U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-KSB

               [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2002
                                             -----------------

             [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

               For the transition period ________ from to ________

                        Commission file number 000-24498
                                               ---------

                       DIAMOND HILL INVESTMENT GROUP, INC
                       ----------------------------------
                 (Name of small business issuer in its charter)

             Ohio                                         65-0190407
             -------------------------------------------------------
             (State or other jurisdiction of        (I.R.S. Employer
             incorporation or organization)      Identification No.)

        375 North Front Street, Suite 300,    Columbus,    Ohio    43215
        ----------------------------------------------------------------
        (Address of principal executive offices)              (Zip Code)

                    Issuer's telephone number (614) 255-3333
                                              --------------

         Securities registered under Section 12(b) of the Exchange Act:

   --------------------------------------------------------------------------
   (Title of Class)               (Name of each exchange on which registered)

         Securities registered under Section 12(g) of the Exchange Act:

                           Common Stock, no par value
                           --------------------------
                                (Title of class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.  Yes  X   No
                                                               ---     ---

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X]

State issuer's revenues for its most recent fiscal year $962,093
                                                        --------

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  prices of such common  equity,  as of a
specified  date within the past 60 days.  (See  definition  of affiliate in Rule
12b-2 of the Exchange Act.)

As of February 5, 2003: 1,304,518 Shares of Common Stock
     @ Bid of    $5.19 = $6,770,448
     @ Asked of  $5.21 = $6,796,539

State the number of shares outstanding of each of the issuer's classes of common
equity, as of February 5, 2003:
     Common Stock: 1,408,467 shares

Transitional Small Business Disclosure Format (check one):
     Yes      ;  No   X
         -----      -----

<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

                                                                            PAGE
                                                                            ----
Part I:
          Item 1.   Description of Business                                  3-6

          Item 2.   Description of Property                                    6

          Item 3.   Legal Proceedings                                          6

          Item 4.   Submission of Matters to a Vote of
                    Security Holders                                           6

Part II:

          Item 5.   Market for Common Equity and Related
                    Stockholder Matters                                        7

          Item 6.   Management's Discussion and Analysis of
                    Financial Condition and Results of
                    Operations                                              8-10

          Item 7.   Financial Statements                                   11-26

          Item 8.   Changes In and Disagreements With
                    Accountants on Accounting and Financial
                    Disclosure                                                27

Part III:

          Item 9.   Directors, Executive Officers, Promoters
                    and Control Persons; Compliance With
                    Section 16(a) of the Exchange Act                      27-29

          Item 10.  Executive Compensation                                 30-31

          Item 11.  Security Ownership of Certain Beneficial
                    Owners and Management and Related
                    Stockholder Matters                                    32-33

          Item 12.  Certain Relationships and Related Transactions            33

          Item 13.  Exhibits and Reports on Form 8-K                       33-34

          Item 14.  Controls and Procedures                                   34

          Item 16.  Audit Fees                                                34

Signatures                                                                    35

Certifications for Annual Report on Form 10-KSB                            36-37

                                        2
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

PART I
ITEM 1: DESCRIPTION OF BUSINESS

GENERAL

Diamond Hill  Investment  Group,  Inc.  ("the  Company") is an Ohio  corporation
reincorporated  in May 2002 and  previously  a Florida  corporation  since April
1990. The Company has two subsidiary operating companies.

Diamond Hill Capital Management, Inc. ("DHCM"), an Ohio corporation, is a wholly
owned subsidiary of the Company and a registered investment advisor. DHCM is the
investment  advisor to the Diamond Hill Focus Fund, Diamond Hill Small Cap Fund,
Diamond  Hill Large Cap Fund,  Diamond  Hill Short  Term Fixed  Income  Fund and
Diamond Hill  Strategic  Income Fund,  open-end  mutual funds,  and Diamond Hill
Investment  Partners,  L.P. DHCM also offers advisory  services to institutional
and individual investors.

Diamond Hill Securities,  Inc. ("DHS"),  an Ohio corporation,  is a wholly owned
subsidiary of DHCM and a NASD registered  broker-dealer.  DHS is registered with
the  Securities and Exchange  Commission  and the securities  commissions of ten
states (including Ohio) and the District of Columbia. DHS trades securities on a
fully-disclosed  basis and clears customer  transactions through an unaffiliated
broker-dealer  that  also  maintains  the  customer  accounts.  DHS  is  also  a
registered  investment advisor and offers advisory services to institutional and
individual  investors.  DHS is the investment advisor to the Diamond Hill Bank &
Financial Fund.

The Company  operates  primarily as a holding company with  investment  advisory
services provided by DHCM and DHS and underwriting and broker-dealer  operations
conducted  by DHS.  The Company  maintains an  investment  portfolio,  primarily
composed of mutual funds and the  investment  partnership,  which are managed by
DHCM. References to the Company also include references to DHCM and DHS.

In May of 2000, with the change in executive management, the Company shifted its
emphasis  from its  historical  investment  related  activities  through its DHS
subsidiary,  to  the  investment  advisory  services  of  its  DHCM  subsidiary.
Staffing,   other  costs  associated  with  this  shift  and  various  marketing
initiatives  have negatively  impacted the Company in 2001 and 2002.  Management
believes  that  this  process  was  necessary  in order to  achieve  a  critical
threshold  of assets  under  management  to support  operations  in the  future.
However,  there can be no  assurance  the  Company  will be able to achieve  the
critical threshold of assets under management to support future operations.

ASSETS UNDER MANAGEMENT

As of December 31, 2002,  assets under management  totaled  $110,328,387,  a 57%
increase  from December 31, 2001.  The table below  provides a summary of assets
under management as of December 31, 2002 and 2001:

                                     12/31/2002      12/31/2001       % CHANGE
                                    ------------    ------------    ------------
Individually Managed Accounts       $ 58,297,957    $ 28,809,342             102
Mutual Funds                          44,819,496      35,943,939              25
Alternative Investments                7,210,934       5,375,657              34
                                    ------------    ------------    ------------
Total Assets Under Management       $110,328,387    $ 70,128,938              57

INVESTMENT ADVISORY ACTIVITIES

Diamond Hill Capital Management
-------------------------------

DHCM executes its investment strategies through fundamental  research.  Analysts
evaluate a company's  prospects  based upon its current  business and  financial
position,  future growth opportunities,  and management capability and strategy.
The intended result is a reasonably accurate determination of "intrinsic value".
Intrinsic value is the present value of all future cash flows, which we estimate
the investment  will  generate,  discounted at a rate that reflects the required
return for the investment  given the estimated level of risk. In other words, it
is the estimated price a minority  shareholder  should pay in order to achieve a
satisfactory or "fair" return on the investment. The estimate of intrinsic value
is then compared to current market prices to evaluate whether, in the opinion of
the  advisor,  an  attractive  investment   opportunity  exists.  A  proprietary
valuation model, which forecasts cash flows for

                                        3
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

five years  including  a  "terminal  value"  (the  expected  stock price in five
years),  assists  in many of these  intrinsic  value  estimations.  The  advisor
believes   that   although   securities   markets   are   competitive,   pricing
inefficiencies  often exist  allowing for attractive  investment  opportunities.
Furthermore,  the advisor  believes that  investing in  securities  whose market
prices are significantly below our estimate of intrinsic value (or selling short
securities  whose market prices are above  intrinsic  value) is the most assured
method to achieve above average returns as well as mitigate risk.

Currently  available  portfolio  products  managed by DHCM include Focus Equity,
Small Cap Equity,  Large Cap Equity,  Short-Term  Income,  Strategic  Income and
Balanced  (portfolios  consisting  of stocks  and  bonds).  These  products  are
available  on a  separately  managed  basis or through a mutual  fund,  with the
exception of the Balanced  product which is only available on a separate account
basis (an investor  could create a balanced  portfolio  through a combination of
the advisors' mutual funds).

Typically,  an account  with less than  $250,000 is  invested in the  applicable
mutual fund.  Clients investing $250,000 or more typically are managed in either
a separate account or in a "wrap program".  In a separate account, DHCM receives
a  fee,  typically  based  on  a  percentage  of  the  assets,  to  act  as  the
discretionary  manager. This fee, as a percentage of assets, varies depending on
whether  the  portfolio  is managed  as an equity,  fixed  income,  or  balanced
account.  Any one of a variety of banks or brokerage firms acts as a third-party
custodian for the client account.  Thus, for the client,  brokerage  commissions
and custodial fees are in addition to the management  fee. In a "wrap  program",
the investor pays one fee, again based on assets under management, for a variety
of  financial  products,  management  services,  brokerage  services  (including
commissions),  and other related advisory  services.  DHCM receives a portion of
the "wrap fee" for managing the investor's assets.  DHCM currently  participates
in wrap programs with DHS and Synovus Securities, Inc..

The Focus Equity product is typically comprised of 20-30 stocks,  which are also
included  in either  the Small Cap Equity or Large Cap  Equity  products.  These
stocks  are  selected  to  comprise  the  Focus  Equity  portfolio  based on the
portfolio manager's view of their attractiveness. In the Diamond Hill Focus Fund
("DIAMX"), the advisor also has the ability to sell securities short. In a short
sale, stock is borrowed and immediately sold for the proceeds.  The intention is
to be able to buy the stock later at a lower price, returning the borrowed stock
and benefiting from a price decline.

The Company also offers an alternative  investment,  the Diamond Hill Investment
Partners,  L.P.  ("DHIP"),  a limited  partnership  that  invests  in and trades
securities.  DHCM is the managing  member of the DHIP general partner and offers
interests in the  partnership  to certain high net worth  clients who  typically
invest at least $500,000 in the partnership.

Diamond Hill Securities
-----------------------
Diamond  Hill  Securities  serves  as the  advisor  to the  Diamond  Hill Bank &
Financial  Fund,  a financial  services  sector  fund.  The Diamond  Hill Bank &
Financial  Fund  principally  invests in banks and thrifts as well as  specialty
finance  and  insurance   companies  using  the  same  investment  approach  and
methodology  as DHCM (i.e.,  investing in stocks that are deemed to be available
at a  substantial  discount  to an  estimate of  intrinsic  value).  The Fund is
typically invested in a relatively  concentrated  number,  25-35, of stocks from
the financial services sector. Currently, there are no separate accounts managed
as a bank and financial sector portfolio.

Business Development
--------------------

The Company  develops  business with clients through direct contact or strategic
alliances.  The primary  geographic areas are Columbus,  Ohio and Georgia,  with
current efforts outside this area on an opportunistic basis.

The Company  currently relies upon existing  relationships  where prospects have
knowledge sufficient to have confidence in the Company's policies. Many of these
relationships  are with former  clients/contacts  of DHCM  associates.  High net
worth  individuals,   retirement  plans  and  charitable   foundations  are  the
categories  of  clients  DHCM  expects  to  develop.   Alliances  with  brokers,
consultants,  legal and financial advisors and selected individuals constitute a
large part of the business development effort.

Typically,  an account  with less than  $250,000 is  invested in the  applicable
mutual fund.  Clients investing  $250,000 to $1 million typically are managed in
"wrap programs" where the investor pays a fee, based on assets under management,
for a variety of financial  products and for investment  advisory and management
services, brokerage services, including commissions, and other related services.
DHCM receives a portion of the "wrap fee" for

                                        4
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              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

managing the investor's  assets.  DHCM currently  participates  in wrap programs
with DHS and Synovus  Securities,  Inc.Client  accounts that are greater than $1
million are separately managed and may be in a "wrap program" or directly served
by DHCM with a variety of banks and brokerage firms acting as custodian for each
client account.

The Company also offers an alternative  investment,  the Diamond Hill Investment
Partners,  L.P.  ("DHIP"),  a limited  partnership  that  invests  and trades in
securities.  DHCM is the managing  member of the DHIP general partner and offers
interests in the  partnership  to certain high net worth  clients who  typically
invest at least $500,000 in the partnership.

MARKET MAKING AND BROKERAGE ACTIVITIES

Historically,  the Company's  brokerage  subsidiary had specialized in community
and regional bank stocks,  selecting  those bank stocks which DHS believes to be
most  likely to show an increase in value over both the short and the long term.
With the change in executive management in May 2000, the Company has shifted its
emphasis from its  traditional  investment  related  activities  through its DHS
subsidiary,  to  the  investment  advisory  services  of  its  DHCM  subsidiary.
Therefore, market-making activities have significantly declined since that date.
DHS continues to transact trades for the separately managed accounts,  which the
Company manages.

COMPETITION

Competition  in the area of investment  management  services and mutual funds is
intense and includes  investment  management  firms,  broker-dealers,  banks and
insurance  companies.  Many  competitors are better known than the Company,  are
better  capitalized,  offer a broader range of investment products and have more
offices, employees and sales representatives.  The Company competes primarily on
the basis of investment philosophy, performance and customer service.

INVESTMENT PORTFOLIO

DHCM and DHS hold  significant  positions in the Company's mutual fund products,
primarily fixed income, and DHIP, the Company's limited partnership product.

REGULATION

The securities  industry is subject to extensive  regulation  under both federal
and state laws. The principal  purpose of regulation of investment  advisors and
broker-dealers  is the protection of retail investors in the securities  markets
rather  than   protection   of   stockholders   of   investment   advisors   and
broker-dealers. The SEC is the federal agency charged with the administration of
federal  securities  laws.  The Ohio  Division of Securities is charged with the
administration  and  enforcement  of  the  Ohio  Securities  Act.  Much  of  the
regulation of broker-dealers, which do business on an interstate basis, has been
delegated by the SEC to self-regulatory organizations,  principally the National
Association  of  Securities   Dealers  ("NASD")  and  the  national   securities
exchanges. These self-regulatory organizations adopt rules (which are subject to
approval  by  the  SEC),   which  govern  the  industry  and  conduct   periodic
examinations  of member  broker-dealers.  Investment  advisors  are  subject  to
regulation by the SEC and state  securities  commissions  in the states in which
they are registered.

The  regulations  to which  broker-dealers  are subject cover all aspects of the
securities   business,   including  sales  methods,   trading   practices  among
broker-dealers,  capital structure of securities  firms,  record keeping and the
conduct of directors, officers and employees. Additional legislation, changes in
rules promulgated by regulatory  organizations or changes in the  interpretation
or  enforcement  of existing laws and rules often affect  directly the method of
operation  and  profitability  of   broker-dealers.   In  addition,   securities
regulators may conduct administrative proceedings,  which can result in censure,
fine, suspension or expulsion of a broker-dealer, its officers or employees.

DHCM and DHS each operate in this highly  regulated  environment and are subject
to examination and licensing requirements by federal and state authorities.  DHS
is subject to regulation by the SEC and the state securities regulatory agencies
in the states in which it operates;  DHS also is a member of the NASD.  DHCM and
DHS are  registered  investment  advisers and subject to  regulation  by the SEC
pursuant to the Investment Advisers Act of 1940.

                                       5
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

EMPLOYEES

The Company currently has 13 full-time employees,  none of whom are members of a
union. The Company  generally  believes that its relationship  with employees is
good.

SEC FILINGS

This Form  10-KSB  report  includes  financial  statements  for the years  ended
December 31, 2002 and December 31, 2001. The Company files Forms 10-KSB annually
with the SEC and  files  Forms  10-QSB  after  each of the  first  three  fiscal
quarters.

The public may read and copy any materials the Company files with the SEC at the
SEC's Public Reference Room at 450 Fifth Street, N.W.,  Washington,  D.C. 20549.
The public may obtain  information on the operation of the Public Reference Room
by calling the SEC at  1-800-SEC-0330.  The SEC  maintains an Internet site that
contains  reports,  proxy and  information  statements,  and  other  information
regarding issuers that file electronically with the SEC at http://www.sec.gov.

The Company will  distribute  copies of this Form 10-KSB to shareholders in lieu
of preparing a separate annual report.

ITEM 2: DESCRIPTION OF PROPERTY

The Company  sub-leases  approximately  8,500 square feet of office space in the
Arena  Office  Building at 375 North Front  Street,  Suite 300,  Columbus,  Ohio
43215, from an unaffiliated  third party for an aggregate current monthly rental
of $10,000.  This lease expires May 31, 2005. The Company moved on May 13, 2002,
to this more strategic location in downtown Columbus.

ITEM 3: LEGAL PROCEEDINGS

The Company is not engaged in any litigation, other than routine litigation that
is incidental to its business.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters  submitted  during  the most  recent  quarter to a vote of
security holders.

                                        6
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              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

PART II
ITEM 5: MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The  Company's  Common  Stock  trades on the NASDAQ  Small Cap Market  under the
symbol DHIL.  The range of high and low prices for each quarter since January 1,
2001, are shown below:

BEGINNING DATE              ENDING DATE                  HIGH             LOW
--------------------------------------------------------------------------------
January 1, 2001             March 31, 2001               $13.13           $ 7.81
April 1, 2001               June 30, 2001                $ 8.75           $ 4.75
July 1, 2001                September 30, 2001           $ 5.75           $ 4.75
October 1, 2001             December 31, 2001            $ 4.82           $ 3.85
January 1, 2002             March 31, 2002               $ 4.00           $ 3.91
April 1, 2002               June 30, 2002                $ 8.75           $ 3.92
July 1, 2002                September 30, 2002           $ 8.24           $ 4.10
October 1, 2002             December 31, 2002            $ 8.00           $ 3.61

The source of this bid  information is Bloomberg L.P. These  quotations  reflect
inter-dealer prices, without retail markup,  markdown or commissions and may not
represent actual transactions.  In addition, due to the relatively "thin" market
in the Company's Common Stock, quoted prices cannot be considered  indicative of
any viable  market for such  stock.  During the year ended  December  31,  2002,
approximately 624,900 shares of the Company's Common Stock were traded.

As of December 31, 2002,  there were  approximately  1,000  holders of record of
common shares. The Company has not paid any dividends during the last two fiscal
years and has no present intention of paying dividends.

Information  with respect to  securities  authorized  for issuance  under equity
compensation plans is disclosed in Item 11 of this Form 10-KSB.

                                        7
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              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

ITEM 6: MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Forward-looking Statements
--------------------------

Throughout  this  discussion,  the Company may make  forward-looking  statements
relating  to such  matters  as  anticipated  operating  results,  prospects  for
achieving  the  critical  threshold of assets  under  management,  technological
developments,  economic trends (including interest rates and market volatility),
expected  transactions and  acquisitions and similar matters.  While the Company
believes that the  assumptions  underlying  its  forward-looking  statements are
reasonable, any of the assumptions could prove to be inaccurate and accordingly,
the actual results and  experiences of the Company could differ  materially from
the anticipated  results or other  expectations  expressed by the Company in its
forward-looking  statements.  Factors  that could cause such  actual  results or
experiences to differ from results discussed in the  forward-looking  statements
include,  but are not  limited  to:  the  adverse  effect  from a decline in the
securities  markets; a decline in the performance of the Company's  products;  a
general  downturn in the economy;  changes in government  policy and regulation;
changes in the Company's ability to attract or retain key employees;  unforeseen
costs and other  effects  related  to legal  proceedings  or  investigations  of
governmental and self-regulatory organizations;  and other risks identified from
time-to-time in the Company's other public documents on file with the SEC.

General
-------

With the change in executive  management in May of 2000, the Company has shifted
its emphasis from its traditional  investment related activities through its DHS
subsidiary,  to the investment  advisory  services of its DHCM subsidiary.  DHCM
manages  portfolios of stocks  representing  interests in entities  operating in
various  economic  sectors,  as  opposed to a  portfolio  of bank  stocks  only.
Staffing  and  costs  associated  with  this  shift  and the  various  marketing
initiatives at DHCM negatively impacted the Company in 2001 and 2002. Management
believes  that  this  process  was  necessary  in order to  achieve  a  critical
threshold  of assets  under  management  to support  operations  in the  future.
However,  there can be no assurance that the Company will be able to achieve the
critical threshold of assets under management to support future operations.

Year ended December 31, 2002 compared to Year ended December 31, 2001
---------------------------------------------------------------------

Operating  revenues for the year ended  December 31, 2002  decreased to $962,093
compared to  $1,161,304  for the year ended  December 31, 2001, a 17%  decrease.
This decrease results primarily from market making losses.

The Company  generated  management  fees and  commissions  of $1,022,318 in 2002
compared to $1,013,089  for the year ended  December 31, 2001 an increase of 1%.
The  increase is primarily  attributable  to greater  management  fee revenue of
$963,497 in 2002  compared to $762,539 in 2001, a 26% increase.  In  conjunction
with the shift in  emphasis  to the  investment  advisory  services  of DHCM,  a
program has been  initiated to attempt to gather new assets under  management at
DHCM. Assets under management increased to $110,283.737 as of December 31, 2002,
a 57% increase since December 31, 2001. However,  there can be no assurance that
the  Company  will be able to achieve the  critical  threshold  of assets  under
management at DHCM to support future operations.

Market  making gains and losses were losses of $60,225 in 2002 compared to gains
of $148,215 for the year ended  December 31,  2001, a 141%  decrease.  Losses in
2002  resulted  primarily  from  financial   services  sector   securities.   In
conjunction  with the  shift in  emphasis  away from the  Company's  traditional
investment  related  activities  through  DHS,  market-making   activities  have
significantly declined over the past two years.

Operating  expenses for the year ended December 31, 2002 decreased to $3,370,160
compared to $3,901,928  for the year ended December 31, 2001, a decrease of 14%.
Generally,  the decrease is due to the decrease in all operating expenses except
professional fees. Salaries,  benefits and payroll taxes decreased to $1,602,243
in 2002 from  $1,775,276  in 2001,  a decrease of 10%.  This  decrease  reflects
personnel  changes.  Since the  Company  reduced  personnel  at the end of 2002,
management  expects  salary,  benefits and payroll  taxes to decrease in 2003 as
compared to 2002.  Severance  costs  associated with this reduction in personnel
was accrued in 2002.  Brokers'  commission  expense decreased to $61,644 in 2002
compared  to  $175,734  in 2001 a  decrease  of 65%.  In  conjunction  with  the
Company's shift in emphasis from its traditional  investment  related activities
through  DHS,  to the  investment  advisory  services  of  DHCM,  broker  dealer
activities through DHS did not generate the volume of

                                       8
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              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

commissions  in 2002 as they did in 2001.  It is  expected  for 2003,  that this
level of expense in 2002 will be maintained or will increase.  Professional fees
increased to $964,129 in 2002  compared to $693,289 in 2001, an increase of 39%.
This increase results from expenses related to the formation of the Diamond Hill
Short  Term  Fixed   Income  and   Strategic   Income   mutual   funds  and  the
reincorporation  of the Company from Florida to Ohio. Since there are no current
plans for major  administrative  projects or new  products,  management  expects
professional  expense  to  drop  in  2003  as  compared  to  2002.  General  and
administrative  expenses decreased to $742,144 in 2002 compared to $1,257,629 in
2001, a decrease of 41%. This  resulted  from  decreases in a number of expenses
including marketing,  brokerage and general office expenses. In addition, due to
the Company's tax settlement with the State of Ohio, accrued taxes were reduced.
As of  December  31,  2002,  tax  accruals  relate  primarily  to the year ended
December 31, 2002. General and administrative costs may increase in 2003, due to
increased expenditures related to sales and marketing.

Other  revenue and expenses for 2002  decreased to net other  expense of $55,556
compared to net other revenue of  $1,089,148  in 2001, a decrease of 105%.  This
decrease  results  primarily from increases in expense from portfolio  losses in
2002 versus significant  portfolio gains in 2001 and the decline in dividend and
interest income in 2002 versus 2001.

Portfolio gains and losses were losses of $114,503 in 2002, compared to gains of
$893,039 in 2001, a decrease of 113%. These  investment  losses result primarily
from  decreases  in market  values of  investments  in mutual  funds and limited
partnership  interests  in 2002.  Management  is unable to  predict  how  future
fluctuations  in market  values will  impact the  performance  of the  Company's
investment  portfolios.  Dividend income declined in 2002 to $29,156 compared to
$129,471 in 2001, a decrease of 77%; this is due to a  significant  reduction in
the Company's  portfolio of bank stocks (many of which pay dividends).  In 2003,
dividend revenue may increase since the Company  reallocated  approximately $1.5
million of its investments from DHIP to the Company's fixed income funds,  which
pay monthly  dividends,  yielding an  anticipated  average of six percent  (6%).
Interest  and other  income  decreased by 53% from $67,131 in 2001 to $31,360 in
2002  due to lower  interest  rates on lower  money  market  balances.  Interest
expense increased from $493 in 2001 to $1,569 in 2002 due to the Company drawing
on the line of credit  during the fourth  quarter of 2002.  As of  December  31,
2002, the Company's line of credit payable balance was zero ($0).

Liquidity and Capital Resources
-------------------------------

Approximately 94% of the Company's  investment  portfolio is readily marketable.
Approximately 6% of the value of the Company's investment portfolio is comprised
of small  capitalization  bank stocks that are thinly traded and there can be no
assurance  that active  markets  will  develop.  The failure of such  markets to
develop  could  negatively   affect  the  Company's   operations  and  financial
condition.  Investments in securities traded on national  securities markets and
securities  not  traded  on  national  securities  markets,   but  with  readily
ascertainable  market values, are valued at market value. Other securities,  for
which  market  quotations  are not  readily  available,  due to  infrequency  of
transactions, are valued at fair value as determined in good faith by management
of the Company.  While management  employs objective criteria to ascertain these
values,  there is no  independent  benchmark  by which the  values  assigned  by
management  can be judged.  Accordingly,  the value of these  securities  may be
overstated.

Toward the end of 2002,  the Company  reallocated  its  investment  portfolio to
provide more liquidity and reduce its equity exposure.  In doing so, the Company
transferred $2 million out of its investment in the limited  partnership,  DHIP,
and invested  approximately  $1.5 million into the Company's fixed income mutual
funds and used the remaining to pay-off the Company's line of credit and provide
short-term liquidity for current operating expenses.

DHS, under a  correspondent  agreement with its clearing  broker,  has agreed to
indemnify the clearing  broker from damages or losses  resulting from customers'
transactions.  The Company is,  therefore,  exposed to off-balance sheet risk of
loss in the event that customers are unable to fulfill contractual  obligations.
The Company manages this risk by requiring  customers to have sufficient cash in
their account before a buy order is executed and to have the subject  securities
in their account  before a sell order is executed.  The Company has not incurred
any losses from customers being unable to fulfill contractual obligations.

In the normal course of business, the Company may sell securities it has not yet
purchased  (short  sales)  for  its own  account,  and may  write  options.  The
establishment  of short  positions and option  contracts  exposes the Company to
off-balance sheet market risks in the event prices change, as the Company may be
obligated to cover such positions at a loss.

                                        9
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

At December  31,  2002,  the Company had no short  security  positions,  had not
written any option contracts,  and did not own any options.  The Company did not
experience  any credit  losses  due to the  failure  of any  counter  parties to
perform  during the year ended  December  31,  2002.  Senior  management  of the
Company is responsible for reviewing trading positions,  exposures,  profits and
losses, trading strategies and hedging strategies on a daily basis.

As of December  31,  2002,  the Company  had  working  capital of  approximately
$3,300,000  compared to $6,100,000 at December 31, 2001.  The decrease is due to
operating  activities,  which  includes the net loss in 2002,  and using working
capital to  purchase  Company  common  stock.  Working  capital  includes  cash,
securities owned and accounts and notes receivable, net of all liabilities.  The
Company has no long-term debt.

The  Company's  net cash  balance  decreased  by $484,851  during the year ended
December  31,  2002.  Net cash used by operating  activities  was  $73,216.  The
primary use of cash flow was the net loss of $2,463,623, which was offset by the
decrease of investment  portfolio assets.  Investing activities used $118,935 of
cash during 2002,  primarily  from the  acquisition of property and equipment to
furnish  the  Company's  newly  leased  office  space  in  May  2002.  Financing
activities  used  $292,700 of cash during  2002,  entirely  from the purchase of
Company common stock.

The  Company's net cash balance  decreased by  $2,269,202  during the year ended
December  31, 2001.  Net cash used by operating  activities  was  $680,894.  The
primary use of cash flow was the net loss of  $1,502,533.  Investing  activities
used $34,882 of cash during 2001, primarily from the acquisition of property and
equipment.  Financing  activities used $1,553,426 of cash during 2001,  entirely
from the purchase of Company common stock.

Investment  management  fees  primarily  fund  the  operations  of the  Company.
Management believes that the Company's existing  resources,  including available
cash and cash  provided by operating  activities,  will be sufficient to satisfy
its  working  capital  requirements  in  the  foreseeable  future.  However,  no
assurance can be given that additional funds will not be required. To the extent
that returns on investments are less than  anticipated,  or expenses are greater
than  anticipated,  the  Company  may be  required  to  reduce  its  activities,
liquidate the investment portfolio or seek additional  financing.  Further, this
additional  financing  may not be available on acceptable  terms,  if at all. No
significant capital expenditures are expected in the foreseeable future.

Impact of Inflation and Other Factors
-------------------------------------

The Company's operations have not been significantly affected by inflation.  The
Company's  investment   portfolios  of  equity  securities,   primarily  in  the
community-banking  sector, are carried at current market values.  Therefore, the
Company's  profitability is affected by general economic and market  conditions,
the volume of securities trading and fluctuations in interest rates.

The Company's  business is also subject to government  regulation and changes in
legal,  accounting,  tax and other  compliance  requirements.  Changes  in these
regulations may have a significant effect on the Company's operations.

                                       10
<PAGE>

                          INDEPENDENT AUDITORS' REPORT
                 For the Years Ended December 31, 2002 and 2001

ITEM 7: FINANCIAL STATEMENTS

To the Board of Directors
Diamond Hill Investment Group, Inc.
Columbus, Ohio

We have audited the  consolidated  statement  of financial  condition of Diamond
Hill Investment  Group,  Inc. and its  subsidiaries as of December 31, 2002, and
the related  consolidated  statements of  operations,  changes in  shareholders'
equity and cash flows for the years  ended  December  31,  2002 and 2001.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We have  conducted our audits in accordance  with auditing  standards  generally
accepted in the United States of America.  Those standards  require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall consolidated  financial statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Diamond
Hill Investment  Group,  Inc. and its  subsidiaries as of December 31, 2002, and
the consolidated  results of their operations and cash flows for the years ended
December 31, 2002 and 2001, in conformity with accounting  principles  generally
accepted in the United States of America.


BKR Longanbach Giusti, LLC
Columbus, Ohio
January 23, 2003

                                       11
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
                             As of December 31, 2002

                                                                     AUDITED
                                                                     12/31/02
                                                                   ------------

                                     ASSETS
                                     ------
Cash                                                               $    689,175
Investment portfolio (note 4):
     Mutual fund shares and limited partnership interests             2,612,555
     Marketable equity securities, at market value                       40,519
     Not readily marketable equity securities,
          at estimated fair value                                       137,409
Accounts receivable:
     Mutual fund fees                                                    52,027
     Pending settlements and other                                       37,949
Property and equipment, net of accumulated
     depreciation of $97,885                                            165,150
Deposits and other                                                      158,688
                                                                   ------------

          Total assets                                             $  3,893,472
                                                                   ============

                                   LIABILITIES
                                   -----------
Accrued expenses                                                   $    256,196
                                                                   ------------
          Total liabilities                                             256,196
                                                                   ------------

                              SHAREHOLDERS' EQUITY
                              --------------------
Common stock: (note 3)
     No par value, 7,000,000 shares authorized, 1,826,972
          shares issued and 1,408,467 shares outstanding             10,023,703
     Treasury stock, at cost
          (418,505 shares)                                           (2,394,510)
     Deferred compensation                                              (15,174)
Accumulated deficit                                                  (3,976,743)
                                                                   ------------

          Total shareholders' equity                                  3,637,276
                                                                   ------------

          Total liabilities and shareholders' equity               $  3,893,472
                                                                   ============

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       12
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                           December 31, 2002 and 2001

                                     AUDITED
                                     -------
                                                       YEAR             YEAR
                                                      ENDED            ENDED
                                                       2002             2001
                                                    ----------       ----------

OPERATING REVENUES:
   Management fees and commissions                   1,022,318        1,013,089
   Market making gains and (losses)                    (60,225)         148,215
                                                    ----------       ----------

   Total operating revenues                            962,093        1,161,304
                                                    ----------       ----------

OPERATING EXPENSES:
   Salaries, benefits and payroll taxes              1,602,243        1,775,276
   Brokers' commission                                  61,644          175,734
   Professional fees                                   964,129          693,289
   General and administrative                          742,144        1,257,629
                                                    ----------       ----------
   Total operating expenses                          3,370,160        3,901,928
                                                    ----------       ----------

OPERATING LOSS                                      (2,408,067)      (2,740,624)
                                                    ----------       ----------

OTHER REVENUE AND (EXPENSES):
   Investment gains and (losses)                      (114,503)         893,039
   Dividend income                                      29,156          129,471
   Interest and other income                            31,360           67,131

   Interest expense                                     (1,569)            (493)
                                                    ----------       ----------

   Total other revenue and (expenses)                  (55,556)       1,089,148
                                                    ----------       ----------

LOSS BEFORE TAXES                                   (2,463,623)      (1,651,476)
                                                    ----------       ----------

   Income tax provision (credit)                            --         (148,943)
                                                    ----------       ----------

NET LOSS                                            (2,463,623)      (1,502,533)
                                                    ==========       ==========

 BASIC EARNINGS (LOSS) PER SHARE
                                                    $    (1.73)      $    (0.93)
                                                    ==========       ==========
 DILUTED EARNINGS (LOSS) PER SHARE                  $    (1.73)      $    (0.93)
                                                    ==========       ==========

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       13
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                           December 31, 2002 and 2001

                                     AUDITED
                                     -------

<TABLE>
<CAPTION>
                                                                                              Retained
                                Shares                        Treasury        Deferred        Earnings
                              Outstanding       Amount          Stock       Compensation      (Deficit)         Total
                              -----------     -----------    -----------     -----------     -----------     -----------
Balance at
<S>                             <C>           <C>            <C>             <C>             <C>             <C>
December 31, 2000               1,740,903     $ 9,562,747    ($   87,428)    ($   73,150)    ($   10,587)    $ 9,391,582

Amortization of deferred
compensation                           --              --             --          36,357              --          36,357

Purchase of treasury stock       (261,136)             --     (1,553,426)             --              --      (1,553,426)

Reverse treasury sale                  --         460,956       (460,956)             --              --              --

Net loss                               --              --             --              --      (1,502,533)     (1,502,533)

                              -----------     -----------    -----------     -----------     -----------     -----------
Balance at
December 31, 2001               1,479,767      10,023,703     (2,101,810)        (36,793)     (1,513,120)      6,371,980

Amortization of deferred
compensation                           --              --             --          21,619              --          21,619

Purchase of treasury stock        (71,300)             --       (292,700)             --              --        (292,700)

Net loss                               --              --             --              --      (2,463,623)     (2,463,623)
                              -----------     -----------    -----------     -----------     -----------     -----------
Balance at
December 31, 2002               1,408,467     $10,023,703    ($2,394,510)    ($   15,174)    ($3,976,743)    $ 3,637,276
                              ===========     ===========    ===========     ===========     ===========     ===========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       14
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           December 31, 2002 and 2001

                                     AUDITED
                                     -------

<TABLE>
<CAPTION>
                                                            YEAR             YEAR
                                                           ENDED            ENDED
                                                            2002             2001
                                                        ------------     ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                     <C>              <C>
Net loss                                                $ (2,463,623)    $ (1,502,533)
Adjustments to reconcile net loss
to net cash used in operating activities:

    Depreciation and amortization                             53,346           67,009

    Loss on disposal of property and equipment                40,176            2,613

    Bad debt expense (recovery)                                   --          (14,025)

    Amortization of deferred compensation                     21,619           36,357
    Unrealized (gain) loss                                   209,686         (394,880)
    (Increase) decrease in certain assets-
       Investment portfolio                                1,930,591          590,438

       Mortgage participation notes                               --          223,500
       Accounts receivable

           Mutual fund fees                                    4,941          (33,433)

           Pending settlements and other                      (3,727)         123,789
           Refundable income taxes                           414,251           96,966
       Deposits and other                                    (44,905)          60,573
    Increase (decrease) in certain liabilities-

       Accounts payable to broker-dealers and other               --           (1,698)
       Accrued expenses and other                           (235,571)          64,430
                                                        ------------     ------------
           Net cash used in operating activities             (73,216)        (680,894)
                                                        ------------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment                          (122,567)         (54,628)

Proceeds from sale of property and equipment                   3,632           19,746
                                                        ------------     ------------
     Net cash used in investing activities                  (118,935)         (34,882)
                                                        ------------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock                                  (292,700)      (1,553,426)
                                                        ------------     ------------
     Net cash used in financing activities                  (292,700)      (1,553,426)
                                                        ------------     ------------

NET INCREASE (DECREASE) IN CASH                             (484,851)      (2,269,202)

CASH, BEGINNING OF PERIOD                                  1,174,026        3,443,228
                                                        ------------     ------------

CASH, END OF PERIOD                                     $    689,175     $  1,174,026
                                                        ============     ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:
     Interest                                           $      1,569     $        493
     Income taxes                                                 --               --
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       15
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

Note 1 ORGANIZATION AND NATURE OF BUSINESS
       -----------------------------------

Diamond  Hill  Investment  Group,  Inc.  (the  Company)  is an Ohio  corporation
incorporated in May 2002, previously a Florida corporation since April 1990. The
Company has two subsidiary operating companies.

Diamond Hill Capital Management,  Inc. (DHCM), an Ohio corporation,  is a wholly
owned subsidiary of the Company and a registered investment advisor. DHCM is the
investment  advisor to the Diamond Hill Focus Fund, Diamond Hill Small Cap Fund,
Diamond  Hill Large Cap Fund,  Diamond  Hill Short  Term Fixed  Income  Fund and
Diamond Hill  Strategic  Income Fund,  open-end  mutual funds,  and Diamond Hill
Investment  Partners,  L.P. DHCM also offers advisory  services to institutional
and individual investors.

Diamond Hill  Securities,  Inc.  (DHS), an Ohio  corporation,  is a wholly owned
subsidiary of DHCM and a NASD registered  broker-dealer.  DHS is registered with
the  Securities and Exchange  Commission  and the securities  commissions of ten
states (including Ohio) and the District of Columbia. DHS trades securities on a
fully-disclosed  basis and clears customer  transactions through an unaffiliated
broker-dealer  that  also  maintains  the  customer  accounts.  DHS  is  also  a
registered  investment advisor and offers advisory services to institutional and
individual  investors.  DHS is the investment advisor to the Diamond Hill Bank &
Financial Fund.

Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
       ------------------------------------------

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the reported  amounts of assets and liabilities and the reported  amounts
of revenues and expenses for the periods. Actual results could differ from those
estimates.  The following is a summary of the Company's  significant  accounting
policies:

Principles of Consolidation
---------------------------

The accompanying consolidated financial statements include the operations of the
Company, DHCM and DHS. All material inter-company transactions and balances have
been eliminated in consolidation.

Cash
----

The Company has defined  cash as demand  deposits,  certificate  of deposits and
money market  accounts.  The Company  maintains its cash in eight  accounts with
three financial institutions.

Accounts Receivable
-------------------

Accounts  receivable  are  recorded  when they are due and are  presented in the
statement of financial  condition net of any  allowance  for doubtful  accounts.
Accounts   receivable   are  written  off  when  they  are   determined   to  be
uncollectible. Any allowance for doubtful accounts is estimated on the Company's
historical  losses,  existing  conditions  in the  industry,  and the  financial
stability  of  those  individuals  that owe the  receivable.  No  allowance  for
doubtful accounts was deemed necessary at December 31, 2002.

Valuation of Investment Portfolio
---------------------------------

Securities  and  related  options  traded on  national  securities  markets  and
securities  not  traded  on  national  securities  markets,   but  with  readily
ascertainable  market values, are valued at market value. Other securities,  for
which  market  quotations  are not  readily  available,  due to  infrequency  of
transactions,  are  valued  at fair  value as  determined  in good  faith by the
management of the Company. Realized and unrealized gains and losses are included
in investment profits and losses.

                                       16
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
       ------------------------------------------

Limited Partnership Interests
-----------------------------

DHCM is the managing  member of Diamond Hill General  Partner,  LLC, the General
Partner of Diamond Hill Investment Partners,  L.P. (DHIP), a limited partnership
whose underlying assets consist of marketable  securities.  DHCM's investment in
DHIP is accounted for using the equity  method,  under which DHCM's share of the
net earnings or losses of the  partnership  is reflected in income as earned and
distributions  received  are  reflected as  reductions  of the  investment.  The
Company is actively seeking additional  unaffiliated investors for DHIP. Several
board members, officers and employees of the Company are members in Diamond Hill
General Partner,  LLC. The capital of Diamond Hill General  Partner,  LLC is not
subject to a management fee or an incentive fee.

Property and Equipment
----------------------

Property  and  equipment,  consisting  of  computer  equipment,  furniture,  and
fixtures,  is carried at cost less  accumulated  depreciation.  Depreciation  is
calculated using the straight-line  method over estimated lives of five to seven
years.

Revenues
--------

Securities  transactions  and  commissions  are  accounted for on the trade date
basis.  Dividend income is recorded on the ex-dividend  date and interest income
is accrued as earned.  Realized  gains and losses from sales of  securities  are
determined utilizing the first-in, first-out method (FIFO).

Earnings Per Share
------------------

Basic and diluted  earnings  per common share are  computed in  accordance  with
Statement of Financial  Accounting  Standards  No. 128,  "Earnings per Share." A
reconciliation of the numerators and denominators used in these  calculations is
shown below:

For the year ended December 31, 2002:
                                     Numerator        Denominator       Amount
                                    ------------      ------------     --------

Basic Earnings                      $ (2,463,623)        1,424,602     $  (1.73)

Diluted Earnings                    $ (2,463,623)        1,424,602     $  (1.73)

For the year ended December 31, 2001:
                                     Numerator        Denominator       Amount
                                    ------------      ------------     --------

Basic Earnings                      $ (1,502,533)        1,617,088     $  (0.93)

Diluted Earnings                    $ (1,502,533)        1,617,088     $  (0.93)

Stock  options and warrants  have not been  included in the  denominator  of the
diluted  per-share  computations  because the effect of their inclusion would be
anti-dilutive.

Fair Value of Financial Instruments
-----------------------------------

Substantially  all of the Company's  financial  instruments  are carried at fair
value  or  amounts   approximating  fair  value.   Assets,   including  accounts
receivable,  mortgage  participation  notes,  notes and interest  receivable and
securities owned are carried at amounts that approximate fair value.  Similarly,
liabilities,  including  accounts  payable and accrued  expenses  are carried at
amounts approximating fair value.

Note 3 CAPITAL STOCK
       -------------

Stock Split
-----------

Effective  September  26, 2001,  the Company  completed a 1 for 5 reverse  stock
split of its common stock. All share amounts have been retroactively adjusted to
reflect the split.

                                       17
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

Common Stock
------------

The Company has only one class of securities, Common Stock.

Treasury Stock
--------------

On July 17, 2000,  the Company  announced a program to  repurchase up to 400,000
shares  of  its  Common  Stock  through  open  market  purchases  and  privately
negotiated transactions.  Since July 17, 2000, the Company has purchased 352,897
shares of its Common Stock for $2,009,107.  The table below indicates the number
of shares  purchased for the amounts  indicated for the years ended December 31,
2002 and 2001.

Year Ended December 31,                 2002            2001            Total
--------------------------------------------------------------------------------
Shares                                    71,300         261,136         332,436
Dollar Amount                       $    292,700    $  1,553,426    $  1,846,126

Authorization of Preferred Stock
--------------------------------

The  Company's  Articles of  Incorporation  authorize  the issuance of 1,000,000
shares of "blank  check"  preferred  stock  with such  designations,  rights and
preferences,  as may be determined  from time to time by the Company's  Board of
Directors. The Board of Directors is empowered, without shareholder approval, to
issue preference stock with dividend, liquidation,  conversion, voting, or other
rights,  which could adversely  affect the voting or other rights of the holders
of the  Common  Stock.  There  were no  shares  of  preferred  stock  issued  or
outstanding at December 31, 2002 or 2001.

Note 4 INVESTMENT PORTFOLIO
       --------------------

Investment  portfolio  balances,  which  consist  of  securities  classified  as
trading, are comprised of the following at December 31, 2002:

<TABLE>
<CAPTION>
                                                                         Unrealized      Unrealized
                                           Market           Cost           Gains           Losses
                                        ------------    ------------    ------------    ------------
<S>                                     <C>             <C>             <C>             <C>
Mutual fund shares and limited
partnership interest                    $  2,612,555    $  2,577,989    $    116,584    $    (82,018)

Marketable equity securities                  40,519          31,638          23,525         (14,644)

Not readily marketable equity
securities                                   137,409         335,700             900        (199,191)
                                        ------------    ------------    ------------    ------------
Total                                   $  2,790,483    $  2,945,327    $    141,009    $   (295,853)
                                        ============    ============    ============    ============
</TABLE>

Investment  portfolio  balances,  which  consist  of  securities  classified  as
trading, are comprised of the following at December 31, 2001:

<TABLE>
<CAPTION>
                                                                         Unrealized      Unrealized
                                           Market           Cost           Gains           Losses
                                        ------------    ------------    ------------    ------------
<S>                                     <C>             <C>             <C>             <C>
Mutual fund shares and limited
partnership interest                    $  4,372,394    $  4,171,975    $    200,419    $         --

Marketable equity securities                 241,710         290,948              --         (49,238)

Not readily marketable equity
securities                                   316,656         412,994          11,825        (108,163)
                                        ------------    ------------    ------------    ------------
Total                                   $  4,930,760    $  4,875,917    $    212,244    $   (157,401)
                                        ============    ============    ============    ============
</TABLE>

                                       18
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

Note 4 INVESTMENT PORTFOLIO (Continued)
       --------------------

Marketable equity securities at December 31, 2002 and 2001, consist primarily of
bank stocks, at market value, as follows:

                                                       2002            2001
                                                   ------------    ------------

Traded on national securities market               $     40,519    $     65,702

Not traded on a national  securities  market,
but readily ascertainable market value                       --         176,008
                                                   ------------    ------------

Total                                              $     40,519    $    241,710
                                                   ============    ============

As of  December  31,  2002,  the  Company  had two  individual  equity  security
investments representing 77% and 23% of its marketable equity securities.

DHCM is the  managing  member the  General  Partner of Diamond  Hill  Investment
Partners,   L.P.,  whose  underlying  assets  consist  primarily  of  marketable
securities.   The  General  Partner  is  contingently  liable  for  all  of  the
partnership's liabilities.

Summary financial information, including the Company's carrying value and income
from this  partnership  at  December  31,  2002 and 2001 and for the years  then
ended, is as follows:

                                                       2002            2001
                                                   ------------    ------------

Total assets                                       $ 12,534,274    $  7,471,405
Total liabilities                                     5,323,339       2,095,748
Net assets                                            7,210,934       5,375,657
Net fair market value of earnings                       168,072         109,399

DHCM's carrying value                                 1,109,708       3,064,435
DHCM's income                                            45,273          64,396

DHCM  withdrew  $2,000,000  of  capital  from its  investment  in  Diamond  Hill
Investment Partners, L.P. during the year ended December 31, 2002. DHCM's income
from this partnership  includes its pro-rata capital allocation and its share of
an incentive  allocation from the limited partners.  In addition,  DHCM earns an
administrative  fee  payable  quarterly  at the rate of .25% of the value of the
limited partners' capital accounts.

Note 5 LINE OF CREDIT
       --------------

The Company  obtained a line of credit loan with a maximum  principal  amount of
$325,000 on August 28, 2002 at an annual percentage  interest rate of prime plus
0.50%,  which is currently  4.75%. The balance due on the line of credit loan at
December 31, 2002 was zero ($0). A portion of the Company's investment portfolio
secures this loan. The line of credit loan is due to mature on August 28, 2003.

                                       19
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

Note 6 INCOME TAXES
       ------------

The Company files a consolidated  Federal income tax return. It is the policy of
the Company to allocate the  consolidated  tax provision to  subsidiaries  as if
each subsidiary's tax liability or benefit were determined on a separate company
basis. As part of the consolidated group,  subsidiaries  transfer to the Company
their current Federal tax liability or assets.

                                                       2002            2001
                                                   ------------    ------------

Current income tax provision (benefit)             $         --    $   (148,943)
Deferred income tax provision (benefit)                      --              --
                                                   ------------    ------------

Provision (benefit) for income taxes               $         --    $   (148,943)
                                                   ============    ============

A  reconciliation  of income tax expense at the statutory  rate to the Company's
effective rate is as follows:

                                                       2002            2001
                                                   ------------    ------------

Income tax expense expected statutory rate                   34%             34%
Prior year provision adjustment                               0               9
Dividends received deduction                                  0              -2
Unrealized gain                                               0              -7
Valuation allowance                                         -34             -25
                                                   ------------    ------------
Income tax expense effective rate                             0%              9%
                                                   ============    ============

Deferred  tax assets and  liabilities  consist of the  following at December 31,
2002 and 2001:

                                                       2002            2001
                                                   ------------    ------------

Deferred tax benefit of NOL carryforward           $  1,441,000    $    868,000
Stock options and warrants                                   --          74,000
Investment write down                                        --         126,000
Unrealized (gains) losses                                36,000         (13,000)
Other liabilities                                       (14,000)             --
Valuation allowance                                  (1,463,000)     (1,055,000)
                                                   ------------    ------------

Net deferred tax assets (liabilities)              $         --    $         --
                                                   ============    ============

As of December 31, 2002, the Company and its subsidiaries had net operating loss
(NOL) carry forwards for tax purposes of approximately  $5,763,000.  These NOL's
will  expire  from 2016 to 2022.  Any future  changes  in control  may limit the
availability of NOL carryforwards.

                                       20
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

Note 7 OPERATING LEASES
       ----------------

The Company  leases  office space under an operating  lease.  Under the previous
operating   lease,   which  expired  July  2002,   total  lease   expenses  were
approximately $133,000 for the year ended December 31, 2001. The Company entered
into a new lease agreement  effective May 1, 2002,  which  terminates on May 31,
2005.  Total lease  expenses for the year ended  December 31, 2002 were $50,000.
The future minimum lease payments under the operating lease are as follows:

                     Year Ended                 Amount
                     ----------                 ------
                        2003                    120,000
                        2004                    120,000
                        2005                     50,000

Note 8 EMPLOYEE INCENTIVE PLANS
       ------------------------

Incentive Compensation Plan
---------------------------
All  full-time  employees  of the Company are  eligible  to  participate  in the
Diamond Hill  Investment  Group Incentive  Compensation  Plan. The Plan provides
that a bonus fund will be  established  in an amount equal to 20% of the pre-tax
realized profits of the Company in excess of a 15% pre-tax return on equity. The
amount of the bonus fund is  calculated  each  fiscal  quarter  on a  cumulative
basis.  The  allocation  of the bonus fund is to be made by the President of the
Company.  The  Company  did not incur any  expense  under the Plan for the years
ended December 31, 2002 and 2001.

Stock Option Plan
-----------------
The Company has a Non-Qualified  and Incentive Stock Option Plan that authorizes
the grant of options to purchase an aggregate of 500,000 shares of the Company's
Common Stock.  The Plan  provides  that the Board of  Directors,  or a committee
appointed by the Board,  may grant options and otherwise  administer  the Option
Plan. The exercise price of each incentive stock option or  non-qualified  stock
option must be at least 100% of the fair market value of the Common Stock at the
date of grant,  and no such  option may be  exercisable  for more than ten years
after the date of grant.  However,  the exercise price of each  incentive  stock
option  granted  to any  shareholder  possessing  more than 10% of the  combined
voting power of all classes of capital stock of the Company on the date of grant
must not be less than 110% of the fair  market  value on that date,  and no such
option may be exercisable more than five years after the date of grant.

During the year ended December 31, 2002, no options to purchase shares of Common
Stock were issued to employees.

The  Company  applies  Accounting   Principles  Board  Opinion  25  and  related
Interpretations  (APB 25) in accounting for stock options and warrants issued to
employees and Directors.  Accordingly,  compensation cost is recognized based on
the intrinsic value of the stock options or warrants.

                                       21
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

Note 8 EMPLOYEE INCENTIVE PLANS (Continued)
       ------------------------

Stock Option Plan (Continued)
-----------------
Had  compensation  cost  for  all  of  the  Company's  stock-based  awards  been
determined in accordance with FAS 123, the Company's net income and earnings per
share would have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                  Year Ended            Year Ended
                                               December 31, 2002    December 31, 2001
                                               -----------------    -----------------
<S>                             <C>            <C>                  <C>
Net income (loss)               As reported    $     (2,463,623)    $     (1,502,533)
                                Pro forma      $     (2,894,517)    $     (2,166,883)

Basic earnings per share        As reported    $          (1.73)    $          (0.93)
                                Pro forma      $          (2.03)    $          (1.34)

Diluted earnings per share      As reported    $          (1.73)    $          (0.93)
                                Pro forma      $          (2.03)    $          (1.34)
</TABLE>

To make the  computations  of pro forma results under FAS 123, the fair value of
each option  grant is  estimated  on the date of grant  using the  Black-Scholes
option-pricing  model  with  the  following  weighted-average   assumptions:  no
dividend yield for all years and expected lives of ten years. For the year ended
December 31, 2001, the average expected  volatility was  approximately  50%, and
the average assumed risk-free  interest rate was 3.16%. The options and warrants
granted  under  these plans are not  registered  and,  accordingly,  there is no
quoted market price.

A summary of the status of the Company's  stock option and warrants  plans as of
December 31, 2002 and December 31, 2001 and changes during the periods ending on
those dates is presented below:

<TABLE>
<CAPTION>
                                          Options                     Warrants
                                 -------------------------    ------------------------
                                   Shares     Exercise Price    Shares    Exercise Price
                                   ------     --------------    ------    --------------

<S>                                 <C>         <C>              <C>        <C>
Outstanding January 1, 2001         266,402     $   23.694       280,400    $   12.895
Granted                              77,000          5.657            --            --
Expired unexercised                 (84,740)        28.151            --            --
Forfeited                           (71,760)        15.892            --            --
                                 ----------                   ----------
Outstanding December 31, 2001       186,902         17.245       280,400        12.895
                                 ==========                   ==========

Exercisable December 31, 2001        91,572     $   26.997       160,400    $   16.561
                                 ==========                   ==========

Outstanding January 1, 2002         186,902     $   17.245       280,400    $   12.895
Granted                                  --             --            --            --
Expired unexercised                 (10,350)        23.583            --            --
Forfeited                           (10,650)        12.803            --            --
                                 ----------                   ----------
Outstanding December 31, 2002       165,902         17.124       280,400        12.895
                                 ==========                   ==========

Exercisable December 31, 2002       100,762     $   23.759       200,400    $   14.852
                                 ==========                   ==========

Weighted-average fair value
of options granted during the
year ended December 31, 2001,
computed in accordance with
FAS 123                                         $    3.680
</TABLE>

                                       22
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

Note 8 EMPLOYEE INCENTIVE PLANS (Continued)
       ------------------------

Stock Option Plan (Continued)
-----------------
The  following  table  summarizes  information  about  fixed  stock  options and
warrants outstanding at December 31, 2002:

                                               Options             Warrants
                                             ------------        ------------

Range of exercise prices                     $     73.750        $     73.750
Number outstanding                                 21,202              14,000
Weighted-average remaining
Contractual life in years                           5.359               5.359
Weighted-average exercise price              $     73.750        $     73.750
Number exercisable                                 20,702              14,000

Range of exercise prices                  $ 21.875 - $ 22.50   $ 22.20 - $ 22.50
Number outstanding                                  4,700              16,400
Weighted-average remaining
Contractual life in years                           6.365               6.365
Weighted-average exercise price              $     22.473        $     22.495
Number exercisable                                  3,760              16,400

Range of exercise prices                  $ 7.95 - $ 14.375    $ 8.00 - $ 14.375
Number outstanding                                 65,000             250,000
Weighted-average remaining
Contractual life in years                           4.560               6.794
Weighted-average exercise price              $     11.579        $      8.860
Number exercisable                                 53,300             170,000

Range of exercise prices                   $ 3.90 - $ 8.45
Number outstanding                                 75,000
Weighted-average remaining
Contractual life in years                           8.450
Weighted-average exercise price              $      5.865
Number exercisable                                 23,000

                                       23
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

Note 9 REGULATORY REQUIREMENTS
       -----------------------

DHS is subject to the uniform net capital  rule of the  Securities  and Exchange
Commission   (Rule  15c3-1),   which  requires  that  the  ratio  of  "aggregate
indebtedness" to "net capital" not exceed 15 to 1 (as those terms are defined by
the Rule). DHS had net capital of $319,777 as of December 31, 2002, which was in
excess of its required  minimum net capital of $100,000.  The ratio of aggregate
indebtedness  to net capital was 0.25 to 1 as of December 31, 2002.  DHS is also
subject to regulations of the District of Columbia and ten states in which it is
registered as a licensed broker-dealer.

DHCM and DHS are registered investment advisers and subject to regulation by the
SEC pursuant to the Investment Advisors Act of 1940.

Note 10 CONCENTRATIONS OF CREDIT RISK AND FINANCIAL INSTRUMENTS WITH OFF-BALANCE
        ------------------------------------------------------------------------
        SHEET RISK
        ----------

DHS, under a  correspondent  agreement with its clearing  broker,  has agreed to
indemnify  the clearing  broker from damages or losses  resulting  from customer
transactions.  The Company is,  therefore,  exposed to off-balance sheet risk of
loss in the event that customers are unable to fulfill contractual  obligations.
The Company manages this risk by requiring  customers to have sufficient cash in
their account before a buy order is executed and to have the subject  securities
in their account  before a sell order is executed.  The Company has not incurred
any losses from customers unable to fulfill contractual obligations.

In the normal course of business,  the Company periodically sells securities not
yet  purchased  (short  sales)  for its own  account  and  writes  options.  The
establishment  of short  positions and option  contracts  exposes the Company to
off-balance sheet market risks in the event prices change, as the Company may be
obligated to cover such  positions at a loss. At December 31, 2002,  the Company
had no short security  positions,  had not written any option  contracts and did
not own any options. The Company did not experience any credit losses due to the
failure of any  counterparties  to perform  during the year  December  31, 2002.
Senior management of the Company is responsible for reviewing trading positions,
exposures,  profits and losses,  trading  strategies and hedging strategies on a
daily basis.

Note 11 SEGMENT INFORMATION
        -------------------

With the change in senior  executive  management in May of 2000, the Company has
shifted its emphasis from its traditional  investment  related activities of its
DHS subsidiary,  to the investment advisory services of its DHCM subsidiary.  In
conjunction  with this change in emphasis,  the Company  redefined its operating
segments  effective  June 1, 2000.  These segments have been designed to aid the
operating decision makers in deciding how to allocate resources and in assessing
performance.

Types of services from which each reportable segment derives its revenues
-------------------------------------------------------------------------
The  Company  has  three  reportable  segments:  Investment  Advisory  Services,
Broker-Dealer Services and Corporate Portfolio. The Investment Advisory Services
segment provides  investment  advisory  services to the Diamond Hill Focus Fund,
Diamond Hill Small Cap Fund,  Diamond  Hill Large Cap Fund,  Diamond Hill Bank &
Financial  Fund,  Diamond  Hill Short Term Fixed  Income Fund and  Diamond  Hill
Strategic Income Fund, open-end mutual funds,  Diamond Hill Investment Partners,
L.P., an investment limited partnership, and offers investment advisory services
and  accounts  to  institutional  and  individual  investors,   specializing  in
diversified,  domestic  securities.  The  Broker-Dealer  Services segment offers
brokerage  services to institutional  and individual  investors and underwriting
services to the Company's  mutual  funds.  The  Corporate  Portfolio  segment is
represented by revenue generating  investments  unrelated to the other operating
segments.

                                       24
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

Note 11 SEGMENT INFORMATION (Continued)
        -------------------

Measurement of segment profit or loss and segment assets
--------------------------------------------------------
The accounting  policies of the segments are the same as those  described in the
summary of significant  accounting policies.  The Company evaluates  performance
based on profit or loss from operations before income taxes. The Company focuses
its attention on providing services to external customers.

Factors management used to identify the enterprises' reportable segments
------------------------------------------------------------------------
The Company's  reportable  segments are primarily defined by legal entities that
specialize in different  financial  products and services.  Investment  Advisory
Services are provided by DHCM. Brokerage Services are provided primarily by DHS.
The Company manages the Corporate Portfolio segment.  These segments are managed
separately because each entity operates in a different regulatory environment.

Financial  information for each reportable  segment is shown below.  The Company
does not operate,  or hold assets, in any foreign country.  The Company does not
have any single customer generating 10% or more of revenue.

Financial information for the year ended December 31, 2002
----------------------------------------------------------

<TABLE>
<CAPTION>
                                           Investment        Broker-
                                            Advisory          Dealer         Corporate
                                            Services         Services        Portfolio         Combined
                                          ---------------------------------------------------------------
<S>                                       <C>              <C>              <C>              <C>
Operating Revenues:
    Management fees & commissions         $    834,100     $    188,218     $         --     $  1,022,318
    Market making gains (losses)                    --          (60,225)              --          (60,225)
                                          ---------------------------------------------------------------
      Total operating revenue                  834,100          127,993               --          962,093
                                          ---------------------------------------------------------------
Operating Expenses:
    Salaries, benefits & payroll taxes       1,107,001          374,842          120,400        1,602,243
    Brokers' commissions                            --           61,644               --           61,644
    Professional fees                          745,578           85,261          133,290          964,129
    General and administrative                 419,539          237,421           85,184          742,144
                                          ---------------------------------------------------------------
      Total operating expenses               2,272,118          759,168          338,874        3,370,160
                                          ---------------------------------------------------------------
Operating Loss                              (1,438,018)        (631,175)        (338,874)      (2,408,067)
                                          ---------------------------------------------------------------
Other Revenue and (Expense):
    Portfolio gains                                 --               --         (114,503)        (114,503)
    Dividend income                              8,026            6,300           14,830           29,156
    Interest and other income                      359           11,020           19,981           31,360
    Interest expense                                --               --           (1,569)          (1,569)
                                          ---------------------------------------------------------------
      Total other revenue & (expense)            8,385           17,320          (81,261)         (55,556)
                                          ---------------------------------------------------------------
Income (Loss) Before Taxes                  (1,429,633)        (613,855)        (420,135)      (2,463,623)
Income Tax Provision (Credit)                       --               --               --               --
                                          ---------------------------------------------------------------
Net Income (Loss)                         $ (1,429,633)    $   (613,855)    $   (420,135)    $ (2,463,623)
                                          ===============================================================

Total Assets                              $    133,915     $    140,801     $  3,618,756     $  3,893,472
                                          ===============================================================
</TABLE>

                                       25
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

Note 11 SEGMENT INFORMATION (Continued)
        -------------------

Financial information for the year ended December 31, 2001
----------------------------------------------------------

<TABLE>
<CAPTION>
                                           Investment        Broker-
                                            Advisory          Dealer         Corporate
                                            Services         Services        Portfolio         Combined
                                          ---------------------------------------------------------------
<S>                                       <C>              <C>              <C>              <C>
Operating Revenues:
       Management fees & commissions      $    612,207     $    400,882     $         --     $  1,013,089
       Market making gains (losses)                 --          148,215               --          148,215
                                          ---------------------------------------------------------------
         Total operating revenue               612,207          549,097               --        1,161,304
                                          ---------------------------------------------------------------
   Operating Expenses:
       Salaries, benefits & payroll taxes    1,181,519          410,598          183,159        1,775,276
       Brokers' commissions                         --          175,734               --          175,734
       Professional fees                       511,130           45,331          136,828          693,289
       General and administrative              639,737          384,423          233,469        1,257,629
                                          ---------------------------------------------------------------
         Total operating expenses            2,332,386        1,016,086          553,456        3,901,928
                                          ---------------------------------------------------------------
   Operating Loss                           (1,720,179)        (466,989)        (553,456)      (2,740,624)
                                          ---------------------------------------------------------------
   Other Revenue and (Expense):
       Portfolio gains                              --               --          893,039          893,039
       Dividend income                              --           27,528          101,943          129,471
       Interest and other income                 3,797           62,165            1,169           67,131
       Interest expense                             --             (493)              --             (493)
                                          ---------------------------------------------------------------
         Total other revenue & (expense)         3,797           89,200          996,151        1,089,148
                                          ---------------------------------------------------------------
   Income (Loss) Before Taxes               (1,716,382)        (377,789)         442,695       (1,651,476)
   Income Tax Provision (Credit)                    --               --         (148,943)        (148,943)
                                          ---------------------------------------------------------------
   Net Income (Loss)                      $ (1,716,382)    $   (377,789)    $    591,638     $ (1,502,533)
                                          ===============================================================

   Total Assets                           $    116,362     $    769,106     $  6,008,279     $  6,893,747
                                          ===============================================================
</TABLE>

                                       26
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS OR ACCOUNTING AND
        FINANCIAL DISCLOSURES

On January 14, 2002,  the Diamond Hill  Investment  Group,  Inc.  ("DHIG") audit
committee  and board of directors  dismissed  PricewaterhouseCoopers  LLP as its
independent accountants and approved the hiring of BKR Longanbach Giusti, LLC as
its new independent accountants.  The reports of  PricewaterhouseCoopers  LLP on
the financial  statements  of DHIG for the periods  ended  December 31, 2000 and
February 29, 2000 contained no adverse opinion or disclaimer of opinion and were
not  qualified  or  modified  as  to  uncertainty,  audit  scope  or  accounting
principle. In connection with its audits for the periods ended December 31, 2000
and  February  29,  2000 and  through  January  14,  2002,  there  have  been no
disagreements  with  PricewaterhouseCoopers  LLP on  any  matter  of  accounting
principles or practices,  financial  statement  disclosure or auditing  scope or
procedure.  DHIG  requested  that  PricewaterhouseCoopers  LLP furnish it with a
letter  addressed  to the SEC  stating  whether or not it agrees  with the above
statements.  A copy of such  letter,  dated  January  18,  2002 was  filed as an
Exhibit to the Form 8-K.  During the two most  recent  fiscal  years and through
January 14, 2002,  DHIG has not consulted  with BKR  Longanbach  Giusti,  LLC on
either  the  application  of  accounting  principles  or  type  of  opinion  BKR
Longanbach Giusti, LLC might issue on DHIG's financial statements.

PART III
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT

As of December 31, 2002, the members of the Company's Board of Directors and the
Company's executive officers, each of whom serves at the direction of the Board,
were as follows:

                                         Term
Name                        Age         Expires                 Position
--------------------------------------------------------------------------------
R. H. Dillon                46           2003             President & Director
James F. Laird, Jr.         46                           Chief Financial Officer
Larry A. Beres              56           2003                  Director
Roger D. Blackwell          62           2003                  Director
Richard Desich              63           2003                  Director
David P. Lauer              60           2003                  Director
James G. Mathias            49           2003                  Director
David R. Meuse              56           2003                  Director
William G. Perkins          48           2003                  Director
Diane D. Reynolds           42           2003                  Director

     R. H. DILLON,  was appointed  President of the Company in May 2000. He also
serves as the Chief Investment Officer of Diamond Hill Capital Management,  Inc.
From 1997 through  2000,  Mr.  Dillon was a Vice  President of Loomis,  Sayles &
Company.  From 1993 through 1997, Mr. Dillon was President and Chief  Investment
Officer for Dillon Capital  Management,  an investment advisory firm acquired by
Loomis, Sayles in 1997. Mr. Dillon received his B.S and M.A. degrees in Business
Administration  with a major in Finance from The Ohio State  University  and his
M.B.A.  degree from the University of Dayton.  He received a C.F.A.  designation
from the Institute of Chartered Financial Analysts in 1982.

     JAMES F. LAIRD, JR. was appointed as Chief Financial  Officer and Treasurer
of the Company on December  31, 2001 and has served as President of Diamond Hill
Securities,  Inc.  since  July 16,  2001.  On January  1,  2003,  Mr.  Laird was
appointed as Secretary. In his capacity with the Company, Mr. Laird oversees all
financial  and  corporate  aspects of the Company.  As President of Diamond Hill
Securities,  Inc., Mr.  Laird's  responsibilities  are to oversee  broker-dealer
operations  and to  increase  distribution  of the  Diamond  Hill Funds  through
various  broker-dealer  channels.  Prior to joining the  Company,  Mr. Laird was
Senior Vice President of Villanova  Capital,  a subsidiary of  Nationwide,  from
1999-2001.  He was Vice  President  and  General  Manager  from  1995-1999,  and
Treasurer form 1987-1994,  of Nationwide  Advisory Services,  Inc. Mr. Laird was
also Vice  President of Cranston  Securities  from 1986-1987 and worked for KPMG
Peat Marwick from 1980-1986.  Mr. Laird received his B.S.B.A. in accounting from
The Ohio State University. He is also a Certified Public Accountant and a member
of the American Institute of Certified Public Accountants. In addition, he holds
several NASD licenses including Series 7, 24, 26, 27, and 63.

                                       27
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

     LARRY A. BERES  became a Director  of the  Company  in 1995.  Mr.  Beres is
Executive Vice  President of Tooling  Technology  Group of Dayton,  Ohio. He was
formerly  President of Formex,  Inc., a Dayton,  Ohio supplier of systems to the
plastics  industry.  Mr.  Beres  graduated  from Kent  State  University  with a
Bachelor  of Science  Degree in  Chemistry  and has taken  courses in the M.B.A.
Program at Kent State University.

     DR. ROGER D. BLACKWELL became director of the Company in February 1999. Dr.
Blackwell is a Professor  of Marketing at the Max M. Fisher  College of Business
at  The  Ohio  State  University  and  is  also  President  of  Roger  Blackwell
Associates, Inc., a consulting firm in Columbus, Ohio. Dr. Blackwell co-authored
one of the leading books on consumers, entitled Consumer Behavior. It is used by
business schools throughout North America,  Europe, Asia and Africa. He has also
written  twenty-three other books on marketing  strategy,  research,  and global
marketing.  His most recent  publications are From Mind to Market,  published by
HarperBusiness  and Customers Rule!, which was released by Crown/Random House in
2001. Dr.  Blackwell  received his B.S. and M.S.  degrees from The University of
Missouri and his Ph.D.  from  Northwestern  University.  He resides in Columbus,
Ohio,  and  serves  on  the  boards  of  Airnet  Systems,   Applied   Industrial
Technologies  (formerly Bearings,  Inc.),  Frontstep,  Flex-Funds,  Max & Erma's
Restaurants, Anthony and Sylvan Pools, and Value City Department Stores.

     RICHARD  DESICH  became a Director of the Company in December  1999.  Since
1974,  Mr. Desich has been the owner and President of Mid-Ohio  Securities.  Mr.
Desich is also President of Equity Oil and Gas Funds  Incorporated,  and General
Principal for Maddie Consulting. He has lectured throughout the United States at
various  seminars  and  conferences  on the  topic of  self-directed  Individual
Retirement  Accounts.  Mr. Desich is a Director of the Lorain  County  Community
College  and  Lorain  County  Community   College   Foundation,   and  of  Accel
International  Corporation.  Mr.  Desich is also an officer and  director of the
Equity Trust Company. He graduated from Ohio State University with a B.S. degree
in Finance.

     DAVID P.  LAUER,  CPA  became a  director  in May  2002.  From June of 1997
through March of 2001, Mr. Lauer served as President and Chief Operating Officer
of Bank One - Columbus.  Prior to June 1997,  he was a partner  with  Deloitte &
Touche for nineteen  years; he retired from Deloitte & Touche in 1997. He serves
on the board of Air Net Systems,  Huntington  Preferred  Capital,  Inc., Metatec
International and Wendy's International.

     JAMES G. MATHIAS became a Director of the Company in 1993.  Since 1988, Dr.
Mathias has been a veterinarian practicing in Tipp City, Ohio, where he owns the
Tipp City  Veterinary  Hospital and Wellness  Center.  Dr. Mathias  attended the
University of Texas and  completed  his education at The Ohio State  University,
graduating  from the College of Veterinary  Medicine in 1978. He was a member of
the Honor  Society of Phi Zeta,  a  Veterinary  Honor  Society.  Dr.  Mathias is
founder and  President  of the Dayton North  Women's  Center and is a speaker on
Ratite Medicine. He is also on the Veterinary Advisory Board of the Iams Company
in Dayton, Ohio.

     DAVID R. MEUSE became a director of the Company in August 2000. Since 1999,
Mr. Meuse has been a Principal for Stonehenge Holdings,  Inc.  ("Stonehenge") of
Columbus,  Ohio, where he is responsible for managing its affairs.  From 1990 to
1999, Mr. Meuse was the Chairman and Chief Executive Officer of Banc One Capital
Holdings Corporation  ("BCHC"),  the holding company for the investment banking,
merchant  banking,  securities  brokerage,  investment  advisory  and  insurance
activities  of Bank  One  Corporation.  He came to BCHC in 1990  when  Bank  One
Corporation  acquired  Meuse,  Rinker,  Chapman,  Endres &  Brooks,  a  regional
investment  banking  firm  which  Mr.  Meuse  founded  in 1981.  He is an active
investor in venture capital and mezzanine finance opportunities, both personally
and through Banc One Capital Partners  Corporation.  Mr. Meuse received his B.A.
in Political Science from John Carroll  University and subsequently took courses
at  Cleveland-Marshall  College of Law at Cleveland  State  University,  and the
University of Pennsylvania,  Wharton School of Finance, Securities Industry. Mr.
Meuse  serves  on  the  board  of  directors  of  the  following:  Alliance  One
Incorporated,  Banc One Investment  Advisors,  BBQ Development,  Inc., Bluestone
Corporation, Bopp-Busch Manufacturing Company, Central Benefits Mutual Insurance
Company, Cornerstone Industrial Group, MCE Companies, Inc., Omnimold, LLC, Orion
Holdings Corporation, ORIX Real Estate Capital Markets, LLC, RP&C International,
Sportsworld Media Group, and Stonehenge Financial Holdings, Inc.

                                       28
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

     WILLIAM G. PERKINS became  director of the Company in May 2002. Mr. Perkins
currently serves as President and Chief Operating  Officer of Synovus  Financial
Management Services and Chief Executive Officer of Synovus  Securities,  Inc. in
Columbus,  Georgia.  In his current role,  Mr.  Perkins is  responsible  for the
brokerage,  trust, insurance and private banking businesses of Synovus Financial
Corp.,  a $19 billion  financial  services  company  headquartered  in Columbus.
Synovus  is the parent  company  for 39  community  banks  located  in  Georgia,
Alabama,  Florida, South Carolina and Tennessee as well as Synovus Trust Company
with over $8 billion in client assets, Synovus Securities,  Inc., a full-service
brokerage firm with 55 investment  consultants in 23 offices  overseeing over $2
billion  in client  assets  and  Synovus  Insurance  Services  which  provides a
comprehensive array of insurance products to clients of all 39 Synovus affiliate
banks.  Additionally,  Synovus owns 80.8% of TSYS, Total System Services,  Inc.,
one of the world's  largest  processors  of credit,  debit,  affinity and stored
value cards.  Synovus has  consistently  been  recognized  as one of the highest
performing   financial  services  firms  in  the  industry  and  has  also  been
consistently  rated  as one of the best  companies  to work  for in  America  by
Fortune Magazine.

     Prior to joining  Synovus in June 1998, Mr. Perkins was with First Commerce
Corporation  in Louisiana from 1987 to 1998. He served in a series of leadership
roles in  trust,  private  banking  and  brokerage.  His last  assignment  was a
President  and CEO of Marquis  Investments,  LLC,  First  Commerce's  investment
brokerage subsidiary. He began his financial services career in 1981 as a retail
broker in the Baton Rouge office of A.G. Edwards.

     Mr. Perkins is a 1976 graduate of Texas Christian  University and completed
the Trust and Private Banking Executive Management Program at the Wharton School
of Business, University of Pennsylvania in 1993.

     DIANE D.  REYNOLDS  became a Director  of the  Company in April  2001.  Ms.
Reynolds  is a  partner  with the law  firm of  Benesch,  Friedlander,  Coplan &
Aronoff LLP and focuses her practice on mergers and acquisitions,  divestitures,
business law, commercial law, corporate law, antitrust law, real estate, finance
and contracts. Ms. Reynolds has extensive experience in financing matters and in
the purchase and  licensing of  information  technology  hardware and  software.
Prior to joining her law firm, Ms.  Reynolds was engaged in a diverse  corporate
practice with two Fortune 500 multinational corporations. She received a B.A. in
1982 from The Ohio State University,  a J.D. in 1985 from Capital University and
an M.B.A. in 1999 from the University of Chicago.

There are no family  relationships  among the directors or executive officers of
the Company.

Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------

Based solely upon a review of Forms 3 and 4 furnished to the Company, there were
no reports filed late during the year ended December 31, 2002.

                                       29
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

ITEM 10: EXECUTIVE COMPENSATION

The following table sets forth the  compensation  paid or payable by the Company
during the  calendar  years  ended  December  31,  2002,  2001 and 2000,  to the
President of the Company and to certain  other named  executive  officers of the
Company.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
                                                      LONG-TERM COMPENSATION
                               ANNUAL COMPENSATION           AWARDS
----------------------------------------------------------------------------------------
NAME AND PRINCIPAL                                    SECURITIES UNDERLYING      ALL
     POSITION         YEAR   SALARY ($)   BONUS ($)        OPTIONS (#)        OTHER ($)
----------------------------------------------------------------------------------------
<S>                   <C>    <C>             <C>            <C>                  <C>
R. H. Dillon (1)      2002    150,000         0                 --                --
President and Chief   2001    150,000         0                 --                --
Executive Officer     2000     96,435         0              200,000              --
----------------------------------------------------------------------------------------
James F. Laird (2)    2002    139,125         0                 --                --
Treasurer and Chief   2001     33,750         0               60,000              --
Financial Officer
----------------------------------------------------------------------------------------
</TABLE>

(1)  Mr. Dillon became President of the Company in May 2000.

(2)  Mr. Laird became CFO of the Company and President of DHS in July 2001.  Mr.
     Laird was appointed Secretary of the Company in January 2003.

AGGREGATED  OPTION  EXERCISES  IN LAST  FISCAL  YEAR AND FISCAL  YEAR END OPTION
VALUES

The  following  table sets forth  information  concerning  the exercise of stock
options by each of the Company's named executive officers during fiscal 2002 and
the fiscal year end value of unexercised options.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                                  NUMBER OF SECURITIES              VALUE OF UNEXERCISED
                                                 UNDERLYING UNEXERCISED           IN-THE-MONEY OPTIONS AT
                                              OPTIONS AT FISCAL YEAR END (#)      FISCAL YEAR END ($) (1)
------------------------------------------------------------------------------------------------------------
                  SHARES ACQUIRED     VALUE
                  ON EXERCISE (#)   REALIZED
        NAME                           ($)     EXERCISABLE   UNEXERCISABLE      EXERCISABLE   UNEXERCISABLE
------------------------------------------------------------------------------------------------------------
<S>                      <C>          <C>        <C>             <C>               <C>             <C>
R. H. Dillon             0             --        120,000         80,000             --              --
------------------------------------------------------------------------------------------------------------
James F. Laird           0             --         20,000         40,000             --              --
------------------------------------------------------------------------------------------------------------
</TABLE>

--------------

(1)  Value is based on the December 31, 2002,  closing  price of $3.92 per Share
     on the NASDAQ Small Cap Market.

INCENTIVE COMPENSATION PLAN

All full-time  executive employees of the Company are eligible to participate in
the Company's Incentive  Compensation Plan (the "IC Plan"). The IC Plan provides
that a bonus fund will be  established  in an amount equal to 20% of the pre-tax
realized profits of the Company in excess of a 15% pre-tax return on equity. The
amount of the bonus fund is  calculated  each  fiscal  quarter  on a  cumulative
basis.  The  allocation  of the bonus fund is to be made by the President of the
Company.  The Company  did not incur any expense  under the IC Plan for the year
ended December 31, 2002.

                                       30
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

STOCK OPTION PLAN

The 1993  Non-Qualified  and  Incentive  Stock  Option  Plan (the  "1993  Plan")
authorizes the grant of options to purchase an aggregate of 500,000 Shares.  The
1993 Plan provides that the Board of Directors,  or a committee appointed by the
Board,  may grant options and otherwise  administer  the 1993 Plan. The exercise
price of each incentive  stock option or  non-qualified  stock option must be at
least 100% of the fair market  value of the Shares at the date of grant,  and no
such option may be exercisable  for more than ten years after the date of grant.
However,  the  exercise  price of each  incentive  stock  option  granted to any
shareholder possessing more than 10% of the combined voting power of all classes
of capital  stock of the Company on the date of grant must not be less than 110%
of the fair market  value on that date,  and no such  option may be  exercisable
more than five years after the date of grant.

DIRECTOR COMPENSATION

Each director who is not an employee of the Company is entitled to receive a fee
of $500 plus travel expenses for each director's meeting attended.

EMPLOYMENT CONTRACTS

The Company entered into an employment  agreement in May 2000 with R.H.  Dillon,
Jr., the  President  of the  Company.  The  agreement  automatically  renews for
successive  one-year  terms  unless  earlier  terminated  by Mr.  Dillon  or the
Company. The agreement provides for an annual salary of $150,000 plus a bonus in
the form of cash,  stock or other equity position in the discretion of the Board
of  Directors,  and further  provides  for such  benefits  and other  employment
privileges  as are  afforded  to  other  executive  employees.  If  the  Company
terminates Mr. Dillon's  employment without cause, he is entitled to a severance
payment equal to one year's base salary. If the Company  terminates Mr. Dillon's
employment without cause within 24 months of a change in control, he is entitled
to a lump sum payment  equal to his  aggregate  compensation  plus bonus for the
most  recently  completed  fiscal  year,  a  reduction  in the  duration  of his
non-competition  covenant to 6 months,  continuation of family medical  coverage
for one year after the date of termination  (subject to Mr. Dillon being covered
by a medical plan of a subsequent  employer) and an  accelerated  vesting of all
qualified stock options or warrants held by him at the time of termination.

The Company  entered  into an  employment  agreement  in July 2001 with James F.
Laird, Jr., the Chief Financial Officer, Secretary and Treasurer of the Company.
The agreement  expires in July 2006 (which  unless  otherwise  terminated  shall
automatically  renew for a one-year period),  and provides for an initial annual
salary of $135,000 with annual  adjustments of $9,000 each in subsequent  years.
The  agreement  also  provides  for  those  benefits  as are  afforded  to other
executive  employees.  If the Company  terminates Mr. Laird's employment without
cause, or if Mr. Laird resigns his employment for specified reasons (including a
change in control),  he is entitled to a severance  payment  equal to one year's
salary,  reduced  by the  amount of any  employment  compensation  earned by him
elsewhere  on or after the  beginning of the 6th calendar  month  following  the
effective date of the termination or resignation.

                                       31
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The Company's Common Stock is the only class of voting securities. The following
table sets forth, as of December 31, 2002, certain information  concerning share
ownership  of (a) all  persons  known by the  Company to own  beneficially  five
percent or more of the outstanding Shares, (b) each director,  nominee and named
executive officer of the Company,  and (c) all executive  officers and directors
of the  Company,  as a group,  and the  percentage  of  voting  power  (assuming
exercise of all  options  which are  currently  exercisable).  Unless  otherwise
indicated,  the named persons exercise sole voting and investment power over the
Shares that are shown as beneficially owned by them.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
                                      AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
---------------------------------------------------------------------------------------
                                          COMMON SHARES WHICH
                              COMMON      CAN BE ACQUIRED UPON
                              SHARES     EXERCISE OF OPTIONS OR
    NAME AND ADDRESS OF      PRESENTLY    WARRANTS EXERCISABLE              PERCENT OF
     BENEFICIAL OWNER        HELD (1)        WITHIN 60 DAYS        TOTAL     CLASS(3)
---------------------------------------------------------------------------------------
<S>                           <C>               <C>               <C>          <C>
R. H. Dillon (4)              699(2)            120,000           120,699      7.1%
 308 Jackson Street
 Columbus, Ohio  43206
---------------------------------------------------------------------------------------
James F. Laird (4)            320(2)             20,000            20,320      1.2%
 5277 Brynwood Drive
 Columbus, Ohio 43220
---------------------------------------------------------------------------------------
Larry A. Beres                8,500              8,000             16,500      1.0%
 7640 Whispering Oaks Trail
 Tipp City, Ohio  45371
---------------------------------------------------------------------------------------
Dr. Roger D. Blackwell        20,640             2,000             22,640      1.3%
 3380 Tremont Road
 Columbus, Ohio  43221
---------------------------------------------------------------------------------------
Richard Desich                5,490              2,000             7,490       (5)
 11149 Arrowhead Dr.
 Grafton, Ohio  44044
---------------------------------------------------------------------------------------
David P. Lauer                  0                  0                 0          --
 5386 Dunniker Park Drive
 Dublin, OH 43017
---------------------------------------------------------------------------------------
Dr. James G. Mathias          18,945             13,000            31,945      1.9%
 7707 Winding Way South
 Tipp City, Ohio  45371
---------------------------------------------------------------------------------------
David R. Meuse                41,698               0               41,698      2.4%
 191 W. Nationwide Blvd.
 Suite 600
 Columbus, Ohio 43215
---------------------------------------------------------------------------------------
William G. Perkins              0                  0                 0          --
 4 Millington Court
 Columbus, Georgia  31904
---------------------------------------------------------------------------------------
Diane D. Reynolds               0                  0                 0          --
 372 W. Seventh Avenue
 Columbus, Ohio  43201
---------------------------------------------------------------------------------------
All directors and executive
officers as a group
(10 persons)                  96,292            165,000           261,292     15.3%
---------------------------------------------------------------------------------------
</TABLE>

-----------
(1)  Unless  otherwise  indicated,  the  beneficial  owner has sole  voting  and
     dispositive power as to all common shares reflected in the table.

                                       32
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

(2)  Shares are related to the  Company's  401(k) Plan, in which the Trustees of
     the 401(k)  Plan  possess  the  voting  power and  restrictions  exist with
     respect to the power to dispose of these shares.
(3)  The  percent of class is based  upon (a) the number of Shares  owned by the
     named person plus the number of Shares as to which the named person has the
     right to  acquire  beneficial  ownership  upon the  exercise  of options or
     warrants exercisable within 60 days after December 31, 2002, divided by (b)
     the total number of Shares which are issued and  outstanding as of December
     31,  2002,  plus the total number of Shares which are subject to options or
     warrants exercisable within 60 days after December 31, 2002.
(4)  Individual named in the Summary Compensation Table.
(5)  Represents  ownership of less than 1% of the  outstanding  common shares of
     the Company.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table provides information as of December 31, 2002 with respect to
shares of the  Company's  common  stock  that may be issued  under our  existing
equity compensation plans,  including the 1993 Non-Qualified and Incentive Stock
Option Plan.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                  (A)                             (B)                             (C)
--------------------------------------------------------------------------------------------------------------------------------
PLAN CATEGORY                     NUMBER OF SECURITIES TO BE      WEIGHTED-AVERAGE EXERCISE       NUMBER OF SECURITIES
                                  ISSUED UPON EXERCISE OF         PRICE OF OUTSTANDING OPTIONS,   REMAINING AVAILABLE FOR
                                  OUTSTANDING OPTIONS, WARRANTS   WARRANTS AND RIGHTS             FUTURE ISSUANCE UNDER EQUITY
                                  AND RIGHTS                                                      COMPENSATION PLANS (EXCLUDING
                                                                                                  SECURITIES REFLECTED IN
                                                                                                  COLUMN (A))
--------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>                               <C>                             <C>
EQUITY COMPENSATION PLANS                       446,302                           $14.47                          8,598
APPROVED BY SECURITY HOLDERS (1)
--------------------------------------------------------------------------------------------------------------------------------
EQUITY COMPENSATION PLANS NOT
APPROVED BY SECURITY HOLDERS                         --                               --                             --
--------------------------------------------------------------------------------------------------------------------------------
TOTAL                                           446,302                           $14.47                          8,598
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

-----------
(1)  Consists of the 1993 Non-Qualified and Incentive Stock Option Plan.

ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - None

ITEM 13: EXHIBITS AND REPORTS ON FORM 8-K

(a)  Index of Exhibits
       *3.1   Amended and Restated Articles of Incorporation of the Company.
       *3.2   Code of Regulations of the Company.
       10.1   Diamond  Hill   Investment   Group  (fka   Heartland)   Incentive
              Compensation Plan.
     **10.2   1993 Non-Qualified and Incentive Stock Option Plan.
    ***10.3   Synovus Securities, Inc., Sub-Advisory Agreement with the Diamond
              Hill Capital Management, Inc. dated January 30, 2001.
       10.4   Employment  Agreement between the Company and Roderick H. Dillon,
              Jr. dated May 11, 2000.
       10.5   Employment Agreement between the Company and James F. Laird dated
              October 24, 2001.
       21.1   Subsidiaries of the Company.
       99.1   Certification of Chief Executive  Officer Pursuant to Section 906
              of the Sarbanes-Oxley Act of 2002.
       99.2   Certification of Chief Financial  Officer Pursuant to Section 906
              of the Sarbanes-Oxley Act of 2002.

* Filed  with the  Securities  and  Exchange  Commission  as an  exhibit  to the
Company's Form 8-K filed on May 8, 2002 and incorporated herein by reference.
** Filed  with the  Securities  and  Exchange  Commission  as an  exhibit to the
Company's  Proxy  Statement  filed on July 21, 1998 and  incorporated  herein by
reference.
*** Filed  with the  Securities  and  Exchange  Commission  as an exhibit to the
Company's  Form  10-KSB  filed on  March 1,  2001  and  incorporated  herein  by
reference.

                                       33
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

ITEM 13: EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)

(b)  Reports on Form 8-K - None

ITEM 14: CONTROLS AND PROCEDURES

Our Chief  Executive  Officer and Chief  Financial  Officer have  evaluated  the
effectiveness  of our  disclosure  controls and  procedures (as defined in Rules
13a-14(c)  and  15d-14(c)  under the  Exchange  Act) as of a date within 90 days
prior to the filing date of this annual report (the "Evaluation Date"). Based on
such  evaluation,  such officers have concluded that, as of the Evaluation Date,
our disclosure controls and procedures are effective.

There have been no  significant  changes in our  internal  controls  or in other
factors that could significantly affect such controls since the Evaluation Date.

ITEM 16: AUDIT FEES

For the years ended December 31, 2002 and 2001, the following fees apply:

                                      Year Ended               Year Ended
                                      12/31/2002               12/31/2001
                                      ----------               ----------

       Audit                              22,000                   22,725
       Current Year Tax                    5,000                    4,731
       Prior Year Tax                         --                   16,309
       Quarterly Review                    2,993                       --
                                      ----------               ----------

       Total                              29,993                   43,765
                                      ==========               ==========

Prior year tax fees  consist  of  amounts  paid to the  current  accountants  to
resolve  notices from the State of Ohio relating to tax years 1996 through 2000.
The notices were resolved in 2002.

It is the policy of the Audit  Committee  to  pre-approve  the  services  of the
independent accountants and present that approval to the Board of Directors. For
the years ended December 31, 2002 and 2001, 100% of the independent accountants'
fees were pre-approved by the Audit Committee.

                                       34
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized:

DIAMOND HILL INVESTMENT GROUP, INC.


/S/ R. H. Dillon
---------------------------------------
By R. H. Dillon, President and Director      March 21, 2003
                                             --------------

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.

Signature                          Title                         Date
--------------------------------------------------------------------------------


/S/ R. H. Dillon                   President and Director        March 21, 2003
---------------------------
R. H. Dillon


/S/ James F. Laird                 Chief Financial Officer       March 21, 2003
---------------------------
James F. Laird


/S/ Larry A. Beres                 Director                      March 21, 2003
---------------------------
Larry A. Beres


/S/ Dr. Roger D. Blackwell         Director                      March 21, 2003
---------------------------
Dr. Roger D. Blackwell


/S/ Richard Desich                 Director                      March 21, 2003
---------------------------
Richard Desich


/S/ David P. Lauer                 Director                      March 21, 2003
---------------------------
David P. Lauer


/S/ James G. Mathias               Director                      March 21, 2003
---------------------------
James G. Mathias


/S/ David R. Meuse                 Director                      March 21, 2003
---------------------------
David R. Meuse


/S/ William G. Perkins             Director                      March 21, 2003
---------------------------
William G. Perkins


/S/ Diane D. Reynolds              Director                      March 21, 2003
---------------------------
Diane D. Reynolds

                                       35
<PAGE>

                 CERTIFICATION FOR ANNUAL REPORT ON FORM 10-KSB

I, R.H. Dillon, certify that:

1.   I have  reviewed  this  annual  report  on  Form  10-KSB  of  Diamond  Hill
     Investment Group, Inc.;

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)   designed such  disclosure  controls and  procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the  period  in which  this  annual  report  is being
     prepared;

b)   evaluated the  effectiveness  of the registrant's  disclosure  controls and
     procedures  as of a date  within 90 days prior to the  filing  date of this
     annual report (the "Evaluation Date"); and

c)   presented in this annual report our conclusions  about the effectiveness of
     the disclosure  controls and  procedures  based on our evaluation as of the
     Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

a)   all  significant  deficiencies  in the  design  or  operation  of  internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weaknesses in internal controls; and

b)   any fraud,  whether or not  material,  that  involves  management  or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual report whether there were significant  changes in internal  controls
     or in other  factors  that could  significantly  affect  internal  controls
     subsequent  to the  date  of our  most  recent  evaluation,  including  any
     corrective  actions with regard to  significant  deficiencies  and material
     weaknesses.


Date: March 21, 2003                    /S/ R. H. Dillon
                                        --------------------------
                                               R.H. Dillon
                                         Chief Executive Officer

                                       36
<PAGE>

                 CERTIFICATION FOR ANNUAL REPORT ON FORM 10-KSB

I, James F. Laird, certify that:

1.   I have  reviewed  this  annual  report  on  Form  10-KSB  of  Diamond  Hill
     Investment Group, Inc.;

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)   designed such  disclosure  controls and  procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the  period  in which  this  annual  report  is being
     prepared;

b)   evaluated the  effectiveness  of the registrant's  disclosure  controls and
     procedures  as of a date  within 90 days prior to the  filing  date of this
     annual report (the "Evaluation Date"); and

c)   presented in this annual report our conclusions  about the effectiveness of
     the disclosure  controls and  procedures  based on our evaluation as of the
     Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

a)   all  significant  deficiencies  in the  design  or  operation  of  internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weaknesses in internal controls; and

b)   any fraud,  whether or not  material,  that  involves  management  or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual report whether there were significant  changes in internal  controls
     or in other  factors  that could  significantly  affect  internal  controls
     subsequent  to the  date  of our  most  recent  evaluation,  including  any
     corrective  actions with regard to  significant  deficiencies  and material
     weaknesses.


Date: March 21, 2003                    /S/ James F. Laird
                                        --------------------------
                                              James F. Laird
                                         Chief Financial Officer

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