affected.

 

***The royalties payable to theTrust could be adversely affected by the failure of the Trust’s independentexperts to competently perform.***

 

As permitted by the terms of the Agreement of Trustand the Amendment, the Trustees are entitled to, and in fact do rely, uponcertain experts to assist the Trustees in carrying out and fulfilling theirobligations as Trustees.  Independentconsultants perform services, render advice and produce reports with respect tomonthly production and shipments, which include figures on crude oreproduction, iron ore pellet production, iron ore pellet shipments, anddiscussions concerning the condition and accuracy of the scales used to weighiron ore pellets produced at Northshore’s facilities.  The Trustees have also retained an accountingfirm to provide non-audit services, including reviews of financial data relatedto shipping and sales reports provided by Northshore and a review of theschedule of leasehold royalties payable to the Trust.  The Trustees believe that the independentexperts are qualified to perform the services and functions assigned tothem.   Nevertheless, any negligence orthe failure of any such independent expert to competently perform couldadversely affect the income of the Trust.

 

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***The Trustrelies on CCI’s estimates of recoverable reserves and if those estimates areinaccurate the total royalty stream to the Trust and distributions payable toeach Unitholder may be adversely affected.***

 

The Trustees do notparticipate in preparing the ore reserve estimate reported by CCI.  According to CCI’s Form 10-K filedFebruary 29, 2008, CCI regularly evaluates its iron ore reserves based onrevenues and costs and updates them as required in accordance with SecuritiesAct Industry Guide 7, promulgated by the U.S. Securities and ExchangeCommission.  In 2007, the Trusteesengaged an independent firm of geological experts to evaluate the process CCIuses to estimate the mineral reserves at the Peter Mitchell Mine.  Still, there are numerous uncertaintiesinherent in estimating quantities of reserves of mineral producing lands andsuch estimates necessarily depend upon a number of variable factors andassumptions, such as production capacity, effects of regulations bygovernmental agencies, future prices for iron ore, future industry conditionsand operating costs, severance and excise taxes, development costs and costs ofextraction and reclamation costs, all of which may in fact vary considerablyfrom actual results.  For these reasons,estimates of the economically recoverable quantities of mineralized depositsattributable to the lands owned by Mesabi Trust and the classifications of suchreserves based on the risk of recovery prepared by different engineers or bythe same engineers at different times may vary substantially as the criteriachange.  CCI’s estimate of the orereserves could be affected by future industry conditions, geological conditionsand ongoing mine planning at the Peter Mitchell Mine.  Actual reserves and therefore actualroyalties will likely vary from estimates, and if such variances are material,the value of the Trust’s Units could decline.

 

***Price adjustment provisions inthe North American supply agreements with CCI’s customers can cause significantfluctuations in the royalties paid to the Trust.***

 

In CCI’s Form 10-Kfiled February 29, 2008, CCI has reported that five customers togetheraccounted for more than 80 percent of its North American iron ore salesrevenues.  According to the Form 10-Kfiled by CCI, sales volume under these agreements is largely dependent oncustomer requirements, and in some cases, CCI is the sole supplier of iron orepellets to its customers.  Contractualdisputes with any of CCI’s significant customers could result in lower salesvolume or lower sales prices, which could adversely affect the royaltiesreceived by the Trust.

 

CCI has also reported thatits North American term supply agreements contain a number of price adjustmentprovisions, or price escalators, including adjustments based on generalindustrial inflation rates, the price of steel and the international price ofiron ore pellets, among other factors, that allow CCI to adjust the pricesunder those agreements generally on an interim and annual basis.  Factors that could result in price adjustmentinclude measures of general industrial inflation, steel prices andinternational pellet prices.  CCI’s priceadjustment provisions are weighted and some are subject to annual collars,which limit CCI’s ability to raise prices to match international levels andfully capitalize on strong demand for iron ore. These price adjustments can be positive or negative, and can result insignificant variations in royalties received by Mesabi Trust (and, in turn, theresulting amount available for distribution to Unitholders) from quarter toquarter and year to year.  Thesevariations, which can be positive or negative, cannot be estimated by the Trustand could adversely affect the income of the Trust.

 

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***Theoperations at Northshore are largely dependent on a single-source energysupplier.***

 

The operations at Northshoreare largely dependent on Silver Bay Power Company, a 115 megawatt power plant,for its electrical supply.  Silver BayPower Company, which is wholly owned by Northshore, has an interconnectionagreement with Minnesota Power, Inc. for backup power, and sells 40megawatts of excess power capacity to Northern States Power Company under acontract that extends to 2011.  Asignificant interruption in service from Silver Bay Power Company due tovandalism, terrorism, weather conditions, natural disasters, or any other causecould cause a decrease in production capacity or require a temporary shutdownof Northshore’s operations.  In addition,one natural gas pipeline serves all of CCI’s Minnesota mines, and a pipelinefailure could idle or substantially impair the operations at Northshore.  Any substantial interruption of, or materialreduction in, Northshore’s operations could adversely affect the income of theTrust.

 

***The mining operations of Northshore are subject to extensivegovernmental regulation and Northshore is subject to risks related to itscompliance with federal and state environmental regulations.***

 

Northshore, as the owner/operator of the Peter Mitchell Mine, issubject to various federal, state and local laws and regulations on matterssuch as employee health and safety, air quality, water pollution, plant andwildlife protection, reclamation and restoration of mining properties, thedischarge of materials into the environment, and the effects that mining has ongroundwater quality and availability. Northshore is required to maintain permits and approvals issued byfederal and state regulatory agencies and its mining operations are subject toinspection and regulation by the Mine Safety and Health Administration of theUnited States Department of Labor (“MSHA”) under the provisions of the MineSafety and Health Act of 1977.  TheOccupational Safety and Health Administration (“OSHA”) also has jurisdictionover safety and health standards not covered by MSHA and the MinnesotaPollution Control Agency (“MPCA”) regulates various aspects of Northshore’soperations.  Northshore is involved inlitigation with the MPCA over certain air quality permitting matters butbecause the Trust has no control over Northshore’s operations, the potentialimpact of these proceedings cannot be determined.  Moreover, Northshore is solely responsiblefor its compliance with any laws, regulations or permits applicable toNorthshore’s operations and therefore the Trust cannot determine whetherNorthshore has been or will continue to be in compliance with such laws andregulations.  If Northshore fails tocomply with these laws, regulations or permits, it could be subject to fines orother sanctions, any of which could have an adverse effect on its operationsand its ability to ship iron ore products from Silver Bay, Minnesota, whichcould, in turn, have an adverse effect on the royalties paid to the Trust.

 

***Equipment failures and otherunexpected events at Northshore may lead to production curtailments orshutdowns.***

 

Interruptions in productioncapabilities at the mine operated by Northshore may have an adverse impact onthe royalties payable to the Trust.  Inaddition to equipment failures, the Northshore facilities are also subject tothe risk of loss due to unanticipated events such as fires, explosions orextreme weather conditions. The manufacturing processes that take place inNorthshore’s mining operations, as well as in its crushing, concentrating andpelletizing facilities, depend on critical pieces of equipment, such asdrilling and blasting equipment, crushers, grinding mills, pebble mills,thickeners, separators, filters, mixers, furnaces, kilns and rolling equipment,as well as electrical equipment, such as transformers. It is possible that thisequipment may, on occasion, be out of service because of unanticipated failuresor unforeseeable acts of vandalism or terrorism. In addition, because theNorthshore mine and processing facilities have been in operation for severaldecades, some of the equipment is aged. Because the Trustees have no control over the operations or maintenanceof the equipment at Northshore, a shutdown or reduction in capacity may comewith little or no advance warning.  Theremediation of any interruption in production capability at Northshore couldrequire CCI to make large capital expenditures which may take place over anextended period of time.  A shutdown orreduction in operations at Northshore could adversely affect the royalties paidto the Trust.

 

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***If steelmakers use methods otherthan blast furnace production to produce steel, shut down or reduce productionusing blast furnaces, the demand for iron ore pellets may decrease.***

 

Demand for iron ore pelletsis determined by the operating rates for the blast furnaces of steel companies.However, not all finished steel is produced by blast furnaces; finished steelalso may be produced by other methods that do not require iron ore pellets. Forexample, steel “mini-mills,” which are steel recyclers, generally produce steelby using scrap steel, not iron ore pellets, in their electric furnaces.  Steel producers also can produce steel usingimported iron ore or semi-finished steel products, which eliminates the needfor domestic iron ore. Environmental restrictions on the use of blast furnacesalso may reduce the use of their blast furnaces in steel production.  Because the maintenance of blast furnaces canrequire substantial capital expenditures, manufacturers may choose not tomaintain their blast furnaces, and some of them may not have the resourcesnecessary to adequately maintain their blast furnaces. If steel manufacturerssignificantly alter the methods they use to produce steel or otherwisesubstantially reduce their use of iron ore pellets, demand for iron ore pelletswill decrease, which could adversely affect the royalties paid to the Trust.

 

***Risk factors affecting CCI, andthe operations of Northshore, could have a material adverse effect on theincome of the Trust.***

 

Because substantially all of the Trust’s revenue is derived from ironore products shipped by Northshore from Silver Bay, Northshore’s processing andshipping activities directly impact the Trust’s revenues in each quarter andfor each year.  A number of factorsaffect CCI’s operations, including Northshore’s shipment volume.  These factors which are described in CCI’s Form 10-Kfiled February 29, 2008, include, among others, economic conditions in theiron ore industry, extensive governmental regulation relating to environmentalmatters and the costs and risks related thereto, availability of substitutematerials, pricing by domestic and international competitors, long-termcustomer contracts or arrangements by Northshore or its competitors, priceadjustment provisions in CCI’s North American term supply agreements (whichtake into account various price indexes), availability of ore boats, productionat Northshore’s mining operations, natural disasters, shipping conditions inthe Great Lakes and production at Northshore’s pelletizing/processingfacility.  Specifically, if any portionof Northshore’s pelletizing lines becomes idle for any reason, production,shipments and, consequently, the royalties paid to the Trust could be adverselyaffected.

 

**OVERVIEWOF TRUST’S ROYALTY STRUCTURE**

 

Leasehold royalty incomeconstitutes the principal source of the Trust’s revenue.  Royalty rates are determined in accordancewith the terms of Mesabi Trust’s leases and assignments of leases.  Three types of royalties, as well as royaltybonuses, comprise the Trust’s royalty income:

 

·                  Base overridingroyalties.  Baseoverriding royalties have historically constituted the majority of Mesabi Trust’sroyalty income.  Base overridingroyalties are determined by both the volume and selling price of iron oreproducts shipped.  Northshore isobligated to pay Mesabi Trust base overriding royalties in varying amounts,based on the volume of iron ore products shipped.  Base overriding royalties are calculated as apercentage of the gross proceeds of iron ore products produced at Mesabi Trustlands (and to a limited extent other lands) and shipped from Silver Bay,Minnesota.  The percentage ranges from2-1/2% of the gross proceeds for the first one million tons of iron oreproducts so shipped annually to 6% of the gross proceeds for all iron ore productsin excess of 4 million tons so shipped annually.  Base overriding royalties are subject tointerim and final price adjustments under the CCI Pellet Agreements and, asdescribed elsewhere in this report, such adjustments may be positive ornegative.

 

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·                  Royalty bonuses.  The Trust earns royalty bonuses when iron oreproducts shipped from Silver Bay are sold at prices above a threshold price perton.  The royalty bonus is based on apercentage of the gross proceeds of product shipped from Silver Bay and sold atprices above a threshold price.  Thethreshold price is adjusted (but not below $30.00 per ton) on an annual basisfor inflation and deflation (the “Adjusted Threshold Price”).  The Adjusted Threshold Price was $44.60 perton per for calendar year 2006, $45.98 per ton for calendar year 2007 and willbe $47.43 per ton for calendar year 2008. The royalty bonus percentage ranges from 1/2 of 1% of the gross proceeds(on all tonnage shipped for sale at prices between the Adjusted Threshold Priceand $2.00 above the Adjusted Threshold Price) to 3% of the gross proceeds (onall tonnage shipped for sale at prices $10.00 or more above the AdjustedThreshold Price).  Royalty bonuses aresubject to price adjustments under the CCI Pellet Agreements (described elsewherein this Annual Report); such adjustments may be positive or negative.  See the section entitled “Comparison ofFiscal Years ended January 31, 2008 and January 31, 2007 — RoyaltyIncome” on page 11 of this Annual Report for more information.

 

·                  Fee royalties.  Fee royalties have historically constituted asmaller component of the Trust’s total royalty income.  Fee royalties are payable to the Mesabi LandTrust, a Minnesota land trust, which holds a 20% interest as fee owner in theAmended Assignment of Peters Lease. Mesabi Trust holds the entire beneficial interest in the Mesabi LandTrust for which U.S. Bank N.A. acts as the corporate trustee.  Mesabi Trust receives the net income of theMesabi Land Trust, which is generated from royalties on the amount of crude oremined after the payment of expenses to U.S. Bank N.A. for its services ascorporate trustee.  Crude ore is thesource of iron oxides used to make iron ore pellets and other products.  The fee royalty on crude ore is based on anagreed price per ton, subject to certain indexing.

 

·                  Minimum advanceroyalties. Northshore’s obligation to pay base overriding royalties and royaltybonuses with respect to the sale of iron ore products generally accrues uponthe shipment of those products from Silver Bay. However, regardless of whether any shipment has occurred, Northshore isobligated to pay to Mesabi Trust a minimum advance royalty.  Each year, the amount of the minimum advanceroyalty is adjusted (but not below $500,000 per annum) for inflation anddeflation.  The minimum advance royaltywas $743,420 for calendar year 2006, $766,510 for calendar year 2007 and is$790,721 for calendar year 2008.  Untiloverriding royalties (and royalty bonuses, if any) for a particular year equalor exceed the minimum advance royalty for the year, Northshore must makequarterly payments of up to 25% of the minimum advance royalty for theyear.  Because minimum advance royaltiesare essentially prepayments of base overriding royalties and royalty bonusesearned each year, any minimum advance royalties paid in a fiscal quarter arerecouped by credits against base overriding royalties and royalty bonusesearned in later fiscal quarters during the year.

 

The current royalty rateschedule became effective on August 17, 1989 pursuant to the AmendedAssignment Agreements, which the Trust entered into with Cyprus NorthshoreMining Corporation (“Cyprus NMC”). Pursuant to the Amended Assignment Agreements, overriding royalties aredetermined by both the volume and selling price of iron ore productsshipped.  In 1994, Cyprus NMC was sold byits parent corporation to Cleveland-Cliffs Inc (“CCI”) and renamed NorthshoreMining Company.  CCI now operatesNorthshore as a wholly owned subsidiary.

 

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Under the relevantagreements, Northshore has the right to mine and ship iron ore products fromlands other than Mesabi Trust lands. Northshore alone determines whether to conduct mining operations onTrust and/or such other lands based on its current mining and engineeringplan.  The Trustees do not exert anyinfluence over mining operational decisions. To encourage the use of iron ore products from Mesabi Trust lands,Mesabi Trust receives royalties on stated percentages of iron ore shipped fromSilver Bay, whether or not the iron ore products are from Mesabi Trustlands.  Mesabi Trust receives royaltiesat the greater of (i) the aggregate quantity of iron ore products shippedthat were mined from Mesabi Trust lands, and (ii) a portion of theaggregate quantity of all iron ore products shipped from Silver Bay that weremined from any lands, such portion being 90% of the first four million tonsshipped from Silver Bay during such year, 85% of the next two million tonsshipped during such year, and 25% of all tonnage shipped during such year inexcess of six million tons.

 

Royalty income constitutesthe principal source of the Trust’s revenue, which comprised 99.7%, 99.6% and99.8% of the total revenue of the Trust in fiscal years 2008, 2007, and 2006,respectively (years ending January 31). A more complete discussion of royalty rates and the manner in which theyare determined is set forth under the headings “Leasehold Royalties” and “LandTrust and Fee Royalties,” beginning on pages 22 and 24, respectively, ofthis Annual Report.

 

During the course of itsfiscal year some portion of royalties expected to be paid to Mesabi Trust isbased in part on estimated prices for iron ore products sold under termcontracts between Northshore, CCI and certain of their customers (the “CCIPellet Agreements”).  Under the CCIPellet Agreements, royalty payments are made using estimated prices which aresubject to interim and final pricing adjustments, which can be positive ornegative, and which adjustments are dependent in part on multiple price andinflation index factors that are not known until after the end of a contractyear. Even though Mesabi Trust is not a party to the CCI Pellet Agreements,these adjustments can result in significant variations in royalties received byMesabi Trust (and in turn the resulting amount available for distribution toUnitholders by the Trust) from quarter to quarter and on a comparativehistorical basis, and these variations, which can be positive or negative, cannotbe predicted by Mesabi Trust.  In eithercase, these price adjustments will impact future royalties received by theTrust that become available for distribution to Unitholders.

 

As describedelsewhere in this Annual Report, the royalty percentage paid to the Trustincreases as the aggregate tonnage of iron ore products shipped, attributableto the Trust, in any calendar year increases past each of the first fourone-million ton volume thresholds. Assuming a consistent sales price per ton throughout a calendar year,shipments of iron ore product attributable to the Trust later in the yeargenerate a higher royalty to the Trust, as total shipments for the year exceedincreasing levels of royalty percentages and pass each of the first fourone-million ton volume thresholds.

 

As alsodescribed elsewhere in this Annual Report, the Trust receives a bonus royaltyequal to a percentage of the gross proceeds of iron ore products (mined fromMesabi Trust lands) shipped from Silver Bay and sold at prices above the AdjustedThreshold Price.  Although Northshore wasable to sell some product at prices higher than the Adjusted Threshold Price incalendar 2007, the Trustees are unable to project whether Northshore willcontinue to be able to sell pellets at prices above the applicable AdjustedThreshold Price, entitling the Trust to any future bonus royalty payments.

 

In accordance with the CCIPellet Agreements, the Trust received negative adjustments to royalty incomeduring fiscal year 2008.  Theseadjustments are attributable to shipments of iron ore pellets by Northshore/CCIto its customers from Silver Bay, Minnesota during calendar 2006 and calendar2007.  In the aggregate, the pricingadjustments caused a slight decrease in the total royalty income received bythe Trust during fiscal year 2008.  TheTrustees are not able to predict whether pricing adjustments in the future, ifany, will be upward or downward.

 

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**SELECTEDFINANCIAL DATA**

 
| **Years ended on  January 31**   | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|-------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| Royalty and interest  income                    |       | $          | 18,866,511 |       | $          | 17,902,988 |       | $          | 21,579,833 |       | $          | 13,575,548 |   | $ | 7,270,517 |   |
| Trust expenses                                  |       | 634,151    |       | 756,322    |       | 844,956    |       | 557,961    |       | 499,177    |       |
| Net income(a)                                   |       | $          | 18,232,360 |       | $          | 17,146,666 |       | $          | 20,734,877 |       | $          | 13,017,587 |   | $ | 6,771,340 |   |
| Net income per Unit(b)                          |       | $          | 1.39       |       | $          | 1.31       |       | $          | 1.58       |       | $          | 0.99 |   | $ | 0.52 |   |
| Distributions declared per  Unit(b)(c)          |       | $          | 1.35       |       | $          | 1.60       |       | $          | 1.53       |       | $          | 0.77 |   | $ | 0.49 |   |
|                                            |       |       |       |       |       |       |       |       |       |       |       |
| **Years ended on    January 31** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total Assets                                    |       | $          | 8,488,509  |       | $          | 5,414,552  |       | $          | 11,328,959 |       | $          | 8,252,335 |   | $ | 5,390,081 |   |

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(a)                                  The Trust, as a grantor trust, isexempt from federal and state income taxes.

 

(b)                                 Based on 13,120,010 Units ofBeneficial Interest outstanding during all years.

 

(c)                                  During the Trust’s fiscal year ended January 31, 2008, theTrustees distributed $1.35 per Unit (including $0.315 per Unit declared infiscal 2007 but distributed in fiscal 2008 (February 2007)) and in fiscal2008 declared a distribution of $0.515 per Unit payable in February 2008,the next fiscal year.  During the Trust’s fiscal yearended January 31, 2007, the Trustees distributed $1.755 per Unit(including $0.47 per Unit declared in fiscal 2006 but distributed in fiscal2007 (February 2006)) and in fiscal 2007 declared a distribution of $0.315per Unit payable in February 2007, the next fiscal year.  During the Trust’s fiscal year ended January 31,2006, the Trustees distributed $1.355 per Unit (including $0.295 per Unitdeclared in fiscal 2005 but distributed in fiscal 2006 (February 2005))and in fiscal 2006 declared a distribution of $0.47 per Unit payable in February 2006,the next fiscal year.  During the Trust’sfiscal year ended January 31, 2005, the Trustees distributed $0.775 perUnit (including $0.30 per Unit declared in fiscal 2004 but distributed infiscal 2005 (February 2004)) and declared a distribution of $0.295 perUnit, payable in February 2005, the next fiscal year.  During the Trust’s fiscal year ended January 31,2004, the Trustees distributed $.38 per Unit (including $0.19 per Unit declaredin fiscal 2003 but distributed in fiscal 2004 (February 2003)) anddeclared a distribution of $0.30 per Unit payable in February 2004, thenext fiscal year.

 

**TRUSTEES’ DISCUSSION AND ANALYSIS OF FINANCIAL**

**CONDITION AND RESULTS OF OPERATIONS**

** **

**Results ofOperations**

** **

**Comparisonof Iron Ore Pellet Production and Shipments for the Fiscal Years Ended January 31,2008, January 31, 2007 and January 31, 2006**

 

Production at Northshore attributable toTrust lands has remained fairly constant over the prior three fiscalyears.  During fiscal year 2008,production attributed to Trust lands totaled approximately 4.72 million tons,an increase of 3% as compared to production for fiscal year 2007.  Similarly, production for fiscal year 2007increased 2.4% to 4.58 million tons as compared to production for fiscal year2006.

 

Shipments, on the other hand, which aredetermined by the demand of Northshore’s customers, have fluctuatedsignificantly during the prior three fiscal years.  Shipments for fiscal year 2008 increased15.3% to 4.25 million tons as compared to shipments for fiscal year 2007.  Conversely, shipments for fiscal year 2007decreased 12.4% to 3.68 million tons as compared to shipments for fiscal year2006.

 

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The table below, which is based oninformation provided to the Trust by Northshore, shows the total production andtotal shipments of iron ore pellets from Mesabi Trust lands during the priorthree fiscal years.

 

| **Fiscal Year Ended** | ** ** | **Pellets Produced from  Trust Lands  (Tons)** | ** ** | **Pellets Shipped from  Trust Lands  (Tons)** | ** ** |
|---------------------------------|------------|---------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| January 31, 2008           |       | 4,719,005                                                     |       | 4,248,785                                                    |       |
| January 31, 2007           |       | 4,575,655                                                     |       | 3,684,763                                                    |       |
| January 31, 2006           |       | 4,468,263                                                     |       | 4,207,240                                                    |       |

 

Production of iron orepellets was nearly flat for the fourth quarter of fiscal 2008 as compared tothe fourth quarter of fiscal 2007, increasing just 1.8%.  However, shipments by Northshore increased by192.6% for the fourth quarter of fiscal 2008 as compared to the fourth quarter offiscal 2007.  The increase in shipmentsof approximately 857,000 tons in fiscal 2008 is primarily due to a significantincrease in shipping volumes during the fourth quarter of fiscal 2008 ascompared to the fourth quarter of fiscal 2007. The table below shows the production and shipments of iron ore pelletsat Northshore from Mesabi Trust lands during the fourth quarters of fiscal 2008and fiscal 2007.

 

| **Three Months Ended** | ** ** | **Pellets Produced from  Trust Lands  (Tons)** | ** ** | **Pellets Shipped from  Trust Lands  (Tons)** | ** ** |
|------------------------|------------|------------------------------------------------|------------|-----------------------------------------------|------------|
| January 31, 2008  |       | 1,179,149                                      |       | 1,302,240                                     |       |
| January 31, 2007  |       | 1,158,015                                      |       | 444,999                                       |       |

 

The table below shows the change in thepercentages of production and shipments from lands owned or leased by MesabiTrust versus the percentages of production and shipments from lands owned bythe State of Minnesota for the most recent three fiscal years.

 

 
| **Fiscal Year  Ended** | ** ** | **Percentage of  Pellets Produced  From Trust  Lands** | ** ** | **Percentage of  Pellets Produced  From State  Lands** | ** ** | **Percentage of  Pellets  Shipped  From Trust  Lands** | ** ** | **Percentage of  Pellets  Shipped  From State  Lands** | ** ** |
|-----------------------------|------------|-----------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|
| January 31, 2008       |       | 91.7                                                                  | %          | 8.3                                                                   | %          | 88.2                                                             | %          | 11.8                                                             | %          |
| January 31, 2007       |       | 89.2                                                                  | %          | 10.8                                                                  | %          | 91.4                                                             | %          | 8.6                                                              | %          |
| January 31, 2006       |       | 90.0                                                                  | %          | 10.0                                                                  | %          | 90.2                                                             | %          | 9.8                                                              | %          |

 

As is the case with the volume of shipmentsfrom Silver Bay, Minnesota, the Trustees cannot predict what percentage ofproduction or shipments will be attributable to Mesabi Trust lands in fiscal2009.  However, pursuant to theAmendment, Mesabi Trust will be credited with at least 90% of the first fourmillion tons of iron ore pellets shipped from Silver Bay, Minnesota in eachcalendar year, at least 85% of the next two million tons of pellets shippedfrom Silver Bay, Minnesota in each calendar year, and at least 25% of all tonsof pellets shipped from Silver Bay, Minnesota in each calendar year in excessof six million tons.

 

As described above under the heading “RiskFactors,” Mesabi Trust has no control over the production or shipments of ironore by Northshore.  Therefore, theTrustees cannot predict whether production or shipments attributable to theTrust lands will increase or decrease during fiscal 2009.

 

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**Comparisonof Financial Results for Fiscal Years ended January 31, 2008 and January 31,2007**

 

***Royalty Income***

 
| ** **                               | ** ** | **Fiscal Years Ended on January 31,** | ** ** | **% increase** | ** ** |
|------------------------------------------|------------|----------------------------------------------------------------|------------|---------------------|------------|
| ** **                               | ** ** | **2008**                                                       | ** ** | **2007**            | ** ** | **(decrease)** | ** ** |
| Base overriding royalties                |       | $                                                              | 10,624,935 |                | $          | 9,877,120 |   | 7.57 | % |
| Bonus royalties                          |       | 7,717,513                                                      |       | 7,530,423           |       | 2.48 | % |
| Minimum advance royalty  paid (recouped) |       | —                                                         |       | —              |       |   |   |
| Fee royalties                            |       | 474,094                                                        |       | 426,313             |       | 11.21 | % |
| Total royalty income                     |       | $                                                              | 18,816,542 |                | $          | 17,833,856 |   | 5.51 | % |

 

Total royalty incomeincreased 5.51% in fiscal 2008 as compared to fiscal 2007.  Although the average sale price for each tonof iron ore shipped from Silver Bay, Minnesota decreased in fiscal 2008, ascompared to fiscal 2007, all three royalty streams payable to the Trust increasedbecause of the 15.3% increase in shipments in fiscal 2008 as compared to fiscal2007.

 

The amounts paid to theTrust for pricing adjustments during fiscal 2008, the period for which thepricing adjustments were determined, are included in the royalty amounts listedabove.  Because the Trust is not a partyto the underlying CCI Pellet Agreements, the Trustees cannot predict whetherany pricing adjustments under these agreements will or will not occur in thefuture, or if there are pricing adjustments, whether they will be positive ornegative. In either case, these price adjustments will impact future royaltiesreceived by the Trust that become available for distribution to Unitholders.

 

***Gross Income, Expenses and NetIncome***

 
| ** **   | ** ** | **Fiscal Years Ended on January 31,** | ** ** | **% increase** | ** ** |
|--------------|------------|----------------------------------------------------------------|------------|---------------------|------------|
| ** **   | ** ** | **2008**                                                       | ** ** | **2007**            | ** ** | **(decrease)** | ** ** |
| Gross Income |       | $                                                              | 18,866,511 |                | $          | 17,902,988 |   | 5.38 | % |
| Expenses     |       | 634,151                                                        |       | 756,322             |       | (16.15 | )% |
| Net Income   |       | $                                                              | 18,232,360 |                | $          | 17,146,666 |   | 6.33 | % |

 

Net income for fiscal 2008 increased 6.33% ascompared to fiscal 2007 primarily due to an increase in gross income related tothe increase in shipments.  In addition,total expenses for fiscal 2008 decreased as compared to fiscal 2007 as a resultof decreases in legal and accounting fees and other fees related to theadministration of the Trust.  A summaryof the Trust’s expenses is set forth under the heading “Trust Expenses” on page 25of this Annual Report.

 

***CashDistributions and******Unallocated Reserve*

 
| ** **                | ** ** | **Fiscal Years Ended on January 31,** | ** ** | **% increase** | ** ** |
|---------------------------|------------|----------------------------------------------------------------|------------|---------------------|------------|
| ** **                | ** ** | **2008**                                                       | ** ** | **2007**            | ** ** | **(decrease)** | ** ** |
| Total Cash Distributions  |       | $                                                              | 15,088,012 |                | $          | 23,025,618 |   | (34.47 | )% |
| Distributions per Unit    |       | $                                                              | 1.150      |                | $          | 1.755 |   | (34.47 | )% |
| Accrued Income Receivable |       | $                                                              | 959,925    |                | $          | 409,764 |   | 134.26 | % |
| Unallocated Reserve       |       | $                                                              | 1,660,021  |                | $          | 1,139,674 |   | 45.66 | % |

 

Although the Trust’s total royalty income andnet income for fiscal 2008 each increased approximately 5.51% and 6.33%,respectively, total distributions paid to Unitholders in fiscal 2008 decreased34.47% as compared to fiscal 2007. The decrease in total cash distributions anddistributions per unit is primarily due to decreased shipping activity duringthe first quarter of fiscal 2008, which resulted in lower royalties received bythe Trust in April 2007.  Inaddition, because income payable to the Trust is accounted for on an accrualbasis, before the royalties are actually received by the Trust, shipmentsduring the fourth quarter of fiscal 2008 were 

 

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included as income duringfiscal 2008 even though royalty payments with respect to those shipments weredistributed to Unitholders in the first quarter of fiscal 2009.

 

The Unallocated Reserve aggregated $1,660,021, as of January 31,2008, as compared to an Unallocated Reserve of $1,139,674 as of January 31,2007.  The Unallocated Reserve, which iscomprised of accrued income receivable and cash reserve for unexpected losses,increased 45.7% or $520,347, as of the end of fiscal 2008 as compared to thebalance at the end of fiscal 2007.  Thisincrease is due to a significant increase in the accrued income receivableportion of the Unallocated Reserve which increased 134.3% to $959,925 in fiscal2008 as compared to $490,764 in fiscal 2007. The significant increase in accrued income receivable is the result ofthe 192.6% increase in shipments during the fourth quarter of fiscal 2008 ascompared to the fourth quarter of fiscal 2007. The Trust’s cash reserve for potential fixed or contingent futureliabilities decreased 4.1% to $700,096 in fiscal 2008 from $729,910 in fiscal2007 because Trustees decided to distribute a slightly higher portion of theroyalty payments received by the Trust during fiscal 2008.

 

Because the Unallocated Reserve includes accrued income receivablewhich is determined solely by volume of shipments and the price per ton, theTrustees cannot predict whether the Trust’s accrued income receivable willincrease or decrease in fiscal 2009.   Inaddition, the pricing adjustments under the CCI Pellet Agreements may impactthe accrued income receivable and the Trustees cannot predict what effect suchpricing adjustments will have on the future distributions paid to the Trust’sUnitholders.

 

See the discussion under the heading “Unallocated Reserve” on page 25of this Annual Report for more information on the Trust’s policy formaintaining a cash reserve for unexpected losses.

 

**Comparisonof Financial Results for Fiscal Years ended January 31, 2007 and January 31,2006**

 

***Royalty Income***

 
| ** **                               | ** ** | **Fiscal Years Ended on January 31,** | ** ** | **% increase** | ** ** |
|------------------------------------------|------------|----------------------------------------------------------------|------------|---------------------|------------|
| ** **                               | ** ** | **2007**                                                       | ** ** | **2006**            | ** ** | **(decrease)** | ** ** |
| Base overriding royalties                |       | $                                                              | 9,877,120  |                | $          | 12,133,160 |   | (18.59 | )% |
| Bonus royalties                          |       | 7,530,423                                                      |       | 9,017,924           |       | (16.49 | )% |
| Minimum advance royalty  paid (recouped) |       | —                                                         |       | —              |       | — |   |
| Fee royalties                            |       | 426,313                                                        |       | 376,138             |       | 13.34 | % |
| Total royalty income                     |       | $                                                              | 17,833,856 |                | $          | 21,527,222 |   | (17.16 | )% |

 

Total royalty income decreased17.16% in fiscal 2007 as a result of the decrease in shipments.  Although the market price for iron ore pelletprices was generally higher in 2007 as compared to 2006, the lower volume ofshipments had a negative impact on both the base overriding royalty and thebonus royalty.  Base overriding royaltiesdecreased 18.59% because of the lower volume of shipments from Silver Bay.  The lower volume of shipments had asignificant impact on the base overriding royalty because the Trust was notcredited with any shipments at the highest royalty rate of 6%, which onlyapplies to shipments in excess of 4.0 million tons in any calendar year.  Comparatively, the Trust received the 6%royalty on 308,633 tons of shipments for the fiscal year ended January 31,2006.

 

The bonus royalty decreased 16.49% because oftwo contributing factors.  First, thedecrease in shipments resulted in fewer tons being shipped at prices above theAdjusted Threshold Price.  Second,because the market price for iron ore stabilized in 2007, the Trust receivedfewer positive pricing adjustments to the bonus royalty payments in fiscal 2007as compared to fiscal 2006. Specifically, in accordance with the CCI Pellet Agreements, certainnegative adjustments to the bonus royalty were made in the fourth fiscalquarter based on changes in the prices CCI charges its customers for iron orepellets shipped during calendar years ended December 31, 2005 and December 31,2006.

 

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The contract pricing adjustments under theCCI Pellet Agreements are included as revenue in fiscal 2007, the period forwhich the pricing adjustments were determined. Because the Trust is not a party to the underlying CCI PelletAgreements, the Trustees cannot predict with certainty whether any pricingadjustments under these agreements will or will not occur in the future, or ifthere are pricing adjustments, whether they will be positive or negative. Ineither case, these price adjustments will impact future royalties received bythe Trust that become available for distribution to Unitholders.

 

***Gross Income, Expenses and NetIncome***

 
| ** **   | ** ** | **Fiscal Years Ended on January 31,** | ** ** | **% increase** | ** ** |
|--------------|------------|----------------------------------------------------------------|------------|---------------------|------------|
| ** **   | ** ** | **2007**                                                       | ** ** | **2006**            | ** ** | **(decrease)** | ** ** |
| Gross Income |       | $                                                              | 17,902,988 |                | $          | 21,579,833 |   | (17.04 | )% |
| Expenses     |       | 756,322                                                        |       | 844,956             |       | (10.49 | )% |
| Net Income   |       | $                                                              | 17,146,666 |                | $          | 20,734,877 |   | (17.31 | )% |

 

Net income for fiscal 2007 decreased 17.31%as compared to fiscal 2006 primarily due to the decrease in total royaltyincome, which was partially offset by a decrease in expenses.  Fiscal 2007 expenses were lower than fiscal2006, as a result of a decrease in legal and accounting fees.  Trust expenses are discussed in furtherdetail under the heading “Trust Expenses” beginning on page 25 of thisAnnual Report.

 

***Cash Distributions and******UnallocatedReserve*

 
| ** **                | ** ** | **Fiscal Years Ended on January 31,** | ** ** | **% increase** | ** ** |
|---------------------------|------------|----------------------------------------------------------------|------------|---------------------|------------|
| ** **                | ** ** | **2007**                                                       | ** ** | **2006**            | ** ** | **(decrease)** | ** ** |
| Total Cash Distributions  |       | $                                                              | 23,025,618 |                | $          | 17,777,614 |   | 29.52 | % |
| Distributions per Unit    |       | $                                                              | 1.755      |                | $          | 1.355 |   | 29.52 | % |
| Accrued Income Receivable |       | $                                                              | 409,764    |                | $          | 4,277,766 |   | (90.42 | )% |
| Unallocated Reserve       |       | $                                                              | 1,139,674  |                | $          | 4,985,024 |   | (77.14 | )% |

 

Although the Trust’s total royalty income andnet income for fiscal 2007 each decreased approximately 17%, totaldistributions paid to Unitholders in fiscal 2007 increased 29.52% over fiscal2006. The increase in total cash distributions and distributions per unit isprimarily due to $4.277 million that was reflected on the Trust’s balance sheetas accrued income receivable and included in the Trust’s net income as of thefiscal year ended January 31, 2006. Because income payable to the Trust is accounted for on an accrual basisbefore the royalties are actually received by the Trust, royalty income payablewith respect to the Trust’s fourth quarter of fiscal 2006 was actually distributedto Unitholders in the first quarter of fiscal 2007.  Accordingly, the total distributions paid toUnitholders in fiscal 2007 exceeded both the total royalty income and netincome of the Trust during the same period.

 

The Unallocated Reserve aggregated $1,139,674, as of January 31,2007, as compared to an Unallocated Reserve of $4,985,024 as of January 31,2006.  The Unallocated Reserve, which iscomprised of accrued income receivable and cash reserve for unexpected losses,decreased 77.14% or $3,845,350, as of the end of fiscal 2007 as compared to thebalance at the end of fiscal 2006.  Theaccrued income receivable portion of the Unallocated Reserve decreased 90.42%from $4,277,766 in fiscal 2006 to $409,764 in fiscal 2007.  At the same time, the Trust’s reserve forpotential fixed or contingent future liabilities, which is unallocated cash andU.S. Government securities, increased 3.2% from $707,258 in fiscal 2006 to$729,910 in fiscal 2007.

 

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The decrease in the Trust’s Unallocated Reserve was caused by asignificant drop in the amount of accrued income receivable with respect to thefourth quarter of fiscal 2007 as compared to the fourth quarter of fiscal2006.  The decrease in the accrued incomereceivable is the result of fewer contract pricing adjustments from pelletssold under the CCI Pellet Agreements in calendar 2006 and calendar 2005 thatwere finalized during the first three months of calendar 2007, and no shipmentsin January 2007.

 

**Liquidity and Capital Resources**

** **

The Trust’sactivities are limited to the collection of royalty income, payment of expensesand liabilities, distribution of net income to the Trust’s Unitholders andprotection and conservation of Trust assets. Distributions of net income to Unitholders are based on the amount oftotal royalty income after providing for the payment of expenses and, to theextent deemed prudent by the Trustees, reserving funds in the UnallocatedReserve to provide for potential fixed or contingent future liabilities.  See the discussion of the Trustees’management of liquidity set forth under the heading “Unallocated Reserve”beginning on page 25****of this AnnualReport.

 

The Trust’sprimary short-term liquidity needs are to fund the distributions to Unitholdersfollowing the Trust’s receipt of the royalty payments from Northshore eachcalendar quarter.  After the Trustreceives the royalty payments, the Trust’s current assets are invested in U.S.government securities, either through direct purchases of U.S. governmentsecurities or through investments in a money market fund that investsexclusively in obligations of the U.S. Treasury.  Due to the high investment quality andshort-term duration of these investments, the Trustees believe that the Trust’scurrent assets are adequate to meet the Trust’s currently foreseeable liquidityneeds.  As of January 31, 2008, theTrust held $6,958,227 in a money market fund that invests exclusively inobligations of the U.S. Treasury, of which $6,756,805 was distributed toUnitholders in February 2008.

 

**Off-Balance Sheet Arrangements**

 

The Trust has no off-balancesheet arrangements.

 

**Contractual Obligations**

** **

**TheTrust has no payment obligations under any long-term borrowings, capital lease,operating lease, or purchase agreement.**

** **

**CriticalAccounting Policies**

** **

This “Trustees’ Discussionand Analysis of Financial Condition and Results of Operations” is based uponthe Trust’s financial statements, which have been prepared in accordance withaccounting principles generally accepted in the United States.  The preparation of these financial statementsrequires the Trustees to make estimates and judgments that affect the reportedamounts of assets, liabilities, revenues and expenses, and related disclosureof contingent assets and liabilities. These estimates form the basis for making judgments about the carryingvalue of assets and liabilities that are not readily apparent from othersources.  The Trustees base theirestimates and judgments on historical experience and on various otherassumptions that the Trustees believe are reasonable under thecircumstances.  However, future eventsare subject to change and the best estimates and judgments may requireadjustment.  For a complete descriptionof the Trust’s significant accounting policies, please see Note 2 to thefinancial statements on pages F-8 through F-12.

 

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Critical accounting policiesare those that have meaningful impact on the reporting of the Trust’s financialcondition and results of operations, and that require significant managementjudgment and estimates.  The Trusteeshave determined that there are no critical accounting policies.

 

**Recent Developments**

** **

***2008 Estimates***. Neither CCI nor Northshore has provided the Trust with an estimate fortotal calendar year 2008 shipments. During calendar years 2007, 2006, 2005 and 2004, the percentage ofshipments of iron ore products from Mesabi Trust lands was approximately 88.2%,90.9%, 90.1%, 92.0% and 95.5%, respectively, of total shipments.  Northshore has not advised the Trustees as tothe percentage of iron ore products from Mesabi Trust lands it anticipatesshipping in calendar year 2008.  See thedescription of the uncertainty of market conditions in the iron ore and steelindustry under the heading “Risk Factors” above.

 

***Iron Ore Pricing and Contract Adjustments.***  During the course of its fiscalyear some portion of the royalties paid to Mesabi Trust are based on estimatedprices for iron ore products sold under term contracts between CCI and itssubsidiaries and certain of their customers (the “CCI Pellet Agreements”).  Mesabi Trust is not a party to any of the CCIPellet Agreements.  These prices aresubject to interim and final pricing adjustments, which can be positive ornegative, and which adjustments are dependent in part on a variety of price andinflation index factors, including but not limited to the internationalbenchmark pellet price, hot band steel prices and various Producer PriceIndexes.  Although Northshore makesinterim adjustments to the royalty payments on a quarterly basis, these priceadjustments cannot be finalized until after the end of a contract year. Thismay result in significant and frequent variations in royalties received byMesabi Trust (and in turn the resulting amount of funds available fordistribution to Unitholders by the Trust) from quarter to quarter and on acomparative historical basis, and these variations, which can be positive ornegative, cannot be predicted by Mesabi Trust.

 

***Production Capacity Expansions***. In its Form 10-K filed February 29, 2008, CCI confirmed thatit is continuing construction activity to restart an idled pellet furnace atNorthshore’s pelletizing facility in Silver Bay, Minnesota.  CCI reported that the restart of the idledfurnace will increase annual capacity by approximately 600,000 tons beginningin 2008, increasing capacity to approximately 800,000 tons thereafter.  CCI has not indicated whether the increase incapacity will result in an increase in actual production at Northshore orshipments of iron ore pellets from Silver Bay, Minnesota.  Accordingly, the Trustees are unable to makeany projections regarding the extent to which the restart of the idled furnaceat Northshore may impact future royalties payable to Mesabi Trust.

 

***NorthshoreAir Permit Matters*****.**  In its Form 10-K filed February 29,2008 (“CCI’s Form 10-K”), CCI provided an update to the matters previouslyreported regarding the administrative permit amendment application thatNorthshore submitted on December 16, 2006 to the Minnesota PollutionControl Agency.  As previously reported,Northshore submitted an administrative permit amendment application to theMinnesota Pollution Control Agency (“MPCA”) with respect to its Title Voperating permit requesting the deletion of a 30 year old “control city”monitoring requirement.  The MPCA deniedNorthshore’s application on February 23, 2007 and CCI appealed the denialto the Minnesota Court of Appeals (the “Amendment Appeal”).   CCI’s Form 10-K reported that subsequent tothe filing of the appeal, the MPCA advised Northshore that the MPCA consideredNorthshore to be in violation of the control city standard based on new datathat the MPCA collected showing that current fiber levels in St. Paul werelower than in Silver Bay for a period in 2007. CCI’s Form 10-K also reported that the Minnesota Center forEnvironmental Advocacy intervened in the Amendment Appeal and that oralarguments were held on February 21, 2008.

 

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CCI’s Form 10-Kalso reported that in 2007, Northshore filed a motion with the U.S. DistrictCourt for the District of Minnesota to re-open the original Reserve Miningcase, requesting that the court declare the control city standard satisfied andthe court’s injunction voided, or if the control city standard remained ineffect, clarify that it was a fixed standard set at the 1980 level rather thana moving standard (the “Federal Suit”). Shortly thereafter, the Save LakeSuperior Association and the Sierra Club filed a lawsuit in U.S. District Courtfor the District of Minnesota with respect to alleged violations of the controlcity standard (the “Citizens Suit”). On September 20, 2007, the courtgranted Northshore’s motion to stay the Citizen’s Suit pending resolution ofthe Federal Suit.  CCI’s Form 10-Kreported that the Court entered an order in the Federal Suit on December 21,2007, concluding that the 1975 federal court injunction from the case no longerhad any force or effect.  CCI alsoreported that the Court’s order stated that the control city standard was astate permit requirement that can only be addressed in state court.  CCI reported that it is currently analyzingthe implications of the Court’s order in the Federal Suit with respect toNorthshore’s operating permit and the Amendment Appeal.

 

CCI’s Form 10-Kalso reported that on February 19, 2008, Northshore filed an appeal ofcertain aspects of the Court’s order in the Federal Suit.  CCI also reported that the impact of theCourt’s order in the Federal Suit on the Citizen’s Suit is also unclear,although, according to CCI’s Form 10-K, the MPCA stated during depositions in November 2007for the Federal Suit “that based on current fiber sample results, it believesNorthshore to be in compliance with the control city permit term.”

 

Given theinherent uncertainty surrounding these proceedings, the Trustees are unable topredict what effect, if any, a decision adverse to Northshore and/or CCI withrespect to these proceedings would have on royalties payable to the Trust.

 

***Securities Regulation***.  The Trust is a publicly-traded trust listedon the New York Stock Exchange (“NYSE”) and is therefore subject to extensiveregulation under, among others, the Securities Act of 1933, the SecuritiesExchange Act of 1934, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and therules and regulations of the NYSE. Issuers failing to comply with such authorities risk seriousconsequences, including criminal as well as civil and administrativepenalties.  In most instances, theselaws, rules and regulations do not specifically address theirapplicability to publicly-traded trusts such as Mesabi Trust.  In particular, Sarbanes-Oxley mandated theadoption by the Securities and Exchange Commission (the “SEC”) and NYSE ofcertain rules and regulations that are impossible for the Trust toliterally satisfy because of its nature as a pass-through trust.  Pursuant to NYSE rules the Trust isexempt from many of the corporate governance requirements that apply to otherpublicly traded corporations.   The Trustdoes not have, nor does the Agreement of Trust provide for, a board ofdirectors, an audit committee, a corporate governance committee, a compensationcommittee or executive officers.  TheTrustees intend to closely monitor the SEC’s and NYSE’s rulemaking activity andwill comply with their rules and regulations to the extent applicable.

 

***Other Information.***  Mesabi Trust has no employees, but it engagesindependent consultants to assist the Trustees in monitoring, among otherthings, the amount and sales prices of iron ore products shipped by Northshorefrom Silver Bay.  As noted above, theinformation regarding amounts and sales prices of shipped iron ore products isused to compute the royalties payable to Mesabi Trust by Northshore.  Deutsche Bank Trust Company Americas, theCorporate Trustee, also performs certain administrative functions for MesabiTrust.

 

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**TO THE HOLDERS OFCERTIFICATES OF BENEFICIAL INTEREST INMESABI TRUST**

 

**THE TRUST ESTATE**

** **

The principal assets ofMesabi Trust consist of two different interests in certain properties in theMesabi Iron Range: (i) Mesabi Trust’s interest as assignor in the AmendedAssignment of Peters Lease and the Amended Assignment of Cloquet Lease, whichtogether cover properties aggregating approximately 9,750 largely contiguousacres in St. Louis County, Minnesota (the “Peters Lease Lands” and the “CloquetLease Lands,” respectively), and (ii) Mesabi Trust’s ownership of theentire beneficial interest in the Mesabi Land Trust, which has a 20% interestas fee owner in the Peters Lease Lands and a 100% fee ownership in certainnon-mineral-bearing lands adjacent to the Peters and Cloquet Lease Lands (the “MesabiLease Lands,” together with the Peters Lease Lands and the Cloquet Lease Lands,the “Trust Estate”).  The map below showsthe approximate location of the Trust Estate.

 

 
| o | *The boxed area indicates the approximate  location of Mesabi Trust’s Trust Estate (not drawn to scale), as defined  above under “The Trust Estate,” which is a small part of the region known as  the Mesabi Iron Range. The Mesabi Trust does not own any property interests  other than in the Trust Estate.* |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

Under the Amended AssignmentAgreements, Northshore produces iron ore from the Trust Estate for themanufacture of iron ore products to be sold to various customers of CCI.  Mesabi Trust receives royalties on the crudeore extracted from such Lands and the pellets produced from such crude ore, andin each case the royalties are based upon the volume of iron ore productsshipped and the prices charged to CCI’s customers.

 

17

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The largest component of theTrust Estate is the Peters Lease Lands. The Peters Lease provides that each leasehold estate will continue untilthe reserves of iron ore, taconite and other minerals or materials on the landsubject 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.  IfNorthshore decides to terminate or surrender one or more of these leases, itmust first give Mesabi Trust at least six months’ notice of its intention to doso and, at Mesabi Trust’s request, reassign all of such leases to MesabiTrust.  If any such reassignment occurs,Northshore must transfer the lease interests to Mesabi Trust free and clear ofliens, except public highways.  Inreturn, Mesabi Trust must assume Northshore’s future obligations as lesseeunder the reassigned leases.

 

The Peters Lease Lands andthe Cloquet Lease Lands are located at the northeastern end of the Mesabi IronRange and contain mineral deposits consisting of a sedimentary bed of bandedmagnetite in siliceous gangue, a form of low-grade iron ore known as taconite,approximately three tons of which must be beneficiated to produce one ton ofhigh-grade pellets.  The Mesabi LeaseLands contain substantially no commercial ore deposits and have been usedprincipally in connection with mining the taconite from other parts of theTrust Estate, such as the provision of an area for location of service roads,supporting plants and equipment and dump sites for overburden.

 

Because the Trust is notinvolved with the mining operations at Northshore, the Trust relies on the orereserve estimate reported in CCI’s Form 10-K each year.  In CCI’s last Form 10-K filed with theSecurities and Exchange Commission, which was for the year ended December 31,2007, CCI estimated that there remains enough proven ore reserve in the mine atNorthshore to produce approximately 303 million tons of pellets.  In 2007, the Trustees engaged an independentgeological consulting firm, Scott Wilson Roscoe Postle Associates, Inc. (“ScottWilson RPA”), to confirm that the process used by CCI to estimate the orereserve in the mine at Northshore is reasonable.  In its report to the Trustees, Scott WilsonRPA summarized its review and evaluation of CCI’s ore reserve estimationprocess.  Scott Wilson RPA reported tothe Trustees that the reserve estimation process used by CCI is reasonable andcomplies with the reporting standards set forth in Securities Act IndustryGuide 7.  Based on the report of ScottWilson RPA, the Trustees estimate that at least 90% of the ore reserve in themine at Northshore, as reported by CCI, is attributable to the Trust Estate.

 

## **HISTORYOF THE TRUST’S ACQUISITION OF THE TRUST ESTATE**

##  

Prior to the creation of theMesabi Trust and the Mesabi Land Trust on July 18, 1961, Mesabi IronCompany (“MIC”), the Trust’s predecessor in interest, owned the interests inthe Peters, Cloquet and Mesabi Lease Lands. MIC obtained its interests as follows:

 

Peters LeaseLands.MIC owned a 20% interest in the fee ownership in the Peters Lease Lands.  Originally, the Peters Lease Lands were ownedby East Mesaba and Dunka River which were wholly owned subsidiaries ofDunka-Mesaba Security Company (“Dunka-Mesaba”). In August 1951, East Mesaba and Dunka River conveyed the PetersLease Lands to their parent company, Dunka-Mesaba, which in turn conveyed toeach of its stockholders an undivided interest in the Peters Lease Lands inproportion to each stockholder’s ownership in the parent company.  Accordingly, MIC, which had been the owner of20% of the outstanding capital stock of Dunka-Mesaba, acquired a 20% undividedinterest in the Peters Lease Lands and the right to receive a 20% fee royaltyunder the Peters Lease.

 

18

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By an instrument dated October 1,1917, as of April 30, 1915, East Mesaba and Dunka River leased theirproperties to Claude W. Peters.  (Thisinstrument, as modified by instruments dated February 3, 1921, July 17,1939 and July 31, 1951, is known as the “Peters Lease.”)  Claude W. Peters acquired the Peters Lease onbehalf of MIC and an assignment of the Peters Lease from Claude W. Peters toMIC was recorded in 1919.  In 1939, MICassigned the Peters Lease to Reserve Mining Company (“Reserve”) in considerationfor which Reserve agreed to pay MIC a percentage of its net profits.  Later, these payments were changed to royaltypayments.

 

Cloquet LeaseLands.  MIC held a leasehold interest in the CloquetLease Lands pursuant to the Indenture of Lease dated May 1, 1916.  In 1939, MIC assigned its interest in theCloquet Lease as lessee to Reserve.

 

Mesabi LeaseLands.  MIC held a fee interest in the Mesabi LeaseLands, subject to earlier grants of mineral rights to other parties.  In 1939, MIC leased its interest in theMesabi Lease Lands to Reserve.  One40-acre parcel of the Mesabi Lease Lands was forfeited in the 1980s to theState of Minnesota and subsequently sold to the United States government,excluding the mineral rights granted to other parties.  Further, another 40-acre parcel of the MesabiLease Lands, for which the Trust owns only surface rights, is currently beingexplored for non-ferrous deposits by the holder of the mineral rights to theparcel.  The Trustees do not believe thateither parcel was ever involved in, or otherwise material to, Northshore’smining operations.

 

Acquisition ofInterests from MIC.  MIC had not engaged in actualmining operations since 1939, with all of its ownership of land in fee havingbeen leased out and its leaseholds in land assigned to Reserve in exchange forroyalty payments.  Because MIC’sactivities in connection with the administration of its assets were limited tothe collection of income, the payment of expenses and liabilities, thedistribution of the net income and the protection and conservation of theassets held, in July 1961 its board of directors proposed, and itsstockholders subsequently approved, to adopt a plan of complete liquidation asa result of which MIC’s assets were transferred to and administered by twotrust entities.

 

To comply with the law ofthe State of Minnesota, which requires that a trust holding real propertylocated in that state must be administered under Minnesota law, the Mesabi LandTrust was created under Minnesota law on July 18, 1961 pursuant to anAgreement of Trust of even date.  MICtransferred to the Mesabi Land Trust its 20% interest as fee owner in thePeters Lease and the Peters Lease Lands and its interest as 100% fee owner inthe Mesabi Lease Lands and as lessor of the Mesabi Lease (subject to thereservation of mineral rights described above).

 

Also pursuant to anAgreement of Trust, the Mesabi Trust was created under New York law on July 18,1961.  MIC transferred to the MesabiTrust instruments assigning the Amended Assignment of Peters Lease and theAmended Assignment of Cloquet Lease (covering its interest as assignor of theentire leasehold interest in the Peters Lease Lands and the Cloquet LeaseLands), together with cash, marketable securities and other assets.  The Mesabi Trust also received all of thebeneficial interest in the Mesabi Land Trust.

 

Reserve, the originallessee, operated the mine until it closed on July 31, 1986.  Cyprus Minerals Company (“Cyprus”) purchasedsubstantially all of Reserve’s assets on August 17, 1989 and resumedoperations as Cyprus NMC.  On September 30,1994, CCI purchased all of Cyprus NMC’s capital stock from Cyprus.  CCI renamed the operation Northshore MiningCorporation.

 

Since thecreation of the Mesabi Land Trust and the Mesabi Trust, although the miningoperators have changed and the Peters Lease, the Cloquet Lease and the MesabiLease have been further amended and assigned, the Trust Estate has not changedbeyond the forfeiture of one parcel of the Mesabi Lease Lands described above.

 

19

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The diagrambelow illustrates the relationships of the various parties that own the landsand have interests in the lands the Trust has interests in:

 

 

**DESCRIPTION OF THE MINERAL PROPERTIES ANDNORTHSHORE’S MINING OPERATIONS**

** **

Mine and Rock Formation.  The Mesabi Trust properties, including theore mine, are located in northeastern Minnesota, approximately two miles southof Babbitt, Minnesota.  The ore mine onthe Mesabi Trust properties is called the Peter Mitchell mine, an open pit mineconsisting a 10-mile long segment of a host rock called the Biwabik IronFormation, which is a very hard cherty rock containing magnetite as the oremineral.  The Biwabik Iron Formationextends west and southwest for over 100 miles and constitutes the Mesabi IronRange.  Recoverable iron grades rangefrom 21% in the west end of the mine open pit to 26% in the central portion andeast end, with 22.5% as the cut off grade. The ore body dips south under the hanging wall called the VirginiaFormation.  To date, the Mesabi Trustproperties have been explored for their iron ore potential.  To the knowledge of the Mesabi Trustees, noother minerals have been explored on the Mesabi Trust properties.

 

MiningProperties.  Asdisclosed elsewhere in this Annual Report, Northshore, a wholly ownedsubsidiary of CCI, currently conducts the mining operation upon the MesabiTrust properties.  The main entrance tothe Northshore mine is accessed by means of a gravel road and is located offCounty Road 70.  Northshore’s processingfacilities are located in Silver Bay, Minnesota, near Lake Superior, onU.S. Highway 61.  Each year, theTrustees visit the Northshore mine in Babbitt, Minnesota and the processingplant in Silver Bay, Minnesota.  Duringsuch visits, the Trustees inspect the condition of the mining properties aswell as mining equipment and facilities. Based on the Trustees’ past inspection trips, including the most recentone in October 2007, the Trustees believe that the mining properties andfacilities are in good operating condition.

 

Northshore’sOperations. Because the Mesabi Trust is not involved in Northshore’s miningoperations, the Trustees do not have detailed firsthand information relating tosuch operations or the equipment and 

 

20

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facilities used byNorthshore.  Therefore, the Trustees relyon information provided by Northshore personnel, disclosed by CCI in itsperiodic reports filed with the SEC or provided in other reports published byindependent organizations, such as Skillings Mining Review, in providing theinformation relating to Northshore’s mining operations, its equipment andfacilities.

 

·                  **Mining and Railroad:** Drilling at the Northshoremine is conducted with three P&H 120 and one P&H 320XPC rotary unitswith 16-inch diameter holes on 28- to 30-foot spacing.  The drilling is followed with blasts usingheavy ANFO (which stands for ammonium nitrate and fuel oil) and emulsion whichbreak an average of 700,000 to 1,200,000 tons of crude taconite.  After blasts, taconite is then removed by aloading fleet consisting of one P&H 2800 shovel with a 34 cubic-yardbucket, one P&H 2800 shovel with a 28 cubic-yard bucket, one 295-BBucyrus-Erie shovels with 20 cubic-yard bucket, one LeTourneau L1850 loaderwith a 28 cubic yard bucket and a Cat 994 loader with a 19 cubic-yardbucket.  A haulage fleet of three 250-tonTerex Model 4400 and four 200-ton Dresser Model 730 carry crude taconite to theprimary and secondary crushers located about two miles away.  At the crushers, taconite is emptied from theend-dump trucks into a 60-inch primary gyratory unit and four 30-inch by70-inch secondary crushers for reduction to a nominal 4-6 inch size.  Coarse ore is then fed into 80-ton capacityore cars for transportation to Silver Bay via a 47-mile long, single trackrailroad owned by Northshore.  Each trainis pulled by three or four diesel electric locomotives.

 

·                  **Concentrating and PelletizingProcess**.  Uponarrival at the pelletizing facility in Silver Bay, the coarse taconite orefirst passes through a fine crushing stage where it is reduced in size toapproximately 0-3/4” and then the non-magnetic material is rejected through adry cobber magnetic separation stage. The non-magnetic material is rail hauled seven miles to the Mile Post 7disposal site. The magnetic material is then fed into one of the fourteenactive grinding lines.  Each lineincludes one 10-1/2-foot by 18-foot rod mill and two 10-foot by 16-foot(14-foot in west plant) ball mills.  Thefinal grinding of the crude taconite is reduced to 90% minus 325 mesh.

 

During the concentrating process, ore concentrate isseparated by a two-stage magnetic separation, which removes low grade tailingsfrom the ore concentrate.  The tailingsare pumped uphill to the Mile Post 7 disposal site.  The concentrate is then fed intohydro-separators followed by a final flotation upgrading accomplished with two500 cubic foot flotation cells per grinding line.  Next, the concentrate proceeds to a centralfiltering facility of nine 9-foot diameter vacuum filters, during which processthe moisture content in the concentrate is reduced and the final concentrate isready for pelletizing.  The pelletizingprocess first feeds the ore concentrate, to which bentonite and starch has beenadded as a binder, into a balling drum 14 feet long and 7 feet indiameter.  The revolving action of thedrum causes the concentrate to build up into green balls.  Next, the green balls with a target size of plus0-1/4” and minus 0-1/2” in diameter are conveyed to one of four moving gratesand enter into an accompanying high temperature furnace where they are heatedto over 2400° F. and are hardened into the final pellet product.  From the four furnaces the pellets areconveyed to a dockside storage area with a 5-million ton storage capacity.  Northshore’s sheltered harbor at Silver Baycan handle lake-going vessels with capacities up to 55,000 tons.

 

·                  **Capital Expenditures**.** **In calendar year 2007, Northshoreapproved capital expenditures to modernize and improve the operations at thePeter Mitchell Mine in Babbitt and Northshore’s pelletizing facility in SilverBay.  During their annual inspection trip,the Trustees learned that CCI has:

 

·                  Received and commissioned the first of four P&H 2800-XPCshovels.  Two are scheduled to arriveduring calendar 2008 with the final one in early calendar 2009.

 

21

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·                  Scheduled delivery and commissioning of a P&H 320-XPC rotary drill.

 

·                  Continued aprogram to improve the railroad locomotive fleet for the ore haul between thePeter Mitchell Mine and Northshore’s pelletizing facility.

 

·                  Continued thereactivation of Furnace 5 and associated concentrate expansion that will increase annual pellet productioncapacity by 800,000 gross tons by the second quarter of 2008.

 

·                  Completed the installation of new dust collectors at Northshore’sconcentrating and pelletizing facility.

 

·                  Completed an expansion of the water treatment plant at Northshore’sMilepost 7 facility.

 

**LEASEHOLDROYALTIES**

 

Northshore is obligated to pay to Mesabi Trust base overridingroyalties and royalty bonuses on all pellets (and other iron ore products) producedfrom the Peters Lease Lands and the Cloquet Lease Lands (“Mesabi Ore”) andshipped from Silver Bay in each calendar year. The royalties are based on prices per unit of product, volumes ofproduct shipped and where on the escalating scale of royalties—2-1/2% on thefirst million tons to 6% on shipments above four million long tons per calendaryear—each shipment falls.

 

***Base overriding royalties.***  Base overriding royalties are calculated onthe basis of an escalating scale of percentages of gross sales proceeds of ironore shipped.  The applicable percentageis determined by reference to the tonnage of pellets previously shipped in thethen current calendar year, as follows:

 

| **Tons of iron ore products  shipped in calendar year** | ** ** | **Applicable royalty  (expressed as a percentage  of gross sales proceeds  within each tranche)** | ** ** |
|--------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                                                       |       |                                                                                                                                           |       |
| 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%                                                                                                                                             |       |

 

***Royalty bonuses.***  Royalty bonuses are payable on all iron oreproducts produced from Mesabi Ore shipped from Silver Bay during a calendarquarter and sold at prices above the Adjusted Threshold Price.  The Adjusted Threshold Price was $44.60 forcalendar year 2006, $45.98 for calendar year 2007, and will be $47.43 forcalendar year 2008.  The AdjustedThreshold Price is subject to adjustment (but not below $30 per ton) for inflationand deflation and is determined each year on the basis of the change in theGross Domestic Product Implicit Price Deflator, a broad based index ofinflation and deflation published quarterly by the U.S. Department of Commerce.

 

The amount ofroyalty bonuses payable for any calendar quarter is calculated on the basis ofan escalating scale of percentages of the gross sales proceeds to Northshore ofpellets produced from Mesabi Ore that are sold at prices above the AdjustedThreshold Price.  The applicablepercentage is determined by reference to the amount by which the sales pricesfor a particular quantity of pellets exceeds the Adjusted Threshold Price, asfollows:

 

22

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| **Amount by which  sales price per ton  exceeds Adjusted Threshold Price** | ** ** | **Applicable  Percentage** | ** ** |
|---------------------------------------------------------------------------------------------------------------|------------|----------------------------|------------|
|                                                                                                          |       |                       |       |
| $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%                         |       |

 

***Leasehold royalty example.***  To illustrate the calculation of baseoverriding royalties and royalty bonuses, assume that no shipments of iron oreproducts were made during the first calendar quarter of 2008, and furtherassume that pellets were shipped from Silver Bay in the second and thirdcalendar quarters of 2008 in the following tonnage quantities and rendering thefollowing gross proceeds:

 
| ** **   | ** ** | **Tonnage** | ** ** | **Sales Price per Ton** | ** ** | **Gross Proceeds** | ** ** |
|--------------|------------|-------------|------------|----------------------------------------|------------|-------------------------|------------|
| 2nd Quarter: |       | 500,000     |       | $                                      | 42.00      |                    | $          | 21,000,000 |   |
| 3rd Quarter: |       | 500,000     |       | $                                      | 44.00      |                    | $          | 22,000,000 |   |
|         |       | 1,000,000   |       | $                                      | 46.00      |                    | $          | 46,000,000 |   |
|         |       | 1,000,000   |       | $                                      | 48.00      |                    | $          | 48,000,000 |   |
|         |       | 1,000,000   |       | $                                      | 50.00      |                    | $          | 50,000,000 |   |
|         |       | 1,500,000   |       | $                                      | 52.00      |                    | $          | 78,000,000 |   |

 

In this example, the base overridingroyalties payable in respect of the second and third calendar quarters of 2008would be as follows:

 
| 2nd Quarter: |   | $21,000,000 x 2-1/2% |   | = |   | $ | 525,000   |   |
|--------------|--------|----------------------|--------|---|--------|---|-----------|--------|
| 3rd Quarter: |   | $22,000,000 x 2-1/2% |   | = |   | $ | 550,000   |   |
|         |   | $46,000,000 x 3-1/2% |   | = |   | $ | 1,610,000 |   |
|         |   | $48,000,000 x 5%     |   | = |   | $ | 2,400,000 |   |
|         |   | $50,000,000 x 5-1/2% |   | = |   | $ | 2,750,000 |   |
|         |   | $78,000,000 x 6%     |   | = |   | $ | 4,680,000 |   |

 

Based on the same example, the baseoverriding royalty percentage applicable for all iron ore products shipped inthe fourth calendar quarter of 2008 would be 6%, because more than four milliontons were shipped during the first three quarters.

 

Further, theroyalty bonuses payable in respect of the second and third calendar quarters of2008 would be as follows (with reference to the Adjusted Threshold Price (“ATP”)of $47.43):

 
| 2nd Quarter: |   | $42.00/ton falls below  ATP: no bonus payable |   | = |   | None |      |
|--------------|--------|-----------------------------------------------|--------|---|--------|------|-----------|
| 3rd Quarter: |   | $44.00/ton falls below  ATP: no bonus payable |   | = |   | None |      |
|         |   | $46.00/ton falls below  ATP: no bonus payable |   | = |   | None |      |
|         |   | $48,000,000 x 1⁄2 of 1%                    |   | = |   | $    | 240,000   |   |
|         |   | $50,000,000 x 1%                              |   | = |   | $    | 500,000   |   |
|         |   | $78,000,000 x 1-1/2%                          |   | = |   | $    | 1,170,000 |   |

 

The above figures areprovided only to illustrate the method for calculating base overridingroyalties and royalty bonuses and do not indicate the amount of base overridingroyalties or royalty bonuses the Trustees expect Mesabi Trust to earn incalendar 2008 or any other calendar or fiscal year.  Accordingly, the foregoing exampleillustrating the calculation of base overriding royalties and royalty bonusesshould not be considered a prediction of the amount of base overriding royaltiesor royalty bonuses Mesabi Trust will receive.

 

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***Bonuses on other ore.***  Northshore also must pay base overridingroyalties and royalty bonuses on pellets produced from lands other than MesabiLease Lands (“Other Ore”) to the extent necessary to assure payment of baseoverriding royalties and royalty bonuses on at least 90% of the first fourmillion tons of pellets shipped from Silver Bay in each calendar year, at least85% of the next two million tons of pellets shipped therefrom in each calendaryear, and at least 25% of all tonnage of pellets shipped therefrom in eachcalendar year in excess of six million tons. Base overriding royalties and royalty bonuses payable on Other Ore canbe recouped by Northshore out of base overriding royalties and royalty bonusespaid on Mesabi Ore.  The amount of OtherOre royalties and Other Ore royalty bonuses which can be recouped on anypayment date cannot, however, exceed 20% of the amount of Mesabi Ore royalties androyalty bonuses which are otherwise payable on that payment date.

 

***Advance royalties.***  Northshore is obligated to pay Mesabi Trustadvance royalties in equal quarterly installments.  The advance royalty was $743,420 for calendaryear 2006, $766,510 for calendar year 2007 and is $790,721 for calendar year2008.  The amount of advance royaltiespayable is subject to adjustment (but not below $500,000 per annum) forinflation and deflation and is determined each year in the same manner as theAdjusted Threshold Price.  All paymentsof advance royalties are credited against payments of base overriding royaltiesand royalty bonuses payable on Mesabi Ore until fully recouped byNorthshore.  The amount of advanceroyalties payable in respect of each calendar quarter constitutes the minimumoverriding royalty amount payable by Northshore in respect of that calendarquarter.

 

***Other leasehold royalty information.***  Base overriding royalties and royalty bonusesare payable quarterly and accrue upon shipment, whether or not the actual salesproceeds for any shipment are received by Northshore.  The amount of base overriding royalties androyalty bonuses payable with respect to the first three quarters in anycalendar year are determined on the basis of tonnage shipped during each suchcalendar quarter and the actual sales proceeds of such shipments, with anadjustment made to the royalties payable with respect to the last quarter inany calendar year to account for adjustments.

 

**LAND TRUST ANDFEE ROYALTIES**

** **

Mesabi Land Trust holds a20% interest as fee owner in the Peters Lease Lands and a 100% interest as feeowner in the Mesabi Lease Lands as lessor of the Mesabi Lease.  Mesabi Trust holds the entire beneficialinterest in Mesabi Land Trust and is entitled to receive the net income ofMesabi Land Trust after payment of expenses. Northshore is not obligated to pay royalties or rental to Mesabi LandTrust as fee owner of the non-mineral bearing Mesabi Lease Lands, aconsideration having been paid in that respect at the inception of the MesabiLease.

 

Northshore is required topay a base royalty to the fee owners in an amount which, at its option, iseither (a) 11-2/3¢ per gross ton of crude ore it mines from the PetersLease Lands, or (b) $0.0056 for each 1% of metallic iron ore naturalcontained in each gross ton of pellets it produces from the Peters Lease Landsand ships.  The base fee royalty rate isadjusted up or down each quarter (but not below the base royalty specified above)by adding or subtracting an amount to be determined by reference to changes inLower Lake Mesabi Range pellet prices and the All Commodities Producer PriceIndex.  The adjustment factor is computedby multiplying the base fee royalty rate specified above by a percentage thatis the sum of (a) one-half of the percentage change, if any, by which thethen prevailing price per iron unit of Mesabi Range taconite pellets deliveredby rail or vessel at Lower Lake Erie ports exceeds 80.5¢ (the price per ironunit in effect in January 1982), plus (b) one-half of the percentagechange, if any, by which the All Commodities Producer Price Index exceeds 295.8(the level of the Index for December 1981).  Fee royalties aggregating $474,094 withrespect to crude ore mined by Northshore were earned by Mesabi Land Trustduring the fiscal year ended January 31, 2008.

 

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**TRUST EXPENSES**

** **

Total Trust expenses for thefiscal year ended January 31, 2008 were $634,151, representing a decreaseof 16.2% from the $756,322 of Trust expenses in fiscal 2007.  Total Trust expenses by category for fiscal2008, 2007 and 2006 are set forth in the table below.

 
| ** **                                                                                                                                     | ** ** | **Fiscal Year ended on January 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                                                                                     | ** ** | **2008**                                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                                                                                                                           |       |                                                          |       |   |   |   |   |
| Compensation of Trustees                                                                                                                       |       | $                                                             | 181,700    |   | $ | 167,216 |   | $ | 178,697 |   |
| Fees and Disbursements:                                                                                                                        |       |                                                          |       |   |   |   |   |
| Corporate Trustee’s administrative fees                                                                                                   |       | 62,500                                                        |       | 62,500 |   | 62,500 |   |
| Accounting                                                                                                                                     |       | 60,324                                                        |       | 71,465 |   | 108,675 |   |
| Inspection trips, travel and other expenses of  Trustees                                                                                       |       | 26,688                                                        |       | 37,217 |   | 33,069 |   |
| Legal                                                                                                                                          |       | 160,780                                                       |       | 244,070 |   | 265,248 |   |
| Mining consultant and field representatives                                                                                                    |       | 52,242                                                        |       | 56,650 |   | 35,398 |   |
| Stock exchange listing fee                                                                                                                     |       | 38,000                                                        |       | 38,000 |   | 35,000 |   |
| Printing and filing of annual, quarterly and  current reports, proxy statements and letters to Unitholders; other  Unitholder meeting expenses |       | 4,601                                                         |       | 51,854 |   | 75,105 |   |
| Transfer Agent and Registrar                                                                                                                   |       | 12,694                                                        |       | 12,738 |   | 15,030 |   |
| Transfer Agent miscellaneous disbursements                                                                                                     |       | 34,622                                                        |       | 14,612 |   | 36,234 |   |
|                                                                                                                                           |       | $                                                             | 634,151    |   | $ | 756,322 |   | $ | 844,956 |   |

 

**UNALLOCATED RESERVE**

 

The Trustees have determinedthat a portion of the Unallocated Reserve, usually within the range of $500,000to $1,000,000 or such other amount as the Trustees may deem prudent, should bemaintained as a cash reserve for unexpected losses.  Although the actual amount of the UnallocatedReserve will fluctuate from time to time and may increase or decrease from itscurrent level, it is currently intended that future distributions will behighly dependent upon royalty income as it is received and the level of Trustexpenses.  The amount of future royaltyincome available for distribution will be subject to the volume of iron oreproduct shipments and the dollar level of sales by Northshore.  Shipping activity is greatly reduced duringthe winter months and economic conditions, particularly those affecting thesteel industry, may adversely affect the amount and timing of such futureshipments and sales.  See discussionunder the heading “Risk Factors” beginning on page 3 of this AnnualReport.

 

The Trusteeswill continue to monitor the economic circumstances of the Trust to strike aresponsible balance between distributions to Unitholders and the need tomaintain reserves at a prudent level, given the unpredictable nature of theiron ore industry, the Trust’s dependence on the actions of the lessee/operator,and the fact that the Trust essentially has no other liquid assets.

 

**CERTIFICATES OFBENEFICIAL INTEREST**

** **

The Mesabi Trust’sCertificates of Beneficial Interest are traded on the New York StockExchange.  Distributions paid toUnitholders during the fiscal year ended January 31, 2008 totaled$15,088,012 as compared to $23,025,618 during the fiscal year ended January 31,2007, and $17,777,614 during the fiscal year ended January 31, 2006.  Unitholders received distributions of $1.150per Unit for the fiscal year ended January 31, 2008, compared withdistributions of $1.755 and $1.355 per Unit for the fiscal years ended January 31,2007 and 2006, respectively.

 

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During the past two fiscalyears, the market ranges of the certificates for each quarterly period and thedistributions declared for such quarterly periods were as follows:

 
| **Fiscal Quarter Ended** | ** ** | **High** | ** ** | **Low** | ** ** | **Distribution  Declared** | ** ** | **Distribution  Per Unit** | ** ** |
|------------------------------------|------------|----------|------------|---------|------------|----------------------------|------------|---------------------------------|------------|
| April 30, 2007                |       | $        | 25.88      |    | $          | 19.73                      |       | $                               | 590,400    |   | $ | 0.045 |   |
| July 31, 2007                 |       | $        | 22.80      |    | $          | 19.04                      |       | 4,067,203                       |       | 0.31 |   |
| October 31, 2007              |       | $        | 25.94      |    | $          | 17.89                      |       | 6,297,605                       |       | 0.48 |   |
| January 31, 2008              |       | $        | 25.28      |    | $          | 19.06                      |       | 6,756,805                       |       | 0.515 |   |
|                               |       |     |       |    |       | $                          | 17,712,013 |                            | $          | 1.35 |   |

 
| **Fiscal Quarter Ended** | ** ** | **High** | ** ** | **Low** | ** ** | **Distribution  Declared** | ** ** | **Per Unit** | ** ** |
|------------------------------------|------------|----------|------------|---------|------------|----------------------------|------------|-------------------|------------|
| April 30, 2006                |       | $        | 25.84      |    | $          | 19.25                      |       | $                 | 3,936,003  |   | $ | 0.30 |   |
| July 31, 2006                 |       | $        | 21.76      |    | $          | 17.75                      |       | 5,248,004         |       | 0.40 |   |
| October 31, 2006              |       | $        | 24.43      |    | $          | 18.00                      |       | 7,675,206         |       | 0.585 |   |
| January 31, 2007              |       | $        | 28.93      |    | $          | 21.17                      |       | 4,132,803         |       | 0.315 |   |
|                               |       |     |       |    |       | $                          | 20,992,016 |              | $          | 1.60 |   |

 

As of the close of businesson March 28, 2008, the beneficial interest in Mesabi Trust was representedby 13,120,010 Units registered in the names of approximately 1,382****individuals holding of recordapproximately 939,303 Units, and in the names of approximately 127 brokers,nominees, or fiduciaries holding of record approximately 12,180,707 Units.

 

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** **

**THE TRUSTEES**

The name and address of eachTrustee and the principal occupation of each individual Trustee are as follows:

 
| **Name  and Address of Trustee**                                                                                                                             | ** ** | **Principal  Occupation**                                                                   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------|
|                                                                                                                                                         |       |                                                                                        |
| Deutsche Bank Trust Company Americas   Corporate Trustee   60 Wall Street   27th Floor   New York, New York 10005                                            |       | New York banking corporation                                                                |
|                                                                                                                                                         |       |                                                                                        |
| James A. Ehrenberg   Individual Trustee   295 Kopp Drive   West St. Paul, Minnesota 55118                                                                    |       | Until April 2005, Senior Vice   President, Corporate Trust Services,   U.S. Bank, N.A. |
|                                                                                                                                                         |       |                                                                                        |
| David J. Hoffman   Individual Trustee   150 Forrest View Drive   Sedona, Arizona 86336                                                                       |       | Retired mining geologist                                                                    |
|                                                                                                                                                         |       |                                                                                        |
| Richard G. Lareau   Individual Trustee   Oppenheimer Wolff & Donnelly LLP   3400 Plaza VII   45 South Seventh Street   Minneapolis, Minnesota 55402 |       | Partner in the law firm of   Oppenheimer Wolff & Donnelly   LLP                    |
|                                                                                                                                                         |       |                                                                                        |
| Norman F. Sprague III   Individual Trustee   11726 San Vicente Blvd.   Suite 625   Los Angeles, California 90049                                        |       | Private investor; orthopedic surgeon                                              |
|                                                                                                                                                         |       |                                                                                        |
|                                                                                                                                                         |       |                                                                                        |
|                                                                                                                                                         |       |                                                                                        |
| New York, New York   April 11, 2008                                                                                                                     |       | Respectfully submitted,   DEUTSCHE BANK TRUST COMPANY AMERICAS                              |
|                                                                                                                                                         |       |                                                                                        |
|                                                                                                                                                         |       | JAMES A. EHRENBERG   DAVID J. HOFFMAN   RICHARD G. LAREAU   NORMAN F. SPRAGUE III           |

 

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INDEX TO FINANCIAL STATEMENTS

 
| Trustees’ Report on Internal Control over Financial  Reporting                                           |   | Page F-2         |
|---------------------------------------------------------------------------------------------------------------|--------|-----------------------|
|                                                                                                          |   |                  |
| Report of Independent Registered Public Accounting  Firm                                                      |   | Pages F-3        |
|                                                                                                          |   |                  |
| Balance Sheets as of January 31, 2008 and 2007                                                           |   | Page F-4         |
|                                                                                                          |   |                  |
| Statements of Income for the years ended  January 31, 2008, 2007, and 2006                               |   | Page F-5         |
|                                                                                                          |   |                  |
| Statements of Unallocated Reserve and Trust Corpus  for the years ended January 31, 2008, 2007, and 2006 |   | Page F-6         |
|                                                                                                          |   |                  |
| Statements of Cash Flows for the years ended  January 31, 2008, 2007, and 2006                           |   | Page F-7         |
|                                                                                                          |   |                  |
| Notes to Financial Statements                                                                                 |   | Pages F-8 - F-12 |

 

F-1

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**TRUSTEES’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING**

 

The Mesabi Trustees are responsible forestablishing and maintaining adequate internal control over financial reportingfor Mesabi Trust.  The Trust’s internalcontrol system was designed to provide reasonable assurance to the Trusteesregarding the preparation and fair presentation of published financialstatements.

 

All internal control systems, no matter howwell designed, have inherent limitations. Therefore, even those systems determined to be effective can provideonly reasonable assurance with respect to financial statement preparation andpresentation.

 

The Mesabi Trustees assessed theeffectiveness of the Trust’s internal control over financial reporting as of January 31,2008.  In making this assessment, theyused the criteria set forth by the Committee of Sponsoring Organizations of theTreadway Commission in Internal Control — Integrated Framework.  Based on their assessment, the Trusteesbelieve that, as of January 31, 2008, the Trust’s internal control overfinancial reporting is effective, based on those criteria.

 

Gordon, Hughes and Banks, LLP, the Trust’sindependent registered public accounting firm, has issued an audit report onits assessment of the Trust’s internal control over financial reporting.  This report appears immediately below.

 

F-2

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**REPORT OF INDEPENDENTREGISTERED PUBLIC ACCOUNTING FIRM**

 

To the Trustees

MESABI TRUST

New York, New York

 

We have audited the accompanying balance sheets of MESABI TRUST (the “Trust”)as of January 31, 2008 and 2007, and the related statements of income,unallocated reserve and trust corpus, and cash flows for each of the years inthe three-year period ended January 31, 2008.  We also have audited MESABI TRUST’S internalcontrol over financial reporting as of January 31, 2008, based on criteriaestablished in Internal Control—Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (COSO).  The Trustees are responsible for thesefinancial statements, for maintaining effective internal control over financialreporting, and for their assessment of the effectiveness of the Trust’sinternal control over financial reporting, included in the accompanyingTrustees’ Report on Internal Control Over Financial Reporting.  Our responsibility is to express an opinionon these financial statements and an opinion on the Trust’s internal controlover financial reporting based on our audits.

 

We conducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States).  Those standards require that we plan andperform the audits to obtain reasonable assurance about whether the financialstatements are free of material misstatement and whether effective internalcontrol over financial reporting was maintained in all material respects.  Our audits of the financial statementsincluded examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accounting principlesused and significant estimates made by the Trustees, and evaluating the overallfinancial statement presentation.  Ouraudit of internal control over financial reporting included obtaining anunderstanding of internal control over financial reporting, assessing the riskthat a material weakness exists, and testing and evaluating the design andoperating effectiveness of internal control based on the assessed risk.  Our audits also included performing suchother procedures as we considered necessary in the circumstances.  We believe that our audits provide areasonable basis for our opinions.

 

An organization’s internal control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles.  An organization’s internal control overfinancial reporting includes those policies and procedures that 1) pertain tothe maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the organization; 2)provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures of theorganization are being made only in accordance with authorizations of theTrustees; and 3) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition, use, or disposition of the organization’sassets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financialreporting may not prevent or detect misstatements.  Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.

 

In our opinion, the financial statements referred to above presentfairly, in all material respects, the financial position of MESABI TRUST as of January 31,2008 and 2007, and the results of its operations and its cash flows for each ofthe years in the three-year period ended January 31, 2008 in conformitywith accounting principles generally accepted in the United States ofAmerica.  Also in our opinion, MESABITRUST maintained, in all material respects, effective internal control overfinancial reporting as of January 31, 2008, based on criteria establishedin Internal Control—Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO).

 

/s/ Gordon, Hughes & Banks, LLP

 

Greenwood Village, Colorado

April 8, 2008

 

F-3

----

 

**MESABITRUST**

**BALANCE SHEETS**

**JANUARY31, 2008 AND 2007**

 
| ** **                                                                      | ** ** | **2008**      | ** **    | **2007**   | ** ** |
|---------------------------------------------------------------------------------|------------|---------------|---------------|------------|------------|
|                                                                            |       |          |          |       |       |
| **ASSETS**                                                                      | ** ** | ** **    | ** **    | ** ** | ** ** |
|                                                                            |       |          |          |       |       |
| CASH AND CASH EQUIVALENTS                                                       | ** ** | **$**         | **6,959,701** |       | $          | 4,258,201 |   |
| U.S. GOVERNMENT SECURITIES, at  amortized cost (which approximates market) |       | **544,193**   |          | 727,883    |       |
| ACCRUED INCOME RECEIVABLE                                                       | ** ** | **959,925**   |          | 409,764    |       |
| PREPAID EXPENSE                                                                 | ** ** | **24,687**    |          | 18,701     |       |
|                                                                            | ** ** | **8,488,506** |          | 5,414,549  |       |
|                                                                            |       |          |          |       |       |
| FIXED PROPERTY, including  intangibles, at nominal values                       |       |          |          |       |       |
| Assignments of leased property                                                  |       |          |          |       |       |
| Amended assignment of Peters Lease                                              |       | **1**         |          | 1          |       |
| Assignment of Cloquet Leases                                                    |       | **1**         |          | 1          |       |
| Certificate of beneficial interest for 13,120,010  units of Land Trust          |       | **1**         |          | 1          |       |
|                                                                            | ** ** | **3**         |          | 3          |       |
|                                                                            |       |          |          |       |       |
|                                                                            | ** ** | **$**         | **8,488,509** |       | $          | 5,414,552 |   |
|                                                                            |       |          |          |       |       |
| **LIABILITIES, UNALLOCATED  RESERVE AND TRUST CORPUS**                          | ** ** | ** **    | ** **    | ** ** | ** ** |
|                                                                            |       |          |          |       |       |
| DISTRIBUTION PAYABLE                                                            | ** ** | **$**         | **6,756,805** |       | $          | 4,132,803 |   |
| ACCRUED EXPENSES                                                                | ** ** | **71,680**    |          | 142,072    |       |
|                                                                            | ** ** | **6,828,485** |          | 4,274,875  |       |
|                                                                            |       |          |          |       |       |
| UNALLOCATED RESERVE                                                             | ** ** | **1,660,021** |          | 1,139,674  |       |
|                                                                            |       |          |          |       |       |
| TRUST CORPUS                                                                    | ** ** | **3**         |          | 3          |       |
|                                                                            |       |          |          |       |       |
|                                                                            | ** ** | **$**         | **8,488,509** |       | $          | 5,414,552 |   |

 

See Notes toFinancial Statements

 

F-4

----

 

**MESABITRUST**

**STATEMENTS OF INCOME**

**YEARSENDED JANUARY 31, 2008, 2007 AND 2006**

** **
| ** **                                      | ** ** | **2008**       | ** **     | **2007**   | ** ** | **2006**   | ** ** |
|-------------------------------------------------|------------|----------------|----------------|------------|------------|------------|------------|
| ** **                                      | ** ** | ** **     | ** **     | ** ** | ** ** | ** ** | ** ** |
| REVENUES                                        |       |           |           |       |       |       |       |
| Royalties under amended lease agreements        |       | **$**          | **18,342,448** |       | $          | 17,407,543 |       | $ | 21,151,084 |   |
| Royalties under Peters Lease fee                |       | **474,094**    |           | 426,313    |       | 376,138    |       |
| Interest                                        |       | **49,969**     |           | 69,132     |       | 52,611     |       |
|                                            |       |           |           |       |       |       |       |
| Total revenues                                  |       | **18,866,511** |           | 17,902,988 |       | 21,579,833 |       |
|                                            |       |           |           |       |       |       |       |
| EXPENSES                                        |       |           |           |       |       |       |       |
| Compensation of Trustees                        |       | **181,700**    |           | 167,216    |       | 178,697    |       |
| Corporate Trustee’s administrative fees    |       | **62,500**     |           | 62,500     |       | 62,500     |       |
| Professional fees and expenses:                 |       |           |           |       |       |       |       |
| Legal and accounting                            |       | **221,104**    |           | 315,535    |       | 373,923    |       |
| Mining consultant and field representatives     |       | **52,242**     |           | 56,650     |       | 35,398     |       |
| Transfer agent’s and registrar’s fees |       | **12,694**     |           | 12,738     |       | 15,030     |       |
| Other Trust expenses                            |       | **103,911**    |           | 141,683    |       | 179,408    |       |
|                                            |       |           |           |       |       |       |       |
| Total expenses                                  |       | **634,151**    |           | 756,322    |       | 844,956    |       |
|                                            |       |           |           |       |       |       |       |
| NET INCOME                                      | ** ** | **$**          | **18,232,360** |       | $          | 17,146,666 |       | $ | 20,734,877 |   |
|                                            |       |           |           |       |       |       |       |
| WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING    |       | **13,120,010** |           | 13,120,010 |       | 13,120,010 |       |
|                                            |       |           |           |       |       |       |       |
| NET INCOME PER UNIT                             | ** ** | **$**          | **1.390**      |       | $          | 1.307      |       | $ | 1.580 |   |

 

See Notes to Financial Statements

 

F-5

----

 

**MESABITRUST**

**STATEMENTS OF UNALLOCATED RESERVE AND TRUST CORPUS**

**YEARSENDED JANUARY 31, 2008, 2007 AND 2006**

** **
| ** **                                                                                | ** ** | **Unallocated Reserve** | ** ** | ** ** | ** ** |
|-------------------------------------------------------------------------------------------|------------|-------------------------|------------|------------|------------|
| ** **                                                                                | ** ** | **Number of**           | ** ** | **Trust**  | ** ** | ** ** | ** ** |
| ** **                                                                                | ** ** | **Units**               | ** ** | **Amount** | ** ** | **Corpus** | ** ** |
|                                                                                      |       |                    |       |       |       |   |   |
| BALANCE, JANUARY 31, 2005                                                                 |       | 13,120,010              |       | $          | 4,323,763  |   | $ | 3 |   |
|                                                                                      |       |                    |       |       |       |   |   |
| Net income                                                                                |       | —                  |       | 20,734,877 |       | — |   |
| Distribution paid May 20, 2005, $.33 per unit                                        |       | —                  |       | (4,329,603 | )          | — |   |
| Distribution paid August 20, 2005, $.37 per  unit                                    |       | —                  |       | (4,854,404 | )          | — |   |
| Distribution paid November 20, 2005, $.36 per  unit                                  |       | —                  |       | (4,723,204 | )          | — |   |
| Distribution declared January 13, 2006, paid  February 20, 2006, $.47 per unit  |       | —                  |       | (6,166,405 | )          | — |   |
|                                                                                      |       |                    |       |       |       |   |   |
| BALANCE, JANUARY 31, 2006                                                                 |       | 13,120,010              |       | 4,985,024  |       | 3 |   |
|                                                                                      |       |                    |       |       |       |   |   |
| Net income                                                                                |       | —                  |       | 17,146,666 |       | — |   |
| Distribution paid May 20, 2006, $.30 per unit                                        |       | —                  |       | (3,936,003 | )          | — |   |
| Distribution paid August 20, 2006, $.40 per  unit                                    |       | —                  |       | (5,248,004 | )          | — |   |
| Distribution paid November 20, 2006, $.585  per unit                                 |       | —                  |       | (7,675,206 | )          | — |   |
| Distribution declared January 12, 2007, paid  February 20, 2007, $.315 per unit |       | —                  |       | (4,132,803 | )          | — |   |
|                                                                                      |       |                    |       |       |       |   |   |
| BALANCE, JANUARY 31, 2007                                                                 |       | 13,120,010              |       | 1,139,674  |       | 3 |   |
|                                                                                      |       |                    |       |       |       |   |   |
| Net income                                                                                |       | —                  |       | 18,232,360 |       | — |   |
| Distribution paid May 20, 2007, $.045 per  unit                                      |       | —                  |       | (590,400   | )          | — |   |
| Distribution paid August 20, 2007, $.310 per  unit                                   |       | —                  |       | (4,067,203 | )          | — |   |
| Distribution paid November 20, 2007, $.480  per unit                                 |       | —                  |       | (6,297,605 | )          | — |   |
| Distribution declared January 11, 2008, paid  February 20, 2008, $.515 per unit |       | —                  |       | (6,756,805 | )          | — |   |
|                                                                                      |       |                    |       |       |       |   |   |
| BALANCE, JANUARY 31, 2008                                                                 |       | 13,120,010              |       | $          | 1,660,021  |   | $ | 3 |   |

 

See Notes to Financial Statements

 

F-6

----

 

**MESABITRUST**

**STATEMENTS OF CASH FLOW**

**YEARSENDED JANUARY 31, 2008, 2007 AND 2006**

 
| ** **                                                          | ** ** | **2008**        | ** **     | **2007**    | ** ** | **2006**    | ** ** |
|---------------------------------------------------------------------|------------|-----------------|----------------|-------------|------------|-------------|------------|
|                                                                |       |            |           |        |       |        |       |
| OPERATING ACTIVITIES                                                |       |            |           |        |       |        |       |
| Royalties received                                                  |       | **$**           | **18,265,935** |        | $          | 21,702,292  |       | $ | 20,765,979 |   |
| Interest received                                                   |       | **50,415**      |           | 68,697      |       | 56,010      |       |
| Expenses paid                                                       |       | **(710,529**    | **)**          | (785,470    | )          | (737,255    | )          |
|                                                                |       |            |           |        |       |        |       |
| NET CASH FROM OPERATING  ACTIVITIES                                 | ** ** | **17,605,821**  |           | 20,985,519  |       | 20,084,734  |       |
|                                                                |       |            |           |        |       |        |       |
| INVESTING ACTIVITIES                                                |       |            |           |        |       |        |       |
| Maturities of U.S. Government securities                            |       | **9,464,477**   |           | 23,881,252  |       | 18,664,390  |       |
| Purchases of U.S. Government securities                             |       | **(9,280,787**  | **)**          | (23,960,942 | )          | (18,564,390 | )          |
|                                                                |       |            |           |        |       |        |       |
| NET CASH FROM (USED FOR)  INVESTING ACTIVITIES                      |       | **183,690**     |           | (79,690     | )          | 100,000     |       |
|                                                                |       |            |           |        |       |        |       |
| FINANCING ACTIVITY                                                  |       |            |           |        |       |        |       |
| Distributions to unitholders                                        |       | **(15,088,011** | **)**          | (23,025,618 | )          | (17,777,614 | )          |
|                                                                |       |            |           |        |       |        |       |
| NET CHANGE IN CASH AND  CASH EQUIVALENTS                            |       | **2,701,500**   |           | (2,119,789  | )          | 2,407,120   |       |
|                                                                |       |            |           |        |       |        |       |
| CASH AND CASH EQUIVALENTS,  BEGINNING OF YEAR                       |       | **4,258,201**   |           | 6,377,990   |       | 3,970,870   |       |
|                                                                |       |            |           |        |       |        |       |
| CASH AND CASH EQUIVALENTS,  END OF YEAR                             |       | **$**           | **6,959,701**  |        | $          | 4,258,201   |       | $ | 6,377,990 |   |
|                                                                |       |            |           |        |       |        |       |
| RECONCILIATION OF NET INCOME TO NET CASH FROM  OPERATING ACTIVITIES |       |            |           |        |       |        |       |
| Net income                                                          |       | **$**           | **18,232,360** |        | $          | 17,146,666  |       | $ | 20,734,877 |   |
| Decrease (increase) in accrued income receivable                    |       | **(550,161**    | **)**          | 3,868,002   |       | (757,843    | )          |
| Decrease (increase) in prepaid expense                              |       | **(5,986**      | **)**          | 6,306       |       | (11,661     | )          |
| Increase (decrease) in accrued expenses                             |       | **(70,392**     | **)**          | (35,455     | )          | 119,361     |       |
|                                                                |       |            |           |        |       |        |       |
| NET CASH FROM OPERATING  ACTIVITIES                                 | ** ** | **$**           | **17,605,821** |        | $          | 20,985,519  |       | $ | 20,084,734 |   |

 

See Notes toFinancial Statements

 

F-7

----

 

** **

**MESABITRUST**

**NOTES TO FINANCIAL STATEMENTS**

**JANUARY31, 2008 AND 2007**

 

**NOTE 1 -             NATURE OF BUSINESS AND ORGANIZATION**

 

*Nature of Business*

 

Mesabi Trust was created in 1961 upon the liquidation of Mesabi IronCompany. The sole purpose of the Trust, as set forth in the Agreement of Trustdated as of July 18, 1961, is to conserve and protect the Trust Estate andto collect and distribute the income and proceeds therefrom to the Trust’scertificate holders after the payment of, or provision for, expenses andliabilities. The Agreement of Trust prohibits the Trust from engaging in anybusiness.  In accordance with the Agreement of Trust, the Trust willterminate twenty-one years after the death of the survivor of twenty-fivepersons named in an exhibit to the Agreement of Trust, the youngest of whom isbelieved to be forty-seven years old.

 

The lessee/operator of Mesabi Trust’s mineral interests is NorthshoreMining Corporation (NMC), a subsidiary of Cleveland-Cliffs Inc (CCI). CCI isamong 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 Companyand was named Cyprus Northshore Mining Corporation (Cyprus NMC).

 

*Organization*

 

The beneficial interest in Mesabi Trust is represented by 13,120,010transferable units distributed on July 27, 1961 to shareholders of MesabiIron Company.

 

The Trust’s status as a grantor trust was confirmed by letter rulingaddressed to Mesabi Iron Company from the Internal Revenue Service in 1961. Asa grantor trust, Mesabi is exempt from Federal income taxes and its income istaxable directly to the Unitholders.

 

**NOTE 2 -             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

*Cash and Cash Equivalents*

 

For purposes of the statements of cash flows, the Trust considers allhighly liquid investments with an**originalmaturity of three months or less to be cash equivalents.  As of January 31,2008, the Trust held $6,958,227 in a money market fund that invests exclusivelyin obligations of the U.S. Treasury.  TheTrust had no cash equivalents as of January 31, 2007.

 

*Investments*

 

The Trust invests solely in U.S. Government securities. Managementdetermines the appropriate classifications of the securities at the time theyare acquired and evaluates the appropriateness of such classifications as ofeach balance sheet date.

 

The U.S. Government securities are classified as held-to-maturitysecurities as the Trust has the positive intent and ability to hold to maturityand are therefore stated at amortized cost.

 

F-8

----

 

*Revenue Recognition*

 

Royalty income under the amended lease agreements with NMC (Cyprus NMCthrough September 30, 1994) is recognized as it is earned. Under suchagreements, royalties are earned upon shipment from Silver Bay, Minnesota (NMC’slocation), regardless of whether the actual sales proceeds for any shipment arereceived by NMC.

 

The amount of base overriding royalties and royalty bonuses payablewith respect to the first three quarters in any calendar year are determined onthe basis of tonnage shipped during each calendar quarter and the actualproceeds of such shipments, with an adjustment made to the royalties payablewith respect to the last quarter in any calendar year to account foradjustments.

 

Adjustments could result from changes in final reconciliations oftonnage shipped by NMC with the final amounts received from NMCcustomers.  Such adjustments have historically had minimal effect on theamount of royalties reported in the fourth quarter.  Adjustments resultfrom sales of tonnage shipped where the final sales price may be adjustedupward or downward from the original price used by NMC in computing theroyalties payable to Mesabi Trust.  Historically, these adjustments havenot had a material effect on the financial statements.  No substantial adjustments related to finalpricing were made in the fourth quarter of fiscal 2007 or fiscal 2008.

 

Royalty income under the Peters Lease fee agreement also is recognizedas it is earned. Under such agreement, however, royalties are earned at theoption of NMC (Cyprus NMC through September 30, 1994) either upon miningof crude ore from Peters Lease lands or upon shipment from Silver Bay of ironore product produced from Peters Lease lands.

 

*Fixed Property, Including Intangibles*

 

The Trust’s fixed property, including intangibles, is recorded atnominal values and includes the following:

 

1.                       Theentire beneficial interest as assignor in the Amended Peters Lease Assignmentand the Amended Cloquet Lease Assignment covering taconite properties inMinnesota which are leased to NMC (Cyprus NMC through September 30, 1994).

 

2.                       Theentire beneficial interest in Mesabi Land Trust which owns a 20% fee interestin the lands subject to the Peters Lease and the entire fee interest in otherproperties in Minnesota.

 

*Net Income Per Unit*

 

Net income per unit is computed by dividing net income available toUnitholders by the weighted average number of units outstanding.

 

*Concentration of Credit Risk*

 

Statement of Financial Accounting Standards (“SFAS”) No. 105, “*Disclosure of Information about Financial Instrumentswith Off-Balance-Sheet Risk and Financial Instruments with Concentrations ofCredit Risk*” requires disclosure of significant concentrations ofcredit risk regardless of the degree of such risk. Financial instruments whichpotentially subject the Trust to concentrations of credit risk consistprimarily of cash and cash equivalents. The Trust maintains its cash depositswith a high quality financial institution.  Amounts on deposit with thefinancial institution are insured by the Federal Deposit Insurance Corporation(“FDIC”) up to 

 

F-9

----

 

$100,000.  There is a concentration of credit risk related toamounts that exceed the FDIC insurance coverage.  The Trust believes thatthe risk is insignificant.

 

*Accounting Estimates*

 

The preparation of financial statements in conformity with generallyaccepted accounting principles requires the Trustees to make estimates andassumptions that affect the reported amounts of assets and liabilities, thedisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during the reportingperiod. Actual results could differ from those estimates.

 

*Fair Value of Financial Instruments*

 

The carrying amounts of financial instruments including cash,investments, accrued income receivable, distributions payable and accruedexpenses approximated fair value as of January 31, 2008 and 2007, becauseof the relative short maturity of these instruments.

 

*Recent Accounting Pronouncements*

 

In September 2006, the Financial Accounting Standards Board (FASB)issued SFAS No. 157, “Fair Value Measurements.”  SFAS No. 157defines fair value, establishes a framework for measuring fair value andexpands disclosure of fair value measurements. SFAS No. 157 applies underother accounting pronouncements that require or permit fair value measurementsand accordingly, does not require any new fair value measurements. SFAS No. 157is effective for financial statements issued for fiscal years beginning after November 15,2007. The Trust believes the impact of the implementation of SFAS No. 157will have no effect on the results of operations or financial condition.

 

In February 2007, the FASB issued SFAS No. 159, “The FairValue Option for Financial Assets and Financial Liabilities—Including anamendment of FASB Statement No. 115.”  SFAS No. 159 expands theuse of fair value accounting but does not affect existing standards whichrequire assets or liabilities to be carried at fair value. Under SFAS No. 159,a company may elect to use fair value to measure accounts and loans receivable,available-for-sale and held-to-maturity securities, equity method investments,accounts payable, guarantees and issued debt. Other eligible items include firmcommitments. SFAS No. 159 is effective for financial statements issued forfiscal years beginning after November 15, 2007. The Trust is currentlyevaluating the impact of SFAS No. 159, but believes it will have nomaterial impact on the results of operations or statement of financialposition.

 

 

 

F-10

----

**NOTE 3 -             U. S. GOVERNMENT SECURITIES**

 

U.S. government securities at January 31, 2008 and 2007 areclassified as held-to-maturity and mature as follows:

 
| ** **                              | ** ** | **2008**     | ** **  | **2007**       | ** ** |
|-----------------------------------------|------------|--------------|-------------|----------------|------------|
| ** **                              | ** ** | **Carrying** | ** **  | ** **     | ** ** | **Carrying** | ** ** | ** ** | ** ** |
| ** **                              | ** ** | **Value**    | ** **  | **Fair Value** | ** ** | **Value** | ** ** | **Fair Value** | ** ** |
|                                    |       |         |        |           |       | ** ** |   |   |   |
| Due within one year                     | ** ** | **$**        | **544,193** | ** **     | **$**      | **544,266** |   | $ | 293,009 |   | $ | 288,171 |   |
| Due after one year through  three years |       | **—**   |        | **—**     |       | 434,874 |   | 425,839 |   |
|                                    |       |         |        |           |       |   |   |   |   |
| ** **                              | ** ** | **$**        | **544,193** |           | **$**      | **544,266** |   | $ | 727,883 |   | $ | 714,010 |   |

 

**NOTE 4 -              ROYALTY AGREEMENT**

 

The current royalty rate schedule became effective on August 17,1989, which was established pursuant to certain agreements (the “AmendedAssignment Agreements”) the Trust entered into with Cyprus Northshore MiningCorporation (“Cyprus NMC”).  Pursuant to the Amended AssignmentAgreements, overriding royalties are determined by both the volume and sellingprice of iron ore products shipped.

 

On September 30, 1994, Cyprus Amax Minerals Company sold its ironore operations, including Cyprus NMC, to Cleveland-Cliffs Inc (CCI).  CCIrenamed the operation Northshore Mining Corporation (NMC).  CCI is amongthe 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 varyingamounts constituting a percentage of the gross proceeds of shipments, fromSilver 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 productshipments within 30 days following the calendar quarter in which such shipmentsoccur.  NMC (Cyprus NMC through September 30, 1994) resumed miningoperations and shipping product from Silver Bay in the second calendar quarterof 1990, and the first payment of overriding royalties was made in July 1990.

 

NMC (Cyprus NMC through September 30, 1994) also is obligated topay to Mesabi Trust a minimum advance royalty of $500,000 per annum, subject toadjustment for inflation and deflation (but not below $500,000), which iscredited against base overriding royalties and royalty bonuses. NMC (Cyprus NMCthrough September 30, 1994) is obligated to make quarterly payments of theminimum advance royalty in January, April, July and October of eachyear.  For the calendar year ending December 31,2008, the minimum advance royalty is $790,721. The minimum annual advanceroyalty was $766,510 and 743,420, for the calendar years ended December 31,2007 and 2006, respectively.

 

**NOTE 5 -              UNALLOCATED RESERVE AND DISTRIBUTIONS**

 

The Unallocated Reserve aggregated $1,660,021 at January 31, 2008,as compared with an Unallocated Reserve of $1,139,674 at January 31,2007.  The Trust’s Unallocated Reserve, which is comprised of accruedincome receivable and cash reserve for unexpected losses, increased 46% or$520,347, as of the end of fiscal year ended January 31, 2008 as comparedto the fiscal year ended January 31, 2007.  This increase is due to asignificant increase in the accrued income receivable portion of theUnallocated Reserve which increased 134% to $959,925 at January 31, 2008from $490,764 at January 31, 2007.  The Trust’s cash reserve forunexpected losses decreased 4% to $700,096 at January 31, 2008 from $729,910at January 31, 2007.

 

F-11

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The Trustees have determined that the Unallocated Reserve should bemaintained at a prudent level, usually within the range of $500,000 to$1,000,000, to meet present or future liabilities of the Trust. Accordingly, although the actual amount of the Unallocated Reserve willfluctuate from time to time, and may increase or decrease from its currentlevel, it is currently intended that future distributions will be highly dependentupon royalty income as it is received quarterly and the level of Trust expensesthat the Trustees anticipate occurring in subsequent quarters.  TheTrustees determine the level of distributions on a quarterly basis afterreceiving notification from NMC as to the amount of royalty income that will bereceived and after determination of any known or anticipated expenses,liabilities and obligations of the Trust.

 

During the fiscal years ended January 31, 2008, 2007, and 2006,the Trustees distributed cash payments totaling $15,088,012 ($1.15 per Unit),$23,025,618 ($1.755 per Unit), and $17,777,614 ($1.355 per Unit), respectively.In addition, in January 2008 the Trustees declared a distribution of$6,756,805 ($0.515 per Unit), which was paid in February 2008.

 

**NOTE 6 -              SUMMARY OF QUARTERLY EARNINGS (UNAUDITED)**

 

The quarterly results of operations for the two years ended January 31,2008 and 2007 are presented below:

 
| ** **          | ** ** | **2008**    | ** **    |
|---------------------|------------|-------------|---------------|
| ** **          | ** ** | **First**   | ** **    | **Second** | ** ** | **Third** | ** ** | **Fourth** | ** ** |
| ** **          | ** ** | **Quarter** | ** **    | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** |
| ** **          | ** ** | ** **  | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenue             | ** ** | **$**       | **1,785,056** | ** ** | **$** | **4,435,484** | ** ** | **$** | **6,703,055** | ** ** | **$** | **5,942,916** | ** ** |
| Expenses            | ** ** | **85,439**  | ** **    | **261,345** | ** ** | **109,924** | ** ** | **177,443** | ** ** |
|                |       |        |          |   |   |   |   |   |   |
| Net income          | ** ** | **$**       | **1,699,617** | ** ** | **$** | **4,174,139** | ** ** | **$** | **6,593,131** | ** ** | **$** | **5,765,473** | ** ** |
| ** **          | ** ** | ** **  | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net income per unit | ** ** | **$**       | **0.130**     | ** ** | **$** | **0.318** | ** ** | **$** | **0.503** | ** ** | **$** | **0.439** | ** ** |
| ** **          | ** ** | ** **  | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|                |       | **2007**    |          |
| ** **          | ** ** | **First**   | ** **    | **Second** | ** ** | **Third** | ** ** | **Fourth** | ** ** |
| ** **          | ** ** | **Quarter** | ** **    | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** |
|                |       |        |          |   |   |   |   |   |   |
| Revenue             |       | $           | 1,644,970     |   | $ | 6,327,114 |   | $ | 7,180,092 |   | $ | 2,750,812 |   |
| Expenses            |       | 171,117     |          | 137,759 |   | 134,465 |   | 312,981 |   |
|                |       |        |          |   |   |   |   |   |   |
| Net income          |       | $           | 1,473,853     |   | $ | 6,189,355 |   | $ | 7,045,627 |   | $ | 2,437,831 |   |
|                |       |        |          |   |   |   |   |   |   |
| Net income per unit |       | $           | 0.112         |   | $ | 0.472 |   | $ | 0.537 |   | $ | 0.186 |   |

 

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