Intrepid Capital Management Funds Trust N-CSRSCertified semi-annual shareholder report (management investment company)

Intrepid Capital Fund

Intrepid Endurance Fund

Intrepid Income Fund

Intrepid Disciplined Value Fund

Semi-Annual Report

March 31, 2020

Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the Funds’ annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website (www.intrepidcapitalfunds.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report.

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Funds electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-866-996-FUND, sending an e-mail request to invest@intrepidcapitalfunds.com, or by enrolling at www.intrepidcapitalfunds.com.

You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Funds, you can call 1-866-996-FUND or send an e-mail request to invest@intrepidcapitalfunds.com to let the Funds know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all Funds held with the fund complex if you invest directly with the Funds.

April 2, 2020

Dear Friends and Clients,

In the height of the market panic this past March, I was asked to “Skype” into a CNBC Nightly Business Show.  For those who may have missed it, when asked what I thought, my response was “the Federal Reserve and Central Banks of the world held rates too low for too long, giving us too much corporate debt equaling a giant margin call.”  From a prior letter at the end of the 3rd Quarter of 2019, I said at the time, “I believe this is an ‘Emperor Has No Clothes’ moment, one years hence we will look back on incredulously.”  Rate suppression activity by central banks around the world has encouraged all sorts of shenanigans to persist, in my opinion, from financing larger U.S. budget deficits to unicorns like WeWork, to an IPO market of largely unprofitable offerings.”

Well…now for my “mea culpa,” I wish I had better prepared our portfolios for this unforeseen global pandemic.  While our portfolio results may, depending on the strategy, have “relative” outperformance, one can only eat from “absolute” returns (i.e. positive).  My wife of 30 years, Rosalind, inquired recently about the fund performance.  I replied “nowhere to hide,” with the notable exception being long maturity U.S. Treasury Bonds and gold.  A ladder of these treasury bonds now has interest rates from 3 months to 30 years all less than 1.20% (30-year). I refer to them, with a touch of sarcasm, as “return free risk.”  It will take very little upward movement in rates to vaporize those small coupons with lost principal.

I mentioned earlier the source of “the problem,” at least from my perspective, was easy and lenient credit terms for borrowers, particularly Corporate America.  We entered this crisis with as heavily leveraged Corporate Sector as ever with $1 trillion of debt rated marginally investment grade (BBB).  Well, when you are levered up and a new government edict is issued to suspend business activity, you now have a “Houston, we have a problem” moment.  Many of these bonds’ prices are now under intense pressure as leverage ratios shoot up with less cash flow to service the existing debt.  As sales collapse, I have heard it said before: Stocks climb the stairs but take the elevator down.  There have been 5 weeks in which the Dow Jones Industrial Average has fallen 12% or more since the fall of France in 1940.  The good news is that I have been around in this business (and survived!) for almost all of them (except the one in 1940!).

So, what are we doing about this down 30% downdraft in prices?  Buying!  I don’t know, nor does anyone here or elsewhere know where the bottom is for prices.  The analogy I use is this: remember as a kid going swimming in a lake, river or ocean, and wondering, “how deep is it?”  Well, you held an arm over your head, pointed a

toe and started gradually letting air out to assist in your descent, knowing that if it was really deep, you didn’t want to exhale all of your oxygen necessary to return safely to the surface.  The portfolio management team has been taking advantage of the downdraft in prices and wild volatility to do two things: upgrade the quality of the businesses we own, looking for impeccable balance sheets (see discussion earlier) that now after this swoon in prices are much more attractively priced.  Next, we are very gradually adding to companies where we already own shares and can average down our cost basis.

Lastly, in the bond market we are busily acquiring very short-term bonds with net cash (cash greater than debt) and often unused lines of credit.  Our preference is the next scheduled bond in their respective maturity schedule, knowing they have the necessary liquidity to pay it off.  Frankly, I think this part of the capital markets may be offering one of the better risk-adjusted returns currently, with many of these bonds fetching a low double-digit yield-to-worst.

For the fiscal six-month period ended March 31, 2020, the Intrepid Capital Fund (the “Fund”) declined 17.83% compared to the S&P 500 Index’s decline of 12.31% and the combined benchmark’s (60% S&P 500 Index/40% Bloomberg Barclays US Gov/Credit 1-5Yr Index) decline of 6.26% for the period.  The Fund ended March 31, 2020 with 4.8% in cash.

I know this has been scary for many of you, and as your portfolio manager, I am entirely and completely empathetic to where we find ourselves today.  I won’t dredge up the charts suggesting you stay invested (they are too numerous to include here), but I will leave you with this parting thought:  there is opportunity in chaos and frankly we are now focused on the abundant opportunities that we haven’t seen since the failure of Lehman Brothers in the fall of 2008 which ignited the Great Financial Crisis.  We came through that period in fine form and I expect no different this time.  As your “Captain,” I will say: “Passengers, please return to your seats and buckle your seat belts, we are expecting some turbulence.”

Mark F. Travis, President

Intrepid Capital Fund Portfolio Manager

Fund holdings and sector allocations are subject to change at any time and should not be considered a recommendation to buy or sell any security. Please see the Schedule of Investments in this report for complete Fund holdings.

The S&P 500 Index is a broad-based, unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general.  The Bloomberg Barclays US Gov/Credit 1-5Y TR Index measures the performance of U.S. dollar-denominated U.S. Treasury bonds, government-related bonds, and investment-grade U.S. corporate bonds that have a remaining maturity of greater than or equal to one year and less than five years.  The Bloomberg Barclays Combined Index consists of an unmanaged portfolio of 60% common stocks represented by the S&P 500 Index and 40% bonds represented Bloomberg Barclays US Government/Credit 1-5 Yr Index.  You cannot invest directly in an index.

Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange.

Cash Flow measures the cash generating capability of a company by adding non-cash charges and interest to pretax income. Initial Public Offering (IPO) is the first sale of stock by a private company to the public.  Yield-to-Worst is the lowest yield an investor can expect when investing in a callable bond.

Investment Grade is a bond with credit rating of BBB or higher by Standard & Poor’s or Baa3 or higher by Moody’s.

Opinions expressed are subject to change, are not guaranteed and should not be considered investment advice or recommendations to buy or sell any security.

The Intrepid Capital Funds are distributed by Quasar Distributors, LLC.

April 2, 2020

Dear Fellow Shareholders,

As I sit down to write this letter, the governor of Florida just issued a stay-at-home order for residents.  Just a few weeks ago, it would have been unthinkable to see sights of empty beaches and theme parks on a sunny Saturday afternoon in the spring.  Indeed, similar scenes are playing out nationwide as the country adjusts to a strange period of isolation.  We hope that you and your families remain healthy throughout this challenging time.

Financial markets pivoted perhaps just as hard as everyday life during the quarter.  Investors entered the year cheering on the longest ever bull market expansion with bold predictions of ever-higher stock prices, valuations be damned.  Since there was no clearly identifiable catalyst for a recession, why wouldn’t stocks continue to grind higher?  However, after the full potential impacts of the coronavirus came more clearly into focus, stocks suffered the fastest drawdown in history.  We find it interesting that most market participants seem to believe they will spot the signs of a bear market before others, and safely head for the exits before them.  In our view, it is precisely this collective confidence that helps fuel bull markets on the way up and produce violent selloffs on the way down.  The coronavirus, like the catalysts of other bear markets before, did not exactly repair the herd’s reputation of predicting recessions and smoothly heading for the exits.

As we have discussed in countless letters before this, it has been our opinion that stocks have been broadly overvalued, over leveraged, and did not compensate investors well for bearing the risk of ownership. The Endurance Fund (the “Fund”) had a 39% position in cash & treasuries coming into the year and a 34% position immediately prior to the significant sell-off which began on February 20th.  We should emphasize here that this defensive positioning was due to the valuations of the stocks in our opportunity set rather than predicting how the events of the virus might unfold.  Like many other investors, we closely followed news related to the virus, but could not reasonably anticipate the economic shutdown and related damage it could create until prices had already begun to reflect this risk.

The historic selloff and related volatility created some great opportunities to deploy much of the Fund’s war chest of cash & treasuries.  True to its name, the Fund is designed to “endure” by remaining flexible and holding cash when valuations are not attractive and then allocating this cash into businesses that can “endure” in any environment.  Over the duration of the quarter, approximately 19% of the 39% position in cash was invested, or about half.  Our approach to investing in this crisis was not to dive directly into the “middle of the storm,” but rather to scrape along the edges for higher quality businesses caught up in the selloff.  By this we mean, we did not concentrate our efforts at investing in hotels, cruise lines and restaurants that bore the brunt of the carnage.  Many of these businesses were highly leveraged and may depend on government bailouts for survival.  Instead, we focused on identifying stocks of good businesses selling off due to temporary setbacks, but whose long-term value we believed was intact.

From a trading perspective, the Fund was the most active it has been in many years.  We increased our position sizes of several existing names and purchased new positions in several others.  As discussed before, our additions tended to be businesses with strong cash flows, good balance sheets and ample liquidity to “endure” through this period.  Rather than provide a detailed description of each, we think it would be helpful to highlight a few areas where we concentrated a meaningful portion of our activity:

To summarize, we found a good deal of opportunity as stock prices went into free-fall in some high quality, market-leading businesses within already attractive industries. Like all businesses, we expect their operations to take a hit with the sharp slowdown to come near-term in the economy. But in many cases, we expect the companies we purchased within these categories to come out in an even stronger competitive position than they went into this crisis.

While most of the additions to the Fund fit into the categories above, there were a few exceptions that the Fund purchased which we will briefly highlight:

Despite all this buying activity, it’s worth mentioning that the Fund still has a bullet in the chamber, so to speak, in the remaining 20.2% position in cash.  Despite a historic crash in prices, we still do not believe small cap stocks are screaming bargains – a testament to how stretched we think valuations had gotten before the selloff.  Proclaiming that we are in a recession right now is not controversial.  More debatable, however, is how long this period will last.  Will it be a V-shaped recovery that snaps back when the economy is re-opened?  Or will this be a more drawn out period of weakness?  While we obviously don’t know for certain, we would argue the odds of the latter scenario have increased meaningfully – there is simply a tremendous amount of debt for the economy to deal with as it processes this exogenous blow.  In our opinion, there are still many stocks that are not adequately pricing in this risk.  There are a number of high-quality stocks in our “on-deck” circle, but we are still waiting for more attractive entry prices.  To play off an old Warren Buffett-ism, we are still picking up falling stocks with a thimble and have not yet reached for the bucket.

For the quarter ended March 31, 2020, the Endurance Fund returned -21.50%.  As absolute return-oriented investors, we are frustrated to have lost money during the quarter.  Unfortunately, there were few places to hide amidst the selloff and the stocks that the Fund owned were not immune from the selling pressure.  While it pains us to have to report that your capital suffered a loss, we think it’s recoverable.  Swings in prices are a reality of investing in the stock market, but we are confident in the long-term intrinsic values of the businesses that the Fund holds.  We also view the selloff as an opportunity to deploy more of the Fund’s cash and position itself to capture more upside potential when prices recover.

The Fund’s return was more palatable compared to the -31.61% return of the Morningstar Small Cap Index benchmark.  And better still when compared to value-oriented small cap indices, such as the Morningstar US Small Value Fund category which fell 36.97%.  It was yet another period in which small value indexes lagged those of larger and more growth-oriented companies.  If the last two recessions are a guide, then we might expect to see a sharper recovery from small caps coming out of this bear market than large caps.

The top three contributors to performance were:

The top three detractors to performance were:

The Fund sold out of six positions during the quarter:

For the first six months of the Fund’s fiscal year, the Fund returned -17.80% vs. -25.68% for the benchmark Morningstar Small Cap Index. The Fund underperformed during the period of low volatility through mid-February, but then meaningfully outperformed when volatility spiked and panic ensued later in the period.

Despite the carnage in the markets, the current investing landscape is a more favorable environment for the Fund’s strategy than we have seen in years.  Prices are cheaper, bargains are far more plentiful, and the extreme volatility has created attractive opportunities.  The Fund is now positioned for much more upside potential should stocks rally higher and stands ready to deploy the remainder of its cash should volatility continue.  This valuation driven approach has served well in periods such as this, and we are working diligently to assess the best opportunities in which to invest your capital for attractive long-term appreciation.

In closing, we want to express our sincere appreciation for the patience of the long-term shareholders of the Fund.  Its positioning has been unconventional, leading to lackluster returns during the later stages of this record long bull market.  We are hopeful that the current environment – with far lower prices and heightened volatility – will allow us to position the portfolio for much more desirable results looking forward.  Thank you for your investment.

Fund holdings and sector allocations are subject to change at any time and should not be considered a recommendation to buy or sell any security. Please see the Schedule of Investments in this report for complete Fund holdings.

Prior to June 26, 2015, the Fund was named the Intrepid Small Cap Fund.

Earnings growth is not representative of the Fund’s future performance.

The Morningstar Small Cap Index tracks the performance of U.S. small-cap stocks that fall between 90th and 97th percentile in market capitalization of the investable universe. The Morningstar US Small Value category consists of small-value portfolios invested in small U.S. companies with valuations and growth rates below other small-cap peers. Stocks in the bottom 10% of the capitalization of the U.S. equity market are defined as small cap. Value is defined based on low valuations (low price ratios and high dividend yields) and slow growth (low growth rates for earnings, sales, book value, and cash flow). The S&P 500 Index is a broad-based, unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general.  The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange.  The National Association of Securities Dealers Automated Quotations (NASDAQ) is a US electronic securities market that quotes prices through a computer network and allows brokers to conduct trades online or via telephone. Since there is no physical ‘exchange’ involved, it is referred to as an over the counter market.  You cannot invest directly in an index.

Cash Flow measures the cash generating capability of a company by adding non-cash charges and interest to pretax income. Free Cash Flow measures the cash generating capability of a company by subtracting capital expenditures from cash flow from operations. Duration is an approximate measure of the price sensitivity of a fixed-income investment to a change in interest rates, expressed as a number of years.  Drawdown is the measure of the decline from a historical peak in an investment or fund.

Opinions expressed are subject to change, are not guaranteed and should not be considered investment advice or recommendations to buy or sell any security.

The Intrepid Capital Funds are distributed by Quasar Distributors, LLC.

April 2, 2020

Dear Fellow Shareholders,

Credit markets screeched to a halt in March and bond prices plummeted as debt investors crammed for the exit.  The uncertainty around the COVID-19 pandemic froze out even the most creditworthy borrowers from issuing new debt.  Grandiose stimulus promises did little to abate the rampant panic, at least initially. It felt to us like a Minsky Moment.

The term “Minsky Moment” was coined in 1997 to describe the Asian Debt Crisis.  It would later be used to describe the Great Financial Crisis in 2008.  Hyman Minsky, whose work inspired this phrase, was a prolific 20th century economist.  Minsky believed that long periods of stability bred periods of instability.  For instance, when the economy is humming and there seems to be no bust in sight, investors and companies take on more and more debt to maximize their participation in the economic boom.  This behavior eventually leads to a tipping point, or a Minsky Moment, when the debt is no longer serviceable and there is a rapid decline in asset prices.

If we have just experienced a Minsky Moment, it is ostensibly unlike prior ones.  Both the Great Financial Crisis and the Asian Debt Crisis were directly caused by excessive risk taking.  This time around, an unforeseen global pandemic served as the tipping point.  We would argue that although COVID-19 served as the catalyst, excessive leverage in the system exacerbated the depth and rapidness of the selloff.

Regardless, we believe the pain in debt markets is likely to get worse before it gets better.  Even assuming we can get the economy back up and running over the next couple of months, which seems optimistic, the toll from months of foregone revenue will be enough to shutter many debt-laden businesses.  Bankruptcies, which we have seen few of so far, would send shockwaves through the system and possibly lead to renewed panic selling. In order to avoid this, we anticipate the government printing trillions of additional dollars for fiscal stimulus and bailouts.  This remedy could cause inflationary headaches down the road, but we doubt any politician will mention

that.  Considering all of this, we remain cautious as we search amid the junk bond rubble for attractive bargains.

Despite the beating that bonds took in March, longer duration government bonds served as a buffer for some indices as rates plummeted to new lows.  Accordingly, the Bloomberg Barclays US Aggregate Index (the “Barclays Aggregate Index”) returned 3.15% for the quarter ended March 31, 2020 and the ICE BofAML US Corporate Index (the “Corporate Index”) lost 4.05% over the same period.  Riskier debt took a walloping in the first calendar quarter, with the ICE BofAML High Yield Index (the “HY Index”) losing 13.12%.  The shorter-duration Bloomberg Barclays US Govt/Credit 1-5 Year Total Return USD Index (the “1-5 Year TR Index”) gained 2.17% over the same period.  The Intrepid Income Fund (the “Fund”) lost 6.55% in the quarter ended March 31, 2020.

For the first six months of the Fund’s fiscal year, the Fund lost 5.60%.  This compares to a return of 3.33% for the Barclays Aggregate Index and a loss of 2.95% for the Corporate Index.  The 1-5 Year TR Index returned 2.68% and the HY Index lost 10.86% over the same period.

The Fund did not have any material contributors for the three months ended March 31, 2020.  However, we had several credits that held up well, generating slightly positive total returns for the quarter despite the battering that the credit markets took.  Despite this, many of these credits, most of which are maturing soon, traded hands at surprisingly low dollar prices.  We believe this was due to technical market factors.

As money managers scramble to raise cash for redemptions or to reposition their portfolios, they are more likely to sell short-dated paper than longer-dated paper.  This is because the short-dated credits sell off less than bonds that don’t mature for a while, and the money manager can realize less of an absolute loss by selling these front-end bonds.  In March, this dynamic led to a strange situation in which some companies’ short-dated paper yielded more than its longer-dated paper.  This is known as an inverted yield curve and it sometimes occurs during periods of financial stress.

The silver lining to this inverted yield curve is that we were able to scoop up additional short-dated investment grade bonds at eye-popping yields, often in the double digits.  These purchases included debt from issuers like Sherwin Williams, Expedia, American Tower, and Fiat Chrysler.  Most of these were bought towards the end of March at significant discounts to par and with maturity dates in the next 1-6 months.  Hence, we believe we will see the fruits of these purchases soon.

To be clear, we believe that all the issuers we mentioned have enough cash on their balance sheets and/or access to credit to pay down their upcoming maturities many times over.  In fact, we performed various stress tests assuming, in some cases, the total absence of revenue for these issuers until their bonds mature.  Even in these unlikely scenarios, we still believe the various issuers will be able to pay down the issues we purchased.

The Fund had one material contributor for the six months ended March 31, 2020, which was Cincinnati Bell’s Notes due in 2025.  We wrote about these notes in a previous commentary and were pleased to see that this telecom company held up during the quarter after finalizing the terms of a takeover deal with Macquarie.

The Fund’s top three detractors for the three months and six months ended March 31, 2020 were all energy related.  We still own these positions and believe the issuers have the balance sheet strength to weather this extraordinary environment for commodities.  These positions represent a small percentage of the overall portfolio but offer compelling returns at current levels:

The Income Fund had six corporate bond positions that were called or matured in the first calendar quarter and eleven positions that were called or matured during the six months that ended 3/31/2020.  We also rebalanced several positions.  The proceeds from the bonds that matured or were called were redeployed into short-term paper of investment grade issuers that we believe offer attractive yields in excess of

government securities.  Additionally, we added to several of our existing high yield positions and bought a couple positions from new issuers, including:

Portfolio activity was otherwise subdued as we brace ourselves for this brave new world.  In our opinion, nothing is certain in the near term except for more uncertainty which will likely translate into more volatility in financial markets.

The Federal Reserve continues to do everything in its power to remedy this uncertainty with heaps of liquidity and even a bit of razzle dazzle, recently announcing its intent to purchase certain junk bonds.  These developments hardly surprise us, but they do concern us as we wonder where the intervention ends, or if there is any contemplation of the consequences.  Consumers, companies, and industries are already lining up for bailouts which will prompt endless philosophical discussions around what makes this or that essential and why we are choosing to save this company over that municipality and so on.

Progress is hardly ever linear, and every boom eventually has its bust.  When it can operate freely, this boom and bust cycle creates a stronger, more resilient system.  Our past couple dozen or so commentaries have cautioned investors about an overleveraged financial system characterized by artificially repressed interest rates, excessive risk taking, and weak covenants on leveraged buyouts that might one day inspire a sequel to Barbarians At The Gate.  Already, many of the private equity sponsors that engineered these loans have met privately with President Trump and are surely arguing for their portfolio companies to receive some stimulus dollars.

The COVID-19 pandemic deserves a massive governmental response and we have been awed at how quickly and effectively task forces and healthcare professionals across the world have responded to this unprecedented crisis.  However, we do not believe that every business deserves to survive this difficult period despite the inevitable refrain of “this time is different.”

There are plenty of well-run businesses that entered this period with conservative amounts of leverage, access to liquidity, and prudently managed balance sheets despite the siren call of low rates and the seemingly sanguine state of the economy a couple months ago.  Then there are businesses that borrowed as much cheap debt as possible and assumed growth would continue forever, leaving themselves very little margin for error.  Both types of companies will likely struggle through this turbulent period, but which company deserves to survive?  And, to ask an eerily familiar question, what sort of signal will it send to future borrowers if we bail out both?

Amid all this uncertainty, we continue to diligently search for attractive opportunities to lend to resilient companies with conservative amounts of leverage, adequate liquidity, and robust balance sheets.

Thank you for your investment.

Sincerely,

Fund holdings and sector allocations are subject to change at any time and should not be considered a recommendation to buy or sell any security. Please see the Schedule of Investments in this report for complete Fund holdings.

The ICE BofAML US High Yield Index tracks the performance of US dollar denominated below investment grade corporate debt publicly issued in the US domestic market.  Qualifying securities must have a below investment grade rating (based on an average of Moody’s, S&P and Fitch), at least 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity as of the rebalancing date, a fixed coupon schedule and a minimum amount outstanding of $250 million.  Bloomberg Barclays Capital U.S. Aggregate Bond Index is an index representing about 8,200 fixed income securities. To be included in the index, bonds must be rated investment grade by Moody’s and

S&P.  ICE BofAML U.S. Corporate Index is an unmanaged index of U.S. dollar denominated investment grade corporate debt securities publicly issued in the U.S. domestic market with at least one-year remaining term to final maturity. The Bloomberg Barclays US Gov/Credit 1-5Y TR Index measures the performance of U.S. dollar-denominated U.S. Treasury bonds, government-related bonds, and investment-grade U.S. corporate bonds that have a remaining maturity of greater than or equal to one year and less than five years.  ICE BofAML B U.S. High Yield Index is a subset of the ICE BofAML US High Yield Index including all securities with a given investment grade rating B.  ICE BofAML CCC & Lower US High Yield Index is a subset of the ICE BofAML US High Yield Index including all securities rated CCC and below, inclusive. You cannot invest directly in an index.

Bond ratings are grades given to bonds that indicate their credit quality as determined by private independent rating services such as Standard & Poor’s, Moody’s and Fitch.  These firms evaluate a bond issuer’s financial strength, or its ability to pay a bond’s principal and interest in a timely fashion.  Ratings are expressed as letters ranging from ‘AAA’, which is the highest grade, to ‘D’, which is the lowest grade.  In limited situations when the rating agency has not issued a formal rating, the rating agency will classify the security as nonrated.

A high-yield bond is a high paying bond with lower credit rating than investment-grade corporate bonds, Treasury bonds and municipal bonds.  Bonds in high yield indices tend to be less liquid and more volatile than U.S. Treasuries.  Corporate bonds come with significant credit risks and, although sometimes secured by collateral, do not have any guarantee of principal repayment. U.S. Treasury Bonds are long-term government debt securities with a maturity of more than 10 years.  They are guaranteed as to the timely payment of principal and interest and are backed by the full faith and credit of the U.S. Government. Investment Grade (IG) is a bond with credit rating of BBB or higher by Standard & Poor’s or Baa3 or higher by Moody’s.

Duration is an approximate measure of the price sensitivity of a fixed-income investment to a change in interest rates, expressed as a number of years. Call is an option contract that gives the holder the right to buy a certain quantity of an underlying security from the writer of the option, at a specified price up to a specified date. Covenants are requirements put in place to protect lenders from borrowers defaulting on their obligations due to actions that are detrimental to themselves or the business.  They most often take the form of financial ratios that must be maintained, such as a maximum debt-to-assets ratio or minimum interest coverage ratio.  Covenants can be classified as affirmative (requiring the borrower to perform specific actions) or negative (prohibiting the borrower from taking specific actions). Yield Curve is a line that plots yields (interest rates) of bonds having equal credit quality but differing maturity dates.  Capital Expenditure (CAPEX) is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life extending beyond the taxable year.  EBITDA is a measure of a company’s operating performance and refers to Earnings before Interest, Taxes, Depreciation and Amortization. Cash Flow measures the cash generating capability of a company by adding non-cash charges and interest to pretax income.

Opinions expressed are subject to change, are not guaranteed and should not be considered investment advice or recommendations to buy or sell any security.

The Intrepid Capital Funds are distributed by Quasar Distributors, LLC.

April 2, 2020

Dear Fellow Shareholders,

We at Intrepid Capital have long admired volatile markets as those periods (which have been few and far between over the past 10 years) tend to be when we are most active in our portfolios.  The first quarter of 2020 was one for the record books as volatility spiked to all-time highs and the S&P 500 descended into bear market territory in just 16 days, less than half the time it took for the previous record back in 1929, which set off the Great Depression.  As COVID-19 spread across the globe forcing governments to put measures in place that effectively shut down economies, uncertainty ensued.

The S&P 500 has moved over 1% in 24 of the last 25 trading days, which has only occurred two other times, both of which were during the Great Depression.  Volatility presents opportunity.  Opportunity to put cash to work and opportunity to upgrade the portfolio to more attractive investments.  Volatility often results in price moves that far exceed a corresponding change in value, and that is exactly what we witnessed in the first quarter.

All domestic equity indices were off materially for the quarter across the board with large caps continuing their outperformance versus small and mid-caps.  The S&P 400 Midcap Value Index was absolutely pummeled, dropping a whopping 47.50% from its high in January to its low in March.  It ended the quarter with a 35.09% decline compared to The Disciplined Value Fund which declined 20.71%.  The S&P 500 was the most resilient with just under a 20% decline for the quarter.

The Fund’s stock selection aided its performance in the quarter as the portfolio ex-cash outperformed its midcap benchmark.  Many of the larger positions going into the crash held up quite well like Dollar General which benefited from having 16,000+ stores across the country where people went to stock up on goods.  Cash levels varied in a wide range of zero to over 20% during the quarter as we navigated through the volatility.  At quarter end cash was 9.3%.

We added five new positions during the quarter: Americold Realty Trust (ticker: COLD), Cable One (ticker: CABO), Visa (ticker: V), Mastercard (ticker: MA), and Facebook (ticker: FB).

Americold Realty Trust is the second largest operator of temperature-controlled warehouses in the U.S. and globally.  It controls 178 warehouses that have a total capacity of 1.1 billion cubic feet.  It is the only pure-play publicly traded cold storage REIT (Real Estate Investment Trust). We like the cold storage business due to its “mission critical” nature as well as the overall stability of the industry.  The company has a demonstrated ability to grow organically at a reasonable rate in addition to having a

long runway of further consolidation opportunities to drive growth.  We view Americold as a way to participate in the growth of cold food/grocery delivery over the long term.

Cable One is a cable operator that was very early in the adoption of shifting focus to its high margin internet business at the expense of its video business.  This has resulted in expanding margins and organic growth that far exceeds its peers.  The company’s size is in the sweet spot to where it can acquire small operators and still realize meaningful accretion.  We suspect Cable One may be an acquisition target as there are limited opportunities for the large players to further consolidate.

Visa and Mastercard are the two largest electronic payment processors in the world.  Their large scale provides competitive advantages over peers and we anticipate continued transaction and volume growth over a very long period of time.  The businesses will of course be negatively impacted by pullbacks in consumer spending due to the coronavirus, but we felt that the share price had more than reflected the risks at the time of our purchases.

Facebook is much more than its namesake as past acquisitions like Instagram and WhatsApp have proven to be massively successful.  The company’s reach to billions across the globe allow it to garner the second largest market share of the fast-growing digital advertising industry.  Pullbacks in advertising budgets this year have caused earnings expectations to come down by over 20% and the share price had dropped even further.  When advertising spend rebounds Facebook should be a large beneficiary.  We purchased shares at an all-time low multiple on what we believe will be depressed earnings.

Activity in the portfolio went beyond these new positions—we adjusted many of the existing positions to become aggressive as valuations became more attractive.  In other words, we aimed to upgrade the portfolio to have more exposure to businesses that were both the highest quality and whose stock price had fallen the most.

The Federal Reserve and our lawmakers did their best to prevent us from doing so by introducing unprecedented measures to help stem losses in the stock market and shore up the economy.  In a series of moves, the Federal Reserve slashed interest rates by 150 basis points, introduced unlimited quantitative easing, and said it will buy corporate bonds and bond ETFs.  Congress introduced a $2 trillion stimulus package and quickly thereafter signaled that there would be more to come.  The Federal Reserve’s balance sheet ballooned in late March and the equity markets followed suit.

We can’t help but be deeply concerned with the recent jobless claims data.  About 16 million people have filed for unemployment over the past three weeks, shattering prior records each week by a long shot.  Will these jobs all come back like flipping a switch when the economy is “reopened?”  We tend to think not.

We mentioned Cable One and Facebook as new positions.  They also were two of the top three largest contributors to performance during the quarter along with AmerisourceBergen (ticker: ABC).  Kroger (ticker: KR) was also a strong performer

during the quarter.  We exited our Cable One position shortly after the end of the quarter as the stock rocketed up above our estimate of intrinsic value.  We still own the other businesses.

AmerisourceBergen is one of the largest drug distributors in the world.  It has been the subject of much controversy in recent years for its role in the opioid crisis.  Uncertainty around the potential liabilities has acted as an overhang on shares, but recent developments have helped alleviate some of these concerns.  We have viewed Amerisource as a defensive security all along and its shares exhibited these traits during the market turmoil.  We continue to value shares materially higher than where they currently trade and expect the multiple to expand as we move past the current issues.

Kroger is the largest traditional grocer in the U.S. and is one of the few beneficiaries of the coronavirus outbreak.  With restaurants shutting down and residents across the country being ordered to shelter in place, consumers rushed to stock up on goods.  Kroger is a natural destination as it is a one-stop shop where consumers can get food, alcohol, paper products, and fill their car up with gas in addition to picking up medication from its network of nearly 2,200 pharmacies.  The company disclosed on April 1 that identical store sales ex-gas were up 30% for the month of March.  While we may see gross margin pressure due to the nature of these sales and demand will surely taper off, we remain optimistic and believe shares continue to be undervalued.

The three largest detractors included Discovery (ticker: DISCK), Cubic (ticker: CUB), and Alpine Income Property Trust (ticker: PINE).

Discovery fell victim to advertisers slashing budgets as they are under significant pressure due to little consumer demand.  It was also widely expected that the Olympics would be cancelled or delayed which would further hurt Discovery’s profitability.  It became official in late March that the Summer Games would not take place this year.  Despite this, Discovery will likely generate significant free cash flow in 2020.  We would like to see the company pay down some debt as we believe elevated leverage also played a role in the poor share price performance.

We had always thought of Cubic and its businesses as defensive, so we were surprised to see shares act as poorly as they did.  Much of the transportation segment’s revenue is contracted so ridership at the large metropolitan clients should not be a factor.  These municipalities are undoubtedly under pressure, but we believe they will honor their contracts.  The company’s debt profile may have played a role in the share price performance, but Cubic took steps to address this in late March when it announced it had entered into a new term loan and expanded its revolver.  Leverage is still high, but its borrowing capacity increased by 30%, interest rates are now lower, and new covenants provide more flexibility.

Alpine Income Property Trust is a REIT with primarily single tenant triple net lease properties; however, many of its tenants are in the retail and entertainment subsectors being impacted the most by the lockdowns.  There have been reports of many

businesses, even those that appear to be on solid financial footing, asking for rent concessions.  We believe that some of this is posturing given the potential handouts (forgiven loans, etc.) that may come their way, but it is negatively impacting landlords including Alpine.  Shares in Alpine are much less liquid than we prefer which likely exacerbated the moves in the stock.  We reduced our position to manage risk but believe that the company’s net asset value is well in excess of where shares trade today.

Could we look back a year from now and all of this is just a distant memory, or is there more volatility to come?  Whichever the case, we are more optimistic about the portfolio’s positioning today than we have been in years.

Thank you for entrusting us with your capital.

Sincerely,

Clay Kirkland, CFA

Intrepid Disciplined Value Fund Portfolio Manager

Mutual fund investing involves risk.  Principal loss is possible.

Fund holdings and sector allocations are subject to change at any time and should not be considered a recommendation to buy or sell any security. Please see the Schedule of Investments in this report for complete Fund holdings.

Prior to April 1, 2013, the Fund was named the Intrepid All Cap Fund.

The S&P 500 Index is a broad based, unmanaged index of 500 stocks, which is widely recognized as representative of the U.S. equity market in general.  The S&P MidCap 400 Index seeks to track the performance of mid-cap U.S. equities, representing more than 7% of available U.S. market cap.  You cannot invest directly in an index.

Basis Point (bps) is a unit that is equal to 1/100th of 1% and is used to denote the change in a financial instrument. Cash Flow measures the cash generating capability of a company by adding non-cash charges and interest to pretax income.

Free Cash Flow measures the cash generating capability of a company by subtracting capital expenditures from cash flow from operations.

Opinions expressed are subject to change, are not guaranteed and should not be considered investment advice or recommendations to buy or sell any security.

The Intrepid Capital Funds are distributed by Quasar Distributors, LLC.

As a shareholder of the Intrepid Capital Management Funds Trust (the “Funds”), you incur ongoing costs, including management fees; distribution and/or service fees; and other expenses incurred by the Funds.  This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held the entire period of October 1, 2019 through March 31, 2020.

Actual Expenses

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The first line of the following table provides information about actual account values and actual expenses.  Although the Funds charge no sales load or transaction fees, you will be assessed fees for outgoing wire transfers, returned checks or stop payment orders at prevailing rates charged by U.S. Bank Global Fund Services, the Funds’ transfer agent.  If you request a redemption be made by wire transfer, currently a $15.00 fee is charged by the Funds’ transfer agent.  To the extent that a Fund invests in shares of other investment companies as part of its investment strategy, you will indirectly bear your proportionate share of any fees and expenses charged by the underlying funds in which the Fund invests in addition to the expenses of the Fund.  Actual expenses of the underlying funds are expected to vary among the various underlying funds.  These expenses are not included in the following example.  The example includes, but is not limited to, management fees, shareholder servicing fees, distribution fees, fund accounting, custody and transfer agent fees.  However, the example below does not include portfolio trading commissions and related expenses, interest expense and other extraordinary expenses as determined under generally accepted accounting principles.  You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period.  Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

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The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return.  The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.  You may use this information to compare the ongoing costs of investing in the Funds and other funds.  To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees.  Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative costs of owning different funds.  In addition, if these transactional costs were included, your costs would have been higher.

INTREPID CAPITAL FUND – INVESTOR CLASS

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INTREPID CAPITAL FUND – INSTITUTIONAL CLASS

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INTREPID ENDURANCE FUND – INVESTOR CLASS

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INTREPID ENDURANCE FUND – INSTITUTIONAL CLASS

INTREPID INCOME FUND

INTREPID DISCIPLINED VALUE FUND

INTREPID CAPITAL FUND

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*  Cash, cash equivalents and other assets less liabilities.

INTREPID ENDURANCE FUND

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The sector and industry classifications presented in this report, present the Global Industry Classification Standard (GICS^®).  GICS^® was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC (“S&P”).  GICS^® is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.

Note: For purposes of categorizing securities for compliance with Section 8(b)(1) of the Investment Company Act of 1940, as amended, the Fund uses more specific industry classifications.

INTREPID INCOME FUND

*  Cash, cash equivalents and other assets less liabilities.

INTREPID DISCIPLINED VALUE FUND

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Note: For purposes of categorizing securities for compliance with Section 8(b)(1) of the Investment Company Act of 1940, as amended, the Fund uses more specific industry classifications.

ADR - American Depository Receipt

Percentages are stated as a percent of net assets.

NOK - Norwegian Krone

USD - U.S. Dollars

ADR - American Depository Receipt

Percentages are stated as a percent of net assets.

EUR - Euro

GBP - British Pound

MXN - Mexican Peso

NOK - Norwegian Krone

USD - U.S. Dollars

Percentages are stated as a percent of net assets.