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

                                   FORM 10-QSB

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

                For the quarterly period ended September 30, 2003
                                               ------------------

             [ ] 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

State the number of shares outstanding of each of the issuer's classes of common
equity, as of October 31, 2003:
     Common Stock: 1,519,467 shares

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

                                       1
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

                                                                            PAGE
                                                                            ----
Part I: FINANCIAL INFORMATION                                               3-22

     Item 1.   Financial Statements:                                        3-15

                  Consolidated Statements of Financial Condition              4
                  as of September 30, 2003 (unaudited)

                  Consolidated Statements of Operations for the               5
                  Nine Months and Three Months Ended September
                  30, 2003 and 2002 (unaudited)


                  Consolidated Statements of Cash Flow for the                6
                  Nine Months Ended September 30, 2003 and 2002
                  (unaudited)

                  Notes to the Consolidated Financial Statements            7-15

     Item 2.   Management's Discussion and Analysis or Plan of             16-21
               Operation

     Item 3.   Controls and Procedures                                       22

Part II: OTHER INFORMATION                                                 22-23

     Item 1.   Legal Proceedings                                             22

     Item 2.   Changes in Securities                                         22

     Item 3.   Defaults Upon Senior Securities                               22

     Item 4.   Submission of Matters to a Vote of Security Holders           22

     Item 5.   Other Information                                             22

     Item 6.   Exhibits and Reports on Form 8-K                              23

Signatures                                                                   24

Certifications for Quarterly Report on Form 10-QSB                         25-26

                                       2
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

PART I FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

The  accompanying  consolidated  financial  statements,  which should be read in
conjunction with the  consolidated  financial  statements and footnotes  thereto
included  in the  Company's  Annual  Report on Form  10-KSB  for the year  ended
December 31, 2002,  are  unaudited,  but have been prepared in  accordance  with
generally  accepted  accounting  principles for interim  financial  information.
Accordingly,  they do not include all of the information and footnotes  required
by generally accepted accounting  principles for complete financial  statements.
In the  opinion  of  management,  all  adjustments  (consisting  only of  normal
recurring  adjustments)  considered  necessary for a fair presentation have been
included.

Operating  results for the nine months and three months ended September 30, 2003
are not  necessarily  indicative  of the results  that may be  expected  for the
entire fiscal year ending December 31, 2003

                                       3
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
                            As of September 30, 2003

                                    UNAUDITED
                                    ---------

                                     ASSETS
Cash                                                               $    184,607
Investment portfolio (note 3 and 4):
   Mutual fund shares and limited partnership interests               2,658,801
   Not readily marketable equity securities,
      at estimated fair value                                            15,108
Accounts receivable:
   Investment products                                                  143,444
   Pending settlements and other                                            487
Property and equipment, net of accumulated
   depreciation of $126,092                                             137,957
Deposits and other                                                      191,748
                                                                   ------------

      Total assets                                                 $  3,332,152
                                                                   ============

                                   LIABILITIES
Accounts payable                                                   $      1,244
Accrued expenses                                                        137,513
                                                                   ------------

      Total liabilities                                                 138,757
                                                                   ------------

                              SHAREHOLDERS' EQUITY
Common stock: (note 5)
   No par value, 7,000,000 shares authorized,
      1,827,972 shares issued and 1,519,467 shares outstanding       10,024,999
   Treasury stock, at cost (308,505 shares)                          (1,765,136)
   Deferred compensation                                                 (5,757)
Accumulated deficit                                                  (5,060,711)
                                                                   ------------

      Total shareholders' equity                                      3,193,395
                                                                   ------------

      Total liabilities and shareholders' equity                   $  3,332,152
                                                                   ============

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

                                       4
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   For the Nine Months and Three Months Ended
                   September 30, 2003 and September 30, 2002

                                    UNAUDITED
                                    ---------

<TABLE>
<CAPTION>
                                                       9 MONTHS ENDED                  3 MONTHS ENDED
                                                       --------------                  --------------
                                                  SEP 2003        SEP 2002        SEP 2003        SEP 2002
                                                ------------    ------------    ------------    ------------
<S>                                             <C>             <C>             <C>             <C>
INVESTMENT MANAGEMENT FEES:
   Mutual funds                                 $    312,095    $    268,949    $    122,534    $     79,481
   Managed accounts                                  403,015         194,542         149,724          74,182
   Private partnership                                41,566          15,814          16,759           9,852
                                                ------------    ------------    ------------    ------------

      Total investment management fees               756,676         479,305         289,017         163,515

OPERATING EXPENSES:
   Salaries, benefits and payroll taxes            1,148,883       1,131,470         380,584         381,194
   Legal and audit                                    52,638         157,703          13,002          56,887
   General and administrative                        347,348         387,511         129,279         180,937
   Sales and marketing                               118,860         164,876          36,311          73,469
                                                ------------    ------------    ------------    ------------

      Total operating expenses                     1,667,729       1,841,560         559,176         692,487
                                                ------------    ------------    ------------    ------------

   Mutual fund administration, net (Note 7)         (201,486)       (240,526)        (40,826)       (105,964)

   Mutual fund distribution, net (Note 8)            (68,278)        (41,310)        (12,639)         24,521

   Broker-dealer activity, net (Note 9)              (13,096)       (135,703)            174         (62,682)
                                                ------------    ------------    ------------    ------------

NET OPERATING INCOME (LOSS)                       (1,193,913)     (1,779,794)       (323,450)       (673,097)
                                                ------------    ------------    ------------    ------------

   Investment return, net of interest expense        244,319        (277,017)         59,038        (478,311)
                                                ------------    ------------    ------------    ------------

INCOME (LOSS) BEFORE TAXES                          (949,594)     (2,056,811)       (264,412)     (1,151,408)
                                                ------------    ------------    ------------    ------------

   Income Tax Provision (Credit)                          --              --              --              --
                                                ------------    ------------    ------------    ------------

NET INCOME (LOSS)                               $   (949,594)   $ (2,056,811)   $   (264,412)   $ (1,151,408)
                                                ============    ============    ============    ============


   Basic Earnings (Loss) Per Share              $      (0.66)   $      (1.44)   $      (0.18)   $      (0.82)
                                                ============    ============    ============    ============
   Diluted Earnings (Loss) Per Share            $      (0.66)   $      (1.44)   $      (0.18)   $      (0.82)
                                                ============    ============    ============    ============
</TABLE>

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

                                       5
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Nine Months Ended September 30, 2003 and 2002

                                    UNAUDITED
                                    ---------

<TABLE>
<CAPTION>
                                                                    2003            2002
                                                                ------------    ------------
<S>                                                             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                            $   (949,594)   $ (2,056,811)
   Adjustments to reconcile net income (loss)
      to net cash provided by (used in) operating activities:
   Depreciation and amortization                                      28,767          43,352
   Loss on disposal of property and equipment                            732          39,766
   Amortization of deferred compensation                               9,417          17,351
   Unrealized (gain) loss                                           (263,994)        443,280
   (Increase) decrease in certain assets:
      Investment portfolio                                           380,568         474,253
      Accounts receivable:
         Investment products                                         (53,585)         (7,794)
         Pending settlements and other                                  (369)         (3,553)
         Refundable income taxes                                          --         414,251
      Deposits and other                                             (33,060)        (52,574)
   Increase (decrease) in certain liabilities-
      Accounts payable to broker-dealers and other                     1,244           6,632
      Accrued expenses and other                                    (121,297)       (163,185)
                                                                ------------    ------------
         Net cash used in operating activities                    (1,001,171)       (845,032)
                                                                ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                 (2,307)       (123,826)
   Proceeds from sale of property and equipment                           --              --
                                                                ------------    ------------
         Net cash used in investing activities                        (2,307)       (123,826)
                                                                ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Exercise of stock options                                           3,910              --
   Purchase of treasury stock                                             --        (292,700)
   Sale of treasury stock                                            495,000              --
   Note payable - line of credit                                          --         152,200
                                                                ------------    ------------
         Net cash provided by (used in) financing activities         498,910        (140,500)
                                                                ------------    ------------

NET DECREASE IN CASH                                                (504,568)     (1,109,358)

CASH, BEGINNING OF PERIOD                                            689,175       1,174,026
                                                                ------------    ------------

CASH, END OF PERIOD                                             $    184,607    $     64,668
                                                                ============    ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

   Cash paid during the period for:
   Interest                                                     $        693    $        493
   Income taxes                                                           --              --
</TABLE>

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

                                       6
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

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  adviser 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,  which are each a
series in the Diamond Hill Funds trust.  DHCM is also the investment  adviser to
the Diamond  Hill  Investment  Partners,  L.P. and 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 six
states (including  Ohio). 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 adviser and
offers advisory services to institutional and individual  investors.  DHS is the
investment  adviser to the Diamond Hill Bank & Financial Fund, which is a series
in the Diamond Hill Funds trust.

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 seven accounts with two
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 September 30, 2003.

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.

                                       7
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

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.

Reclassifications
-----------------

The  consolidated  statement of operations  for the nine months and three months
ended September 30, 2002, has been  reclassified to conform to the  presentation
of the consolidated statement of operations for the nine months and three months
ended  September  30, 2003.  These  reclassifications  have had no effect on the
operating results for the nine months and three months ended September 30, 2002.

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 nine months ended September 30, 2003:

                        Numerator      Denominator       Amount
                      ------------    ------------    ------------

Basic Earnings        $   (949,594)      1,437,231    $      (0.66)

Diluted Earnings      $   (949,594)      1,437,231    $      (0.66)

For the nine months ended September 30, 2002:

                        Numerator      Denominator       Amount
                      ------------    ------------    ------------

Basic Earnings        $ (2,056,811)      1,430,040    $      (1.44)

Diluted Earnings      $ (2,056,811)      1,430,040    $      (1.44)

                                       8
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

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

Earnings Per Share (Continued)
------------------

For the three months ended September 30, 2003:

                        Numerator      Denominator       Amount
                      ------------    ------------    ------------

Basic Earnings        $   (264,412)      1,491,967    $      (0.18)

Diluted Earnings      $   (264,412)      1,491,967    $      (0.18)

   For the three months ended September 30, 2002:

                        Numerator      Denominator       Amount
                      ------------    ------------    ------------

Basic Earnings        $ (1,151,408)      1,412,542    $      (0.82)

Diluted Earnings      $ (1,151,408)      1,412,542    $      (0.82)

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,  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    INVESTMENT PORTFOLIO
          --------------------

Investment  portfolio  balances,  which  consist  of  securities  classified  as
trading, are comprised of the following at September 30, 2003:

<TABLE>
<CAPTION>
                                                              Unrealized     Unrealized
                                  Market          Cost          Gains          Losses
                               ------------   ------------   ------------   ------------
<S>                            <C>            <C>            <C>            <C>
Mutual fund shares and
limited partnership interest   $  2,658,801   $  2,364,609   $    294,626   $       (434)

Not readily marketable
equity securities                    15,108        200,150             --       (185,042)
                               ------------   ------------   ------------   ------------

Total                          $  2,673,909   $  2,564,759   $    294,626   $   (185,476)
                               ============   ============   ============   ============
</TABLE>

DHCM is the managing  member of 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.

                                       9
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

Note 3    INVESTMENT PORTFOLIO (Continued)
          --------------------

Summary financial information, including the Company's carrying value and income
from this  partnership  at  September  30, 2003 and 2002 and for the nine months
then ended, is as follows:

                                                   2003           2002
                                               ------------   ------------
Total assets                                   $ 19,131,239   $ 11,211,502
Total liabilities                                 7,621,422      3,361,068
Net assets                                       11,509,817      7,850,434
Net fair market value of earnings                 1,032,734       (732,970)

DHCM's carrying value                             1,223,581      2,886,126
DHCM's income                                       113,873       (178,310)


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 4    LINE OF CREDIT
          --------------

The Company renewed its line of credit loan with a maximum  principal  amount of
$325,000 on August 28, 2003 at an annual percentage  interest rate of prime plus
0.50%,  which is currently  4.50%. The balance due on the line of credit loan at
September 30, 2003 was zero ($0). The Company has pledged  $390,000 of its fixed
income mutual fund  investments  to secure this line. The line of credit loan is
due to mature on August 28, 2004, at which time management  intends to renew the
line.

Note 5    CAPITAL STOCK
          -------------

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.  From July 17, 2000 through  December  31,  2001,  the
Company  purchased  281,597 shares of its Common Stock for  $1,716,407.  For the
nine months and three months ended  September  30, 2002,  the Company  purchased
71,300  shares and 15,000  shares of its Common  Stock for $292,700 and $67,500,
respectively. For the nine months and three months ended September 30, 2003, the
Company did not purchase any of its shares of Common Stock.  As of September 30,
2003, the Company has purchased  352,897  shares for $2,009,107  pursuant to the
aforementioned  400,000 share repurchase  program. On July 22, 2003, the Company
issued 110,000  shares out of Treasury  Stock in a private  placement to certain
directors,  officers and employees of the Company. The shares were sold at $4.50
per share, and Treasury Stock was reduced by an average cost of $5.72 per share.
The  Company's  total  Treasury  Stock share balance as of September 30, 2003 is
308,505.

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 preferred 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 September 30, 2003.

                                       10
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

Note 6    OPERATING LEASES
          ----------------

The Company leases office space under an operating lease agreement effective May
1, 2002,  which  terminates on May 31, 2005.  Total lease  expenses for the nine
months and three  months  ended  September  30, 2003 were  $90,000 and  $30,000,
respectively. 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 7    MUTUAL FUND ADMINISTRATION
          --------------------------

DHCM  has an  administrative,  fund  accounting  and  transfer  agency  services
agreement  with Diamond Hill Funds,  an Ohio  business  trust,  under which DHCM
performs certain  services for each series of the trust.  These services include
mutual  fund  administration,  accounting,  transfer  agency  and other  related
functions.  For performing these services,  each series of the trust compensates
DHCM a fee at an annual  rate of 0.45%  times  each  series'  average  daily net
assets.  DHCM  collected  $174,481 and  $144,701 for mutual fund  administration
revenue for the nine months ended September 30, 2003 and 2002, respectively; and
for the three months ended September 30, 2003 and 2002,  DHCM collected  $72,540
and $54,793 for  administration  revenue,  respectively.  In fulfilling its role
under this agreement,  DHCM has engaged several third-party  providers,  and the
cost for their services are paid by DHCM. Mutual fund administration expense for
the nine months ended  September  30, 2003 and 2002 was  $375,967 and  $385,227,
respectively,  and for the three  months ended  September  30, 2003 and 2002 was
$113,366 and $160,757, respectively.

Note 8    MUTUAL FUND DISTRIBUTION
          ------------------------

DHS is the principal underwriter for Diamond Hill Funds, an Ohio business trust,
and may pay  third-party  financial  institutions a fee for  distribution or for
performing  certain  servicing  functions  for  mutual  fund  shareholders.  For
performing  distribution  functions,  DHS collects  front-end and back-end sales
loads,  ranging  from  1.00%  to  5.75%  or  underwriting  fees of 0.50% on fund
investments.  DHS also collects  12b-1 fees at an annual rate ranging from 0.25%
to 1.00% times each series' average daily net assets.  Mutual fund  distribution
revenue for the nine months ended  September  30, 2003 and 2002 was $104,404 and
$84,002,  respectively;  and for the three months ended  September  30, 2003 and
2002, DHS collected $42,097 and $29,463 for distribution  revenue. DHS also pays
for the  production  of  marketing  materials  used in the  distribution  of the
Diamond Hill Funds.  Mutual fund distribution  expense for the nine months ended
September 30, 2003 and 2002 was $172,682 and $125,312, respectively, and for the
three  months  ended  September  30,  2003  and  2002 was  $54,736  and  $4,942,
respectively.

Note 9    BROKER-DEALER ACTIVITY
          ----------------------

DHS is a  registered  full-service  broker-dealer  transacting  security  trades
through its clearing broker under a correspondent agreement. For the nine months
ended September 30, 2003 and 2002, broker-dealer activity expenses,  principally
clearing   charges  and   regulatory   fees,   totaled   $36,753  and  $150,158,
respectively, and for the three months ended September 30, 2003 and 2002 totaled
$4,148 and $43,250, respectively. DHS earns commissions and service fees related
to business transacted through its clearing broker,  along with gains and losses
from  market-making  activities.  Broker-dealer  activity  revenue  for the nine
months ended September 30, 2003 and 2002 was $23,657 and $14,455,  respectively.
For the three months ended September 30, 2003 and 2002,  broker-dealer  activity
generated $4,322 in revenue and lost $19,432, respectively. This revenue loss in
the third quarter of 2002 was the result of $27,977 in market making losses.

                                       11
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

Note 10   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 three
months and nine months ended September 30, 2003 and 2002.

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 three  months  ended  September  30,  2003,  there were no options to
purchase shares of Common Stock issued.

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.

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>
                                               THREE MONTHS ENDED         NINE MONTHS ENDED
                                                  SEPTEMBER 30               SEPTEMBER 30
                                           ------------------------    ------------------------
                                              2003          2002          2003          2002
                                           ----------    ----------    ----------    ----------
<S>                                          <C>         <C>           <C>           <C>
Net income, as reported                      (264,412)   (1,151,408)     (949,594)   (2,056,811)

Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax effects        (40,976)      (75,235)     (171,648)     (356,467)

Pro forma net income                         (305,388)   (1,226,643)   (1,121,242)   (2,413,278)

Earnings per share:

Basic - as reported                             (0.18)        (0.82)        (0.66)        (1.44)
Basic - pro forma                               (0.20)        (0.87)        (0.78)        (1.69)

Diluted - as reported                           (0.18)        (0.82)        (0.66)        (1.44)
Diluted - pro forma                             (0.20)        (0.87)        (0.78)        (1.69)
</TABLE>

                                       12
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

Note 10   EMPLOYEE INCENTIVE PLANS (Continued)
          ------------------------

Stock Option Plan (Continued)
-----------------
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.  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
September  30, 2003 and  September  30, 2002 and changes  during the nine months
ending on those dates is presented below:

                                          Options                 Warrants
                                   ---------------------   ---------------------
                                               Exercise                Exercise
                                     Shares      Price       Shares      Price
                                   ---------   ---------   ---------   ---------
Outstanding December 31, 2001        186,902   $  17.245     280,400   $  12.895
Granted                                   --          --          --          --
Expired unexercised                  (10,700)     23.601          --          --
Forfeited                            (10,300)     12.419          --          --
                                   ---------               ---------
Outstanding September 30, 2002       165,902      17.124     280,400      12.895
                                   =========               =========

Exercisable September 30, 2002        97,742   $  21.395     200,400   $  14.852
                                   =========               =========


Outstanding December 31, 2002        165,902   $  17.124     280,400   $  12.895
Granted                              120,000       4.500          --          --
Exercised                              1,000       3.910          --          --
Expired unexercised                  (11,510)     28.983          --          --
Forfeited                            (25,190)     15.468     (40,000)      8.000
                                   ---------               ---------
Outstanding September 30, 2003       248,202      10.693     240,400      13.712
                                   =========               =========

Exercisable September 30, 2003       114,202   $  17.624     240,400   $  13.712
                                   =========               =========

                                       13
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

Note 10   EMPLOYEE INCENTIVE PLANS (Continued)
          ------------------------

Stock Option Plan (Continued)
-----------------
The  following  table  summarizes  information  about  fixed  stock  options and
warrants outstanding at September 30, 2003:

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

Range of exercise prices                  $   73.750           $   73.750
Number outstanding                            16,202               14,000
Weighted-average remaining
Contractual life in years                      4.609                4.609
Weighted-average exercise price           $   73.750           $   73.750
Number exercisable                            16,202               14,000


Range of exercise prices              $ 7.95 - $ 14.375     $ 22.20 - $ 22.50
Number outstanding                            46,000               16,400
Weighted-average remaining
Contractual life in years                      3.632                5.611
Weighted-average exercise price           $   12.029           $   22.495
Number exercisable                            44,000               16,400


Range of exercise prices              $ 5.25 - $ 8.45       $ 8.00 - $ 14.375
Number outstanding                            66,000              210,000
Weighted-average remaining
Contractual life in years                      7.740                5.942
Weighted-average exercise price           $    5.541           $    9.024
Number exercisable                            34,000              210,000


Range of exercise prices                  $     4.50
Number outstanding                           120,000
Weighted-average remaining
Contractual life in years                      9.667
Weighted-average exercise price           $    4.500
Number exercisable                            20,000

                                       14
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003

Note 11   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 $194,691 as of September 30, 2003,  which was
in excess of its required minimum net capital of $50,000. The ratio of aggregate
indebtedness  to net capital was .12 to 1 as of September 30, 2003.  DHS is also
subject to  regulations  of six 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 12   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 September 30, 2003, 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 nine months ended September
30, 2003.  Senior management of the Company is responsible for reviewing trading
positions,  exposures,  profits  and  losses,  trading  strategies  and  hedging
strategies on a daily basis.

                                       15
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

ITEM 2:   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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 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 2002 and may continue in
2003.  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.

Assets Under Management
-----------------------

As of September 30, 2003, assets under management totaled $198.3 million, an 80%
increase  from  December 31, 2002.  Assets under  management  grew by 126% as of
September 30, 2003 in  comparison  to September  30, 2002.  Asset growth for the
nine months and year ended September 30, 2003 is not  necessarily  indicative of
the results that may be expected for the entire  fiscal year ended  December 31,
2003. The table below provides a summary of assets under management:

                                     9/30/2003     12/31/2002      9/30/2002
                                   ------------   ------------   ------------
Separately Managed Accounts        $117,432,649   $ 58,297,957   $ 41,896,773
Mutual Funds                         69,360,502     44,819,496     37,825,428
Alternative Investment               11,513,417      7,210,934      7,850,434
                                   ------------   ------------   ------------
   Total Assets Under Management   $198,306,568   $110,328,387   $ 87,572,635

Three months ended  September 30, 2003 compared to Three Months ended  September
--------------------------------------------------------------------------------
30, 2002
--------

Investment  management  revenues for the three months ended  September  30, 2003
increased to $289,017  compared to $163,515 for the three months ended September
30, 2002, a 77% increase.  This increase results  primarily from the increase in
assets under management from which the Company derives its revenues.

The  Company  increased  its  investment  management  fees from all three of its
investment  products - mutual funds,  managed accounts and a private  investment
partnership,  Diamond Hill Investment Partners,  L.P. ("DHIP"). Fees from mutual
funds for the three months ended  September 30, 2003 and 2002, were $122,534 and
$79,481,  respectively,  a 54% increase.  Fees from managed  accounts posted the
largest dollar  increase over the three months ended  September 30, 2002, with a
dollar increase of $75,542, or a 102% increase.

                                       16
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

Investment  management  fees  collected  from the DHIP improved by 70%, over the
three months ended  September 30, 2002.  These fees grew from $9,852 to $16,759.
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  $198,306,568  as of
September 30, 2003, a 20% increase since June 30, 2003. 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.

Operating  expenses for the three months ended  September 30, 2003  decreased to
$559,176  compared to $692,487 for the three months ended  September 30, 2002, a
decrease of 19%.  Salaries,  benefits and payroll taxes were essentially flat at
$380,584 in 2003 versus  $381,194 in 2002.  Legal and audit  expense  dropped to
$13,002 from $56,887 for the three  months ended  September  30, 2003 versus the
three  months ended  September  30,  2002,  a 77%  decrease.  Since there are no
current  plans for major  administrative  projects or new  products,  management
expects  legal and audit  professional  expense to drop in 2003 as  compared  to
2002. General and administrative expenses decreased to $129,279 in 2003 compared
to $180,937 in 2002, a decrease of 29%, primarily due to the $39,766 fixed asset
write-off  during the three months ended September 30, 2002. Sales and marketing
expense  for the three  months  ended  September  30, 2003  decreased  by 51% to
$36,311  from  $73,469 for the three  months  ended  September  30,  2002.  This
decrease is due to the reduced expenditures for consulting services.

Mutual fund administration,  which is administrative  services fees collected in
connection  with the  Company's  mutual  fund  products  net of all mutual  fund
administrative  expenses  paid by the Company,  decreased  from a net expense of
$105,964 for the three months ended  September 30, 2002 to $40,826 for the three
months  ended  September  30,  2003,  a  61%  improvement.  Administrative  fees
collected  increased,  while  expenses paid decreased for the three months ended
September  30, 2003 versus the three  months  ended  September  30,  2002.  This
increase in fees is primarily due to the increase in assets under  management in
the Company's mutual fund products. The decrease in expenses is primarily due to
the  decrease in legal fees from  $60,646 to $3,325 for the three  months  ended
September  30,  2002 and 2003,  respectively.  Legal  fees  were  higher in 2002
because  of  new  product  start-up  costs.  DHCM  has an  administrative,  fund
accounting and transfer agency  services  agreement with the Diamond Hill Funds,
where  DHCM  performs  certain  services  for each  series of the  trust.  These
services  include mutual fund  administration,  accounting,  transfer agency and
other related  functions.  For performing these  administrative  services,  each
series of the trust compensates DHCM a fee at an annual rate of 0.45% times each
series' average daily net assets.  DHCM collected $72,540 and $54,793 for mutual
fund  administration  revenue for the three months ended  September 30, 2003 and
2002,  respectively.  In  fulfilling  its role  under this  agreement,  DHCM has
engaged several  third-party  providers and the cost for their services are paid
by DHCM. Mutual fund administration expense for the three months ended September
30, 2003 and 2002 were  $113,366  and  $160,757,  respectively.  As assets under
management grow in the mutual fund products,  the Company expects fees collected
to  increase,  while the  Company  expects  expenses  paid to remain  relatively
steady;  therefore,  causing  the net  mutual  fund  administration  expense  to
decrease.

Mutual  fund  distribution,   which  includes  distribution  fees  collected  in
connection  with sales of the  Company's  mutual  funds net of all  mutual  fund
distribution expenses paid by the Company, increased to a net expense of $12,639
for the three months ended  September 30, 2003 from a net revenue of $24,521 for
the three months ended  September 30, 2002.  Mutual fund  distribution  fees and
expenses both increased  during the three months ended September 30, 2003 versus
the three months ended  September 30, 2002.  For performing  these  distribution
functions,  DHS collects front-end and back-end sales loads,  ranging from 1.00%
to 5.75% or underwriting  fees of 0.50% on fund  investments.  DHS also collects
12b-1 fees at an annual  rate  ranging  from 0.25% to 1.00%  times each  series'
average daily net assets.  Mutual fund distribution revenue for the three months
ended  September 30, 2003 and 2002 was $42,097 and $29,463,  respectively.  This
increase in fees is primarily due to the increase in assets under  management in
the Company's mutual fund products. DHS is the principal underwriter for Diamond
Hill  Funds,  an  Ohio  business  trust,  and  may  pay  third-party   financial
institutions  a  fee  for  distribution  or  for  performing  certain  servicing
functions  for mutual fund  shareholders.  DHS also pays for the  production  of
marketing  materials used in the distribution of the Diamond Hill Funds.  Mutual
fund distribution expense for the three months ended September 30, 2003 and 2002
was $54,736 and $4,942,  respectively.  This increase is the result of increased
sales of the mutual fund

                                       17
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

shares in 2003 versus  2002,  in which DHS finances the  commissions  paid,  and
decreased  expense in 2002 due to an  adjustment  made,  during the three months
ended  September 30, 2002, for a change in accounting  treatment for commissions
paid to brokers for the sale of the Company's mutual fund C shares.  Previously,
the commission was expensed when paid, despite the fact that the revenue,  which
offsets this expense, is collected over a twelve-month  period.  Therefore,  the
portion  of  commission  expense  that has not yet been  offset by the  matching
revenue was  capitalized  and  amortized  over twelve  months.  As assets  under
management grow in the mutual fund products,  the Company expects fees collected
to  increase,  while the  Company  expects  expenses  paid to  remain  steady or
increase;  therefore,  causing  the net  mutual  fund  distribution  expense  to
decrease.

Broker-dealer  activity,   which  is  revenue  from  security  transactions  and
market-making  activity  net  of  broker-dealer  expenses  which  are  comprised
principally of clearing costs and regulatory fees, decreased to a net revenue of
$174 for the three months ended September 30, 2003 from a net expense of $62,682
for the three months ended  September  30,  2002, a 100%  improvement.  DHS is a
registered full-service  broker-dealer and transacts security trades through its
clearing  broker  under a  correspondent  agreement.  For the three months ended
September  30, 2003 and 2002,  broker-dealer  activity  expenses were $4,148 and
$43,250, respectively. This decrease is largely due to the reduction in overhead
and commission expense from reduced activity.  DHS earns commissions and service
fees  related to business  transacted  through its clearing  broker,  along with
gains and losses from market-making activities. Broker-dealer activity generated
revenue of $4,322 for the three months ended September 30, 2003 and lost $19,432
for the three months ended  September  30, 2002.  This revenue loss in the third
quarter  of  2002  was the  result  of  $27,977  in  market  making  losses.  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 have  declined.  It is expected for 2003,
that this level of expense in 2002 will decrease.

The  Company's  net  operating  loss  decreased to $323,450 for the three months
ended  September 30, 2003 from $673,097 for the three months ended September 30,
2002, a 52% improvement.

Investment return,  net of interest expense,  increased to a gain of $59,038 for
the three months ended  September 30, 2003 from a loss of $478,311 for the three
months ended  September 30, 2002, a 112% increase.  This investment gain results
primarily  from  increases  in  market  values  of  investments  in the  limited
partnership  interest and the Company's  mutual  funds.  Management is unable to
predict how future  fluctuations in market values will impact the performance of
the Company's investment portfolios.  Dividend income increased by a multiple of
4.5 to $18,623 for the three months ended  September 30, 2003 compared to $4,102
for the three months ended  September  30, 2002.  In 2003,  dividend  income may
increase versus 2002 since the Company reallocated approximately $1.5 million of
its investments from DHIP to the Company's fixed income mutual funds,  which pay
monthly  dividends,  yielding an  anticipated  average of five percent (5%). The
Company reduced its equity market exposure,  due to the potential large swing in
the market value of its portfolio  investments.  As a result, of this change and
better market  returns in 2003 versus 2002,  the Company's net loss decreased by
77% for the three  months  ended  September  30, 2003  compared to the same time
period for 2002.

Nine Months ended September 30, 2003 compared to Nine Months ended September 30,
--------------------------------------------------------------------------------
2002
----

Investment  management  revenues  for the nine months ended  September  30, 2003
increased to $756,676  compared to $479,305 for the nine months ended  September
30, 2002, a 58% increase.  This increase results  primarily from the increase in
assets under management from which the Company derives its revenues.

The  Company  increased  its  investment  management  fees from all three of its
investment  products:  mutual funds,  managed accounts and a private  investment
partnership,  Diamond Hill Investment Partners,  L.P. ("DHIP"). Fees from mutual
funds were up 16%, for the nine months ended  September 30, 2003,  from $268,949
to $312,095.  Fees from managed accounts posted the largest dollar increase over
the nine months ended  September 30, 2002,  with at dollar increase of $208,473,
or a 107% increase.  Investment management fees collected from the DHIP improved
the most, relatively,  over the nine months ended September 30, 2002. These fees
grew by a multiple of 2.6, increasing from $15,814 to $41,566. In

                                       18
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

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  $198,306,568  as of
September 30, 2003, an 80% increase since December 31, 2002. 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.

Operating  expenses for the nine months ended  September  30, 2003  decreased to
$1,667,729  compared to $1,841,560 for the nine months ended September 30, 2002,
a decrease of 9%.  Salaries,  benefits and payroll taxes  increased  slightly to
$1,148,883  in 2003 from  $1,131,470  in 2002,  an increase of 2%. This increase
reflects  personnel  changes.  Legal and audit  expense  dropped to $52,638 from
$157,703  for the nine months  ended  September  30, 2003 versus the nine months
ended  September 30, 2002, a 67% decrease.  Since there are no current plans for
major  administrative  projects or new  products,  management  expects legal and
audit  professional  expense to drop in 2003 as  compared  to 2002.  General and
administrative  expenses  decreased to $347,348 in 2003  compared to $387,511 in
2002, a decrease of 10%. This decrease is primarily due to a $39,766 fixed asset
write-off  during the nine months ended September 30, 2002.  Sales and marketing
expense  for the nine  months  ended  September  30,  2003  decreased  by 28% to
$118,860  from  $164,876 for the nine months  ended  September  30,  2002.  This
decrease is primarily due the reduction in expenditures for consulting services.

Mutual fund administration,  which is administrative  services fees collected in
connection  with the  Company's  mutual  fund  products  net of all mutual  fund
administrative  expenses  paid by the Company,  decreased  from a net expense of
$240,526 for the nine months ended  September  30, 2002 to $201,486 for the nine
months  ended  September  30,  2003,  a  16%  improvement.  Administrative  fees
collected increased,  while administrative  expenses paid decreased slightly for
the nine months ended  September 30, 2003 versus the nine months ended September
30, 2002. This increase in fees is primarily due to the increase in assets under
management in the Company's  mutual fund  products.  The decrease in expenses is
primarily due to the decrease in legal fees.  DHCM has an  administrative,  fund
accounting and transfer agency  services  agreement with the Diamond Hill Funds,
where  DHCM  performs  certain  services  for each  series of the  trust.  These
services  include mutual fund  administration,  accounting,  transfer agency and
other related  functions.  For performing these  administrative  services,  each
series of the trust compensates DHCM a fee at an annual rate of 0.45% times each
series'  average  daily net assets.  DHCM  collected  $174,481  and $144,701 for
mutual fund administration  revenue for the nine months ended September 30, 2003
and 2002,  respectively.  In fulfilling its role under this agreement,  DHCM has
engaged several  third-party  providers and the cost for their services are paid
by DHCM. Mutual fund administration  expense for the nine months ended September
30, 2003 and 2002 was  $375,967  and  $385,227,  respectively.  As assets  under
management grow in the mutual fund products,  the Company expects fees collected
to  increase,  while  the  Company  expects  expenses  paid  to  remain  steady;
therefore,  causing  the net mutual fund  administration  expense to continue to
decrease.

Mutual  fund  distribution,   which  includes  distribution  fees  collected  in
connection  with sales of the  Company's  mutual  funds net of all  mutual  fund
distribution expenses paid by the Company, increased to a net expense of $68,278
for the nine months  ended  September  30, 2003 from $41,310 for the nine months
ended  September  30,  2002,  a 65%  increase.  Mutual  fund  distribution  fees
collected  and  expenses  paid  both  increased  during  the nine  months  ended
September  30,  2003  versus the nine  months  ended  September  30,  2002.  For
performing these  distribution  functions,  DHS collects  front-end and back-end
sales loads,  ranging from 1.00% to 5.75% or underwriting  fees of 0.50% on fund
investments.  DHS also collects  12b-1 fees at an annual rate ranging from 0.25%
to 1.00% times each series' average daily net assets.  Mutual fund  distribution
revenue for the nine months ended  September 30, 2003 and 2002 were $104,404 and
$84,002, respectively. This increase in fees is primarily due to the increase in
assets  under  management  in the  Company's  mutual fund  products.  DHS is the
principal  underwriter for Diamond Hill Funds,  an Ohio business trust,  and may
pay third-party financial  institutions a fee for distribution or for performing
certain servicing functions for mutual fund shareholders.  DHS also pays for the
production of marketing  materials used in the  distribution of the Diamond Hill
Funds. Mutual fund distribution  expense for the nine months ended September 30,
2003 and 2002 were  $172,682 and  $125,312,  respectively.  This increase is the
result of increase sales of the mutual fund shares in 2003 versus 2003, in which
DHS finances  the  commissions  paid,  and  decreased  expense in 2002 due to an
adjustment  made,  during the nine months ended September 30, 2002, for a change
in  accounting  treatment  for  commissions  paid to brokers for the sale of the
Company's mutual fund C shares.

                                       19
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

Previously,  the  commission  was expensed when paid,  despite the fact that the
revenue,  which offsets this expense,  is collected over a twelve-month  period.
Therefore, the portion of commission expense that has not yet been offset by the
matching revenue was capitalized and is amortized over twelve months.  As assets
under  management  grow in the mutual fund  products,  the Company  expects fees
collected to increase,  while the Company expects expenses paid to remain steady
or  increase;  therefore,  causing the net mutual fund  distribution  expense to
decrease.

Broker-dealer  activity,   which  is  revenue  from  security  transactions  and
market-making  activity  net  of  broker-dealer  expenses  which  are  comprised
principally of clearing costs and regulatory fees, decreased to a net expense of
$13,096 for the nine months ended  September 30, 2003 from $135,703 for the nine
months  ended  September  30,  2002,  a 90%  improvement.  DHS  as a  registered
full-service broker-dealer transacts security trades through its clearing broker
under a  correspondent  agreement.  For the nine months ended September 30, 2003
and  2002,   broker-dealer   activity   expenses   were  $36,753  and  $150,158,
respectively.  This  decrease is largely due to the  reduction  in overhead  and
commission expense from reduced activity. DHS earns commissions and service fees
related to business transacted through its clearing broker, along with gains and
losses from  market-making  activities.  Broker-dealer  activity revenue for the
nine  months  ended  September  30,  2003 and 2002  were  $23,657  and  $14,455,
respectively.  Commission  revenue  decreased by 55% from 2002 to 2003.  However
market-making  losses  negatively  impacted the nine months ended  September 30,
2003 by $45,604.  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 have declined.
It is expected for 2003, that this level of expense in 2002 will decrease.

The  Company's net operating  loss  decreased to $1,193,913  for the nine months
ended September 30, 2003 from $1,765,173 for the nine months ended September 30,
2002, a 32% improvement.

Investment return, net of interest expense,  increased to a gain of $244,319 for
the nine months  ended  September  30, 2003 from a loss of $277,017 for the nine
months ended  September  30,  2003, a 188%  improvement.  This  investment  gain
results  primarily from increases in market values of investments in the limited
partnership  interest and the Company's  mutual  funds.  Management is unable to
predict how future  fluctuations in market values will impact the performance of
the Company's investment portfolios.  Dividend income increased by a multiple of
3.5 to $64,912 for the nine months ended  September 30, 2003 compared to $18,192
for the nine months ended  September  30,  2002.  In 2003,  dividend  income may
increase versus 2002 since the Company reallocated approximately $1.5 million of
its investments from DHIP to the Company's fixed income mutual funds,  which pay
monthly  dividends,  yielding an  anticipated  average of five percent (5%). The
Company reduced its equity market exposure,  due to the potential large swing in
the market value of its portfolio  investments.  As a result, of this change and
better market  returns in 2003 versus 2002,  the Company's net loss decreased by
54% for the nine  months  ended  September  30,  2003  compared to the same time
period for 2002.

Liquidity and Capital Resources
-------------------------------
Almost  100%  of the  Company's  investment  portfolio  is  readily  marketable.
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.

By 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.  The remaining  cash was used the to pay-off the Company's line of credit
and provide  short-term  liquidity for current operating  expenses.  On July 22,
2003,  the Company sold  110,000  shares of the  Company's  Common  Stock,  from
Treasury Stock, to certain  directors,  officers and employees through a private
placement at a price of $4.50,  thereby  increasing  the  liquidity  and capital
resources by approximately $495,000.

                                       20
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

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.

At September  30, 2003,  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 nine months ended  September 30, 2003.  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 September 30, 2003, the Company had working capital of approximately  $2.9
million  compared to $2.7  million at June 30, 2003 and compared to $3.3 million
at December 31, 2002. The increase  during the three months ended  September 30,
2003 is primarily due to the financing  activities,  which  includes the private
placement  that occurred on July 22, 2003.  The decrease  during the nine months
ended  September  30,  2003 is  primarily  due to the  operating  and  financing
activities, which include the net loss and the private placement,  respectively.
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 $504,568  during the nine months
ended September 30, 2003. Net cash used by operating  activities was $1,001,171.
The primary use of cash flow was the net loss of $949,594.  Investing activities
used $2,307 for property and  equipment  purchased  during the nine months ended
September 30, 2003.  Financing  activities  provided $498,910 of cash during the
nine months ended September 30, 2003, mostly from the $495,000 private placement
on July 22, 2003.

The  Company's net cash balance  decreased by $1,109,358  during the nine months
ended  September 30, 2002.  Net cash used by operating  activities was $845,032.
The  primary  use of  cash  flow  was  the net  loss  of  $2,056,811.  Investing
activities  used  $123,826  during the nine months ended  September 30, 2002 for
furnishings  and a new phone system for the new office  space the Company  began
leasing in May 2002.  Financing activities used $140,500 of cash during the nine
months ended  September 30, 2002,  primarily from the purchase of Company common
stock.  This use of cash was offset by cash  provided by the  Company's  line of
credit..

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 and fixed  income  securities,  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.

                                       21
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

ITEM 3:   CONTROLS AND PROCEDURES

The Company's Chief Executive Officer and Chief Financial Officer have evaluated
the  effectiveness  of the  Company's  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  quarterly  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.

PART II:  OTHER INFORMATION

ITEM 1:   LEGAL PROCEEDINGS - None

ITEM 2:   CHANGES IN SECURITIES

On July 22, 2003, the Company sold 110,000 shares of the Company's  Common Stock
in a private placement that was offered to all directors, officers and employees
of the Company. The Common Stock was sold for cash at an offering price of $4.50
per share. No underwriter  was used in the offering.  This offering was exempted
from registration  under section 4(2) of the Securities Act of 1933, as amended.
This  exemption was relied upon because the offering was a private  placement to
all directors,  officers and employees of the Company.  There are no exchange or
conversion provisions associated with the securities sold in this offering.  Net
proceeds from this offering were used for working capital.

ITEM 3:   DEFAULTS UPON SENIOR SECURITIES - None

ITEM 4:   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None

ITEM 5:   OTHER INFORMATION - None

                                       22
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

ITEM 6:   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.

    10.6  Form of  Subscription  Agreement  for Common  Shares of  Diamond  Hill
          Investment  Group, Inc. executed by subscribers as part of the private
          placement referenced in Part II, Item 2 of this Form 10-QSB.

    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  Form 10-KSB filed on March 28, 2003 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.

(b)  Reports on Form 8-K

     A Form 8-K was filed on July 25, 2003 to  announce  the  Company's  private
     placement that took place on July 22, 2003.

     A Form 8-K was filed on August 15,  2003 to report the  Company's  earnings
     for the six months and three months ended September 30, 2003.

                                       23
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

                                   SIGNATURES

In accordance with the  requirements 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.

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

/s/R. H. Dillon               President and Director        November 14, 2003
-------------------------
R. H. Dillon

/s/James F. Laird             Chief Financial Officer       November 14, 2003
-------------------------
James F. Laird

                                       24
<PAGE>

                CERTIFICATION FOR QUARTERLY REPORT ON FORM 10-QSB

I, R.H. Dillon, certify that:

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

2.   Based on my knowledge,  this  quarterly  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 quarterly
report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  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 quarterly 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 quarterly 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
quarterly report (the "Evaluation Date"); and

c)   presented in this quarterly 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
quarterly 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: November 14, 2003                      /s/R. H. Dillon
                                             -----------------------
                                                R.H. Dillon
                                             Chief Executive Officer

                                       25
<PAGE>

                CERTIFICATION FOR QUARTERLY REPORT ON FORM 10-QSB

I, James F. Laird, certify that:

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

2.   Based on my knowledge,  this  quarterly  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 quarterly
report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  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 quarterly 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 quarterly 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
quarterly report (the "Evaluation Date"); and

c)   presented in this quarterly 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
quarterly 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: November 14, 2003                      /s/James F. Laird
                                             -----------------------
                                                James F. Laird
                                             Chief Financial Officer

                                       26