##### 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, 2008
 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
  o þ
 Yes o No þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 Yes o No þ
 nd




---



##### 



Required Information
    
    PagePart IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    8Item 1B. Unresolved Staff Comments
    
    
    9Item 2. Properties
    
    
    9Item 3. Legal Proceedings
    
    
    9Item 4. Submission of Matters to a Vote of Security Holders
    
    
    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
    
    
    19Item 8. Financial Statements and Supplementary Data
    
    
    20Item 9. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosures
    
    
    34Item 9A. Controls and Procedures
    
    
    34Item 9B. Other Information
    
    
    35Part IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    35Item 11. Executive Compensation
    
    
    35Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
    
    
    35Item 13. Certain Relationships and Related Transactions, and
Director Independence
    
    
    35Item 14. Principal Accounting Fees and Services
    
    
    35Part IVItem 15. Exhibits, Financial Statement Schedules
    
    
    36Signatures
    
    
    37Exhibit 10.6Exhibit 14.1Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




---



##### Table of Contents



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




---



##### Table of Contents



Assets Under Management
  Assets Under Management by ProductAs of December 31,(in millions)
    
    2008
    
    
    2007
    
    
    2006Mutual funds
    
    $
    3,114
    
    
    $
    2,910
    
    
    $
    2,518Separate accounts
    
    
    1,175
    
    
    
    998
    
    
    
    875Private investment funds
    
    
    221
    
    
    
    495
    
    
    
    315Total
    
    $
    4,510
    
    
    $
    4,403
    
    
    $
    3,708
 Assets Under Management by ObjectiveAs of December 31,(in millions)
    
    2008
    
    
    2007
    
    
    2006Small and Small-Mid Cap
    
    $
    505
    
    
    $
    597
    
    
    $
    807Large Cap and Select
    
    
    1,524
    
    
    
    1,031
    
    
    
    919Long-Short
    
    
    2,331
    
    
    
    2,500
    
    
    
    1,720Strategic Income and Other
    
    
    150
    
    
    
    275
    
    
    
    262Total
    
    $
    4,510
    
    
    $
    4,403
    
    
    $
    3,708
 Change in Assets Under ManagementFor the Year Ended December 31,(in millions)
    
    2008
    
    
    2007
    
    
    2006AUM at beginning of the period
    
    $
    4,403
    
    
    $
    3,708
    
    
    $
    1,531Net cash inflows (outflows)mutual funds
    
    
    1,328
    
    
    
    362
    
    
    
    1,333separate accounts
    
    
    812
    
    
    
    70
    
    
    
    441private investment funds
    
    
    (162
    )
    
    
    170
    
    
    
    1641,978
    
    
    
    602
    
    
    
    1,938Net market appreciation (depreciation) and income
    
    
    (1,871
    )
    
    
    93
    
    
    
    239Increase during the period
    
    
    107
    
    
    
    695
    
    
    
    2,177AUM at end of the period
    
    $
    4,510
    
    
    $
    4,403
    
    
    $
    3,708
 Investment Advisory Activities
   4




---



##### Table of Contents



Marketing
  Diamond Hill Funds
  Diamond Hill FundsAssets by Distribution ChannelAs of December 31,(in millions)
    
    2008
    
    
    2007
    
    
    2006Independent registered investment advisors
and broker/dealers
    
    $
    1,450
    
    
    $
    1,405
    
    
    $
    1,161Wirehouse and regional broker/dealers
    
    
    1,105
    
    
    
    1,020
    
    
    
    917Defined contribution (401k)
    
    
    282
    
    
    
    229
    
    
    
    157Institutions
    
    
    110
    
    
    
    105
    
    
    
    132Other
    
    
    30
    
    
    
    35
    
    
    
    40Total
    
    $
    2,977
    
    
    $
    2,794
    
    
    $
    2,407
 Separately Managed Accounts and Private Investment Funds
  Growth Prospects
   5




---



##### Table of Contents




    
    adding additional marketing and support staff,
 
    
    attending and sponsoring at key industry conferences, and
 
    
    adding systems infrastructure to support client service and portfolio administration.
    New Business Subsidiary
  Competition
  Corporate Investment Portfolio
   6




---



##### Table of Contents



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




---



##### Table of Contents



ITEM 1A: Risk Factors
  Investment Performance.
  The Companys assets under management, which impact revenue, are 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




---



##### 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: Submission of Matters to a Vote of Security Holders
   9




---



##### Table of Contents



PART II
 
 ITEM 5: Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 TM TM
 
 12/31/2003
    
    
    12/31/2004
    
    
    12/31/2005
    
    
    12/31/2006
    
    
    12/31/2007
    
    
    12/31/2008Diamond Hill Investment Group, Inc.
    
    
    100.0
    
    
    
    241.4
    
    
    
    451.0
    
    
    
    1,206.5
    
    
    
    1,053.3
    
    
    
    1,072.6Russell MicrocapTM Index
    
    
    100.0
    
    
    
    114.1
    
    
    
    117.1
    
    
    
    136.4
    
    
    
    125.5
    
    
    
    75.6Peer Group*
    
    
    100.0
    
    
    
    126.6
    
    
    
    168.0
    
    
    
    174.6
    
    
    
    183.0
    
    
    
    62.8
 
 *
    
    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.  10




---



##### Table of Contents



2008
    
    
    2007High Price
    
    Low Price
    
    High Price
    
    Low PriceQuarter ended:March 31
    
    $
    82.99
    
    
    $
    66.88
    
    
    $
    113.85
    
    
    $
    80.82June 30
    
    $
    100.00
    
    
    $
    72.30
    
    
    $
    109.99
    
    
    $
    82.01September 30
    
    $
    100.00
    
    
    $
    73.30
    
    
    $
    92.85
    
    
    $
    69.02December 31
    
    $
    91.00
    
    
    $
    46.25
    
    
    $
    87.40
    
    
    $
    69.50
     Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  Total Number of
    
    
    Maximum NumberShares Purchased as
    
    
    of Shares That MayTotal Number
    
    
    
    
    
    
    part of Publicly
    
    
    Yet Be Purchasedof Shares
    
    
    Average Price
    
    
    Announced Plans
    
    
    Under the Plans orPeriod
    
    Purchased
    
    
    Paid Per Share
    
    
    or Programs
    
    
    Programs (1)October 1, 2008 through
October
31, 2008
    
    
    
    
    
    
    
    
    
    
    16,105
    
    
    
    333,895November 1, 2008 through
November 30, 2008
    
    
    
    
    
    
    
    
    
    
    16,105
    
    
    
    333,895December 1, 2008 through
December
31, 2008
    
    
    
    
    
    
    
    
    
    
    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




---



##### Table of Contents



ITEM 6: Selected Financial Data
  For the Years Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Income Statement Data 
(in thousands):Total revenues
    
    $
    47,019
    
    
    $
    41,308
    
    
    $
    31,905
    
    
    $
    10,246
    
    
    $
    2,774Net operating income (loss)
    
    
    13,729
    
    
    
    14,078
    
    
    
    9,769
    
    
    
    1,394
    
    
    
    (664
    )Net income (loss)
    
    
    3,276
    
    
    
    9,932
    
    
    
    8,065
    
    
    
    3,651
    
    
    
    (177
    )Per Share Information:Basic earnings
    
    $
    1.36
    
    
    $
    4.61
    
    
    $
    4.51
    
    
    $
    2.21
    
    
    $
    (0.11
    )Diluted earnings
    
    
    1.36
    
    
    
    4.39
    
    
    
    3.63
    
    
    
    1.83
    
    
    
    (0.11
    )Cash dividend declared
    
    
    10.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted Average Shares OutstandingBasic
    
    
    2,400,142
    
    
    
    2,155,829
    
    
    
    1,787,390
    
    
    
    1,654,935
    
    
    
    1,566,385Diluted
    
    
    2,408,476
    
    
    
    2,264,234
    
    
    
    2,219,580
    
    
    
    1,996,176
    
    
    
    1,566,385
 At December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Balance Sheet Data 
(in thousands):Total assets
    
    $
    44,540
    
    
    $
    53,284
    
    
    $
    37,236
    
    
    $
    12,748
    
    
    $
    3,968Long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shareholders equity
    
    
    30,246
    
    
    
    39,308
    
    
    
    20,483
    
    
    
    10,861
    
    
    
    3,566Assets Under Management 
(in millions):
    
    $
    4,510
    
    
    $
    4,403
    
    
    $
    3,708
    
    
    $
    1,531
    
    
    $
    524
 
 ITEM 7: Managements Discussion and Analysis of Financial Condition and Results of Operations
    12




---



##### Table of Contents



Assets Under Management by ProductAs of December 31,(in millions)
    
    2008
    
    
    2007
    
    
    2006Mutual funds
    
    $
    3,114
    
    
    $
    2,910
    
    
    $
    2,518Separate accounts
    
    
    1,175
    
    
    
    998
    
    
    
    875Private investment funds
    
    
    221
    
    
    
    495
    
    
    
    315Total AUM
    
    $
    4,510
    
    
    $
    4,403
    
    
    $
    3,708
 (in millions)
    
    2008
    
    
    2007
    
    
    2006AUM at beginning of year
    
    $
    4,403
    
    
    $
    3,708
    
    
    $
    1,531Net cash inflowsmutual funds
    
    
    1,328
    
    
    
    362
    
    
    
    1,333separate accounts
    
    
    812
    
    
    
    70
    
    
    
    441private investment funds
    
    
    (162
    )
    
    
    170
    
    
    
    1641,978
    
    
    
    602
    
    
    
    1,938Net market appreciation / (depreciation) and income
    
    
    (1,871
    )
    
    
    93
    
    
    
    239Increase during the year
    
    
    107
    
    
    
    695
    
    
    
    2,177AUM at end of year
    
    $
    4,510
    
    
    $
    4,403
    
    
    $
    3,708
 Consolidated Results of Operations
  2008
    
    
    2007
    
    
    % Change
    
    
    2007
    
    
    2006
    
    
    % ChangeNet income (in thousands)
    
    $
    3,276
    
    
    $
    9,932
    
    
    
    -67
    %
    
    $
    9,932
    
    
    $
    8,065
    
    
    
    23
    %Net income per shareBasic
    
    $
    1.36
    
    
    $
    4.61
    
    
    
    -70
    %
    
    $
    4.61
    
    
    $
    4.51
    
    
    
    2
    %Diluted
    
    $
    1.36
    
    
    $
    4.39
    
    
    
    -69
    %
    
    $
    4.39
    
    
    $
    3.63
    
    
    
    21
    %Weighted average shares
outstanding (in thousands)Basic
    
    
    2,400
    
    
    
    2,156
    
    
    
    
    
    
    
    2,156
    
    
    
    1,787Diluted
    
    
    2,408
    
    
    
    2,264
    
    
    
    
    
    
    
    2,264
    
    
    
    2,220
 Year Ended December 31, 2008 compared with Year Ended December 31, 2007
   
    
    Employee compensation expense increased by 31%, or $6.1 million, primarily due to an
increase in overall staff from 42 to 57, long-term equity awards, and an acceleration of
vesting of certain restricted stock awards.
 
    
    Sales and marketing expenses increased by 26%, or $165 thousand, primarily due to an
increase in travel and other marketing expenses related to new business growth during 2008.
Despite only a 2% increase in AUM in 2008 compared to 2007, the Company generated over
$1.9 billion in net new client assets during 2008.
 
    
    Despite continued growth in mutual fund assets under management during 2008, mutual fund
administration expense decreased by 6%, or $142 thousand due to a re-negotiation of certain
vendor contracts resulting in both expense reductions and a shifting of certain expense
obligations directly to the Diamond Hill Funds.
  13




---



##### Table of Contents



Year Ended December 31, 2007 compared with Year Ended December 31, 2006
   
    
    Employee compensation expense increased by 10%, or $1.9 million, primarily due to an
increase in overall staff from 31 to 42.
 
    
    Consistent with continued growth in mutual fund assets under management, mutual fund
administration expense increased by 44%, or $735 thousand.
 
    
    Consistent with higher investment advisory incentive fees, third party distribution
expenses increased by 94%, or $731 thousand. A large portion of this increase was related
to an increase in assets of the Companys private investment funds.
 Revenue
 (in Thousands)
    
    2008
    
    
    2007
    
    
    % Change
    
    
    2007
    
    
    2006
    
    
    % ChangeInvestment advisory
    
    $
    40,486
    
    
    $
    35,165
    
    
    
    15%
    
    
    $
    35,165
    
    
    $
    20,247
    
    
    
    74%Performance incentive
    
    
    379
    
    
    
    174
    
    
    
    118%
    
    
    
    174
    
    
    
    7,947
    
    
    
    -98%Mutual fund administration, net
    
    
    6,154
    
    
    
    5,969
    
    
    
    3%
    
    
    
    5,969
    
    
    
    3,710
    
    
    
    61%Total
    
    
    47,019
    
    
    
    41,308
    
    
    
    14%
    
    
    
    41,308
    
    
    
    31,904
    
    
    
    29%
 Revenue for the Year Ended December 31, 2008 compared with Year Ended December 31, 2007
  Investment Advisory Fees.
 Performance Incentive Fees.
  14




---



##### Table of Contents



Mutual Fund Administration Fees.
 Revenue for the Year Ended December 31, 2007 compared with Year Ended December 31, 2006
  Investment Advisory Fees.
 Performance Incentive Fees.
 Mutual Fund Administration Fees.
 Expenses
 (in Thousands)
    
    2008
    
    
    2007
    
    
    % Change
    
    
    2007
    
    
    2006
    
    
    % ChangeCompensation and related costs
    
    $
    26,120
    
    
    $
    20,007
    
    
    
    31%
    
    
    $
    20,007
    
    
    $
    18,148
    
    
    
    10%General and administrative
    
    
    2,643
    
    
    
    2,659
    
    
    
    -1%
    
    
    
    2,659
    
    
    
    1,137
    
    
    
    134%Sales and marketing
    
    
    796
    
    
    
    632
    
    
    
    26%
    
    
    
    632
    
    
    
    384
    
    
    
    65%Third party distribution
    
    
    1,452
    
    
    
    1,512
    
    
    
    -4%
    
    
    
    1,512
    
    
    
    781
    
    
    
    94%Mutual fund administration
    
    
    2,279
    
    
    
    2,420
    
    
    
    -6%
    
    
    
    2,420
    
    
    
    1,686
    
    
    
    44%Total
    
    
    33,290
    
    
    
    27,230
    
    
    
    22%
    
    
    
    27,230
    
    
    
    22,136
    
    
    
    23%
  15




---



##### Table of Contents



Expenses for the Year Ended December 31, 2008 compared with Year Ended December 31, 2007
 Compensation and Related Costs.
  General and Administrative.
 Sales and Marketing.
 Third Party Distribution.
 Mutual Fund Administration.
 Expenses for the Year Ended December 31, 2007 compared with Year Ended December 31, 2006
 Compensation and Related Costs.
 General and Administrative.
  16




---



##### Table of Contents



Sales and Marketing.
 Third Party Distribution.
 Mutual Fund Administration.
 Beacon Hill Fund Services
  Liquidity and Capital Resources
      17




---



##### Table of Contents



Selected Quarterly Information
  At or For the Quarter Ended2008
    
    
    2007(in thousands)
    
    12/31
    
    
    09/30
    
    
    06/30
    
    
    03/31
    
    
    12/31
    
    
    09/30
    
    
    06/30
    
    
    03/31Assets Under Management
(in millions)
    
    $
    4,510
    
    
    $
    5,548
    
    
    $
    5,486
    
    
    $
    4,665
    
    
    $
    4,403
    
    
    $
    4,380
    
    
    $
    4,479
    
    
    $
    4,169Total revenue
    
    
    10,372
    
    
    
    13,348
    
    
    
    12,396
    
    
    
    10,903
    
    
    
    10,883
    
    
    
    10,701
    
    
    
    10,369
    
    
    
    9,355Total operating expenses
    
    
    8,447
    
    
    
    9,126
    
    
    
    8,340
    
    
    
    7,378
    
    
    
    6,847
    
    
    
    7,168
    
    
    
    6,947
    
    
    
    6,268Operating income
    
    
    1,925
    
    
    
    4,222
    
    
    
    4,056
    
    
    
    3,525
    
    
    
    4,036
    
    
    
    3,533
    
    
    
    3,422
    
    
    
    3,087Investment Return
    
    
    (4,180
    )
    
    
    (2,319
    )
    
    
    (1,331
    )
    
    
    (375
    )
    
    
    175
    
    
    
    534
    
    
    
    230
    
    
    
    (30
    )Net income (loss)
    
    $
    (1,713
    )
    
    $
    1,224
    
    
    $
    1,779
    
    
    $
    1,986
    
    
    $
    2,876
    
    
    $
    2,648
    
    
    $
    2,414
    
    
    $
    1,994Diluted EPS
    
    $
    (0.70
    )
    
    $
    0.50
    
    
    $
    0.73
    
    
    $
    0.82
    
    
    $
    1.23
    
    
    $
    1.14
    
    
    $
    1.05
    
    
    $
    0.91Diluted shares outstanding
    
    
    2,455
    
    
    
    2,444
    
    
    
    2,447
    
    
    
    2,426
    
    
    
    2,335
    
    
    
    2,322
    
    
    
    2,302
    
    
    
    2,196
  Contractual Obligations
  Payments Due by PeriodTotal
    
    
    2009
    
    
    2010-2011
    
    
    2012-2013
    
    
    LaterOperating lease obligations
    
    $
    1,159,000
    
    
    $
    259,000
    
    
    $
    516,000
    
    
    $
    384,000
    
    
    $
    Purchase obligations
    
    
    2,486,000
    
    
    
    2,326,000
    
    
    
    160,000
    
    
    
    
    
    
    
    Total
    
    $
    3,645,000
    
    
    $
    2,585,000
    
    
    $
    676,000
    
    
    $
    384,000
    
    
    $
    
 Off-Balance Sheet Arrangements
   18




---



##### Table of Contents



Critical Accounting Policies and Estimates
 Provisions for Income Tax Taxes.
 Revenue Recognition on Incentive-Based Advisory Contracts.
 Revenue Recognition when Acting as an Agent vs. Principal.
 
 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, 2008
    
    
    Increase
    
    
    DecreaseEquity investments
    
    $
    17,319,366
    
    
    $
    19,051,303
    
    
    $
    15,587,429Bond fund investments
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    17,319,366
    
    
    $
    19,051,303
    
    
    $
    15,587,429
  19




---



##### Table of Contents



ITEM 8. Financial Statements and Supplementary Data
 Report of Independent Registered Public
 Accounting Firm on Consolidated Financial Statements
 
      
  20




---



##### Table of Contents



Diamond Hill Investment Group, Inc.  Consolidated Balance Sheets
 December 31,2008
    
    
    2007ASSETSCash and cash equivalents
    
    $
    15,788,560
    
    
    $
    11,783,278Investment portfolio
    
    
    17,185,611
    
    
    
    34,036,163Accounts receivable
    
    
    5,339,558
    
    
    
    5,694,274Prepaid expenses
    
    
    1,067,388
    
    
    
    1,115,728Fixed assets, net of depreciation, and other assets
    
    
    835,314
    
    
    
    654,500Income tax receivable
    
    
    2,334,836
    
    
    
    Deferred taxes
    
    
    1,989,016
    
    
    
    Total assets
    
    $
    44,540,283
    
    
    $
    53,283,943LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesAccounts payable and accrued expenses
    
    $
    1,294,396
    
    
    $
    979,467Accrued incentive compensation
    
    
    13,000,000
    
    
    
    12,450,000Deferred taxes
    
    
    
    
    
    
    546,944Total liabilities
    
    
    14,294,396
    
    
    
    13,976,411Commitments and contingencies
    
    
    
    
    
    
    Shareholders EquityCommon stock, no par value
7,000,000 shares authorized; 
2,447,299 issued and outstanding at December 31, 2008; 

2,243,653 issued and outstanding at December 31, 2007
    
    
    16,233,501
    
    
    
    27,719,024Preferred stock, undesignated, 1,000,000 shares
authorized and unissued
    
    
    
    
    
    
    Deferred compensation
    
    
    (4,908,215
    )
    
    
    (4,056,015
    )Retained earnings
    
    
    18,920,601
    
    
    
    15,644,523Total shareholders equity
    
    
    30,245,887
    
    
    
    39,307,532Total liabilities and shareholders equity
    
    $
    44,540,283
    
    
    $
    53,283,943
   21




---



##### Table of Contents



Diamond Hill Investment Group, Inc.  Consolidated Statements of Income
 Year Ended December 31,2008
    
    
    2007
    
    
    2006REVENUES:Investment advisory
    
    $
    40,486,415
    
    
    $
    35,165,043
    
    
    $
    20,246,624Performance incentive
    
    
    378,881
    
    
    
    174,292
    
    
    
    7,947,434Mutual fund administration, net
    
    
    6,153,919
    
    
    
    5,968,603
    
    
    
    3,710,141Total revenue
    
    
    47,019,215
    
    
    
    41,307,938
    
    
    
    31,904,199OPERATING EXPENSES:Compensation and related costs
    
    
    26,120,040
    
    
    
    20,006,542
    
    
    
    18,147,526General and administrative
    
    
    2,643,274
    
    
    
    2,658,649
    
    
    
    1,137,319Sales and marketing
    
    
    796,438
    
    
    
    631,911
    
    
    
    383,994Third party distribution
    
    
    1,452,087
    
    
    
    1,512,095
    
    
    
    781,256Mutual fund administration
    
    
    2,278,562
    
    
    
    2,420,252
    
    
    
    1,685,536Total operating expenses
    
    
    33,290,401
    
    
    
    27,229,449
    
    
    
    22,135,631NET OPERATING INCOME
    
    
    13,728,814
    
    
    
    14,078,489
    
    
    
    9,768,568Investment return
    
    
    (8,205,051
    )
    
    
    909,134
    
    
    
    2,526,620INCOME BEFORE TAXES
    
    
    5,523,763
    
    
    
    14,987,623
    
    
    
    12,295,188Income tax provision
    
    
    (2,247,685
    )
    
    
    (5,055,308
    )
    
    
    (4,230,055
    )NET INCOME
    
    $
    3,276,078
    
    
    $
    9,932,315
    
    
    $
    8,065,133Earnings per shareBasic
    
    $
    1.36
    
    
    $
    4.61
    
    
    $
    4.51Diluted
    
    $
    1.36
    
    
    $
    4.39
    
    
    $
    3.63Weighted average shares outstandingBasic
    
    
    2,400,142
    
    
    
    2,155,829
    
    
    
    1,787,390Diluted
    
    
    2,408,476
    
    
    
    2,264,234
    
    
    
    2,219,580
   22




---



##### Table of Contents



Diamond Hill Investment Group, Inc.  Consolidated Statements of Shareholders Equity
 RetainedShares
    
    
    Common
    
    
    Treasury
    
    
    Deferred
    
    
    EarningsOutstanding
    
    
    Stock
    
    
    Stock
    
    
    Compensation
    
    
    (Deficit)
    
    
    TotalBalance at January 1, 2006
    
    
    1,755,899
    
    
    $
    13,199,444
    
    
    $
    (412,370
    )
    
    $
    (292,381
    )
    
    $
    (1,633,681
    )
    
    $
    10,861,012Deferred compensation
    
    
    44,482
    
    
    
    2,246,503
    
    
    
    160,101
    
    
    
    (2,406,604
    )
    
    
    
    
    
    
    Recognition of current year
deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    343,486
    
    
    
    
    
    
    
    343,486FAS 123R compensation expense
    
    
    
    
    
    
    27,597
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,597Tax benefit from options and
warrants exercised
    
    
    
    
    
    
    426,419
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    426,419Sale of treasury stock
    
    
    34,054
    
    
    
    525,293
    
    
    
    156,533
    


    
    
    
    


    
    
    (12,216
    )
    
    
    669,610Exercise of 4,000 warrants
for common stock
    
    
    4,000
    
    
    
    90,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90,000Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,065,133
    
    
    
    8,065,133Balance at December 31, 2006
    
    
    1,838,435
    
    
    $
    16,515,256
    
    
    $
    (95,736
    )
    
    $
    (2,355,499
    )
    
    $
    6,419,236
    
    
    $
    20,483,257Deferred compensation
    
    
    36,000
    
    
    
    3,089,280
    
    
    
    
    
    
    
    (3,089,280
    )
    
    
    
    
    
    
    Recognition of current year
deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,388,764
    
    
    
    
    
    
    
    1,388,764Issuance of stock grants
    
    
    57,254
    
    
    
    5,628,641
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,628,641Issuance of stock related to
401k plan match
    
    
    2,582
    
    
    
    202,019
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    202,019FAS 123R compensation expense
    
    
    
    
    
    
    8,152
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,152Tax benefit from options and
warrants exercised
    
    
    
    
    
    
    6,015,186
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,015,186Payment of taxes withheld related
to option exercises
    
    
    (85,518
    )
    
    
    (8,020,273
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,020,273
    )Purchase of treasury stock related
to option exercises
    
    
    (15,797
    )
    
    
    
    
    
    
    (1,344,958
    )
    
    
    
    
    
    
    
    
    
    
    (1,344,958
    )Sale of treasury stock for
issuance of stock grant
    
    
    614
    
    
    
    25,874
    
    
    
    38,903
    
    
    
    
    
    
    
    
    
    
    
    64,777Sale of treasury stock for
401k plan match
    
    
    2,423
    
    
    
    57,061
    
    
    
    177,435
    
    
    
    
    
    
    
    
    
    
    
    234,496Sale of treasury stock related
to option exercises
    
    
    22,585
    
    
    
    57,084
    
    
    
    1,224,356
    
    
    
    
    
    
    
    (707,028
    )
    
    
    574,412Exercise of options/warrants for
common stock
    
    
    390,017
    
    
    
    4,500,478
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,500,478Repurchase of common stock
    
    
    (4,942
    )
    
    
    (359,734
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (359,734
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,932,315
    
    
    
    9,932,315Balance at December 31, 2007
    
    
    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 common 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
    )Dividends 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
    
    
    $
    30,245,887
   23




---



##### Table of Contents



Diamond Hill Investment Group, Inc.  Consolidated Statements of Cash Flow
 Year Ended December 31,2008
    
    
    2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net Income
    
    $
    3,276,078
    
    
    $
    9,932,315
    
    
    $
    8,065,133Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Depreciation on property and equipment
    
    
    181,908
    
    
    
    147,059
    
    
    
    69,165Amortization of deferred compensation
    
    
    4,332,601
    
    
    
    1,388,764
    
    
    
    343,486(Increase) decrease in accounts receivable
    
    
    354,716
    
    
    
    1,229,734
    
    
    
    (5,026,307
    )Increase (decrease) in deferred income taxes
    
    
    (2,535,960
    )
    
    
    (1,352,162
    )
    
    
    4,071,965Stock option expense
    
    
    2,233
    
    
    
    8,152
    
    
    
    27,597Noncash director fee expense
    
    
    167,281
    
    
    
    
    
    
    
    Investment gain/loss, net
    
    
    3,298,360
    
    
    
    389,771
    
    
    
    (2,110,524
    )Increase (decrease) in accrued liabilities
    
    
    8,281,581
    
    
    
    (1,424,647
    )
    
    
    12,991,309Other changes in assets and liabilities
    
    
    48,340
    
    
    
    (246,227
    )
    
    
    (289,392
    )Net cash provided by operating activities
    
    
    17,407,138
    
    
    
    10,072,759
    
    
    
    18,142,432CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    (362,722
    )
    
    
    (304,262
    )
    
    
    (454,599
    )Cost of
investments purchased and other portfolio activity
    
    
    (10,076,234
    )
    
    
    (15,317,252
    )
    
    
    (11,142,788
    )Proceeds from sale of investments
    
    
    23,628,426
    
    
    
    
    
    
    
    Net cash provided by (used in) investing
activities
    
    
    13,189,470
    
    
    
    (15,621,514
    )
    
    
    (11,597,387
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payment for repurchase of common shares
    
    
    (862,115
    )
    
    
    (359,734
    )
    
    
    Payment of taxes withheld on option/warrant exercises
    
    
    (2,777,545
    )
    
    
    (8,020,273
    )
    
    
    Proceeds from common stock issuance
    
    
    1,489,218
    
    
    
    16,346,324
    
    
    
    90,000Payment of dividends
    
    
    (24,440,884
    )
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    (1,344,958
    )
    
    
    Sale of treasury stock
    
    
    
    
    
    
    873,685
    
    
    
    669,610Net cash provided by (used in) financing
activities
    
    
    (26,591,326
    )
    
    
    7,495,044
    
    
    
    759,610CASH AND CASH EQUIVALENTSNet change during the period
    
    
    4,005,282
    
    
    
    1,946,289
    
    
    
    7,304,655At beginning of period
    
    
    11,783,278
    
    
    
    9,836,989
    
    
    
    2,532,334At end of period
    
    $
    15,788,560
    
    
    $
    11,783,278
    
    
    $
    9,836,989Cash paid during the period for:Interest
    
    $
    
    
    
    $
    
    
    
    $
    Income taxes
    
    
    3,005,000
    
    
    
    435,682
    
    
    
    91,000Noncash Transactions during the period for:Common Stock Issued as Incentive Compensation
    
    
    5,754,140
    
    
    
    5,478,718
    
    
    
    
   24




---



##### Table of Contents



Diamond Hill Investment Group, Inc.  Notes to Consolidated Financial Statements
 Organization
      Significant Accounting Policies
  Principles of Consolidation
  Segment Information
  Cash and Cash Equivalents
   25




---



##### Table of Contents



Significant Accounting Policies (Continued)
 Accounts Receivable
  Valuation of Investment Portfolio
   Limited Partnership Interests
  Property and Equipment
  Treasury Stock
  Revenue Recognition  General
   26




---



##### Table of Contents



Significant Accounting Policies (Continued)
 Revenue Recognition  Performance Incentive Revenue
  As Of December 31,2008
    
    
    2007
    
    
    2006AUM  Contractual Period Ends Quarterly
    
    $
    218,503,205
    
    
    $
    193,342,530
    
    
    $
    240,725,253AUM  Contractual Period Ends Annually
    
    
    159,514,591
    
    
    
    387,466,713
    
    
    
    133,128,473Total AUM Subject to Performance Incentive
    
    $
    378,017,796
    
    
    $
    580,809,243
    
    
    $
    373,853,726
 For The Period Ending December 31,2008
    
    
    2007
    
    
    2006Performance Incentive Fees  Method 1
    
    $
    378,881
    
    
    $
    174,292
    
    
    $
    7,947,434Performance Incentive Fees  Method 2
    
    
    378,881
    
    
    
    174,292
    
    
    
    7,947,434
  Revenue Recognition  Mutual Fund Administration
   27




---



##### Table of Contents



Revenue Recognition  Mutual Fund Administration (Continued)
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Mutual fund admin revenue, gross
    
    $
    9,194,973
    
    
    $
    8,226,438
    
    
    $
    5,795,110Mutual fund admin, fund related expense
    
    
    3,061,646
    
    
    
    2,393,732
    
    
    
    2,183,599Mutual fund admin revenue, net of fund related expenses
    
    
    6,133,327
    
    
    
    5,832,706
    
    
    
    3,611,511C Share advance repayments
    
    
    1,776,206
    
    
    
    1,970,006
    
    
    
    1,210,697C Share amortization of advances
    
    
    1,755,614
    
    
    
    1,834,109
    
    
    
    1,112,067C Share financing activity, net
    
    
    20,592
    
    
    
    135,897
    
    
    
    98,630Mutual fund administration revenue, net
    
    $
    6,153,919
    
    
    $
    5,968,603
    
    
    $
    3,710,141
 Third Party Distribution Expense
  Income Taxes
   Earnings Per Share
  Reclassifications
   28




---



##### Table of Contents



Investment Portfolio
  Year Ended December 31,2008
    
    
    2007Diamond Hill Small Cap Fund
    
    $
    
    
    
    $
    1,039,517Diamond Hill Small-Mid Cap Fund
    
    
    
    
    
    
    1,016,243Diamond Hill Large Cap Fund
    
    
    
    
    
    
    1,017,340Diamond Hill Select Fund
    
    
    
    
    
    
    1,015,803Diamond Hill Long-Short Fund
    
    
    
    
    
    
    1,027,615Diamond Hill Financial Long-Short Fund
    
    
    
    
    
    
    1,025,356Diamond Hill Strategic Income Fund
    
    
    
    
    
    
    3,765,566Diamond Hill Investment Partners, L.P.
    
    
    7,494,929
    
    
    
    10,070,021Diamond Hill Investment Partners II, L.P.
    
    
    3,767,480
    
    
    
    5,058,702Other marketable equity securities
    
    
    5,923,202
    
    
    
    9,000,000Total Investment Portfolio
    
    $
    17,185,611
    
    
    $
    34,036,163
  December 31,2008
    
    
    2007
    
    
    2006Total parternship assets
    
    $
    196,021,226
    
    
    $
    360,372,685
    
    
    $
    357,375,152Total partnership liabilities
    
    
    33,056,747
    
    
    
    80,007,267
    
    
    
    146,918,057Net partnership assets
    
    
    162,964,479
    
    
    
    280,365,418
    
    
    
    210,457,095Net partnership income (loss)
    
    
    (75,625,562
    )
    
    
    6,581,829
    
    
    
    35,961,019DHCMs portion of net assets
    
    
    11,262,409
    
    
    
    15,128,723
    
    
    
    14,566,253DHCMs portion of net income (loss)
    
    
    (3,866,314
    )
    
    
    562,469
    
    
    
    6,515,194
   29




---



##### 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
   30




---



##### Table of Contents



Stock-Based Compensation (Continued)
 Stock Options and Warrants
   Options
    
    
    WarrantsWeighted Average
    
    
    
    
    
    
    Weighted AverageShares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceOustanding December 31, 2005
    
    
    303,002
    
    
    $
    14.48
    
    
    
    259,400
    
    
    $
   12.78Exercisable December 31, 2005
    
    
    231,002
    
    
    $
    17.53
    
    
    
    259,400
    
    
    $
    12.78Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired / Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    19,900
    
    
    
    12.79
    
    
    
    10,000
    
    
    
    17.88Oustanding December 31, 2006
    
    
    283,102
    
    
    $
    14.60
    
    
    
    249,400
    
    
    $
    12.57Exercisable December 31, 2006
    
    
    243,102
    
    
    $
    16.26
    
    
    
    249,400
    
    
    $
    12.57Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired / Forfeited
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    Exercised
    
    
    190,602
    
    
    
    16.64
    
    
    
    222,000
    
    
    
    8.65Oustanding 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
    
    
    $
    13.00
   WarrantsRemainingNumber
    
    
    
    
    Life
    
    
    NumberOutstanding
    
    
    
    
    In Years
    
    
    Exercisable
    
    
    Exercise Price2,000
    
    
    
    
    
    0.37
    
    
    
    2,000
    
    
    
    22.506,000
    
    
    
    
    
    1.16
    
    
    
    6,000
    
    
    
    11.252,000
    
    
    
    
    
    1.36
    
    
    
    2,000
    
    
    
    8.7510,000
    
    
    
    
    
    1.08
    
    
    
    10,000
   31




---



##### Table of Contents



Operating Leases
  2009
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013$
    259,000
    
    $
    267,000
    
    
    $
    249,000
    
    
    $
    254,000
    
    
    $
    130,000
  Income Taxes
  2008
    
    
    2007
    
    
    2006Current city income tax provision
    
    $
    375,821
    
    
    $
    197,760
    
    
    $
    158,090Current state income tax provision
    
    
    11,000
    
    
    
    
    
    
    
    Current federal income tax provision
    
    
    4,396,824
    
    
    
    
    
    
    
    Deferred federal income tax provision (benefit)
    
    
    (2,535,960
    )
    
    
    4,857,548
    
    
    
    4,071,965Provision for income taxes
    
    $
    2,247,685
    
    
    $
    5,055,308
    
    
    $
    4,230,055
  2008
    
    
    2007
    
    
    2006Income tax computed at statutory rate
    
    $
    1,898,479
    
    
    $
    5,095,792
    
    
    $
    4,180,364City and state income taxes, net of federal benefit
    
    
    255,302
    
    
    
    197,760
    
    
    
    104,339Other
    
    
    93,904
    
    
    
    (238,244
    )
    
    
    (54,648
    )Income tax expense
    
    $
    2,247,685
    
    
    $
    5,055,308
    
    
    $
    4,230,055
  2008
    
    
    2007Stock-based compensation
    
    $
    515,914
    
    
    $
    700,723Unrealized (gains) losses
    
    
    316,249
    
    
    
    (1,332,895
    )Capital loss
carry forward
    
    
    1,182,044
    
    
    
    Other assets and liabilities
    
    
    (25,191
    )
    
    
    85,228Net deferred tax assets (liabilities)
    
    $
    1,989,016
    
    
    $
    (546,944
    )
   32




---



##### Table of Contents



Earnings Per Share
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Basic and Diluted net income
    
    $
    3,276,078
    
    
    $
    9,932,315
    
    
    $
    8,065,133Weighted average number of outstanding sharesBasic
    
    
    2,400,142
    
    
    
    2,155,829
    
    
    
    1,787,390Diluted
    
    
    2,408,476
    
    
    
    2,264,234
    
    
    
    2,219,580Earnings per shareBasic
    
    $
    1.36
    
    
    $
    4.61
    
    
    $
    4.51Diluted
    
    $
    1.36
    
    
    $
    4.39
    
    
    $
    3.63
  Commitments and Contingencies
   33




---



##### 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
     /s/ R. H. Dillon

R. H. Dillon
    
    
    
    /s/ James F. Laird

James F. LairdChief Executive Officer and President
    
    
    
    Chief Financial OfficerMarch 13, 2009
    
    
    
    March 13, 2009
  34




---



##### 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
  
 ITEM 13: Certain Relationships and Related Transactions, and Director Independence
  
 ITEM 14: Principal Accounting Fees and Services
   35




---



##### Table of Contents



PART IV:
 
 ITEM 15: Exhibits, Financial Statement Schedules
 (1)
    
    Financial Statements: See Part II. Item 8, Financial Statements and Supplementary Data.
 (2)
    
    Financial Statement Schedules are omitted because they are not required or the required
information is included in the financial statements or notes thereto.
 (3)
    
    Exhibits
 3.1
    
    Amended and Restated Articles of Incorporation of the Company.
(Incorporated by reference from Form 8-K Current Report for the event
on May 2, 2002 filed with the SEC on May 7, 2002; File No.
000-24498.)3.2
    
    Code of Regulations of the Company. (Incorporated by reference from
Form 8-K Current Report for the event on May, 2002 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 Form N1-A filed with the SEC on December 30, 2005;
File No. 811-08061.)10.2
    
    Sixth Amended and Restated Administrative and Transfer Agency
Services Agreement between Diamond Hill Capital Management, Inc. and
the Diamond Hill Funds. (Incorporated by reference from Form N1-A
filed with the SEC on April 30, 2008; File No. 811-08061.)10.3
    
    2005 Employee and Director Equity Incentive Plan, as amended January
1, 2008. (Incorporated by reference from Form 10-K filed with the
SEC on March 14, 2008; File No. 000-24498.)10.4
    
    2006 Performance-Based Compensation Plan, as amended January 1, 2008.
(Incorporated by reference from Form 10-K filed with the SEC on
March 14, 2008; File No. 000-24498.)10.5
    
    Employment Agreement between the Company and Roderick H. Dillon, Jr.
dated August 10, 2006, as amended February 28, 2008. (Incorporated
by reference from Form 10-K filed with the SEC on March 14, 2008;
File No. 000-24498.)10.6
    
    First Amendment to the Amended and Restated Employment Agreement
between the Company and Roderrick H. Dillon, Jr. dated December 2,
2008. (Filed herewith)14.1
    
    Amended Code of Business Conduct and Ethics. (Filed herewith)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)
  36




---



##### Table of Contents



SIGNATURES
   By:
    
    /S/ R. H. DillonR. H. Dillon, President, Chief Executive Officer and a Director
    
    
    
    March 13, 2009
  Signature
    
    Title
    
    Date/S/ R. H. Dillon

R. H. Dillon
    
    President, Chief Executive Officer, and a Director
    
    March 13, 2009/S/ James F. Laird

James F. Laird
    
    Chief Financial Officer, Treasurer,
and Secretary
    
    March 13, 2009/S/ Lawrence E. Baumgartner

Lawrence E. Baumgartner
    
    Director
    
    March 13, 2009/S/ David P. Lauer

David P. Lauer
    
    Director
    
    March 13, 2009/S/James G. Mathias

James G. Mathias
    
    Director
    
    March 13, 2009/S/ David R. Meuse

David R. Meuse
    
    Director
    
    March 13, 2009/S/ Diane D. Reynolds

Diane D. Reynolds
    
    Director
    
    March 13, 2009/S/ Donald B. Shackelford

Donald B. Shackelford
    
    Director
    
    March 13, 2009
  37




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description3.1
    
    
    Amended and Restated Articles of Incorporation of the Company.
(Incorporated by reference from Form 8-K Current Report for
the event on May 2, 2002 filed with the SEC on May 7, 2002;
File No. 000-24498.)3.2
    
    
    Code of Regulations of the Company. (Incorporated by
reference from Form 8-K Current Report for the event on May,
2002 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 Form N1-A filed with the SEC
on December 30, 2005; File No. 811-08061.)10.2
    
    
    Sixth Amended and Restated Administrative and Transfer Agency
Services Agreement between Diamond Hill Capital Management,
Inc. and the Diamond Hill Funds. (Incorporated by reference
from Form N1-A filed with the SEC on April 30, 2008; File No.
811-08061.)10.3
    
    
    2005 Employee and Director Equity Incentive Plan, as amended
January 1, 2008. (Incorporated by reference from Form 10-K
filed with the SEC on March 14, 2008; File No. 000-24498.)10.4
    
    
    2006 Performance-Based Compensation Plan, as amended January
1, 2008. (Incorporated by reference from Form 10-K filed with
the SEC on March 14, 2008; File No. 000-24498.)10.5
    
    
    Employment Agreement between the Company and Roderick H.
Dillon, Jr. dated August 10, 2006, as amended February 28,
2008. (Incorporated by reference from Form 10-K filed with
the SEC on March 14, 2008; File No. 000-24498.)10.6
    
    
    First Amendment to the Amended and Restated Employment
Agreement between the Company and Roderrick H. Dillon, Jr.
dated December 2, 2008. (Filed herewith)14.1
    
    
    Amended Code of Business Conduct and Ethics. (Filed herewith)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)
  38