##### Table of Contents



United States Securities and Exchange Commission
 Washington, D.C. 20549
 Form 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 Commission file number 000-24498
 DIAMOND HILL INVESTMENT GROUP, INC.
  Ohio
    
    65-0190407(State of incorporation)
    
    (I.R.S. Employer Identification No.)325 John H. McConnell Blvd., Suite 200, Columbus,
Ohio 43215
    
    614-255-3333(Address of principal executive offices) (Zip Code)
    
    (Registrants telephone number)
  Title of each class
    
    Name of each exchange on which registeredCommon shares, no par value
    
    The NASDAQ Stock Market LLC
  Yes o No þ
 Yes o No þ
 Yes þ No o
 Yes o No o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 Yes o No þ




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##### 



Required Information
    
    PagePart IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    8Item 1B. Unresolved Staff Comments
    
    
    9Item 2. Properties
    
    
    9Item 3. Legal Proceedings
    
    
    9Item 4. (Removed and Reserved)
    
    
    9Part IIItem 5. Market for Registrants Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities
    
    
    10Item 6. Selected Financial Data
    
    
    12Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    12Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 8. Financial Statements and Supplementary Data
    
    
    21Item 9. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosures
    
    
    35Item 9A. Controls and Procedures
    
    
    35Item 9B. Other Information
    
    
    36Part IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    36Item 11. Executive Compensation
    
    
    36Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
    
    
    36Item 13. Certain Relationships and Related Transactions, and
Director Independence
    
    
    37Item 14. Principal Accounting Fees and Services
    
    
    37Part IVItem 15. Exhibits, Financial Statement Schedules
    
    
    38Signatures
    
    
    39Exhibit 10.4Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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##### Table of Contents



PART I
 
 Item 1.
    
    Business
 Forward-Looking Statements
  General
    Investment Advisory Activities
   3




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Marketing
  Assets Under Management
  Assets Under Management by ProductAs of December 31,(in millions)
    
    2010
    
    
    2009
    
    
    2008Mutual funds
    
    $
    4,198
    
    
    $
    3,494
    
    
    $
    3,010Sub-advised mutual funds
    
    
    930
    
    
    
    146
    
    
    
    104Separate accounts
    
    
    3,284
    
    
    
    2,423
    
    
    
    1,175Private investment funds
    
    
    211
    
    
    
    220
    
    
    
    221Total AUM
    
    $
    8,623
    
    
    $
    6,283
    
    
    $
    4,510
  4




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##### Table of Contents



Assets Under Managementby Investment ObjectiveAs of December 31,(in millions)
    
    2010
    
    
    2009
    
    
    2008Small Cap
    
    $
    948
    
    
    $
    625
    
    
    $
    403Small-Mid Cap
    
    
    196
    
    
    
    146
    
    
    
    102Large Cap
    
    
    4,631
    
    
    
    2,654
    
    
    
    1,266Select
    
    
    422
    
    
    
    400
    
    
    
    258Long-Short
    
    
    2,251
    
    
    
    2,300
    
    
    
    2,331Strategic Income
    
    
    175
    
    
    
    158
    
    
    
    150Total AUM
    
    $
    8,623
    
    
    $
    6,283
    
    
    $
    4,510
 Change in Assets Under ManagementFor the Year Ended December 31,(in millions)
    
    2010
    
    
    2009
    
    
    2008AUM at beginning of the year
    
    $
    6,283
    
    
    $
    4,510
    
    
    $
    4,403Net cash inflows (outflows)mutual funds
    
    
    467
    
    
    
    (109
    )
    
    
    1,328sub-advised mutual funds
    
    
    714
    
    
    
    6
    
    
    
    54separate accounts
    
    
    532
    
    
    
    734
    
    
    
    757private investment funds
    
    
    (15
    )
    
    
    (52
    )
    
    
    (162
    )1,698
    
    
    
    579
    
    
    
    1,977Net market appreciation (depreciation) and
income
    
    
    642
    
    
    
    1,194
    
    
    
    (1,870
    )Increase during the year
    
    
    2,340
    
    
    
    1,773
    
    
    
    107AUM at end of the year
    
    $
    8,623
    
    
    $
    6,283
    
    
    $
    4,510
 Diamond Hill Funds
  Diamond Hill FundsAssets by Distribution ChannelAs of December 31,(in millions)
    
    2010
    
    
    2009
    
    
    2008Registered investment advisors
    
    $
    1,080
    
    
    $
    1,272
    
    
    $
    1,197Independent broker/dealers
    
    
    815
    
    
    
    757
    
    
    
    781Wirehouse broker/dealers
    
    
    775
    
    
    
    824
    
    
    
    645Defined contribution and banks
    
    
    1,290
    
    
    
    254
    
    
    
    166Other
    
    
    183
    
    
    
    345
    
    
    
    188Total
    
    $
    4,143
    
    
    $
    3,452
    
    
    $
    2,977
 Sub-advised mutual funds
  Institutional Accounts
   5




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##### Table of Contents

================================================================================

Growth Prospects
   
    
    adding additional business development and support staff;
 
    
    attending and sponsoring key industry conferences; and
 
    
    adding systems infrastructure to support client service and portfolio
administration.
    Fund Administration Activities
  Competition
   6




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##### Table of Contents



Corporate Investment Portfolio
  Regulation
   Contractual Relationships with the Diamond Hill Funds
  Employees
  SEC Filings
   7




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##### Table of Contents



ITEM 1A.
    
    Risk Factors
  Poor investment performance of our products could affect our sales or reduce the amount of
assets under management, potentially negatively impacting revenue and net income.
  The Companys AUM, which impacts revenue, is subject to significant fluctuations.
  The Companys success depends on its key personnel, and its financial performance could be
negatively affected by the loss of their services.
  The Company is subject to substantial competition in all aspects of its business.
  
    
    asset management firms;
    
    mutual fund companies;
    
    commercial banks and thrift institutions;
    
    insurance companies;
    
    hedge funds; and
    
    brokerage and investment banking firms.
   8




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##### Table of Contents



A significant portion of the Companys revenues are based on contracts with the Diamond Hill
Funds that are subject to termination without cause and on short notice.
  The Companys business is subject to substantial governmental regulation.
   
 ITEM 1B.
    
    Unresolved Staff Comments
  
 ITEM 2.
    
    Properties
   
 ITEM 3.
    
    Legal Proceedings
  
 ITEM 4.
    
    (Removed and Reserved)
  9




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PART II
 
 ITEM 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 ® ® ®
 
 12/31/2005
    
    
    12/31/2006
    
    
    12/31/2007
    
    
    12/31/2008
    
    
    12/31/2009
    
    
    12/31/2010Diamond Hill Investment Group, Inc.
    
    
    100
    
    
    
    268
    
    
    
    234
    
    
    
    238
    
    
    
    274
    
    
    
    364Russell Microcap®Index
    
    
    100
    
    
    
    117
    
    
    
    107
    
    
    
    65
    
    
    
    82
    
    
    
    106Peer Group*
    
    
    100
    
    
    
    112
    
    
    
    119
    
    
    
    44
    
    
    
    66
    
    
    
    77
 
 *
    
    The following companies are included in the Peer Group: Westwood Holdings Group, Inc.; Epoch
Holding Corp.; Eaton Vance Corp.; Waddell & Reed Financial, Inc.; Federated Investors, Inc.; GAMCO
Investors, Inc.; Affiliated Managers Group, Inc.; Legg Mason, Inc.; U.S. Global Investors, Inc.;
Alliance Bernstein Holding L.P.; Janus Capital Group, Inc.; SEI Investments, Co.; Cohen & Steers,
Inc.; and Calamos Asset Management, Inc.  10




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2010
    
    
    2009High
    
    
    Low
    
    
    Dividend
    
    
    High
    
    
    Low
    
    
    DividendPrice
    
    
    Price
    
    
    Per Share
    
    
    Price
    
    
    Price
    
    
    Per ShareQuarter ended:March 31
    
    $
    74.84
    
    
    $
    54.58
    
    
    $
    
    
    
    $
    67.74
    
    
    $
    28.51
    
    
    $
    June 30
    
    $
    82.49
    
    
    $
    55.88
    
    
    $
    
    
    
    $
    45.50
    
    
    $
    36.26
    
    
    $
    September 30
    
    $
    74.95
    
    
    $
    50.52
    
    
    $
    
    
    
    $
    62.00
    
    
    $
    38.48
    
    
    $
    December 31
    
    $
    86.15
    
    
    $
    68.86
    
    
    $
    13.00
    
    
    $
    71.95
    
    
    $
    52.33
    
    
    $
    10.00
  Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  Total Number
    
    
    Maximum Numberof Shares Purchased
    
    
    of Shares That Mayas part of a Publicly
    
    
    Yet Be PurchasedTotal Number
    
    
    Average Price
    
    
    Announced Plans
    
    
    Under the Plans orPeriod
    
    of Shares Purchased
    
    
    Paid Per Share
    
    
    or Programs
    
    
    Programs (1)October 1,
2010 through October 31, 2010
    
    
    
    
    
    
    
    
    
    
    16,105
    
    
    
    333,895November 1,
2010 through
November 30, 2010
    
    
    
    
    
    
    
    
    
    
    16,105
    
    
    
    333,895December 1,
2010 through
December 31, 2010
    
    
    
    
    
    
    
    
    
    
    16,105
    
    
    
    333,895
 (1) -
    
    The Companys current share repurchase program was announced on August 9, 2007. The
board of directors authorized management to repurchase up to 350,000 shares of its common stock in
the open market and in private transactions in accordance with applicable securities laws. The
Companys stock repurchase program is not subject to an expiration date.  11




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##### Table of Contents



ITEM 6.
    
    Selected Financial Data
  For the Years Ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Income Statement Data (in thousands):Total revenues
    
    $
    56,704
    
    
    $
    43,562
    
    
    $
    47,019
    
    
    $
    41,308
    
    
    $
    31,905Compensation and related costs
    
    
    30,991
    
    
    
    24,114
    
    
    
    26,120
    
    
    
    20,007
    
    
    
    18,147Other expenses
    
    
    7,240
    
    
    
    7,336
    
    
    
    7,170
    
    
    
    7,223
    
    
    
    3,989Total expenses
    
    
    38,231
    
    
    
    31,450
    
    
    
    33,290
    
    
    
    27,230
    
    
    
    22,136Net operating income
    
    
    18,473
    
    
    
    12,112
    
    
    
    13,729
    
    
    
    14,078
    
    
    
    9,769Net income
    
    
    12,402
    
    
    
    11,374
    
    
    
    3,276
    
    
    
    9,932
    
    
    
    8,065Operating profit margin
    
    
    32.6
    %
    
    
    27.8
    %
    
    
    29.2
    %
    
    
    34.1
    %
    
    
    30.6
    %Per Share Information:Basic earnings
    
    $
    4.48
    
    
    $
    4.40
    
    
    $
    1.36
    
    
    $
    4.61
    
    
    $
    4.51Diluted earnings
    
    
    4.48
    
    
    
    4.40
    
    
    
    1.36
    
    
    
    4.39
    
    
    
    3.63Cash dividend declared
    
    
    13.00
    
    
    
    10.00
    
    
    
    10.00
    
    
    
    
    
    
    
    Weighted Average Shares OutstandingBasic
    
    
    2,766,741
    
    
    
    2,582,998
    
    
    
    2,400,142
    
    
    
    2,155,829
    
    
    
    1,787,390Diluted
    
    
    2,767,895
    
    
    
    2,587,751
    
    
    
    2,408,476
    
    
    
    2,264,234
    
    
    
    2,219,580
 At December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Balance Sheet Data (in thousands):Total assets
    
    $
    28,566
    
    
    $
    40,505
    
    
    $
    44,540
    
    
    $
    53,284
    
    
    $
    37,236Long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shareholders equity
    
    
    7,498
    
    
    
    22,981
    
    
    
    30,246
    
    
    
    39,308
    
    
    
    20,483Assets Under Management (in millions)
    
    $
    8,623
    
    
    $
    6,283
    
    
    $
    4,510
    
    
    $
    4,403
    
    
    $
    3,708Net Client Flows (in millions)
    
    
    1,698
    
    
    
    579
    
    
    
    1,977
    
    
    
    602
    
    
    
    1,938
 
 ITEM 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    12




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Assets Under Management by ProductAs of December 31,(in millions)
    
    2010
    
    
    2009
    
    
    2008Mutual funds
    
    $
    4,198
    
    
    $
    3,494
    
    
    $
    3,010Sub-advised funds
    
    
    930
    
    
    
    146
    
    
    
    104Separate accounts
    
    
    3,284
    
    
    
    2,423
    
    
    
    1,175Private investment funds
    
    
    211
    
    
    
    220
    
    
    
    221Total AUM
    
    $
    8,623
    
    
    $
    6,283
    
    
    $
    4,510
 Change in Assets Under ManagementFor the Year Ended December 31,(in millions)
    
    2010
    
    
    2009
    
    
    2008AUM at beginning of the year
    
    $
    6,283
    
    
    $
    4,510
    
    
    $
    4,403Net cash inflows (outflows)mutual funds
    
    
    467
    
    
    
    (109
    )
    
    
    1,328sub-advised mutual funds
    
    
    714
    
    
    
    6
    
    
    
    54separate accounts
    
    
    532
    
    
    
    734
    
    
    
    757private investment funds
    
    
    (15
    )
    
    
    (52
    )
    
    
    (162
    )1,698
    
    
    
    579
    
    
    
    1,977Net market appreciation (depreciation) and income
    
    
    642
    
    
    
    1,194
    
    
    
    (1,870
    )Increase during the year
    
    
    2,340
    
    
    
    1,773
    
    
    
    107AUM at end of the year
    
    $
    8,623
    
    
    $
    6,283
    
    
    $
    4,510
 Consolidated Results of Operations
  (in thousands, except per share data)
    
    2010
    
    
    2009
    
    
    % Change
    
    
    2009
    
    
    2008
    
    
    % ChangeNet operating income
    
    $
    18,473
    
    
    $
    12,112
    
    
    
    53
    %
    
    $
    12,112
    
    
    $
    13,729
    
    
    
    -12
    %Net operating income after tax(a)
    
    $
    11,643
    
    
    $
    7,867
    
    
    
    48
    %
    
    $
    7,867
    
    
    $
    8,143
    
    
    
    -3
    %Net income
    
    $
    12,402
    
    
    $
    11,374
    
    
    
    9
    %
    
    $
    11,374
    
    
    $
    3,276
    
    
    
    247
    %Net operating income after tax per
share(a)Basic
    
    $
    4.21
    
    
    $
    3.05
    
    
    
    38
    %
    
    $
    3.05
    
    
    $
    3.39
    
    
    
    -10
    %Diluted
    
    $
    4.21
    
    
    $
    3.04
    
    
    
    38
    %
    
    $
    3.04
    
    
    $
    3.38
    
    
    
    -10
    %Net income per shareBasic
    
    $
    4.48
    
    
    $
    4.40
    
    
    
    2
    %
    
    $
    4.40
    
    
    $
    1.36
    
    
    
    224
    %Diluted
    
    $
    4.48
    
    
    $
    4.40
    
    
    
    2
    %
    
    $
    4.40
    
    
    $
    1.36
    
    
    
    224
    %Operating profit margin
    
    
    32.6
    %
    
    
    27.8
    %
    
    NM
    
    
    
    27.8
    %
    
    
    29.2
    %
    
    NM
 (a) -
    
    Net operating income after tax is a non-GAAP performance measure. See Use of
Supplemental Data as Non-GAAP Performance Measure on page 18 of this report. Year Ended December 31, 2010 compared with Year Ended December 31, 2009
   13




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Year Ended December 31, 2009 compared with Year Ended December 31, 2008
  Revenue
 (in thousands)
    
    2010
    
    
    2009
    
    
    %Change
    
    
    2009
    
    
    2008
    
    
    % ChangeInvestment advisory
    
    $
    49,249
    
    
    $
    37,472
    
    
    
    31
    %
    
    $
    37,472
    
    
    $
    40,865
    
    
    
    -8
    %Mutual fund administration, net
    
    $
    7,455
    
    
    
    6,090
    
    
    
    22
    %
    
    
    6,090
    
    
    
    6,154
    
    
    
    -1
    %Total
    
    
    56,704
    
    
    
    43,562
    
    
    
    30
    %
    
    
    43,562
    
    
    
    47,019
    
    
    
    -7
    %
 Revenue for the Year Ended December 31, 2010 compared with Year Ended December 31, 2009
  Investment Advisory Fees.
 Mutual Fund Administration Fees.
 Revenue for the Year Ended December 31, 2009 compared with Year Ended December 31, 2008
  Investment Advisory Fees.
  14




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Mutual Fund Administration Fees.
 Expenses
 (in thousands)
    
    2010
    
    
    2009
    
    
    % Change
    
    
    2009
    
    
    2008
    
    
    % ChangeCompensation and related costs
    
    $
    30,991
    
    
    $
    24,114
    
    
    
    29
    %
    
    $
    24,114
    
    
    $
    26,120
    
    
    
    -8
    %General and administrative
    
    
    3,409
    
    
    
    3,133
    
    
    
    9
    %
    
    
    3,133
    
    
    
    2,643
    
    
    
    19
    %Sales and marketing
    
    
    854
    
    
    
    751
    
    
    
    14
    %
    
    
    751
    
    
    
    796
    
    
    
    -6
    %Third party distribution
    
    
    1,036
    
    
    
    1,112
    
    
    
    -7
    %
    
    
    1,112
    
    
    
    1,452
    
    
    
    -23
    %Mutual fund administration
    
    
    1,941
    
    
    
    2,340
    
    
    
    -17
    %
    
    
    2,340
    
    
    
    2,279
    
    
    
    3
    %Total
    
    
    38,231
    
    
    
    31,450
    
    
    
    22
    %
    
    
    31,450
    
    
    
    33,290
    
    
    
    -6
    %
 Expenses for the Year Ended December 31, 2010 compared with Year Ended December 31, 2009
 Compensation and Related Costs.
 General and Administrative.
 Sales and Marketing.
 Third Party Distribution.
 Mutual Fund Administration.
  15




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##### Table of Contents



Expenses for the Year Ended December 31, 2009 compared with Year Ended December 31, 2008
 Compensation and Related Costs.
 General and Administrative.
 Sales and Marketing.
 Third Party Distribution.
 Mutual Fund Administration.
 Beacon Hill Fund Services
  For the Year EndedDecember 31,2010
    
    
    2009
    
    
    2008Revenue1
    
    $
    1,588,243
    
    
    $
    1,023,662
    
    
    $
    116,516Expenses
    
    
    2,407,417
    
    
    
    1,999,922
    
    
    
    1,513,731Net loss
    
    $
    (819,174
    )
    
    $
    (976,260
    )
    
    $
    (1,397,215
    )
 1
    
    Beacon Hills 2010, 2009, and 2008 revenue includes $511,625, $146,067, and $0,
respectively, of inter-company revenue earned from services provided to DHCM. This amount has
been eliminated from the Consolidated Statements of Income. Liquidity and Capital Resources
   16




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17




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Selected Quarterly Information
  At or For the Quarter Ended2010
    
    
    2009(in thousands, except per share data)
    
    12/31
    
    
    09/30
    
    
    06/30
    
    
    03/31
    
    
    12/31
    
    
    09/30
    
    
    06/30
    
    
    03/31Assets Under
Management(in millions)
    
    $
    8,623
    
    
    $
    7,080
    
    
    $
    6,482
    
    
    $
    6,876
    
    
    $
    6,283
    
    
    $
    5,489
    
    
    $
    4,733
    
    
    $
    3,909Total revenue
    
    
    15,516
    
    
    
    14,043
    
    
    
    13,754
    
    
    
    13,391
    
    
    
    13,715
    
    
    
    11,372
    
    
    
    9,592
    
    
    
    8,883Total operating expenses
    
    
    9,272
    
    
    
    9,844
    
    
    
    9,652
    
    
    
    9,462
    
    
    
    9,110
    
    
    
    8,523
    
    
    
    7,061
    
    
    
    6,756Operating income
    
    
    6,244
    
    
    
    4,199
    
    
    
    4,102
    
    
    
    3,929
    
    
    
    4,605
    
    
    
    2,849
    
    
    
    2,531
    
    
    
    2,127Investment Return
    
    
    974
    
    
    
    1,170
    
    
    
    (1,184
    )
    
    
    245
    
    
    
    881
    
    
    
    2,064
    
    
    
    4,032
    
    
    
    (1,579
    )Net income
    
    $
    4,464
    
    
    $
    3,438
    
    
    $
    1,830
    
    
    $
    2,670
    
    
    $
    3,504
    
    
    $
    3,204
    
    
    $
    4,315
    
    
    $
    351Diluted EPS
    
    $
    1.60
    
    
    $
    1.24
    
    
    $
    0.66
    
    
    $
    0.98
    
    
    $
    1.34
    
    
    $
    1.23
    
    
    $
    1.66
    
    
    $
    0.14Diluted shares outstanding
    
    
    2,794
    
    
    
    2,779
    
    
    
    2,774
    
    
    
    2,721
    
    
    
    2,621
    
    
    
    2,612
    
    
    
    2,603
    
    
    
    2,516
 Contractual Obligations
  Payments Due by PeriodTotal
    
    
    2011
    
    
    2012-2013
    
    
    2014-2015
    
    
    LaterOperating lease obligations
    
    $
    1,973,000
    
    
    $
    340,000
    
    
    $
    704,000
    
    
    $
    719,000
    
    
    $
    210,000Purchase obligations
    
    
    2,989,000
    
    
    
    2,413,000
    
    
    
    434,000
    
    
    
    142,000
    
    
    
    Total
    
    $
    4,962,000
    
    
    $
    2,753,000
    
    
    $
    1,138,000
    
    
    $
    861,000
    
    
    $
    210,000
 Use of Supplemental Data as Non-GAAP Performance Measure
 Net Operating Income After Tax
   18




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##### Table of Contents



Year Ended December 31,(in thousands, except per share data)
    
    2010
    
    
    2009
    
    
    2008Net operating income, GAAP basis
    
    $
    18,473
    
    
    $
    12,112
    
    
    $
    13,729Non-GAAP Adjustments:Tax Provision excluding impact of Investment Return
    
    
    6,830
    
    
    
    4,245
    
    
    
    5,586Net operating income after tax, non-GAAP basis
    
    
    11,643
    
    
    
    7,867
    
    
    
    8,143Net operating income after tax per basic share, non-GAAP basis
    
    $
    4.21
    
    
    $
    3.05
    
    
    $
    3.39Net operating income after tax per diluted share, non-GAAP basis
    
    $
    4.21
    
    
    $
    3.04
    
    
    $
    3.38Basic weighted average shares outstanding, GAAP basis
    
    
    2,767
    
    
    
    2,583
    
    
    
    2,400Diluted weighted average shares outstanding, GAAP basis
    
    
    2,768
    
    
    
    2,588
    
    
    
    2,408
  Off-Balance Sheet Arrangements
  Critical Accounting Policies and Estimates
 Provisions for Income Taxes.
 Revenue Recognition on Incentive-Based Advisory Contracts.
 Revenue Recognition when Acting as an Agent vs. Principal.
  19




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##### Table of Contents



ITEM 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    Fair Value Assuming a
    
    
    Fair Value Assuming aFair Value as of
    
    
    Hypothetical 10%
    
    
    Hypothetical 10%December 31, 2010
    
    
    Increase
    
    
    DecreaseEquity investments
    
    $
    11,328,494
    
    
    $
    12,461,343
    
    
    $
    10,195,645Bond investments
    
    
    198,566
    
    
    
    218,423
    
    
    
    178,709Total
    
    $
    11,527,060
    
    
    $
    12,679,766
    
    
    $
    10,374,354
  20




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##### Table of Contents



ITEM 8.
    
    Financial Statements and Supplementary Data
 Report of Independent Registered Public Accounting Firm
 
      
  21




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##### Table of Contents



Diamond Hill Investment Group, Inc.

Consolidated Balance Sheets
 December 31,2010
    
    
    2009ASSETSCash and cash equivalents
    
    $
    5,775,526
    
    
    $
    11,513,194Investment portfolio
    
    
    11,527,060
    
    
    
    16,429,967Accounts receivable
    
    
    8,695,103
    
    
    
    10,144,004Prepaid expenses
    
    
    787,033
    
    
    
    724,825Fixed assets, net of depreciation, and other assets
    
    
    907,670
    
    
    
    1,171,670Deferred taxes
    
    
    873,474
    
    
    
    520,965Total assets
    
    $
    28,565,866
    
    
    $
    40,504,625LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesAccounts payable and accrued expenses
    
    $
    4,101,079
    
    
    $
    4,465,011Accrued incentive compensation
    
    
    16,111,250
    
    
    
    12,300,650Income tax payable
    
    
    855,285
    
    
    
    758,257Total liabilities
    
    
    21,067,614
    
    
    
    17,523,918Commitments and contingencies
    
    
    
    
    
    
    Shareholders EquityCommon stock, no par value
7,000,000 shares authorized;
2,795,683 issued and outstanding at December 31, 2010;
2,677,577 issued and outstanding at December 31, 2009
    
    
    34,423,011
    
    
    
    26,922,484Preferred stock, undesignated, 1,000,000 shares
authorized and unissued
    
    
    
    
    
    
    Deferred compensation
    
    
    (7,137,729
    )
    
    
    (8,070,697
    )Retained earnings/(Accumulated deficit)
    
    
    (19,787,030
    )
    
    
    4,128,920Total shareholders equity
    
    
    7,498,252
    
    
    
    22,980,707Total liabilities and shareholders equity
    
    $
    28,565,866
    
    
    $
    40,504,625Book value per share
    
    $
    2.68
    
    
    $
    8.58
   22




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##### Table of Contents



Diamond Hill Investment Group, Inc.

Consolidated Statements of Income
 Year Ended December 31,2010
    
    
    2009
    
    
    2008REVENUES:Investment advisory
    
    $
    49,248,586
    
    
    $
    37,472,407
    
    
    $
    40,865,296Mutual fund administration, net
    
    
    7,455,537
    
    
    
    6,089,979
    
    
    
    6,153,919Total revenue
    
    
    56,704,123
    
    
    
    43,562,386
    
    
    
    47,019,215OPERATING EXPENSES:Compensation and related costs
    
    
    30,990,572
    
    
    
    24,113,631
    
    
    
    26,120,040General and administrative
    
    
    3,408,981
    
    
    
    3,133,359
    
    
    
    2,643,274Sales and marketing
    
    
    853,851
    
    
    
    751,040
    
    
    
    796,438Third party distribution
    
    
    1,036,231
    
    
    
    1,112,460
    
    
    
    1,452,087Mutual fund administration
    
    
    1,941,160
    
    
    
    2,339,544
    
    
    
    2,278,562Total operating expenses
    
    
    38,230,795
    
    
    
    31,450,034
    
    
    
    33,290,401NET OPERATING INCOME
    
    
    18,473,328
    
    
    
    12,112,352
    
    
    
    13,728,814Investment return
    
    
    1,205,194
    
    
    
    5,398,636
    
    
    
    (8,205,051
    )INCOME BEFORE TAXES
    
    
    19,678,522
    
    
    
    17,510,988
    
    
    
    5,523,763Income tax provision
    
    
    (7,276,081
    )
    
    
    (6,137,045
    )
    
    
    (2,247,685
    )NET INCOME
    
    $
    12,402,441
    
    
    $
    11,373,943
    
    
    $
    3,276,078Earnings per shareBasic
    
    $
    4.48
    
    
    $
    4.40
    
    
    $
    1.36Diluted
    
    $
    4.48
    
    
    $
    4.40
    
    
    $
    1.36Weighted average shares outstandingBasic
    
    
    2,766,741
    
    
    
    2,582,998
    
    
    
    2,400,142Diluted
    
    
    2,767,895
    
    
    
    2,587,751
    
    
    
    2,408,476
   23




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##### Table of Contents



Diamond Hill Investment Group, Inc.
 Consolidated Statements of Shareholders Equity
 Shares
    
    
    Common
    
    
    Treasury
    
    
    Deferred
    
    
    Retained EarningsOutstanding
    
    
    Stock
    
    
    Stock
    
    
    Compensation
    
    
    (Accumulated Deficit)
    
    
    TotalBalance at January 1, 2008
    
    
    2,243,653
    
    
    $
    27,719,024
    
    
    $
    
    
    
    $
    (4,056,015
    )
    
    $
    15,644,523
    
    
    $
    39,307,532Deferred compensation
    
    
    63,450
    
    
    
    5,184,801
    
    
    
    
    
    
    
    (5,184,801
    )
    
    
    
    
    
    
    Recognition of current year
deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,332,601
    
    
    
    
    
    
    
    4,332,601Issuance of stock grants
    
    
    85,796
    
    
    
    6,021,482
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,021,482Issuance of stock related to
401k plan match
    
    
    8,506
    
    
    
    638,796
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    638,796FAS 123R compensation expense
    
    
    
    
    
    
    2,233
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,233Tax benefit from equity transactions
    
    
    
    
    
    
    3,997,348
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,997,348Payment of taxes withheld related
to employee stock transactions
    
    
    (33,991
    )
    
    
    (2,777,545
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,777,545
    )Purchase of common stock related
to option exercises
    
    
    (4,452
    )
    
    
    (381,843
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (381,843
    )Exercise of options/warrants for
common stock
    
    
    95,500
    
    
    
    1,132,204
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,132,204Repurchase of common stock
    
    
    (11,163
    )
    
    
    (862,115
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (862,115
    )Dividend Paid of $10.00 per share
    
    
    
    
    
    
    (24,440,884
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,440,884
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,276,078
    
    
    
    3,276,078Balance at December 31, 2008
    
    
    2,447,299
    
    
    $
    16,233,501
    
    
    $
    
    
    
    $
    (4,908,215
    )
    
    $
    18,920,601
    
    
    $
    30,245,887Deferred compensation
    
    
    78,092
    
    
    
    4,836,595
    
    
    
    
    
    
    
    (4,836,595
    )
    
    
    
    
    
    
    Recognition of current year
deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,674,113
    
    
    
    
    
    
    
    1,674,113Issuance of stock grants
    
    
    135,313
    
    
    
    5,032,290
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,032,290Issuance of common stock related
to 401k plan match
    
    
    15,610
    
    
    
    758,459
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    758,459Tax benefit from equity transactions
    
    
    
    
    
    
    134,741
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134,741Payment of taxes withheld
related to employee stock
transactions
    
    
    (2,737
    )
    
    
    (140,602
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (140,602
    )Exercise of options/warrants
for common stock
    
    
    4,000
    
    
    
    67,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,500Dividend Paid of $10.00 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,165,624
    )
    
    
    (26,165,624
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,373,943
    
    
    
    11,373,943Balance at December 31, 2009
    
    
    2,677,577
    
    
    $
    26,922,484
    
    
    $
    
    
    
    $
    (8,070,697
    )
    
    $
    4,128,920
    
    
    $
    22,980,707Deferred compensation
    
    
    20,753
    
    
    
    1,458,898
    
    
    
    
    
    
    
    (1,458,898
    )
    
    
    
    
    
    
    Recognition of current year
deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,391,866
    
    
    
    
    
    
    
    2,391,866Issuance of stock grants
    
    
    83,611
    
    
    
    5,182,983
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,182,983Issuance of common stock related
to 401k plan match
    
    
    13,631
    
    
    
    897,842
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    897,842Tax benefit from equity transactions
    
    
    
    
    
    
    84,375
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,375Payment of taxes withheld
related to employee stock
transactions
    
    
    (1,889
    )
    
    
    (146,071
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (146,071
    )Exercise of options/warrants
for common stock
    
    
    2,000
    
    
    
    22,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,500Dividend Paid of $13.00 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,318,391
    )
    
    
    (36,318,391
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,402,441
    
    
    
    12,402,441Balance at December 31, 2010
    
    
    2,795,683
    
    
    $
    34,423,011
    
    
    $
    
    
    
    $
    (7,137,729
    )
    
    $
    (19,787,030
    )
    
    $
    7,498,252
  24




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##### Table of Contents



Diamond Hill Investment Group, Inc.
Consolidated Statements of Cash Flows
 Year Ended December 31,2010
    
    
    2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net Income
    
    $
    12,402,441
    
    
    $
    11,373,943
    
    
    $
    3,276,078Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Depreciation
on furniture and equipment
    
    
    326,529
    
    
    
    268,572
    
    
    
    181,908Amortization of deferred compensation
    
    
    2,391,866
    
    
    
    1,674,113
    
    
    
    4,332,601(Increase) decrease in accounts receivable
    
    
    1,448,901
    
    
    
    (4,804,446
    )
    
    
    354,716Increase (decrease) in deferred income taxes
    
    
    (382,227
    )
    
    
    1,438,658
    
    
    
    (2,535,960
    )Stock option expense
    
    
    
    
    
    
    
    
    
    
    2,233Noncash director fee expense
    
    
    179,836
    
    
    
    180,074
    
    
    
    167,281Investment gain/loss, net
    
    
    167,495
    
    
    
    (4,055,840
    )
    
    
    3,298,360Increase in accrued liabilities
    
    
    8,449,814
    
    
    
    7,323,481
    
    
    
    8,281,581Other changes in assets and liabilities
    
    
    148,913
    
    
    
    3,599,790
    
    
    
    48,340Net cash provided by operating activities
    
    
    25,133,568
    
    
    
    16,998,345
    
    
    
    17,407,138CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of
furniture and equipment
    
    
    (62,529
    )
    
    
    (604,928
    )
    
    
    (362,722
    )Cost of investments purchased and other portfolio activity
    
    
    (1,314,588
    )
    
    
    (9,149,453
    )
    
    
    (10,076,234
    )Proceeds from sale of investments
    
    
    6,050,000
    
    
    
    13,960,937
    
    
    
    23,628,426Net cash provided by investing activities
    
    
    4,672,883
    
    
    
    4,206,556
    
    
    
    13,189,470CASH FLOWS FROM FINANCING ACTIVITIES:Payment for repurchase of common shares
    
    
    
    
    
    
    
    
    
    
    (862,115
    )Payment of taxes withheld on employee stock transactions
    
    
    (146,071
    )
    
    
    (140,602
    )
    
    
    (2,777,545
    )Proceeds from common stock issuance
    
    
    920,343
    
    
    
    825,959
    
    
    
    1,489,218Payment of dividends
    
    
    (36,318,391
    )
    
    
    (26,165,624
    )
    
    
    (24,440,884
    )Net cash used in financing activities
    
    
    (35,544,119
    )
    
    
    (25,480,267
    )
    
    
    (26,591,326
    )CASH AND CASH EQUIVALENTSNet change during the period
    
    
    (5,737,668
    )
    
    
    (4,275,366
    )
    
    
    4,005,282At beginning of period
    
    
    11,513,194
    
    
    
    15,788,560
    
    
    
    11,783,278At end of period
    
    $
    5,775,526
    
    
    $
    11,513,194
    
    
    $
    15,788,560Cash paid during the period for:Interest
    
    $
    
    
    
    $
    
    
    
    $
    Income taxes
    
    
    7,444,300
    
    
    
    2,625,900
    
    
    
    3,005,000Noncash transactions during the period for:Common stock issued as incentive compensation
    
    
    5,003,146
    
    
    
    4,852,216
    
    
    
    5,754,140
   25




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##### Table of Contents



Diamond Hill Investment Group, Inc.
Notes to Consolidated Financial Statements
 Business and Organization
     Significant Accounting Policies
  Principles of Consolidation
  Segment Information
  Cash and Cash Equivalents
   26




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##### Table of Contents



Significant Accounting Policies (Continued)
 Accounts Receivable
  Valuation of Investment Portfolio
   Limited Partnership Interests
      27




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##### Table of Contents



Significant Accounting Policies (Continued)
 Furniture and Equipment
  Revenue Recognition  General
  Revenue Recognition  Performance Incentive Revenue
  As Of December 31,2010
    
    
    2009
    
    
    2008AUM  Contractual Period Ends Quarterly
    
    $
    108,671,900
    
    
    $
    108,974,458
    
    
    $
    218,503,205AUM  Contractual Period Ends Annually
    
    
    175,231,841
    
    
    
    196,469,025
    
    
    
    159,514,591Total AUM Subject to Performance Incentive
    
    $
    283,903,741
    
    
    $
    305,443,483
    
    
    $
    378,017,796
 For The Year Ending December 31,2010
    
    
    2009
    
    
    2008Performance Incentive Fees  Method 1
    
    $
    217,588
    
    
    $
    1,050,895
    
    
    $
    378,881Performance Incentive Fees  Method 2
    
    
    217,588
    
    
    
    1,262,922
    
    
    
    378,881
 Revenue Recognition  Mutual Fund Administration
   28




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##### Table of Contents



Significant Accounting Policies (Continued)
 Revenue Recognition  Mutual Fund Administration (Continued)
   Year Ended December 31,2010
    
    
    2009
    
    
    2008Mutual fund administration:Administration revenue, gross
    
    $
    10,940,041
    
    
    $
    9,257,464
    
    
    $
    9,194,97312b-1/service
fees and commission
revenue received from Fund clients
    
    
    8,122,268
    
    
    
    5,260,383
    
    
    
    12b-1/service
fees and commission
expense payments to third parties
    
    
    (8,122,268
    )
    
    
    (5,260,383
    )
    
    
    Fund related expense
    
    
    (3,554,156
    )
    
    
    (3,141,229
    )
    
    
    (3,061,646
    )Revenue, net of fund related expenses
    
    
    7,385,885
    
    
    
    6,116,235
    
    
    
    6,133,327DHCM C-Share financing:Broker commission advance repayments
    
    
    619,490
    
    
    
    763,383
    
    
    
    1,776,206Broker commission amortization
    
    
    (549,838
    )
    
    
    (789,639
    )
    
    
    (1,755,614
    )Financing activity, net
    
    
    69,652
    
    
    
    (26,256
    )
    
    
    20,592Mutual fund administration revenue, net
    
    $
    7,455,537
    
    
    $
    6,089,979
    
    
    $
    6,153,919
 Third Party Distribution Expense
  Income Taxes
   29




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##### Table of Contents



Significant Accounting Policies (Continued)
 Income Taxes (Continued)
  Earnings Per Share
  Investment Portfolio
  As of December 31,2010
    
    
    2009Diamond Hill Small Cap Fund
    
    $
    211,301
    
    
    $
    709,881Diamond Hill Small-Mid Cap Fund
    
    
    217,915
    
    
    
    785,714Diamond Hill Large Cap Fund
    
    
    210,413
    
    
    
    684,554Diamond Hill Select Fund
    
    
    221,491
    
    
    
    705,790Diamond Hill Long-Short Fund
    
    
    206,312
    
    
    
    606,800Diamond Hill Strategic Income Fund
    
    
    198,566
    
    
    
    615,431Diamond Hill Investment Partners, L.P.
    
    
    1,177,098
    
    
    
    2,653,856Diamond Hill Investment Partners II, L.P.
    
    
    1,155,022
    
    
    
    2,649,665Diamond Hill Research Partners, L.P.
    
    
    7,928,942
    
    
    
    7,018,276Total Investment Portfolio
    
    $
    11,527,060
    
    
    $
    16,429,967
  As of December 31,2010
    
    
    2009
    
    
    2008Total partnership assets
    
    $
    173,007,238
    
    
    $
    188,716,374
    
    
    $
    196,021,226Total partnership liabilities
    
    
    32,855,190
    
    
    
    40,583,059
    
    
    
    33,056,747Net partnership assets
    
    
    140,152,048
    
    
    
    148,133,315
    
    
    
    162,964,479DHCMs portion of net assets
    
    
    10,261,062
    
    
    
    12,321,797
    
    
    
    11,262,409
 For the Year Ended December 31,2010
    
    
    2009
    
    
    2008Net partnership income (loss)
    
    
    4,486,719
    
    
    
    35,193,357
    
    
    
    (75,625,562
    )DHCMs portion of net income (loss)
    
    
    939,265
    
    
    
    4,634,391
    
    
    
    (3,866,314
    )
   30




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##### Table of Contents



Capital Stock
 Common Shares
  Authorization of Preferred Shares
  Stock-Based Compensation
 Equity Incentive Plans
 2005 Employee and Director Equity Incentive Plan
  Equity Compensation Grants
  Accelerated Vesting of Certain Equity Incentive Plans and Compensation Grants
  401(k) Plan
   31




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##### Table of Contents



Stock-Based Compensation (Continued)
 Stock Options and Warrants
   Options
    
    
    WarrantsWeighted Average
    
    
    
    
    
    
    Weighted AverageShares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceOustanding December 31, 2007
    
    
    92,500
    
    
    $
    10.40
    
    
    
    25,400
    
    
    $
    47.00Exercisable December 31, 2007
    
    
    72,500
    
    
    $
    12.03
    
    
    
    25,400
    
    
    $
    47.00Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired / Forfeited
    
    
    
    
    
    
    
    
    
    
    12,400
    
    
    
    72.09Exercised
    
    
    92,500
    
    
    
    10.40
    
    
    
    3,000
    
    
    
    56.67Oustanding December 31, 2008
    
    
    
    
    
    $
    
    
    
    
    10,000
    
    
    $
    13.00Exercisable December 31, 2008
    
    
    
    
    
    $
    
    
    
    
    10,000
    
    
    $
    13.00Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired / Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    16.88Oustanding December 31, 2009
    
    
    
    
    
    $
    
    
    
    
    6,000
    
    
    $
    10.42Exercisable December 31, 2009
    
    
    
    
    
    $
    
    
    
    
    6,000
    
    
    $
    10.42Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired / Forfeited
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    10.00Exercised
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    11.25Oustanding December 31, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Exercisable December 31, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
 Operating Leases
  2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    Thereafter$
    340,000
    
    
    $
    348,000
    
    
    $
    356,000
    
    
    $
    358,000
    
    
    $
    361,000
    
    
    $
    210,000
   32




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##### Table of Contents



Income Taxes
  2010
    
    
    2009
    
    
    2008Current city income tax provision
    
    $
    514,076
    
    
    $
    266,711
    
    
    $
    375,821Current state income tax provision
    
    
    147,642
    
    
    
    44,000
    
    
    
    11,000Current federal income tax provision
    
    
    6,966,872
    
    
    
    4,358,283
    
    
    
    4,396,824Deferred federal income tax provision (benefit)
    
    
    (352,509
    )
    
    
    1,468,051
    
    
    
    (2,535,960
    )Provision for income taxes
    
    $
    7,276,081
    
    
    $
    6,137,045
    
    
    $
    2,247,685
  2010
    
    
    2009
    
    
    2008Income tax computed at statutory rate
    
    $
    6,887,483
    
    
    $
    5,990,509
    
    
    $
    1,898,479City and state income taxes, net of federal benefit
    
    
    430,117
    
    
    
    204,417
    
    
    
    255,302Other
    
    
    (41,519
    )
    
    
    (57,881
    )
    
    
    93,904Income tax expense
    
    $
    7,276,081
    
    
    $
    6,137,045
    
    
    $
    2,247,685
  2010
    
    
    2009Stock-based compensation
    
    $
    1,462,094
    
    
    $
    926,222Unrealized (gains) losses
    
    
    (1,205,681
    )
    
    
    (1,742,009
    )Capital loss carry forward
    
    
    677,770
    
    
    
    1,547,804Other assets and liabilities
    
    
    (60,709
    )
    
    
    (211,052
    )Net deferred tax assets
    
    $
    873,474
    
    
    $
    520,965
   33




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##### Table of Contents



Earnings Per Share
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Basic and Diluted net income
    
    $
    12,402,441
    
    
    $
    11,373,943
    
    
    $
    3,276,078Weighted average number of outstanding sharesBasic
    
    
    2,766,741
    
    
    
    2,582,998
    
    
    
    2,400,142Diluted
    
    
    2,767,895
    
    
    
    2,587,751
    
    
    
    2,408,476Earnings per shareBasic
    
    $
    4.48
    
    
    $
    4.40
    
    
    $
    1.36Diluted
    
    $
    4.48
    
    
    $
    4.40
    
    
    $
    1.36
 Regulatory Requirements
  Year Ended December 31,2010
    
    
    2009Net Capital
    
    $
    86,107
    
    
    $
    279,718Minimum Net Capital Requirement
    
    
    35,667
    
    
    
    132,199Ratio of Aggregate Indebtedness
to Net Capital
    
    
    8.79 to 1
    
    
    
    7.09 to 1
 Commitments and Contingencies
   34




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##### Table of Contents



ITEM 9.
    
    Changes In and Disagreements With Accountants on Accounting and Financial Disclosures
  
 ITEM 9A.
    
    Controls and Procedures
   Managements Annual Report on Internal Control Over Financial Reporting
      35




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##### Table of Contents



ITEM 9B.
    
    Other Information
  
 PART III
 
 ITEM 10.
    
    Directors, Executive Officers and Corporate Governance
  
 ITEM 11.
    
    Executive Compensation
  
 ITEM 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  Equity Compensation Plan Information
 (a)
    
    
    (b)
    
    
    (c)Number of securitiesremaining available forNumber of securities to
    
    
    
    
    
    
    future issuance underbe issued upon the
    
    
    Weighted-average
    
    
    equity compensationexercise of outstanding
    
    
    exercise price of
    
    
    plans (excludingoptions, warrants and
    
    
    outstanding options,
    
    
    securities reflected inPlan category
    
    rights
    
    
    warrants and rights
    
    
    column (a))Equity compensation plans approved
by security holders
    
    
    
    
    
    $
    
    
    
    
    291,883
    1
 1
    
    This amount relates to common shares that may be issued under our 2005 Employee and Director
Equity Incentive Plan. The maximum aggregate number of common shares that may issued under our
2005 Employee and Director Equity Incentive Plan is annually increased on December 31 by an
amount equal to the lesser of (i) 100,000 common shares, (ii) 5% of the Companys total
outstanding common shares on such date, or (iii) a lesser amount determined by the Board of
Directors.   36




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##### Table of Contents



ITEM 13.
    
    Certain Relationships and Related Transactions, and Director Independence
  
 ITEM 14.
    
    Principal Accounting Fees and Services
   37




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##### Table of Contents



PART IV
 
 ITEM 15.
    
    Exhibits, Financial Statement Schedules
 (a)
    
    (1) Financial Statements: See Part II. Item 8, Financial Statements and
Supplementary Data.
 (2)
    
    Financial Statement Schedules: All financial statement schedules for which
provision is made in the applicable accounting regulations of the SEC are omitted because
they are not required or the required information is included in the accompanying financial
statements or notes thereto.(3)
    
    Exhibits:
 3.1
    
    
    Amended and Restated Articles of Incorporation of the Company.
(Incorporated by reference from Exhibit 3(i) to the Current Report
on Form 8-K filed with the SEC on May 7, 2002; File No. 000-24498.)3.2
    
    
    Regulations of the Company. (Incorporated by reference from Exhibit
3(ii) to the Current Report on Form 8-K filed with the SEC on May 7,
2002; File No. 000-24498.)10.1
    
    
    Representative Investment Management Agreement between Diamond Hill
Capital Management, Inc. and the Diamond Hill Funds. (Incorporated
by reference from Exhibit 23d(viii) to Post-Effective Amendment Nos.
22 and 23 to Registration Statement on Form N1-A (File Nos.
333-22075 and 811-08061) filed by Diamond Hill Funds on December 30,
2005)10.2
    
    
    Seventh Amended and Restated Administrative and Transfer Agency
Services Agreement dated as of May 31, 2002, as amended, between
Diamond Hill Capital Management, Inc. and the Diamond Hill Funds.
(Incorporated by reference from Exhibit 28h(ix) to Post-Effective
Amendment Nos. 28 and 29 to Registration Statement on Form N1-A
(File Nos. 333-22075 and 811-08061) filed by Diamond Hill Funds on
April 30, 2009)10.3*
    
    
    Amended and Restated 2005 Employee and Director Equity Incentive
Plan. (Incorporated by reference from Exhibit 10.6 to Form 10-K
filed with the SEC on March 14, 2008; File No. 000-24498.)10.4*
    
    
    2005 Employee and Director Equity Incentive Plan First Amendment
dated November 2, 2010 and Form of Restricted Stock Agreement
reference therein. (Filed herewith)10.5*
    
    
    Amended and Restated 2006 Performance-Based Compensation Plan.
(Incorporated by reference from Exhibit 10.7 to Form 10-K filed with
the SEC on March 14, 2008; File No. 000-24498.)10.6*
    
    
    Amended and Restated Employment Agreement between the Company and
Roderick H. Dillon, Jr. dated August 10, 2006. (Incorporated by
reference from Exhibit 10.8 to Form 10-K filed with the SEC on March
14, 2008; File No. 000-24498.)10.7*
    
    
    First Amendment to the Amended and Restated Employment Agreement
between the Company and Roderick H. Dillon, Jr. dated December 2,
2008. (Incorporated by reference from Exhibit 10.6 to Form 10-K
filed with the SEC on March 13, 2009; File No. 000-24498.)10.8*
    
    
    Form of Participation Agreement to the Amended and Restated 2006
Performance-Based Compensation Plan. (Incorporated by reference from
Exhibit 10.7 to Form 10-K/A filed with the SEC on January 29, 2010;
File No. 000-24498.)14.1
    
    
    Amended Code of Business Conduct and Ethics. (Incorporated by
reference from Exhibit 14.1 to Form 10-K filed with the SEC on March
13, 2009; File No. 000-24498.)21.1
    
    
    Subsidiaries of the Company. (Filed herewith)23.1
    
    
    Consent of Independent Registered Public Accounting Firm, Plante &
Moran, PLLC. (Filed herewith)31.1
    
    
    Certification of Chief Executive Officer required by Rule 13a-14(a)
or Rule 15d-14(a). (Filed herewith)31.2
    
    
    Certification of Chief Financial Officer required by Rule 13a-14(a)
or Rule 15d-14(a). (Filed herewith)32.1
    
    
    Section 1350 Certifications. (Furnished herewith)
 *
    
    Denotes management contract or compensatory plan or arrangement. (b)
    
    Exhibits: Reference is made to Item 15(a)(3) above.(c)
    
    Financial Statement Schedules: None required.
  38




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##### Table of Contents



SIGNATURES
  DIAMOND HILL INVESTMENT GROUP, INC.By:
    
    /S/ R. H. DillonR. H. Dillon, President, Chief Executive Officer and a Director
    
    
    
    February 25,
2011
  Signature
    
    Title
    
    Date/S/ R. H. Dillon

R. H. Dillon
    
    President, Chief Executive Officer,
and a Director
    
    February 25, 2011/S/ James F. Laird

James F. Laird
    
    Chief Financial Officer, Treasurer,
and Secretary
    
    February 25, 2011/S/ Gary R. Young

Gary R. Young
    
    Controller
    
    February 25, 2011/S/ Lawrence E. Baumgartner
    
    Director
    
    February 25, 2011Lawrence E. Baumgartner/S/ David P. Lauer
    
    Director
    
    February 25, 2011David P. Lauer/S/ Frances A. Skinner
    
    Director
    
    February 25, 2011Frances A. Skinner/S/ David R. Meuse
    
    Director
    
    February 25, 2011David R. Meuse/S/ Diane D. Reynolds
    
    Director
    
    February 25, 2011Diane D. Reynolds/S/ Donald B. Shackelford
    
    Director
    
    February 25, 2011Donald B. Shackelford
  39