See accompanying Notes to Financial Statements.
Organization
The Diamond Hill Small Cap Fund (“Small Cap Fund”), Diamond Hill Small-Mid Cap Fund (“Small-Mid Cap Fund”), Diamond Hill Large Cap Fund (“Large Cap Fund”), Diamond Hill Select Fund (“Select Fund”), Diamond Hill Long-Short Fund (“Long-Short Fund”), Diamond Hill Financial Long-Short Fund (“Financial Long-Short Fund” and Diamond Hill Strategic Income Fund (“Strategic Income Fund”), are each a series of the Diamond Hill Funds (the “Trust”) (each a “Fund” and collectively the “Funds”). The Trust is an Ohio business trust, which is registered under the Investment Company Act of 1940, as amended, (the “1940 Act”) as an open-end, management investment company. Each Fund is a diversified series of the Trust. The Long-Short Fund is closed to new investors as of June 30, 2008.
The Funds offer three classes of shares: Class A, Class C and Class I. Each class of shares for each Fund has identical rights and privileges except with respect to distribution (12b-1) and service fees, voting rights on matters affecting a single class of shares, and the exchange privileges of each class of shares.
Significant Accounting Policies
The following is a summary of the Funds’ significant accounting policies:
Estimates — The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Security valuation — Listed securities for which market quotations are readily available are valued at the closing prices as determined by the primary exchange where the securities are traded. Unlisted securities or listed securities for which the latest sales prices are not readily available are valued at the closing bid price in the principal market where such securities are normally traded. Debt securities are valued on the basis of valuations provided by dealers or by an independent pricing service that determines valuations based upon market transactions for normal, institutional-size trading units of similar securities. Short-term investments maturing in less than 61 days are valued at amortized cost, which approximates market. Securities for which market quotations are not readily available are valued at their "fair value". In these cases, a Valuation Committee established and appointed by the Trustees determines in good faith, subject to Trust procedures, the fair value of portfolio securities held by a Fund ("good faith fair valuation"). When a good faith fair valuation of a security is required, consideration is generally given to a number of factors, including, but not limited to the following: dealer quotes, published analyses by dealers or analysts of the situation at issue, transactions implicitly valuing the security (such as a merger, tender offer, etc.), the value of other securities or contracts which derive their value from the security at issue, and the implications (whether negative or positive) of the circumstances which have caused trading in the security to halt.
Effective December 1, 2007, the Funds adopted Statement on Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements.” SFAS No. 157 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. Under SFAS No. 157 various inputs are used in determining the value of the Funds investments. These inputs are summarized in the three broad levels listed below:
| • | Level 1 – | quoted prices in active markets for identical securities |
| • | Level 2 – | other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) |
| • | Level 3 – | significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, securities maturing in less than 61 days of the filing are valued using amortized cost, in accordance with rules under the Investment Company Act of 1940. Generally, amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities are reflected as Level 2.
| |
| Page 40 | Diamond Hill Funds Semi-Annual Report June 30, 2008 |
Diamond Hill Funds
Notes to Financial Statements (Continued)
June 30, 2008 (Unaudited)
The following is a summary of the inputs used to value the Funds net assets as of June 30, 2008:
| | | | | Level 2 - | | Level 3 - | |
| | | Level 1 - | | Other Significant | | Significant | |
| | | Quoted Prices | | Observable Inputs | | Unobservable Inputs | |
Investments in Securities: | | | | | | | |
(Assets) | | | | | | | |
| Small Cap Fund | | $ | 387,322,336 | | $ | - | | $ | - | |
| Small-Mid Cap Fund | | | 29,623,630 | | | - | | | - | |
| Large Cap Fund | | | 499,015,651 | | | - | | | - | |
| Select Fund | | | 13,432,913 | | | - | | | - | |
| Long-Short Fund | | | 3,548,181,673 | | | - | | | - | |
| Financial Long-Short Fund | | | 18,932,439 | | | - | | | - | |
| Strategic Income Fund | | | 72,100,781 | | | 69,840,985 | | | - | |
| | | | | | | | | | | |
Investments in Securities | | | | | | | | | | |
Sold Short: (Liabilities) | | | | | | | | | | |
| Long-Short Fund | | $ | 662,039,558 | | $ | - | | $ | - | |
| Financial Long-Short Fund | | | 1,013,785 | | | - | | | - | |
Short sales — The Long-Short Fund, Financial Long-Short Fund and Strategic Income Fund may sell a security they do not own in anticipation of a decline in the value of that security. When the Funds sell a security short, they must borrow the security sold short and deliver it to the broker-dealer through which they made the short sale. A gain, limited to the price at which the Funds sold the security short, or a loss, unlimited in size, will be recognized upon closing a short sale. Cash received from short sales is maintained by brokers and is used to meet margin requirements for short calls. It is included as “Deposits with brokers for securities sold short” on the Statements of Assets & Liabilities.
Securities Lending — Effective January 1, 2008, the Board of Trustees approved a securities lending agreement with JPMorgan Chase Bank, N.A. (“JPMorgan”). Under the terms of the agreement, JPMorgan is authorized to loan securities on behalf of the Funds to approved borrowers. In exchange, the Funds receive cash collateral in the amount of at least 100% of the value of the securities loaned. The cash collateral is invested in short term instruments as noted in the Schedules of Investments. Although risk is mitigated by the collateral, the Funds could experience a delay in recovering their securities and possible loss of income or value if the borrower fails to return them. The agreement indemnifies the Funds from losses incurred in the event of a borrower’s material default of the terms and conditions of the borrower agreement. The agreement provides that after predetermined rebates to brokers, net securities lending income shall first be solely paid as credits and offset against costs and other charges incurred by each Fund with JPMorgan. Any remaining securities lending revenue is then paid to the Funds as securities lending income. The securities lending income and the custody fee credits are presented in the Statements of Operations.
As of June 30, 2008, the value of securities loaned and the collateral held were as follows:
| | | Market Value of Securities Loaned | | Value of Collateral Received | |
| Small Cap Fund | | $ | 98,878,527 | | $ | 103,672,124 | |
| Small-Mid Cap Fund | | $ | 8,064,800 | | $ | 8,439,506 | |
| Large Cap Fund | | $ | 23,233,792 | | $ | 24,371,534 | |
| Select Fund | | $ | 1,213,053 | | $ | 1,278,972 | |
| Long-Short Fund | | $ | 71,361,263 | | $ | 75,134,417 | |
| Financial Long-Short Fund | | $ | 980,035 | | $ | 1,048,613 | |
| Strategic Income Fund | | $ | 3,486,878 | | $ | 3,940,398 | |
| |
Diamond Hill Funds Semi-Annual Report June 30, 2008 | Page 41 |
Diamond Hill Funds
Notes to Financial Statements (Continued)
June 30, 2008 (Unaudited)
Security transactions — Changes in holdings of portfolio securities shall be reflected no later than in the first calculation on the first business day following trade date. However, for financial reporting purposes, portfolio security transactions are reported on trade date. The specific identification method is used for determining realized gains or losses for financial statements and income tax purposes. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Discounts and premiums on securities purchased are amortized using the daily effective yield method.
Share valuation — The net asset value per share of each class of shares of each Fund is calculated daily by dividing the total value of a Fund’s assets attributable to that class, less liabilities attributable to that class, by the number of shares of that class outstanding.
Federal income taxes — Each Fund’s policy is to continue to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute substantially all of its taxable net investment income and any net realized capital gains to its shareholders. Therefore, no federal income tax provision is required.
Distributions to shareholders — Dividends from net investment income are declared and paid monthly for the Strategic Income Fund. Dividends from net investment income are declared and paid on an annual basis for the Small Cap Fund, Small-Mid Cap Fund, Large Cap Fund, Select Fund, Long-Short Fund, and Financial Long-Short Fund. The Funds record distributions received from investments in Real Estate Investment Trusts (REITS) in excess of income from underlying investments as a reduction of cost of investments and/or realized gain. Such amounts are based on estimates if actual amounts are not available and actual amounts of income, realized gain and return of capital may differ from the estimated amounts. The Funds adjust the estimated amounts of the components of distributions (and consequently net investment income) as an increase to unrealized appreciation (depreciation) and realized gain (loss) on investments as necessary once the issuers provide information about the actual composition of the distributions. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share rates are due to differences in separate class expenses. Net realized capital gains, if any, are distributed at least annually. Distributions from net investment income and from net capital gains are determined in accordance with U.S. income tax regulations, which may differ from GAAP in the United States. These differences are primarily due to differing treatments for paydown gains and losses on mortgage-backed securities, expiring capital loss carryforwards, and deferrals of certain losses. Permanent book and tax basis differences are reclassified among the components of net assets. Certain Funds may utilize earnings and profits distributed to shareholders on redemption of shares as part of the dividends paid deduction for income tax purposes.
Allocations — Investment income earned, realized capital gains and losses, and unrealized appreciation and depreciation for the Funds are allocated daily to each class of shares based upon its proportionate share of total net assets of the Fund. Class specific expenses are charged directly to the class incurring the expense. Common expenses, which are not attributable to a specific class, are allocated daily to each class of shares based upon its proportionate share of total net assets of the Fund. Expenses not directly billed to a Fund are allocated proportionally among all Funds daily in relation to net assets of each Fund or another reasonable measure.
Investment Transactions
For the six months ended June 30, 2008, the purchases and sales (including maturities) of investment securities (excluding short-term securities and U.S. government obligations) were as follows:
| | | | Purchases | | | Sales | |
| Small Cap Fund | | $ | 70,203,262 | | $ | 80,576,893 | |
| Small-Mid Cap Fund | | $ | 7,641,159 | | $ | 9,661,953 | |
| Large Cap Fund | | $ | 153,246,529 | | $ | 55,422,956 | |
| Select Fund | | $ | 2,690,941 | | $ | 5,473,623 | |
| Long-Short Fund | | $ | 1,319,152,458 | | $ | 670,969,592 | |
| Financial Long-Short Fund | | $ | 7,706,695 | | $ | 10,829,913 | |
| Strategic Income Fund | | $ | 187,217,514 | | $ | 187,319,016 | |
| |
| Page 42 | Diamond Hill Funds Semi-Annual Report June 30, 2008 |
Diamond Hill Funds
Notes to Financial Statements (Continued)
June 30, 2008 (Unaudited)
The Funds pay commissions on the purchase and sale of investment securities. The commissions paid are included as part of the cost of purchases or net proceeds on the sale of investment securities and are not included in the presentation of Fund expenses on the Statements of Operations. The Funds paid the following commissions during the six months ended June 30, 2008:
| | | | | | |
| | Total Commissions | | Commissions as a % of Average Net Assets | |
| Small Cap Fund | | $ | 112,080 | | | 0.03 | % |
| Small-Mid Cap Fund | | $ | 13,172 | | | 0.04 | % |
| Large Cap Fund | | $ | 140,348 | | | 0.03 | % |
| Select Fund | | $ | 3,924 | | | 0.03 | % |
| Long-Short Fund | | $ | 1,260,720 | | | 0.05 | % |
| Financial Long-Short Fund | | $ | 13,918 | | | 0.08 | % |
| Strategic Income Fund | | $ | 18,551 | | | 0.01 | % |
Investment Advisory Fees and Other Transactions with Affiliates
The Small Cap Fund, Small-Mid Cap Fund, Large Cap Fund, Select Fund, Long-Short Fund, Financial Long-Short Fund, and Strategic Income Fund each receive investment management and advisory services from Diamond Hill Capital Management, Inc. (“DHCM”) under management agreements that provide for fees to be paid at an annual rate of 0.80%, 0.75%, 0.60%, 0.70%, 0.90%, 1.00%, and 0.50% of the Funds’ average daily net assets, respectively. The advisory agreements are subject to annual approval by the Board of Trustees. In addition, each Fund has entered into an administrative services agreement whereby DHCM (“Administrator”) is paid a fee at an annual rate of 0.30% for Class A and Class C Shares and 0.18% for Class I shares of each Class’ average daily net assets. Prior to April 30, 2008, the fees paid by Class A and Class C Shares were paid at an annual rate of 0.32% of each Class’ average daily net assets. These administrative fees are used to pay most of the Funds’ operating expenses except advisory, distribution, custody, brokerage, taxes, interest, dividend expense on securities sold short, and extraordinary expenses.
Pursuant to rule 12b-1 of the 1940 Act, each Fund has adopted a distribution plan (together, the “Plans”). Under the Plans, Class A shares pay a distribution fee at an annual rate of 0.25% of Class A average daily net assets. Class C shares pay a distribution and shareholder-servicing fee at an annual rate of 0.75% and 0.25%, respectively, of Class C average daily net assets. Class I shares are not subject to any distribution or shareholder-servicing fees. The Trust entered into a Distribution Agreement on behalf of the Funds with IFS Fund Distributors, Inc. (“Distributor”). Pursuant to the Distribution Agreement, the Distributor acts as principal underwriter of each Fund’s shares.
For the six months ended June 30, 2008, the Distributor received $5,866, $409, $6,349, $48, $138,305, $1,104, and $862, in sales commissions from the sales of Class A shares of the Small Cap Fund, Small-Mid Cap Fund, Large Cap Fund, Select Fund, Long-Short Fund, Financial Long-Short Fund, and Strategic Income Fund, respectively. The Distributor also received $1,438, $139, $3,131, $1,604, $31,086, $1,440, and $696 of contingent deferred sales charges relating to redemptions of Class C shares of the Small Cap Fund, Small-Mid Cap Fund, Large Cap Fund, Select Fund, Long-Short Fund, Financial Long-Short Fund, and Strategic Income Fund, respectively.
DHCM has an agreement with JPMorgan to provide sub-transfer agent, and sub-administrative services for the Funds. The services to be provided under the agreements include day-to-day administration of matters related to the corporate existence of the Trust and its Funds (other than rendering investment advice), preparation of reports, supervision of the Trust’s arrangement with JPMorgan and assistance in the preparation of the Trust’s registration statement under federal and state laws. JPMorgan is paid directly by DHCM under terms of these service agreements.
Certain officers of the Trust are affiliated with DHCM, JPMorgan or the Distributor. Such officers receive no compensation from the Funds for serving in their respective roles.
| |
Diamond Hill Funds Semi-Annual Report June 30, 2008 | Page 43 |
Diamond Hill Funds
Notes to Financial Statements (Continued)
June 30, 2008 (Unaudited)
Commitments and Contingencies
The Funds indemnify the Trust’s officers and Trustees for certain liabilities that might arise from their performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.
Federal Tax Information
The amount and character of income and capital gain distributions paid by the Funds are determined in accordance with Federal income tax regulations which may differ from GAAP. The tax character of distributions paid differs from the character of distributions shown on the Statements of Changes in Net Assets due primarily to short-term capital gains being treated as ordinary income for tax purposes and the use of equalization.
The tax character of distributions paid during 2007 and 2006 was as follows:
| | | Small Cap Fund | | Small-Mid Cap Fund | | Large Cap Fund | | Select Fund | |
| | | 2007 | | 2006 | | 2007 | | 2006 | | 2007 | | 2006 | | 2007 | | 2006 | |
| Distributions paid from: | | | | | | | | | | | | | | | | | |
| Ordinary income | | $ | 1,804,841 | | $ | 8,775,689 | | $ | 383,749 | | $ | 191,604 | | $ | 10,040,327 | | $ | 4,892,161 | | $ | 1,494,756 | | $ | 357,710 | |
| Long-term capital gains | | | 23,287,772 | | | 4,882,826 | | | 614,655 | | | - | | | 15,104,359 | | | 1,739,721 | | | 678,617 | | | - | |
| Total distributions | | $ | 25,092,613 | | $ | 13,658,515 | | $ | 998,404 | | $ | 191,604 | | $ | 25,144,686 | | $ | 6,631,882 | | $ | 2,173,373 | | $ | 357,710 | |
| | | Long-Short Fund | | Financial Long- Short Fund | | Strategic Income Fund | |
| | | 2007 | | 2006 | | 2007 | | 2006 | | 2007 | | 2006 | |
| Distributions paid from: | | | | | | | | | | | | | |
| Ordinary income | | $ | 56,499,180 | | $ | 37,941,138 | | $ | 1,693,193 | | $ | 522,904 | | $ | 9,428,087 | | $ | 5,841,602 | |
| Long-term capital gains | | | 22,195,381 | | | 5,437,134 | | | 616,465 | | | 825,774 | | | 1,736,617 | | | - | |
| Total distributions | | $ | 78,695,561 | | $ | 43,378,272 | | $ | 2,309,658 | | $ | 1,348,678 | | $ | 11,164,704 | | $ | 5,841,602 | |
The following information is computed on a tax basis for each item as of December 31, 2007:
| | | | | | | | | | |
| | | Small Cap Fund | | Small-Mid Cap Fund | | Large Cap Fund | | Select Fund | |
| Federal tax cost of investments | | $ | 540,693,405 | | $ | 44,017,358 | | $ | 418,495,903 | | $ | 18,674,628 | |
| Gross unrealized appreciation | | | 55,291,969 | | | 3,098,335 | | | 56,799,801 | | | 4,075,656 | |
| Gross unrealized depreciation | | | (47,427,091 | ) | | (3,543,123 | ) | | (18,670,183 | ) | | (994,616 | ) |
| Net unrealized appreciation (depreciation) | | | 7,864,878 | | | (444,788 | ) | | 38,129,618 | | | 3,081,040 | |
| Undistributed ordinary income | | | 490,888 | | | 942 | | | 13,484 | | | 54 | |
| Undistributed long-term capital gains | | | - | | | - | | | 3,779,308 | | | 568,314 | |
| Post-October losses | | | (5,312,211 | ) | | (8,467 | ) | | - | | | - | |
| Other temporary differences | | | - | | | - | | | - | | | (1,846,044 | ) |
| Accumulated earnings (deficit) | | $ | 3,043,555 | | $ | (452,313 | ) | $ | 41,922,410 | | $ | 1,803,364 | |
| | | | | | | Financial | | | Strategic | |
| | | | Long-Short | | | Long-Short | | | Income | |
| | | | Fund | | | Fund | | | Fund | |
| Tax cost of portfolio investments | | $ | 1,880,906,277 | | $ | 42,646,857 | | $ | 190,685,964 | |
| Gross unrealized appreciation | | | 233,523,707 | | | 3,156,763 | | | 1,020,441 | |
| Gross unrealized depreciation | | | (149,230,491 | ) | | (6,346,326 | ) | | (15,464,444 | ) |
| Net unrealized appreciation (depreciation) | | | 84,293,216 | | | (3,189,563 | ) | | (14,444,003 | ) |
| Undistributed ordinary income | | | - | | | 7,470 | | | - | |
| Undistributed long-term capital gains | | | 9,366,895 | | | - | | | - | |
| Post-October losses | | | - | | | (303,580 | ) | | (1,503,980 | ) |
| Other temporary differences | | | - | | | - | | | (66,337 | ) |
| Accumulated earnings (deficit) | | $ | 93,660,111 | | $ | (3,485,673 | ) | $ | (16,014,320 | ) |
| |
| Page 44 | Diamond Hill Funds Semi-Annual Report June 30, 2008 |
Diamond Hill Funds
Notes to Financial Statements (Continued)
June 30, 2008 (Unaudited)
The difference between book basis and tax basis net unrealized appreciation is attributable primarily to the tax deferral of losses on wash sales, investments in Real Estate Investment Trusts and Limited Partnerships.
As of June 30, 2008, the Fund’s Federal tax cost of investment securities and net unrealized appreciation (depreciation) was as follows:
| | | | | | | Net | | | |
| | | | | Gross | | Gross | | Unrealized | |
| | | Federal | | Unrealized | | Unrealized | | Appreciation | |
Fund | | Tax Cost | | Appreciation | | Depreciation | | (Depreciation) | |
| Small Cap Fund | | $ | 404,115,921 | | $ | 72,614,528 | | $ | (89,408,083 | ) | $ | (16,793,555 | ) |
| Small-Mid Cap Fund | | | 30,894,299 | | | 4,735,551 | | | (6,006,220 | ) | | (1,270,669 | ) |
| Large Cap Fund | | | 502,925,768 | | | 69,239,133 | | | (73,149,251 | ) | | (3,910,118 | ) |
| Select Fund | | | 14,207,122 | | | 1,785,709 | | | (2,559,918 | ) | | (774,209 | ) |
| Long-Short Fund | | | 2,967,305,090 | | | 351,476,672 | | | (402,416,218 | ) | | (50,939,546 | ) |
| Financial Long-Short Fund | | | 27,503,106 | | | 1,152,491 | | | (10,431,705 | ) | | (9,279,214 | ) |
| Strategic Income Fund | | | 159,745,125 | | | (1,274 | ) | | (17,802,086 | ) | | (17,803,360 | ) |
Reclassification of capital accounts - Reclassifications result primarily from the difference in the tax treatment of paydown gains and losses, equalization and investments in Real Estate Investment Trusts and Limited Partnerships. The Funds may designate a portion of the earnings and profits distributed to shareholders on redemption of shares as part of the dividends paid deduction for income taxes. The following reclassifications have no impact on the net assets or net asset value per share of the Funds and are designed to present the Funds' capital accounts on a tax basis:
| | | | | Undistributed | | Accumulated | |
| | | Paid-In | | Net Investment | | Net Realized | |
| | | Capital | | Income (Loss) | | Gains (Losses) | |
| Small Cap Fund | | $ | 5,505,865 | | $ | (128,207 | ) | $ | (5,377,658 | ) |
| Small-Mid Cap Fund | | | 7,804 | | | 2 | | | (7,806 | ) |
| Large Cap Fund | | | 4,647,019 | | | - | | | (4,647,019 | ) |
| Select Fund | | | (823,704 | ) | | - | | | 823,704 | |
| Long Short Fund | | | 6,338,657 | | | 32,449 | | | (6,371,106 | ) |
| Financial Long-Short Fund | | | 219,019 | | | (18,909 | ) | | (200,110 | ) |
| Strategic Income Fund | | | (33,832 | ) | | 133,381 | | | (99,549 | ) |
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds' tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not" threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. The Funds have analyzed their tax positions taken on Federal income tax returns for all open tax years (tax years ended December 31, 2004 through 2007) for purposes of implementing FIN 48 and have concluded that no provision for income tax is required in their financial statements.
| |
Diamond Hill Funds Semi-Annual Report June 30, 2008 | Page 45 |
Diamond Hill Funds
Other Items
June 30, 2008 (Unaudited)
Proxy Voting
The investment adviser is responsible for exercising the voting rights associated with the securities purchased and held by the Funds. A description of the policies and procedures that the Adviser uses in fulfilling this responsibility and information regarding how those proxies were voted during the twelve month period ended June 30 are available without charge upon request by calling toll free 1-888-226-5595 or on the Securities and Exchange Commission’s website at http://www.sec.gov.
Portfolio Disclosure
The Trust files a complete listing of portfolio holdings as of the end of the first and third quarters of each fiscal year on Form N-Q and each second and forth quarters of each fiscal year on Form N-CSR. The complete listing (i) is available on the Commission’s website; (ii) may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; and (iii) will be made available to shareholders upon request by calling 1-888-226-5595. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Monthly portfolio holdings are also available on www.diamond-hill.com.
Trustee Approval of Investment Advisory Agreements
The Trustees of Diamond Hill Funds (the “Trust”), at a regularly scheduled meeting on May 22, 2008, by a unanimous vote, approved the Management Agreements between the Trust and Diamond Hill Capital Management, Inc. (the “Adviser”), for each series of the Trust (each separately, a “Fund”). The Trustees discussed the following factors, on a Fund-by-Fund basis, in connection with the Trust’s Management Agreements (“investment advisory agreements”):
| a) | The nature, extent and quality of the services provided by the Adviser under the investment advisory agreements, including a review of the investment advisory agreements themselves, the services provided thereunder, the fee formula, fees paid, expenses assumed and termination provisions. The Trustees reviewed the performance history of each fund with a five year track record, noting that each Fund’s performance exceeded its respective benchmark for the five year period ended February 28, 2008. In addition, four of five Fund’s with a five year track record were also in the top quartile when compared to their peer groups for the same five year period and the two funds without a five year track record also ranked in the top quartile for the one year period. Both measurements are consistent with the Adviser’s long-term approach to measuring its performance. The Trustees also noted that the Adviser continued to invest significant resources in its investment team to help enhance the delivery of portfolio management services to the Funds. |
| b) | The reasonableness of the investment advisory fees, with the Trustees noting that the contract rates under the investment advisory agreements as of February 28, 2008 were at or below the mean and median rates of comparable funds within each Fund’s respective peer group. |
| c) | The reasonableness of the total expenses, with the Trustees noting that the total expenses of each class of shares of each of the Funds were generally at or below the mean and median total expenses of comparable funds within each Fund’s respective peer group, with total expenses for Class I shares of each Fund generally in the lower third or quarter of their respective peer groups. |
| d) | With limited exceptions, investment advisory fees charged by the Adviser to the Funds were lower than investment advisory fees the Adviser charges to its other similarly managed accounts (i.e. hedge funds and separate accounts). |
| e) | The reasonableness of each Fund’s profitability to the Adviser, including the Adviser’s methodology for calculating its profitability, with the Trustees noting that the Adviser’s pre-tax profit margin on the investment advisory agreements of each Fund represented a fair and entrepreneurial profit for managing the Fund. The Trustees also noted the Adviser’s voluntary reduction of its fees under the Administration Agreement of five basis points on Class A and Class C shares, effective April 30, 2005; four basis points on Class A and Class C and two basis points on Class I effective, April 30, 2006; four basis points on Class A and Class C effective, April 30, 2007; and two basis points on Class A and Class C effective April 30, 2008, in each case representing a sharing of the economies of scale realized by the Administrator. |
| |
| Page 46 | Diamond Hill Funds Semi-Annual Report June 30, 2008 |
Diamond Hill Funds
Other Items (Continued)
June 30, 2008 (Unaudited)
| f) | The extent to which economies of scale would be realized as each Fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders, with the Trustees noting that the current asset size of the Funds, the current advisory fee for each Fund, and other relevant factors did not warrant additional consideration of fee breakpoints for the Funds at the current time. |
| g) | The ancillary benefits received by the Adviser as a result of its relationship with the Funds. The Board considered that the Adviser has no soft dollar arrangements with respect to securities transactions it executes for the Funds. The Trustees also considered that the Adviser is the Administrator to the Funds (under the Administration Agreement) and is expected to earn fees from the Funds for providing administrative services. The fees were shown separately in the profitability analysis presented to the Trustees. The Trustees also considered revenue and expenses of the Administrator for providing financing arrangements related to the payment of commissions to financial intermediaries for the sale of C Shares of the Funds. |
Having considered (1) the nature, extent and quality of the services provided by the Adviser under the investment advisory agreements, (2) the reasonableness of the investment advisory fees, (3) the reasonableness of the total expenses, (4) the reasonableness of fees charged to other similar clients of the Adviser, (5) the reasonableness of each Fund’s profitability to the Adviser under each investment advisory agreement, (6) the extent to which economies of scale could and should be shared by the Adviser with the Funds, and (7) the ancillary benefits received by the Adviser, as discussed more fully above the Trustees, all of whom qualify as Independent Trustees under the 1940 Act, concluded it was appropriate to renew the investment advisory agreements.
| |
Diamond Hill Funds Semi-Annual Report June 30, 2008 | Page 47 |
Diamond Hill Funds
Performance Update
June 30, 2008 (Unaudited)
Performance Update
The following table summarized the performance of the Diamond Hill Class A shares relative to their benchmarks as of June 30, 2008:
| | | | | | | | | | |
| | | | Six | One | Three | Five | Ten | Since | Inception |
| Fund Name | | | Months | Year | Years | Years | Years | Inception | Date |
| Small Cap Fund (DHSCX) | | Class A - Without Sales Charge | -1.42% | -10.51% | 3.86% | 13.69% | NA | 13.36% | 12/29/00 |
| | | Class A - With Sales Charge | -6.37% | -15.00% | 2.11% | 12.54% | NA | 12.58% | |
| | | Class C - Without Sales Charge | -1.77% | -11.17% | 3.10% | 12.86% | NA | 12.51% | |
| | | Class C - With Sales Charge | -2.75% | -12.00% | 3.10% | 12.86% | NA | 12.51% | |
| | | Class I - Without Sales Charge | -1.24% | -10.16% | 4.29% | 13.98% | NA | 13.55% | |
| Russell 2000 | | | -9.37% | -16.19% | 3.79% | 10.29% | NA | 6.17% | |
| Small-Mid Cap Fund (DHMAX) | | Class A - Without Sales Charge | -0.48% | -7.41% | NA | NA | NA | 3.24% | 12/31/05 |
| | | Class A - With Sales Charge | -5.43% | -12.03% | NA | NA | NA | 1.13% | |
| | | Class C - Without Sales Charge | -0.87% | -8.17% | NA | NA | NA | 2.50% | |
| | | Class C - With Sales Charge | -1.86% | -9.06% | NA | NA | NA | 2.50% | |
| | | Class I - Without Sales Charge | -0.29% | -7.03% | NA | NA | NA | 3.66% | |
| Russell 2500 | | | -8.11% | -14.28% | NA | NA | NA | 3.21% | |
| Large Cap Fund (DHLAX) | | Class A - Without Sales Charge | -8.62% | -8.74% | 7.22% | 13.00% | NA | 7.34% | 6/29/01 |
| | | Class A - With Sales Charge | -13.21% | -13.31% | 5.40% | 11.85% | NA | 6.55% | |
| | | Class C - Without Sales Charge | -9.03% | -9.47% | 6.42% | 12.15% | NA | 6.49% | |
| | | Class C - With Sales Charge | -9.94% | -10.33% | 6.42% | 12.15% | NA | 6.49% | |
| | | Class I - Without Sales Charge | -8.47% | -8.39% | 7.65% | 13.30% | NA | 7.55% | |
| Russell 1000 | | | -11.20% | -12.36% | 4.81% | 8.22% | NA | 2.66% | |
| Select Fund (DHTAX) | | Class A - Without Sales Charge | -9.27% | -9.93% | NA | NA | NA | 3.50% | 12/31/05 |
| | | Class A - With Sales Charge | -13.79% | -14.46% | NA | NA | NA | 1.38% | |
| | | Class C - Without Sales Charge | -9.75% | -10.80% | NA | NA | NA | 2.73% | |
| | | Class C - With Sales Charge | -10.66% | -11.60% | NA | NA | NA | 2.73% | |
| | | Class I - Without Sales Charge | -9.25% | -9.71% | NA | NA | NA | 3.82% | |
| Russell 3000 | | | -11.05% | -12.69% | NA | NA | NA | 3.21% | |
| Long-Short Fund (DIAMX) | | Class A - Without Sales Charge | -2.39% | 0.89% | 10.02% | 13.18% | NA | 9.02% | 6/30/00 |
| | | Class A - With Sales Charge | -7.28% | -4.18% | 8.16% | 12.01% | NA | 8.32% | |
| | | Class C - Without Sales Charge | -2.78% | 0.12% | 9.22% | 12.33% | NA | 8.19% | |
| | | Class C - With Sales Charge | -3.75% | -0.84% | 9.22% | 12.33% | NA | 8.19% | |
| | | Class I - Without Sales Charge | -2.22% | 1.29% | 10.48% | 13.50% | NA | 9.21% | |
| Russell 1000 | | | -11.20% | -12.36% | 4.81% | 8.22% | NA | 0.57% | |
| MorningstarTM Long-Short | | | | | | | | | |
| Category Average | | | -2.67% | 3.10% | 4.76% | 4.86% | NA | 4.50% | |
| |
| Page 48 | Diamond Hill Funds Semi-Annual Report June 30, 2008 |
Diamond Hill Funds
Performance Update (Continued)
June 30, 2008 (Unaudited)
| | | | | | | | | | |
| | | | Six | One | Three | Five | Ten | Since | Inception |
| Fund Name | | | Months | Year | Years | Years | Years | Inception | Date |
| Financial Long-Short Fund | | Class A - Without Sales Charge | -28.27% | -41.06% | -10.75% | -0.06% | 3.46% | 6.28% | 8/1/97 |
| (BANCX) | | Class A - With Sales Charge | -31.85% | -44.01% | -12.27% | -1.08% | 2.93% | 5.78% | |
| | | Class C - Without Sales Charge | -28.72% | -41.67% | -11.51% | -0.86% | 2.73% | 5.53% | |
| | | Class C - With Sales Charge | -29.43% | -42.22% | -11.51% | -0.86% | 2.73% | 5.53% | |
| | | Class I - Without Sales Charge | -28.18% | -40.85% | -10.56% | 0.07% | 3.52% | 6.34% | |
S&P Supercomposite Financials(A) | | | -28.18% | -40.85% | -8.77% | -0.51% | 0.23% | 2.17% | |
| Strategic Income Fund (DSIAX) | | Class A - Without Sales Charge | -1.75% | -9.08% | 0.92% | 3.91% | NA | 6.45% | 9/30/02 |
| | | Class A - With Sales Charge | -5.21% | -12.29% | -0.27% | 3.17% | NA | 5.79% | |
| | | Class C - Without Sales Charge | -2.21% | -9.80% | 0.12% | 3.13% | NA | 5.74% | |
| | | Class C - With Sales Charge | -3.17% | -10.64% | 0.12% | 3.13% | NA | 5.74% | |
| | | Class I - Without Sales Charge | -1.66% | -8.74% | 1.31% | 4.18% | NA | 6.69% | |
| Merril Lynch Domestic Master Index | | | 1.33% | 7.57% | 4.21% | 3.96% | NA | | |
Source: Diamond Hill Funds, Bloomberg LP and Frank Russell Company
The performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the performance data quoted.
Performance is not guaranteed. Performance returns assume reinvestments of all distributions. Average annual total returns illustrate the annual compounded returns that would have produced the cumulative total return if the Fund's performance had remained constant throughout the period indicated. Returns for the periods less than one year are not annualized. The total return figures for the Funds reflect the maximum sales charge applicable to each class. These total return figures may reflect the waiver of a portion of a Fund's advisory or administration fees for certain periods. In such instances, and without such waiver of fees, the total returns would have been lower. The investment return and net asset value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than the original purchase price. Class I and Class C shares include performance based on Class A shares, which was achieved prior to the creation of Class I and Class C shares. Class C returns have been restated for sales charges and for fees applicable to Class C shares, which include a 1.00% 12b-1 fee. No sales charge is assessed on Class I shares. Minimum initial investment for Class I shares is $500,000. Investors should consider the investment objectives, risks, and charges and expenses of the Diamond Hill Funds carefully before investing; this and other information about the Funds is in the prospectus, which can be obtained by calling 888-226-5595 or at www.diamond-hill.com. Read the prospectus carefully before you invest.
| (A) | Returns for the S&P Supercomposite Financials are price change only before November 29, 2001 and total return thereafter. |
| |
Diamond Hill Funds Semi-Annual Report June 30, 2008 | Page 49 |
Diamond Hill Funds
Schedule of Shareholder Expenses
Hypothetical Example of a $1,000 Investment at Beginning of Period
(Unaudited)
All mutual funds have operating expenses. These expenses include costs for portfolio management, administrative services, and distribution fees. Operating expenses, which are deducted from a fund's gross income, directly reduce the investment return of the fund. A fund's expenses are expressed as a percentage of its net assets. This figure is known as the expense ratio.
We believe it is important for you to understand the impact of costs on your investment. The following example illustrates the costs that you would incur over the six-month period covered by this report if you invested $1,000 in the Fund, using the Funds' actual return and operating expenses for the six months ended June 30, 2008. The examples use actual net operating expenses applicable to that class. The calculation does not reflect sales charges (loads). If this cost was included, your costs would have been higher. The examples contain two sets of numbers, one using the actual return earned by each class of each Fund during the six months ended June 30, 2008, and one using a hypothetical 5% annual return (2.5% for the reporting period).
| | | | | Net Expense Ratio Annualized June 30, 2008 | | Beginning Account Value January 1, 2008 | | Ending Account Value June 30, 2008 | | | | | | | | Total Net Expenses | |
Small Cap Fund | | | | | | | | | | | | | | | |
| Class A | | | Actual return | | | 1.35 | % | $ | 1,000.00 | | $ | 985.80 | | $ | 3.89 | | $ | 1.56 | | $ | 1.22 | | $ | 6.67 | |
| | | Hypothetical return | | | 1.35 | % | $ | 1,000.00 | | $ | 1,018.15 | | $ | 3.96 | | $ | 1.58 | | $ | 1.24 | | $ | 6.78 | |
| Class C | | | Actual return | | | 2.09 | % | $ | 1,000.00 | | $ | 982.30 | | $ | 3.89 | | $ | 1.56 | | $ | 4.86 | | $ | 10.31 | |
| | | | Hypothetical return | | | 2.09 | % | $ | 1,000.00 | | $ | 1,014.47 | | $ | 3.95 | | $ | 1.58 | | $ | 4.94 | | $ | 10.47 | |
| Class I | | | Actual return | | | 0.98 | % | $ | 1,000.00 | | $ | 987.60 | | $ | 3.90 | | $ | 0.93 | | $ | 0.00 | | $ | 4.83 | |
| | | | Hypothetical return | | | 0.98 | % | $ | 1,000.00 | | $ | 1,020.01 | | $ | 3.96 | | $ | 0.95 | | $ | 0.00 | | $ | 4.91 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Small-Mid Cap Fund | | | | | | | | | | | | | | | | | | | | | | | |
| Class A | | | Actual return | | | 1.30 | % | $ | 1,000.00 | | $ | 995.20 | | $ | 3.65 | | $ | 1.57 | | $ | 1.22 | | $ | 6.44 | |
| | | | Hypothetical return | | | 1.30 | % | $ | 1,000.00 | | $ | 1,018.40 | | $ | 3.70 | | $ | 1.59 | | $ | 1.23 | | $ | 6.52 | |
| Class C | | | Actual return | | | 2.04 | % | $ | 1,000.00 | | $ | 991.30 | | $ | 3.65 | | $ | 1.57 | | $ | 4.87 | | $ | 10.09 | |
| | | | Hypothetical return | | | 2.04 | % | $ | 1,000.00 | | $ | 1,014.73 | | $ | 3.69 | | $ | 1.59 | | $ | 4.92 | | $ | 10.20 | |
| Class I | | | Actual return | | | 0.92 | % | $ | 1,000.00 | | $ | 997.10 | | $ | 3.66 | | $ | 0.92 | | $ | 0.00 | | $ | 4.58 | |
| | | | | | | 0.92 | % | $ | 1,000.00 | | $ | 1,020.28 | | $ | 3.70 | | $ | 0.93 | | $ | 0.00 | | $ | 4.63 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Large Cap Fund | | | | | | | | | | | | | | | | | | | | | | | |
| Class A | | | Actual return | | | 1.15 | % | $ | 1,000.00 | | $ | 913.80 | | $ | 2.80 | | $ | 1.49 | | $ | 1.17 | | $ | 5.46 | |
| | | | Hypothetical return | | | 1.15 | % | $ | 1,000.00 | | $ | 1,019.16 | | $ | 2.96 | | $ | 1.57 | | $ | 1.23 | | $ | 5.76 | |
| Class C | | | Actual return | | | 1.89 | % | $ | 1,000.00 | | $ | 909.70 | | $ | 2.80 | | $ | 1.49 | | $ | 4.67 | | $ | 8.96 | |
| | | | Hypothetical return | | | 1.89 | % | $ | 1,000.00 | | $ | 1,015.49 | | $ | 2.95 | | $ | 1.57 | | $ | 4.93 | | $ | 9.45 | |
| Class I | | | Actual return | | | 0.78 | % | $ | 1,000.00 | | $ | 1,084.70 | | $ | 3.05 | | $ | 0.97 | | $ | 0.00 | | $ | 4.02 | |
| | | | Hypothetical return | | | 0.78 | % | $ | 1,000.00 | | $ | 1,021.01 | | $ | 2.96 | | $ | 0.94 | | $ | 0.00 | | $ | 3.90 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Select Fund | | | | | | | | | | | | | | | | | | | | | | | |
| Class A | | | Actual return | | | 1.26 | % | $ | 1,000.00 | | $ | 907.60 | | $ | 3.27 | | $ | 1.51 | | $ | 1.17 | | $ | 5.95 | |
| | | | Hypothetical return | | | 1.26 | % | $ | 1,000.00 | | $ | 1,018.62 | | $ | 3.46 | | $ | 1.59 | | $ | 1.24 | | $ | 6.29 | |
| Class C | | | Actual return | | | 2.00 | % | $ | 1,000.00 | | $ | 902.50 | | $ | 3.27 | | $ | 1.51 | | $ | 4.67 | | $ | 9.45 | |
| | | | Hypothetical return | | | 2.00 | % | $ | 1,000.00 | | $ | 1,014.94 | | $ | 3.46 | | $ | 1.59 | | $ | 4.94 | | $ | 9.99 | |
| Class I | | | Actual return | | | 0.88 | % | $ | 1,000.00 | | $ | 907.50 | | $ | 3.27 | | $ | 0.89 | | $ | 0.00 | | $ | 4.16 | |
| | | | Hypothetical return | | | 0.88 | % | $ | 1,000.00 | | $ | 1,020.50 | | $ | 3.47 | | $ | 0.95 | | $ | 0.00 | | $ | 4.42 | |
| |
| Page 50 | Diamond Hill Funds Semi-Annual Report June 30, 2008 |
Diamond Hill Funds
Schedule of Shareholder Expenses
Hypothetical Example of a $1,000 Investment at Beginning of Period (Continued)
(Unaudited)
| | | | | Net Expense Ratio Annualized June 30, 2008 | | Beginning Account Value January 1, 2008 | | Ending Account Value June 30, 2008 | | | | | | | | Total Net Expenses | |
Long-Short Fund | | | | | | | | | | | | | | | |
| Class A | | | Actual return | | | 1.59 | % | $ | 1,000.00 | | $ | 976.10 | | $ | 4.39 | | $ | 2.20 | | $ | 1.22 | | $ | 7.81 | |
| | | Hypothetical return | | | 1.59 | % | $ | 1,000.00 | | $ | 1,016.96 | | $ | 4.48 | | $ | 2.25 | | $ | 1.24 | | $ | 7.96 | |
| Class C | | | Actual return | | | 2.33 | % | $ | 1,000.00 | | $ | 972.20 | | $ | 4.39 | | $ | 2.17 | | $ | 4.88 | | $ | 11.44 | |
| | | | Hypothetical return | | | 2.33 | % | $ | 1,000.00 | | $ | 1,013.26 | | $ | 4.48 | | $ | 2.21 | | $ | 4.98 | | $ | 11.67 | |
| Class I | | | Actual return | | | 1.21 | % | $ | 1,000.00 | | $ | 977.80 | | $ | 4.39 | | $ | 1.56 | | $ | 0.00 | | $ | 5.95 | |
| | | | Hypothetical return | | | 1.21 | % | $ | 1,000.00 | | $ | 1,018.85 | | $ | 4.48 | | $ | 1.60 | | $ | 0.00 | | $ | 6.07 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Long-Short Fund | | | | | | | | | | | | | | | | | | | | | |
| Class A | | | Actual return | | | 1.86 | % | $ | 1,000.00 | | $ | 717.30 | | $ | 4.29 | | $ | 2.59 | | $ | 1.07 | | $ | 7.95 | |
| | | | Hypothetical return | | | 1.86 | % | $ | 1,000.00 | | $ | 1,015.60 | | $ | 5.04 | | $ | 3.04 | | $ | 1.26 | | $ | 9.33 | |
| Class C | | | Actual return | | | 2.62 | % | $ | 1,000.00 | | $ | 712.80 | | $ | 4.13 | | $ | 2.88 | | $ | 4.12 | | $ | 11.13 | |
| | | | Hypothetical return | | | 2.62 | % | $ | 1,000.00 | | $ | 1,011.86 | | $ | 4.85 | | $ | 3.39 | | $ | 4.84 | | $ | 13.09 | |
| Class I | | | Actual return | | | 1.49 | % | $ | 1,000.00 | | $ | 718.20 | | $ | 4.15 | | $ | 2.19 | | $ | 0.00 | | $ | 6.35 | |
| | | | Hypothetical return | | | 1.49 | % | $ | 1,000.00 | | $ | 1,017.48 | | $ | 4.88 | | $ | 2.57 | | $ | 0.00 | | $ | 7.45 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Strategic Income Fund | | | | | | | | | | | | | | | | | | | | | |
| Class A | | | Actual return | | | 1.06 | % | $ | 1,000.00 | | $ | 982.50 | | $ | 2.43 | | $ | 1.56 | | $ | 1.22 | | $ | 5.21 | |
| | | | Hypothetical return | | | 1.06 | % | $ | 1,000.00 | | $ | 1,019.61 | | $ | 2.48 | | $ | 1.59 | | $ | 1.24 | | $ | 5.31 | |
| Class C | | | Actual return | | | 1.80 | % | $ | 1,000.00 | | $ | 977.90 | | $ | 2.43 | | $ | 1.55 | | $ | 4.85 | | $ | 8.83 | |
| | | | Hypothetical return | | | 1.80 | % | $ | 1,000.00 | | $ | 1,015.94 | | $ | 2.47 | | $ | 1.58 | | $ | 4.95 | | $ | 9.00 | |
| Class I | | | Actual return | | | 0.68 | % | $ | 1,000.00 | | $ | 983.40 | | $ | 2.43 | | $ | 0.91 | | $ | 0.00 | | $ | 3.34 | |
| | | | Hypothetical return | | | 0.68 | % | $ | 1,000.00 | | $ | 1,021.49 | | $ | 2.48 | | $ | 0.93 | | $ | 0.00 | | $ | 3.41 | |
_____________________
You can find more information about the Fund's expenses, including annual expense ratios for historical periods in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to the Fund's prospectus. The prospectus presents hypothetical shareholder costs over various time periods based upon a $10,000 investment and a return of 5% a year. This standardized example, which appears in all mutual fund prospectuses, may be useful to you in comparing the costs of investing in different funds.
| |
Diamond Hill Funds Semi-Annual Report June 30, 2008 | Page 51 |
Diamond Hill Funds
Management of the Trust (unaudited)
Listed in the charts below is basic information regarding the Trustees and officers of the Trust.
| TRUSTEES: | | | | |
Name/ Address/1 Age | Position(s) Held with Trust | Term of Office2 and Length of Time Served | Principal Occupation(s) At Least The Last 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee |
Thomas E. Line Year of Birth: 1967 | Chairman Trustee | Since November 2005 | Senior Managing Director and Chief Financial Officer, Red Capital Group (mortgage and investment banking subsidiary of National City Bank), October 2005 to the present; Vice President and Treasurer, Red Capital Group, September 2004 to October 2005; President, Focused Financial Consulting, Inc. (financial consulting), March 2002 to September 2004; Chief Operating Officer, Meeder Financial, Inc. (parent of investment adviser and mutual fund servicing companies), June 1998 to March 2002. | 7 |
| | | | | |
Elizabeth P. Kessler Year of Birth: 1968 | Trustee | Since November 2005 | Attorney - Jones Day | 7 |
| | | | | |
D’Ray Moore Year of Birth: 1959 | Trustee | Since August 2007 | Retired, Community Volunteer. Trustee of American Performance Funds from October 2004 to October 2007. | 7 |
| | | | | |
George A. Skestos Year of Birth: 1968 | Trustee | Since August 2000 | Managing Member, Arcadia Holdings, LLC (private investment banking firm), May 2001 to the present; President of Homewood Corporation (real estate development firm), January 2000 to the present. | 7 |
| PRINCIPAL OFFICERS: | | |
Name/ Address/1 Age | Position(s) Held with Trust | Term of Office and Length of Time Served | Principal Occupation(s) At Least The Last 5 Years |
James F. Laird, Jr.3 Year of Birth: 1957 | President | Since December 2001 | Chief Financial Officer of Diamond Hill Investment Group, Inc., since December 2001. President of Diamond Hill Securities since July 2001. Vice President Corporate Strategy with Nationwide Insurance from January 2001 to July 2001. Senior Vice President Product Development with Villanova Capital from February 1999 through December 2000. |
| | | | |
Gary R. Young3 Year of Birth: 1969 | Treasurer, Secretary and Chief Compliance Officer | Since May 2004 Since September 2004 | Controller of Diamond Hill Investment Group, Inc. since April 2004. Director of Mutual Fund Administration with Banc One Investment Advisors October 1998 through April 2004. Vice President and Manager of Mutual Fund Accounting and Financial Reporting with First Chicago NBD January 1996 through October 1998. |
| 1 | The address of each Trustee and Officer is 325 John H. McConnell Boulevard - Suite 200, Columbus, Ohio 43215. |
| 2 | Each Trustee is elected to serve in accordance with the Declaration of Trust and Bylaws of the Trust until his or her successor is duly elected and qualified. |
| 3 | Mr. Laird and Mr. Young are each an “interested person” of the Trust as defined in the Investment Company Act of 1940, as amended, because of their relationship with Diamond Hill Capital Management, Inc. |
The Statement of Additional Information contains additional information about the Trustees and is available without charge on www.diamond-hill.com or by calling 1-888-226-5595.
| |
| Page 52 | Diamond Hill Funds Semi-Annual Report June 30, 2008 |
[This page has been left blank intentionally.]
[This page has been left blank intentionally.]
[This page has been left blank intentionally.]
