##### 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 September 30, 2007
 Commission file number 000-24498
 DIAMOND HILL INVESTMENT GROUP, INC.
  Ohio
    
    65-0190407(State of incorporation)
    
    (I.R.S. Employer Identification No.)
 325 John H. McConnell Blvd, Suite 200, Columbus, Ohio 43215
   (Registrants telephone number, including area code)
  þ o
  o þ o
  o þ




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##### 



PAGEPart I: FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial Statements
    
    
    2Item 2.
    
    Managements Discussion and Analysis of Financial  Condition and Results of Operation
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4.
    
    Controls and Procedures
    
    
    23Part II: OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    23Item 1A.
    
    Risk Factors
    
    
    23Item 2.
    
    Unregistered Sales of Equity Securities and use of Proceeds
    
    
    23Item 3.
    
    Defaults Upon Senior Securities
    
    
    23Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    23Item 5.
    
    Other Information
    
    
    23Item 6.
    
    Exhibits
    
    
    24Signatures
    
    
    25EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I FINANCIAL INFORMATION
 
 ITEM 1: Financial Statements
 Diamond Hill Investment Group, Inc.
Consolidated Balance Sheets
 9/30/2007
    
    
    12/31/2006(Unaudited)ASSETSCash and cash equivalents
    
    $
    18,253,867
    
    
    $
    9,836,989Investment portfolio
    
    
    19,434,079
    
    
    
    19,108,682Accounts receivable
    
    
    5,935,180
    
    
    
    6,924,008Prepaid expenses
    
    
    1,089,780
    
    
    
    869,501Furniture and equipment, net of depreciation and other assets
    
    
    651,831
    
    
    
    497,297Total assets
    
    $
    45,364,737
    
    
    $
    37,236,477LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesAccounts payable and accrued expenses
    
    
    775,121
    
    
    
    1,217,114Accrued incentive compensation
    
    
    9,301,580
    
    
    
    13,637,000Current and deferred taxes
    
    
    1,456,296
    
    
    
    1,899,106Total Liabilities
    
    
    11,532,997
    
    
    
    16,753,220Commitments and contingencies
    
    
    
    
    
    
    Shareholders EquityCommon
stock, no par value 
7,000,000 shares authorized; 2,218,940 issued
2,218,940 outstanding at September 30, 2007
1,838,435 outstanding at December 31, 2006
    
    
    24,392,704
    
    
    
    16,515,256Preferred stock, undesignated, 1,000,000 shares
authorized and unissued
    
    
    
    
    
    
    Treasury stock, at cost 
0 shares at September 30, 2007
10,037 shares at December 31, 2006
    
    
    
    
    
    
    (95,736
    )Deferred compensation
    
    
    (3,329,475
    )
    
    
    (2,355,499
    )Retained earnings
    
    
    12,768,511
    
    
    
    6,419,236Total shareholders equity
    
    
    33,831,740
    
    
    
    20,483,257Total liabilities and shareholders equity
    
    $
    45,364,737
    
    
    $
    37,236,477
  3




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##### Table of Contents



Diamond Hill Investment Group, Inc.  Consolidated Statements of Income (unaudited)
 Three Months Ended Sept 30,
    
    
    Nine Months Ended Sept 30,2007
    
    
    2006
    
    
    2007
    
    
    2006REVENUES:Investment advisory
    
    $
    9,215,700
    
    
    $
    5,636,902
    
    
    $
    25,979,666
    
    
    $
    13,566,910Performance incentive
    
    
    1,520
    
    
    
    
    
    
    
    5,817
    
    
    
    2,509,875Mutual fund administration, net
    
    
    1,484,121
    
    
    
    1,017,711
    
    
    
    4,439,441
    
    
    
    2,406,904Total revenue
    
    
    10,701,341
    
    
    
    6,654,613
    
    
    
    30,424,924
    
    
    
    18,483,689OPERATING EXPENSES:Compensation and related costs
    
    
    5,074,607
    
    
    
    3,719,230
    
    
    
    14,948,034
    
    
    
    10,638,098General and administrative
    
    
    973,758
    
    
    
    281,243
    
    
    
    2,141,463
    
    
    
    791,393Sales and marketing
    
    
    106,809
    
    
    
    86,009
    
    
    
    348,619
    
    
    
    218,752Third party distribution
    
    
    404,419
    
    
    
    125,484
    
    
    
    1,127,680
    
    
    
    327,403Mutual fund administration
    
    
    608,258
    
    
    
    421,488
    
    
    
    1,816,813
    
    
    
    1,186,842Total operating expenses
    
    
    7,167,851
    
    
    
    4,633,454
    
    
    
    20,382,609
    
    
    
    13,162,488NET OPERATING INCOME
    
    
    3,533,490
    
    
    
    2,021,159
    
    
    
    10,042,315
    
    
    
    5,321,201Investment return
    
    
    534,594
    
    
    
    113,187
    
    
    
    733,720
    
    
    
    903,287INCOME BEFORE TAXES
    
    
    4,068,084
    
    
    
    2,134,346
    
    
    
    10,776,035
    
    
    
    6,224,488Income tax provision
    
    
    (1,419,791
    )
    
    
    (772,101
    )
    
    
    (3,719,733
    )
    
    
    (2,241,463
    )NET INCOME
    
    $
    2,648,293
    
    
    $
    1,362,245
    
    
    $
    7,056,302
    
    
    $
    3,983,025Earnings per shareBasic
    
    $
    1.20
    
    
    $
    0.76
    
    
    $
    3.31
    
    
    $
    2.24Diluted
    
    $
    1.14
    
    
    $
    0.61
    
    
    $
    3.13
    
    
    $
    1.81Weighted average shares outstandingBasic
    
    
    2,204,641
    
    
    
    1,789,147
    
    
    
    2,130,867
    
    
    
    1,775,633Diluted
    
    
    2,322,281
    
    
    
    2,239,245
    
    
    
    2,251,407
    
    
    
    2,204,621
  4




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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
    
    
    21,000
    
    
    
    1,914,180
    
    
    
    
    
    
    
    (1,914,180
    )
    
    
    
    
    
    
    Recognition of current year
deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    940,204
    
    
    
    
    
    
    
    940,204Issuance of stock grants
    
    
    57,254
    
    
    
    5,628,641
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,628,641Issuance of common stock related
to 401k plan match
    
    
    1,113
    
    
    
    85,788
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,788FAS 123R compensation expense
    
    
    
    
    
    
    6,812
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,812Tax benefit from options and
warrants exercised
    
    
    
    
    
    
    3,776,382
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,776,382Payment 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
    
    
    25,622
    
    
    
    140,019
    
    
    
    1,440,694
    
    
    
    
    
    
    
    (707,027
    )
    
    
    873,686Exercise of options/warrants
for common stock
    
    
    378,017
    
    
    
    4,447,841
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,447,841Repurchase of common stock
    
    
    (1,398
    )
    
    
    (101,942
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (101,942
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,056,302
    
    
    
    7,056,302Balance at September 30, 2007
    
    
    2,218,940
    
    
    $
    24,392,704
    
    
    $
    
    
    
    $
    (3,329,475
    )
    
    $
    12,768,511
    
    
    $
    33,831,740
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Diamond Hill Investment Group, Inc.  Consolidated Statements of Cash Flow (unaudited)
 Nine Months Ended September 30,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net Income
    
    $
    7,056,302
    
    
    $
    3,983,025Adjustments to reconcile net income to net cash used in
operating activities:Depreciation on furniture and equipment
    
    
    113,089
    
    
    
    44,724Amortization of deferred compensation
    
    
    940,204
    
    
    
    149,931(Increase) decrease in accounts receivable
    
    
    (988,828
    )
    
    
    (1,760,424
    )Increase in deferred taxes
    
    
    1,762,158
    
    
    
    2,180,116Stock option expense
    
    
    6,812
    
    
    
    24,582(Increase) decrease in unrealized gains
    
    
    (195,853
    )
    
    
    (684,669
    )Increase (decrease) in accrued liabilities
    
    
    (4,777,413
    )
    
    
    6,497,626Other changes in assets and liabilities
    
    
    (220,279
    )
    
    
    (210,034
    )Net cash provided by (used in) operating activities
    
    
    3,696,192
    
    
    
    10,224,877CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of furniture and equipment
    
    
    (267,623
    )
    
    
    (408,024
    )Investment portfolio activity
    
    
    (129,544
    )
    
    
    (6,772,659
    )Net cash used in investing activities
    
    
    (397,167
    )
    
    
    (7,180,683
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payment of taxes withheld on option/warrant exercises
    
    
    (8,020,273
    )Proceeds from common stock issuance
    
    
    13,042,390
    
    
    
    161,994Purchase of treasury stock
    
    
    (1,344,958
    )Sale of treasury stock
    
    
    1,440,694
    
    
    
    267,925Net cash provided by financing activities
    
    
    5,117,853
    
    
    
    429,919CASH AND CASH EQUIVALENTSNet change during the period
    
    
    8,416,878
    
    
    
    3,474,113At beginning of period
    
    
    9,836,989
    
    
    
    2,532,334At end of period
    
    $
    18,253,867
    
    
    $
    6,006,447Cash paid during the period for:InterestIncome taxes
    
    $
    520,560
    
    
    $
    60,000
  6




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##### 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




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##### Table of Contents



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




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##### Table of Contents



Significant Accounting Policies (Continued)
 Revenue Recognition (Continued)
  Three months ended September 30, 2007:
    
    $
    68,642Nine months ended September 30, 2007:
    
    $
    68,642Three months ended September 30, 2006:
    
    $
    0Nine months ended September 30, 2006:
    
    $
    0
 Revenue Recognition  Mutual Fund Administration
  Three Months Ended Sept 30,
    
    
    Nine Months Ended Sept 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Mutual fund admin revenue, gross
    
    $
    2,035,329
    
    
    $
    1,622,207
    
    
    $
    6,195,872
    
    
    $
    3,965,176Mutual fund admin, fund related expense
    
    
    607,548
    
    
    
    627,200
    
    
    
    1,846,107
    
    
    
    1,626,527Mutual fund admin revenue, net of fund
related expenses
    
    
    1,427,781
    
    
    
    995,007
    
    
    
    4,349,765
    
    
    
    2,338,649C-Share broker commission advance
repayments
    
    
    550,857
    
    
    
    319,300
    
    
    
    1,464,002
    
    
    
    850,394C-Share broker commission amortization
    
    
    494,517
    
    
    
    296,596
    
    
    
    1,374,326
    
    
    
    782,139C-Share financing activity, net
    
    
    56,340
    
    
    
    22,704
    
    
    
    89,676
    
    
    
    68,255Mutual fund administration revenue, net
    
    $
    1,484,121
    
    
    $
    1,017,711
    
    
    $
    4,439,441
    
    
    $
    2,406,904
 9




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##### Table of Contents



Significant Accounting Policies (Continued)
 Income Taxes
   Earnings Per Share
  10




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##### Table of Contents



Investment Portfolio
  September 30,
    
    
    December 31,2007
    
    
    2006Diamond Hill Small Cap Fund
    
    $
    65,814
    
    
    $
    65,371Diamond Hill Small-Mid Cap Fund
    
    
    340,544
    
    
    
    330,546Diamond Hill Large Cap Fund
    
    
    315,545
    
    
    
    292,369Diamond Hill Select Fund
    
    
    371,857
    
    
    
    342,121Diamond Hill Long-Short Fund
    
    
    303,736
    
    
    
    295,953Diamond Hill Financial Long-Short Fund
    
    
    291,675
    
    
    
    300,000Diamond Hill Strategic Income Fund
    
    
    2,938,704
    
    
    
    2,916,069Diamond Hill Investment Partners, L.P.
    
    
    9,907,429
    
    
    
    9,744,285Diamond Hill Investment Partners II, L.P.
    
    
    4,898,775
    
    
    
    4,821,968Total Investment Portfolio
    
    $
    19,434,079
    
    
    $
    19,108,682
  2007
    
    2006Total assets
    
    $
    384,067,028
    
    
    $
    357,375,152Total liabilities
    
    
    97,995,265
    
    
    
    146,918,057Net assets
    
    
    286,071,763
    
    
    
    210,457,095Net income
    
    
    2,613,244
    
    
    
    35,961,019DHCMs portion of net assets
    
    
    14,806,204
    
    
    
    14,566,253DHCMs portion of net income
    
    
    234,134
    
    
    
    6,515,194
  11




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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
  12




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##### Table of Contents



Stock-Based Compensation (Continued)
   13




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##### 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
    
    
    10,531
    
    
    
    10.38
    
    
    
    2,000
    
    
    
    11.25Used in conjuction
with cashless
exercise
    
    
    269
    
    
    
    28.10
    
    
    
    
    
    
    
    Outstanding September 30, 2006
    
    
    292,202
    
    
    $
    14.62
    
    
    
    257,400
    
    
    $
    12.79Outstanding December 31, 2006
    
    
    283,102
    
    
    
    14.60
    
    
    
    249,400
    
    
    
    12.57Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired / Forfeited
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    10.63Exercised
    
    
    178,602
    
    
    
    17.36
    
    
    
    222,000
    
    
    
    8.65Outstanding September 30, 2007
    
    
    104,500
    
    
    $
    9.87
    
    
    
    25,400
    
    
    $
    47.00Exercisable September 30, 2007
    
    
    84,500
    
    
    $
    11.14
    
    
    
    25,400
    
    
    $
    47.00
   Options
    
    WarrantsRemaing
    
    
    
    
    
    
    
    
    
    
    
    
    
    RemaingNumber
    
    Life
    
    Number
    
    
    
    
    
    Number
    
    Life
    
    NumberOutstanding
    
    In Years
    
    Exercisable
    
    Exercise Price
    
    Outstanding
    
    In Years
    
    Exercisable
    
    Exercise Price10,000
    
    
    2.86
    
    
    
    10,000
    
    
    
    7.95
    
    
    
    14,000
    
    
    
    0.62
    
    
    
    14,000
    
    
    
    73.7510,000
    
    
    3.22
    
    
    
    10,000
    
    
    
    8.44
    
    
    
    400
    
    
    
    1.25
    
    
    
    400
    
    
    
    22.2019,500
    
    
    3.22
    
    
    
    19,500
    
    
    
    28.10
    
    
    
    3,000
    
    
    
    1.62
    
    
    
    3,000
    
    
    
    22.505,000
    
    
    3.51
    
    
    
    5,000
    
    
    
    8.45
    
    
    
    6,000
    
    
    
    2.42
    
    
    
    6,000
    
    
    
    11.2510,000
    
    
    3.79
    
    
    
    10,000
    
    
    
    5.25
    
    
    
    2,000
    
    
    
    2.61
    
    
    
    2,000
    
    
    
    8.7550,000
    
    
    5.68
    
    
    
    30,000
    
    
    
    4.50104,500
    
    
    4.43
    
    
    
    84,500
    
    
    
    
    
    
    
    25,400
    
    
    
    1.33
    
    
    
    25,400
  Outstanding
    
    $
    10,521,900Exercisable
    
    $
    8,901,900
 14




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Operating Leases
  2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    2013$86,000
    
    $224,000
    
    $231,000
    
    $238,000
    
    $245,000
    
    $254,000
    
    $130,000
  Income Taxes
   Earnings Per Share
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Basic and Diluted net income
    
    $
    2,648,293
    
    
    $
    1,362,245
    
    
    $
    7,056,302
    
    
    $
    3,983,025Weighted average number of
outstanding sharesBasic
    
    
    2,204,641
    
    
    
    1,789,147
    
    
    
    2,130,867
    
    
    
    1,775,633Diluted
    
    
    2,322,281
    
    
    
    2,239,245
    
    
    
    2,251,407
    
    
    
    2,204,621Earnings per shareBasic
    
    $
    1.20
    
    
    $
    0.76
    
    
    $
    3.31
    
    
    $
    2.24Diluted
    
    $
    1.14
    
    
    $
    0.61
    
    
    $
    3.13
    
    
    $
    1.81
  15




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##### Table of Contents



Commitments and Contingencies
  16




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##### Table of Contents



ITEM 2: Managements Discussion and Analysis of Financial Condition and Results of Operation
 Forward-looking Statements
  General
    17




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##### Table of Contents



Assets Under Management
  Assets Under Management by ProductAs of September 30,(in millions)
    
    2007
    
    2006
    
    % ChangeMutual funds
    
    $
    2,889
    
    
    $
    2,193
    
    
    
    32
    %Separate accounts
    
    
    1,000
    
    
    
    747
    
    
    
    34
    %Private investment funds
    
    
    491
    
    
    
    177
    
    
    
    177
    %Total
    
    $
    4,380
    
    
    $
    3,117
    
    
    
    41
    %
 Assets Under Management by ObjectiveAs of September 30,(in millions)
    
    2007
    
    2006
    
    % ChangeSmall and Small-Mid Cap
    
    $
    660
    
    
    $
    758
    
    
    
    -13
    %Large Cap and Select
    
    
    1,028
    
    
    
    802
    
    
    
    28
    %Long-Short
    
    
    2,394
    
    
    
    1,321
    
    
    
    81
    %Strategic and fixed income
    
    
    298
    
    
    
    236
    
    
    
    26
    %Total
    
    $
    4,380
    
    
    $
    3,117
    
    
    
    41
    %
 Consolidated Results of Operations
  Three Months Ended September 30,
    
    Nine Months Ended September 30,2007
    
    2006
    
    % Change
    
    2007
    
    2006
    
    % ChangeNet income (in thousands)
    
    $
    2,648
    
    
    $
    1,362
    
    
    
    94
    %
    
    $
    7,056
    
    
    $
    3,983
    
    
    
    77
    %Net income (loss) per shareBasic
    
    $
    1.20
    
    
    $
    0.76
    
    
    
    58
    %
    
    $
    3.31
    
    
    $
    2.24
    
    
    
    48
    %Diluted
    
    $
    1.14
    
    
    $
    0.61
    
    
    
    87
    %
    
    $
    3.13
    
    
    $
    1.81
    
    
    
    73
    %Weighted average shares
outstanding (in thousands)Basic
    
    
    2,205
    
    
    
    1,789
    
    
    
    
    
    
    
    2,131
    
    
    
    1,776Diluted
    
    
    2,322
    
    
    
    2,239
    
    
    
    
    
    
    
    2,251
    
    
    
    2,205
 Three Months ended September 30, 2007 compared with Three Months Ended September 30, 2006
  18




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##### Table of Contents



Revenue
 Three Months EndedSeptember 30,(in Thousands)
    
    2007
    
    2006
    
    % ChangeInvestment advisory
    
    $
    9,216
    
    
    $
    5,637
    
    
    
    63
    %Performance incentive
    
    
    1
    
    
    
    
    
    
    
    n.m.Mutual fund administration, net
    
    
    1,484
    
    
    
    1,018
    
    
    
    46
    %Total
    
    $
    10,701
    
    
    $
    6,655
    
    
    
    61
    %
  Investment Advisory Fees.
 Performance Incentive Fees.
 Mutual Fund Administration Fees.
 19




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##### Table of Contents



Expenses
 Three Months EndedSeptember 30,(in Thousands)
    
    2007
    
    2006
    
    % ChangeCompensation and related costs
    
    $
    5,075
    
    
    $
    3,719
    
    
    
    36
    %General and administrative
    
    
    974
    
    
    
    281
    
    
    
    247
    %Sales and marketing
    
    
    107
    
    
    
    86
    
    
    
    24
    %Third party distribution
    
    
    404
    
    
    
    125
    
    
    
    223
    %Mutual fund administration
    
    
    608
    
    
    
    422
    
    
    
    44
    %Total
    
    $
    7,168
    
    
    $
    4,633
    
    
    
    55
    %
 Compensation and Related Costs.
 General and Administrative.
 Sales and Marketing.
 Third Party Distribution.
 Mutual Fund Administration.
 20




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##### Table of Contents



Nine Months ended September 30, 2007 compared with Nine Months Ended September 30, 2006
  Revenue
 Nine Months EndedSeptember 30,(in Thousands)
    
    2007
    
    2006
    
    % ChangeInvestment advisory
    
    $
    25,980
    
    
    $
    13,567
    
    
    
    91
    %Performance incentive
    
    
    6
    
    
    
    2,510
    
    
    
    -100
    %Mutual fund administration, net
    
    
    4,439
    
    
    
    2,407
    
    
    
    84
    %Total
    
    $
    30,425
    
    
    $
    18,484
    
    
    
    65
    %
  Investment Advisory Fees.
 Performance Incentive Fees.
 Mutual Fund Administration Fees.
 21




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##### Table of Contents



Expenses
 Nine Months EndedSeptember 30,(in Thousands)
    
    2007
    
    2006
    
    % ChangeCompensation and related costs
    
    $
    14,948
    
    
    $
    10,638
    
    
    
    41
    %General and administrative
    
    
    2,141
    
    
    
    791
    
    
    
    171
    %Sales and marketing
    
    
    349
    
    
    
    219
    
    
    
    59
    %Third party distribution
    
    
    1,128
    
    
    
    327
    
    
    
    245
    %Mutual fund administration
    
    
    1,817
    
    
    
    1,187
    
    
    
    53
    %Total
    
    $
    20,383
    
    
    $
    13,162
    
    
    
    55
    %
 Compensation and Related Costs.
 General and Administrative.
 Sales and Marketing.
 Third Party Distribution.
 Mutual Fund Administration.
 Liquidity and Capital Resources
    22




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##### 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
  Maximum NumberCumulative Number
    
    of Shares That Mayof Shares Purchased
    
    Yet Be PurchasedTotal Number
    
    Average Price
    
    as part of a Publicly
    
    Under the Plans orPeriod
    
    of Shares Purchased
    
    Paid Per Share
    
    Announced Plan
    
    Programs (1)July 1, 2007 throughJuly 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    August 1, 2007 throughAugust 31, 2007
    
    
    1,398
    
    
    $
    72.92
    
    
    
    1,398
    
    
    
    348,602September 1, 2007 throughSeptember 30, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    348,602
 
 (1)
    
    - The Companys current share repurchase program was announced on August 9, 2007. The board of
directors authorized management to repurchase up to 350,000 shares of its common stock in the open
market and in private transactions in accordance with applicable securities laws. The Companys
stock repurchase program is not subject to an expiration date. 
 ITEM 3: Defaults Upon Senior Securities
 
 ITEM 4: Submission of Matters to a Vote of Security Holders
 
 ITEM 5: Other Information
 23




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##### 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.
 24




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##### Table of Contents



SIGNATURES
   Date
    
    Title
    
    SignatureNovember 5, 2007
    
    President, Chief Executive
    
    /s/R. H. DillonOfficer, and a Director
    
    R. H. DillonNovember 5, 2007
    
    Chief Financial Officer,
    
    /s/James F. LairdTreasurer, and Secretary
    
    James F. Laird
 25