##### Table of Contents



U.S. Securities and Exchange Commission
 Washington, D.C. 20549
 Form 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 Commission file number 000-24498
 DIAMOND HILL INVESTMENT GROUP, INC
  Ohio
    
    65-0190407(State of incorporation)
    
    (I.R.S. Employer Identification No.)
 
 
  þ o
 
 o þ o
  o þ




---



##### 



PAGEPart I: FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial Statements
    
    
    3Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operation
    
    
    15Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 4.
    
    Controls and Procedures
    
    
    21Part II: OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    21Item 1A.
    
    Risk Factors
    
    
    21Item 2.
    
    Unregistered Sales of Equity Securities and use of Proceeds
    
    
    21Item 3.
    
    Defaults Upon Senior Securities
    
    
    21Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    21Item 5.
    
    Other Information
    
    
    21Item 6.
    
    Exhibits
    
    
    22Signatures
    
    
    23EX-31.1EX-31.2EX-32.1
  2




---



##### Table of Contents



PART I FINANCIAL INFORMATION
 
 ITEM 1: Financial Statements
 Diamond Hill Investment Group, Inc.
Consolidated Balance Sheets
 6/30/2007
    
    
    12/31/2006(Unaudited)ASSETSCash and cash equivalents
    
    $
    10,825,475
    
    
    $
    9,836,989Investment portfolio
    
    
    19,107,697
    
    
    
    19,108,682Accounts receivable
    
    
    5,700,773
    
    
    
    6,924,008Prepaid expenses
    
    
    1,186,333
    
    
    
    869,501Furniture and equipment, net of depreciation and other assets
    
    
    673,125
    
    
    
    497,297Total assets
    
    $
    37,493,403
    
    
    $
    37,236,477LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesAccounts payable and accrued expenses
    
    
    972,411
    
    
    
    1,217,114Accrued incentive compensation
    
    
    5,951,580
    
    
    
    13,637,000Current and deferred taxes
    
    
    1,456,296
    
    
    
    1,899,106Total Liabilities
    
    
    8,380,287
    
    
    
    16,753,220Commitments and contingencies
    
    
    
    
    
    
    Shareholders EquityCommon
stock, no par value
7,000,000 shares authorized; 2,189,225 issued 
2,188,930 outstanding at June 30, 2007
1,838,435 outstanding at December 31, 2006
    
    
    22,543,603
    
    
    
    16,515,256Preferred stock, undesignated, 1,000,000 shares 
authorized and unissued
    
    
    
    
    
    
    Treasury stock, at cost 
295 shares at June 30, 2007
10,037 shares at December 31, 2006
    
    
    (24,058
    )
    
    
    (95,736
    )Deferred compensation
    
    
    (3,526,647
    )
    
    
    (2,355,499
    )Retained earnings
    
    
    10,120,218
    
    
    
    6,419,236Total shareholders equity
    
    
    29,113,116
    
    
    
    20,483,257Total liabilities and shareholders equity
    
    $
    37,493,403
    
    
    $
    37,236,477
  3




---



##### Table of Contents



Diamond Hill Investment Group, Inc.
Consolidated Statements of Income (unaudited)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006REVENUES:Investment advisory
    
    $
    8,882,560
    
    
    $
    4,548,351
    
    
    $
    16,763,965
    
    
    $
    7,930,008Performance incentive
    
    
    
    
    
    
    896,647
    
    
    
    4,297
    
    
    
    2,509,874Mutual fund administration, net
    
    
    1,486,279
    
    
    
    803,961
    
    
    
    2,955,320
    
    
    
    1,389,193Total revenue
    
    
    10,368,839
    
    
    
    6,248,959
    
    
    
    19,723,582
    
    
    
    11,829,075OPERATING EXPENSES:Compensation and related costs
    
    
    5,221,522
    
    
    
    3,546,356
    
    
    
    9,888,985
    
    
    
    6,918,868General and administrative
    
    
    585,734
    
    
    
    262,215
    
    
    
    1,152,146
    
    
    
    510,150Sales and marketing
    
    
    140,316
    
    
    
    75,298
    
    
    
    241,810
    
    
    
    132,742Third party distribution
    
    
    343,926
    
    
    
    110,889
    
    
    
    723,261
    
    
    
    201,919Mutual fund administration
    
    
    655,582
    
    
    
    448,414
    
    
    
    1,208,556
    
    
    
    765,354Total operating expenses
    
    
    6,947,080
    
    
    
    4,443,172
    
    
    
    13,214,758
    
    
    
    8,529,033NET OPERATING INCOME
    
    
    3,421,759
    
    
    
    1,805,787
    
    
    
    6,508,824
    
    
    
    3,300,042Investment return
    
    
    229,586
    
    
    
    364,982
    
    
    
    199,126
    
    
    
    790,100INCOME BEFORE TAXES
    
    
    3,651,345
    
    
    
    2,170,769
    
    
    
    6,707,950
    
    
    
    4,090,142Income tax provision
    
    
    (1,237,749
    )
    
    
    (802,601
    )
    
    
    (2,299,941
    )
    
    
    (1,469,362
    )NET INCOME
    
    $
    2,413,596
    
    
    $
    1,368,168
    
    
    $
    4,408,009
    
    
    $
    2,620,780Earnings per shareBasic
    
    $
    1.12
    
    
    $
    0.77
    
    
    $
    2.11
    
    
    $
    1.48Diluted
    
    $
    1.05
    
    
    $
    0.62
    
    
    $
    1.97
    
    
    $
    1.20Weighted average shares outstandingBasic
    
    
    2,155,705
    
    
    
    1,775,339
    
    
    
    2,093,282
    
    
    
    1,765,018Diluted
    
    
    2,302,087
    
    
    
    2,200,261
    
    
    
    2,240,037
    
    
    
    2,184,152
  4




---



##### Table of Contents



Diamond Hill Investment Group, Inc.
Consolidated Statement of Shareholders Equity (unaudited)
 Shares
    
    
    Common
    
    
    Treasury
    
    
    Deferred
    
    
    RetainedOutstanding
    
    
    Stock
    
    
    Stock
    
    
    Compensation
    
    
    Earnings
    
    
    TotalBalance at January 1, 2007
    
    
    1,838,435
    
    
    $
    16,515,256
    
    
    $
    (95,736
    )
    
    $
    (2,355,499
    )
    
    $
    6,419,236
    
    
    $
    20,483,257Deferred compensation
    
    
    18,000
    
    
    
    1,693,620
    
    
    
    
    
    
    
    (1,693,620
    )
    
    
    
    
    
    
    Recognition of current year
deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    522,472
    
    
    
    
    
    
    
    522,472Issuance of stock grants
    
    
    57,254
    
    
    
    5,628,641
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,628,641FAS 123R compensation expense
    
    
    
    
    
    
    5,472
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,472Tax benefit from options and
warrants exercised
    
    
    
    
    
    
    2,330,573
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,330,573Payment of taxes withheld
related to option exercises
    
    
    (85,518
    )
    
    
    (8,020,273
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,020,273
    )Purchase of treasury stock
related to option exercises
    
    
    (15,585
    )
    
    
    
    
    
    
    (1,344,958
    )
    
    
    
    
    
    
    
    
    
    
    (1,344,958
    )Sale of treasury stock
    
    
    25,327
    
    
    
    138,423
    
    
    
    1,416,636
    
    
    
    
    
    
    
    (707,027
    )
    
    
    848,032Exercise of options/warrants
for common stock
    
    
    351,017
    
    
    
    4,251,891
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,251,891Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,408,009
    
    
    
    4,408,009Balance at June 30, 2007
    
    
    2,188,930
    
    
    $
    22,543,603
    
    
    $
    (24,058
    )
    
    $
    (3,526,647
    )
    
    $
    10,120,218
    
    
    $
    29,113,116
  5




---



##### Table of Contents



Diamond Hill Investment Group, Inc.
Consolidated Statements of Cash Flow (unaudited)
 Six Months Ended June 30,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net Income
    
    $
    4,408,009
    
    
    $
    2,620,780Adjustments to reconcile net income to net cash used in
operating activities:Depreciation on furniture and equipment
    
    
    78,761
    
    
    
    21,500Amortization of deferred compensation
    
    
    522,472
    
    
    
    63,045(Increase) decrease in accounts receivable
    
    
    1,223,235
    
    
    
    (1,293,003
    )Increase in deferred taxes
    
    
    1,762,158
    
    
    
    1,409,360Stock option expense
    
    
    5,472
    
    
    
    21,567(Increase) decrease in unrealized gains
    
    
    84,217
    
    
    
    (660,086
    )Increase (decrease) in accrued liabilities
    
    
    (7,930,122
    )
    
    
    3,769,577Other changes in assets and liabilities
    
    
    (316,832
    )
    
    
    (88,707
    )Net cash provided by (used in) operating
    
    
    (162,630
    )
    
    
    5,864,033CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    (254,589
    )
    
    
    (157,137
    )Investment portfolio activity
    
    
    (83,232
    )
    
    
    (6,746,828
    )Net cash used in investing activities
    
    
    (337,821
    )
    
    
    (6,903,965
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payment of taxes withheld on option/warrant exercises
    
    
    (8,020,273
    )Proceeds from common stock issuance
    
    
    9,580,888
    
    
    
    147,796Purchase of treasury stock
    
    
    (1,344,958
    )Sale of treasury stock
    
    
    1,273,280
    
    
    
    177,003Net cash provided by financing activities
    
    
    1,488,937
    
    
    
    324,799CASH AND CASH EQUIVALENTSNet change during the period
    
    
    988,486
    
    
    
    (715,133
    )At beginning of period
    
    
    9,836,989
    
    
    
    2,532,334At end of period
    
    $
    10,825,475
    
    
    $
    1,817,201Cash paid during the period for:Interest
    
    
    
    
    
    
    Income taxes
    
    
    486,207
    
    
    
    60,000
  6




---



##### Table of Contents



Diamond Hill Investment Group, Inc.
Notes to Consolidated Financial Statements (unaudited)
 Organization
    Significant Accounting Policies
  Reclassifications
  Principles of Consolidation
  Segment Information
  Cash and Cash Equivalents
  Accounts Receivable
  7




---



##### Table of Contents



Significant Accounting Policies (Continued)
 Valuation of Investment Portfolio
  Limited Partnership Interests
  Property and Equipment
  Treasury Stock
  Revenue Recognition
   8




---



##### Table of Contents



Significant Accounting Policies (Continued)
 Revenue Recognition  Mutual Fund Administration
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Mutual fund admin revenue, gross
    
    $
    2,124,197
    
    
    $
    1,299,598
    
    
    $
    4,160,543
    
    
    $
    2,342,969Mutual fund admin, fund related expense
    
    
    661,738
    
    
    
    521,876
    
    
    
    1,238,559
    
    
    
    999,327Mutual fund admin revenue, net of fund
related expenses
    
    
    1,462,459
    
    
    
    777,722
    
    
    
    2,921,984
    
    
    
    1,343,641C-Share broker commission advance
repayments
    
    
    500,946
    
    
    
    285,575
    
    
    
    913,146
    
    
    
    531,095C-Share broker commission amortization
    
    
    477,126
    
    
    
    259,336
    
    
    
    879,810
    
    
    
    485,544C-Share financing activity, net
    
    
    23,820
    
    
    
    26,239
    
    
    
    33,336
    
    
    
    45,551Mutual fund administration revenue, net
    
    $
    1,486,279
    
    
    $
    803,961
    
    
    $
    2,955,320
    
    
    $
    1,389,193
 Income Taxes
   Earnings Per Share
  9




---



##### Table of Contents



Investment Portfolio
  June 30,
    
    
    December 31,2007
    
    
    2006Diamond Hill Small Cap Fund
    
    $
    69,411
    
    
    $
    65,371Diamond Hill Small-Mid Cap Fund
    
    
    352,966
    
    
    
    330,546Diamond Hill Large Cap Fund
    
    
    309,305
    
    
    
    292,369Diamond Hill Select Fund
    
    
    365,113
    
    
    
    342,121Diamond Hill Long-Short Fund
    
    
    295,953
    
    
    
    295,953Diamond Hill Financial Long-Short Fund
    
    
    303,732
    
    
    
    300,000Diamond Hill Strategic Income Fund
    
    
    3,006,770
    
    
    
    2,916,069Diamond Hill Investment Partners, L.P.
    
    
    9,645,448
    
    
    
    9,744,285Diamond Hill Investment Partners II, L.P.
    
    
    4,758,999
    
    
    
    4,821,968Total Investment Portfolio
    
    $
    19,107,697
    
    
    $
    19,108,682
  June 30,
    
    December 31,2007
    
    2006Total assets
    
    $
    416,309,995
    
    
    $
    357,375,152Total liabilities
    
    
    126,356,400
    
    
    
    146,918,057Net assets
    
    
    289,953,595
    
    
    
    210,457,095Net income (loss)
    
    
    (4,384,434
    )
    
    
    35,961,019DHCMs portion of net assets
    
    
    14,404,447
    
    
    
    14,566,253DHCMs portion of net income (loss)
    
    
    (166,103
    )
    
    
    6,515,194
  10




---



##### Table of Contents



Capital Stock
 Common Shares
  Authorization of Preferred Shares
  Stock-Based Compensation
 Equity Incentive Plans
 2005 Employee and Director Equity Incentive Plan
  1993 Non-qualified and Incentive Stock Option Plan
  Equity Compensation Grants
  401(k) Plan
  11




---



##### Table of Contents



Stock-Based Compensation (Continued)
   12




---



##### Table of Contents



Stock-Based Compensation (Continued)
  Options
    
    WarrantsWeighted Average
    
    
    
    
    
    Weighted AverageShares
    
    Exercise Price
    
    Shares
    
    Exercise PriceOutstanding December 31, 2005
    
    
    303,002
    
    
    
    14.48
    
    
    
    259,400
    
    
    
    12.78Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired / Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    5,200
    
    
    
    14.90
    
    
    
    2,000
    
    
    
    11.25Outstanding June 30, 2006
    
    
    297,802
    
    
    $
    14.47
    
    
    
    257,400
    
    
    $
    12.79Outstanding December 31, 2006
    
    
    283,102
    
    
    
    14.60
    
    
    
    249,400
    
    
    
    12.57Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired / Forfeited
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    10.63Exercised
    
    
    151,602
    
    
    
    19.16
    
    
    
    222,000
    
    
    
    8.65Outstanding June 30, 2007
    
    
    131,500
    
    
    $
    9.34
    
    
    
    25,400
    
    
    $
    47.00Exercisable June 30, 2007
    
    
    111,500
    
    
    $
    10.20
    
    
    
    25,400
    
    
    $
    47.00
   Options
    
    WarrantsRemaing
    
    
    
    
    
    
    
    
    
    
    
    
    
    RemaingNumber
    
    Life
    
    Number
    
    
    
    
    
    Number
    
    Life
    
    NumberOutstanding
    
    In Years
    
    Exercisable
    
    Exercise Price
    
    Outstanding
    
    In Years
    
    Exercisable
    
    Exercise Price10,000
    
    
    3.12
    
    
    
    10,000
    
    
    
    7.95
    
    
    
    14,000
    
    
    
    0.87
    
    
    
    14,000
    
    
    
    73.7510,000
    
    
    3.47
    
    
    
    10,000
    
    
    
    8.44
    
    
    
    400
    
    
    
    1.51
    
    
    
    400
    
    
    
    22.2021,500
    
    
    3.48
    
    
    
    21,500
    
    
    
    28.10
    
    
    
    3,000
    
    
    
    1.87
    
    
    
    3,000
    
    
    
    22.5010,000
    
    
    3.76
    
    
    
    10,000
    
    
    
    8.45
    
    
    
    6,000
    
    
    
    2.67
    
    
    
    6,000
    
    
    
    11.2520,000
    
    
    4.05
    
    
    
    20,000
    
    
    
    5.25
    
    
    
    2,000
    
    
    
    2.87
    
    
    
    2,000
    
    
    
    8.7560,000
    
    
    5.94
    
    
    
    40,000
    
    
    
    4.50131,500
    
    
    4.68
    
    
    
    111,500
    
    
    
    
    
    
    
    25,400
    
    
    
    1.58
    
    
    
    25,400
  Outstanding
    
    $
    11,803,149Exercisable
    
    $
    10,079,949
 13




---



##### Table of Contents



Operating Leases
  2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    2013$121,000
    
    $
    224,000
    
    
    $
    231,000
    
    
    $
    238,000
    
    
    $
    245,000
    
    
    $
    254,000
    
    
    $
    130,000
  Income Taxes
   Earnings Per Share
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Basic and Diluted net income
    
    $
    2,413,596
    
    
    $
    1,368,168
    
    
    $
    4,408,009
    
    
    $
    2,620,780Weighted average number of outstanding sharesBasic
    
    
    2,155,705
    
    
    
    1,775,339
    
    
    
    2,093,282
    
    
    
    1,765,018Diluted
    
    
    2,302,087
    
    
    
    2,200,261
    
    
    
    2,240,037
    
    
    
    2,184,152Earnings per shareBasic
    
    $
    1.12
    
    
    $
    0.77
    
    
    $
    2.11
    
    
    $
    1.48Diluted
    
    $
    1.05
    
    
    $
    0.62
    
    
    $
    1.97
    
    
    $
    1.20
  Commitments and Contingencies
  14




---



##### Table of Contents



ITEM 2: Managements Discussion and Analysis of Financial Condition and Results of Operation
 Forward-looking Statements
  General
    15




---



##### Table of Contents



Assets Under Management by ProductAs of June 30,(in millions)
    
    2007
    
    2006
    
    % ChangeMutual funds
    
    $
    2,976
    
    
    $
    1,868
    
    
    
    59
    %Separate accounts
    
    
    1,025
    
    
    
    716
    
    
    
    43
    %Private investment funds
    
    
    478
    
    
    
    150
    
    
    
    219
    %Total
    
    $
    4,479
    
    
    $
    2,734
    
    
    
    64
    %
 Assets Under Management by ObjectiveAs of June 30,(in millions)
    
    2007
    
    2006
    
    % ChangeSmall and Small-Mid Cap
    
    $
    734
    
    
    $
    774
    
    
    
    -5
    %Large Cap and Select
    
    
    1,062
    
    
    
    737
    
    
    
    44
    %Long-Short
    
    
    2,380
    
    
    
    992
    
    
    
    140
    %Strategic and fixed income
    
    
    303
    
    
    
    230
    
    
    
    32
    %Total
    
    $
    4,479
    
    
    $
    2,734
    
    
    
    64
    %
 Consolidated Results of Operations
  Three Months Ended June 30,
    
    Six Months Ended June 30,2007
    
    2006
    
    % Change
    
    2007
    
    2006
    
    % ChangeNet income (in thousands)
    
    $
    2,414
    
    
    $
    1,368
    
    
    
    76
    %
    
    $
    4,408
    
    
    $
    2,621
    
    
    
    68
    %Net income (loss) per shareBasic
    
    $
    1.12
    
    
    $
    0.77
    
    
    
    45
    %
    
    $
    2.11
    
    
    $
    1.48
    
    
    
    43
    %Diluted
    
    $
    1.05
    
    
    $
    0.62
    
    
    
    69
    %
    
    $
    1.97
    
    
    $
    1.20
    
    
    
    64
    %Weighted average shares
outstanding (in thousands)Basic
    
    
    2,156
    
    
    
    1,775
    
    
    
    
    
    
    
    2,093
    
    
    
    1,765Diluted
    
    
    2,302
    
    
    
    2,200
    
    
    
    
    
    
    
    2,240
    
    
    
    2,184
 Three Months ended June 30, 2007 compared with Three Months Ended June 30, 2006
  16




---



##### Table of Contents



Revenue
 Three Months EndedJune 30,(in Thousands)
    
    2007
    
    2006
    
    % ChangeInvestment advisory
    
    $
    8,883
    
    
    $
    4,548
    
    
    
    95
    %Performance incentive
    
    
    
    
    
    
    897
    
    
    
    -100
    %Mutual fund administration, net
    
    
    1,486
    
    
    
    804
    
    
    
    85
    %Total
    
    $
    10,369
    
    
    $
    6,249
    
    
    
    66
    %
  Investment Advisory Fees.
 Performance Incentive Fees.
 Mutual Fund Administration Fees.
 17




---



##### Table of Contents



Expenses
 Three Months EndedJune 30,(in Thousands)
    
    2007
    
    2006
    
    % ChangeCompensation and related costs
    
    $
    5,222
    
    
    $
    3,546
    
    
    
    47
    %General and administrative
    
    
    586
    
    
    
    262
    
    
    
    124
    %Sales and marketing
    
    
    140
    
    
    
    75
    
    
    
    87
    %Third party distribution
    
    
    344
    
    
    
    111
    
    
    
    210
    %Mutual fund administration
    
    
    655
    
    
    
    449
    
    
    
    46
    %Total
    
    $
    6,947
    
    
    $
    4,443
    
    
    
    56
    %
 Compensation and Related Costs.
 General and Administrative.
 Sales and Marketing.
 Third Party Distribution.
 Mutual Fund Administration.
 18




---



##### Table of Contents



Six Months ended June 30, 2007 compared with Six Months Ended June 30, 2006
 Revenue
 Six Months EndedJune 30,(in Thousands)
    
    2007
    
    2006
    
    % ChangeInvestment advisory
    
    $
    16,764
    
    
    $
    7,930
    
    
    
    111
    %Performance incentive
    
    
    4
    
    
    
    2,510
    
    
    
    -100
    %Mutual fund administration, net
    
    
    2,956
    
    
    
    1,389
    
    
    
    113
    %Total
    
    $
    19,724
    
    
    $
    11,829
    
    
    
    67
    %
  Investment Advisory Fees.
 Performance Incentive Fees.
 Mutual Fund Administration Fees.
 19




---



##### Table of Contents



Expenses
 Six Months EndedJune 30,(in Thousands)
    
    2007
    
    2006
    
    % ChangeCompensation and related costs
    
    $
    9,889
    
    
    $
    6,919
    
    
    
    43
    %General and administrative
    
    
    1,152
    
    
    
    510
    
    
    
    126
    %Sales and marketing
    
    
    242
    
    
    
    133
    
    
    
    82
    %Third party distribution
    
    
    723
    
    
    
    202
    
    
    
    258
    %Mutual fund administration
    
    
    1,209
    
    
    
    765
    
    
    
    58
    %Total
    
    $
    13,215
    
    
    $
    8,529
    
    
    
    55
    %
 Compensation and Related Costs.
 General and Administrative.
 Sales and Marketing.
 Third Party Distribution.
 Mutual Fund Administration.
 Liquidity and Capital Resources
   20




---



##### Table of Contents



ITEM 3: Quantitative and Qualitative Disclosures About Market Risk
  
 ITEM 4: Controls and Procedures
  
 PART II: OTHER INFORMATION
 
 ITEM 1: Legal Proceedings 
 
 ITEM 1A: Risk Factors
  
 ITEM 2: Unregistered Sales of Equity Securities and use of Proceeds
 
 ITEM 3: Defaults Upon Senior Securities 
 
 ITEM 4: Submission of Matters to a Vote of Security Holders
   Name
    
    Votes For
    
    Votes WithheldR. H. Dillon
    
    
    1,787,219
    
    
    
    15,268David P. Lauer
    
    
    1,794,555
    
    
    
    7,932Dr. James G. Mathias
    
    
    1,794,275
    
    
    
    8,212David R. Meuse
    
    
    1,794,775
    
    
    
    7,712Diane D. Reynolds
    
    
    1,794,665
    
    
    
    7,832Donald B. Shackelford
    
    
    1,791,445
    
    
    
    11,042
 
 ITEM 5: Other Information 
 21




---



##### Table of Contents



ITEM 6: Exhibits
 3.1
    
    Amended and Restated Articles of Incorporation of the Company. (Incorporated by
reference from Form 8-K Current Report for the event on May 2, 2002 filed with the SEC
on May 7, 2002; File No. 000-24498.)3.2
    
    Code of Regulations of the Company. (Incorporated by reference from Form 8-K Current
Report for the event on May 2, 2002 filed with the SEC on May 7, 2002; File No.
000-24498.)31.1
    
    Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).31.2
    
    Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).32.1
    
    Section 1350 Certifications.
 22




---



##### Table of Contents



SIGNATURES
   Signature
    
    Title
    
    Date/s/ R. H. Dillon

R. H. Dillon
    
    President, Chief Executive Officer,
and a Director
    
    August 9, 2007/s/ James F. Laird

James F. Laird
    
    Chief Financial Officer, Treasurer,
and Secretary
    
    August 9, 2007
 23