Diamond Hill Small Mid Cap Fund Class I (DHMIX) N-CSRS Certified semi-annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-8061

Diamond Hill Funds

(Exact name of registrant as specified in charter)

325 John H. McConnell Boulevard, Suite 200, Columbus, Ohio 43215

(Address of principal executive offices) (Zip code)

James F. Laird, Jr., 325 John H. McConnell Boulevard, Suite 200, Columbus, Ohio 43215

(Name and address of agent for service)

Registrant’s telephone number, including area code: 614-255-3333

Date of fiscal year end: December 31

Date of reporting period: June 30, 2012

Item 1. Reports to Stockholders.

This material must be preceded or accompanied by a current prospectus.

Semi-Annual Report

June 30, 2012

SMALL CAP FUND

SMALL-MID CAP FUND

LARGE CAP FUND

SELECT FUND

LONG-SHORT FUND

RESEARCH OPPORTUNITIES FUND

FINANCIAL LONG-SHORT FUND

STRATEGIC INCOME FUND

Not FDIC Insured | May Lose Value | No Bank Guarantee 

Table of Contents

Letter to Shareholders	1
Mission Statement, Pledge, and Fundamental Principles	3
Financial Statements
Schedules of Investments	6
Statements of Assets & Liabilities	21
Statements of Operations	23
Statements of Changes in Net Assets	24
Financial Highlights	28
Notes to Financial Statements	36
Other Items	44
Schedule of Shareholder Expenses	46
Notice of Privacy Policy	49

CAUTIONARY STATEMENT

At Diamond Hill, we pledge that, “we will communicate with our clients about our investment performance in a manner that will allow them to properly assess whether we are deserving of their trust.” Our views and opinions regarding the investment prospects of our portfolio holdings and Funds are “forward looking statements” which may or may not be accurate over the long term. While we believe we have a reasonable basis for our opinions, actual results may differ materially from those we anticipate. Information provided in this report should not be considered a recommendation to purchase or sell any particular security.

You can identify forward looking statements by words like “believe,” “expect,” “anticipate,” or similar expressions when discussing prospects for particular portfolio holdings and/or one of the Funds. We cannot assure future results. You should not place undue reliance on forward-looking statements, which speak only as of the date of this report. We disclaim any obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise. This material is not authorized for distribution to prospective investors unless preceded or accompanied by a Prospectus. Please read the Prospectus carefully for a discussion of fees, expenses, and risks. Current performance may be lower or higher than that quoted herein. You may obtain a current copy of the Prospectus or more current performance information by calling 1-888-226-5595 or visit Diamond Hill’s website www.diamond-hill.com.

2012 Semi-Annual Report

Letter to Shareholders

Dear fellow shareholder:

We are pleased to provide this 2012 mid-year update for the Diamond Hill Funds. Since our firm’s inception, we have been very consistent in our long-term investment horizon. We use rolling five-year periods in quarterly increments to estimate the intrinsic value of securities, as well as to measure the results of our portfolio managers. Our long-term investment horizon generally results in lower turnover rates for our strategies and allows us to be disciplined in our assessment of intrinsic value, looking beyond the short-term market moves that are often emotion-based. We believe that our intrinsic value investment philosophy, absolute return focus and lack of benchmark sensitivity add the most value for investors in our strategies over time.

2012 Year-to-Date Market Review

U.S. equity markets rose during the first six months of 2012 with the Russell 1000 and Russell 2000 Indexes increasing 9.38% and 8.53%, respectively. Most of the year-to-date gains were achieved in the first quarter as investors left the safety of high-quality, low-yielding government debt and moved toward lower-quality, high-yield corporate bonds and equity securities. Small cap equity securities, generally considered to be riskier than large cap equity securities, enjoyed their best quarterly return since 2006. Greece completed its debt restructuring during the first quarter of 2012 and the U.S. economy showed continued signs of life, especially on the jobs front. With investors less concerned with macro-economic news, stocks were driven more by underlying company fundamentals. This focus on fundamentals was reflected to some degree in the sharp decline in equity market volatility.

U.S. markets reversed course in the second quarter of 2012, and volatility increased once again with the Dow Jones Industrial Average posting triple digit price moves on 22 trading days, compared to six trading days during the first quarter. In contrast to the first quarter, macro news dominated the market during the second quarter including worries about the European debt crisis and slowing economic growth. China’s economy, a significant contributor to global economic activity, showed signs of slowing as its prime export markets struggled to grow. Investors also began to focus on uncertainties surrounding the U.S. presidential election in November and the year-end expiration of tax cuts that could result in higher capital gains and dividend tax rates. Healthy corporate profits provided some support for stocks as S&P 500 companies exceeded analysts’ reduced first quarter earnings expectations and margins reached record highs.

Economic and Sector Results

During the first quarter of 2012, the U.S. economy showed continued signs of improvement, although some believe the unseasonably warm winter in much of the U.S. gave an artificial lift to economic indicators, boosting construction activity and consumer spending. In contrast, U.S. economic reports during the second quarter of 2012 showed signs of weakness, feeding concerns about a general economic slowdown. In a statement released on June 20, 2012, the Federal Open Market Committee (FOMC) downgraded its views on the economy suggesting an outlook for slower economic growth and a more pessimistic view of the labor market. In addition, the FOMC statement indicated that Federal Reserve officials see “significant downside risks” due to strains in global financial markets. The expectation is for the Federal Reserve to maintain interest rates at exceptionally low levels through 2014; however, the marginal impact of accommodative monetary policies on the economy may be diminishing.

Year-to-date, the technology, financials and consumer discretionary sectors were the best performing sectors despite a clear shift toward more defensive-oriented sectors during the second quarter. The energy sector was the only sector posting negative returns year-to-date primarily reflecting falling commodity prices. Lower oil prices reflected concerns regarding a global economic slowdown as well as an increase in North American crude oil production, while lower natural gas price reflected higher inventories after the abnormally warm winter.

Market Outlook

Our long-term economic view has not changed meaningfully. U.S. and European economies continue to diverge along with the level of fiscal and monetary stimulus. In the U.S., employment and housing appear to be stabilizing, while Europe looks to be in a recessionary environment as its peripheral countries struggle with both soaring debt costs and

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  1

fiscal restraint. Consumer discretionary spending is benefitting from various government initiatives, offsetting the effects of stubbornly high unemployment rates and long-term household deleveraging. We continue to believe that the U.S. economy will be challenged for many years by financial deleveraging and the ultimate withdrawal of fiscal and monetary stimulus. From current levels, our expectation continues to be for modestly below average equity market returns over the next five years.

It is possible that U.S. markets will continue to respond negatively to uncertainty through the November presidential elections and perhaps through the end of the year. If so, we could see continued volatility as markets move in lock step with the headline news of the day. Regardless, our investment process will not change. While stock market prices may experience extreme fluctuations on a given day, intrinsic value is far less volatile. In the short term, market prices are driven as much by emotion as economic fundamentals. Because a company’s stock market price tends to converge with its intrinsic value over sufficiently long periods of time (five years or longer), we believe the economic performance of the business and the price paid will determine the investment return, rather than short-term emotion.

In estimating intrinsic value, we strive to consider all relevant factors that might impact the discounted value of a company’s future cash flows. We will invest when we believe that we can make informed estimates and judgments about those cash flows and when our estimate of intrinsic value provides a margin of safety relative to the current market price. We believe security selection through the independent valuation of businesses and the discipline to only purchase (short) securities selling at a discount (premium) to our estimate of intrinsic value are the keys to a successful long-term track record.

Reflecting our outlook and current market valuations, our portfolios generally tend to be focused on companies with consistent, predictable cash flows. We continue to emphasize higher quality companies with strong balance sheets, quality management, and competitive positioning within the industry. With profit margins at or near their highs, we are focused on companies that we believe can sustain, or at least minimize deterioration in, profit margins. Our positioning toward higher quality securities helped relative results in the second quarter but hurt year-to-date relative returns with most strategies lagging their respective benchmarks.

Chris Bingaman, CFA	Chris Welch, CFA
Portfolio Manager,	Portfolio Manager,
Co-Chief Investment Officer	Co-Chief Investment Officer

The views expressed are those of the portfolio managers as of June 30, 2012, are subject to change, and may differ from the views of other portfolio managers or the firm as a whole. These opinions are not intended to be a forecast of future events, a guarantee of future results, or investment advice. All data referenced are from sources deemed to be reliable but cannot be guaranteed. Securities and sectors referenced should not be construed as a solicitation or recommendation or be used as the sole basis for any investment decision.

The Russell 1000 Index is a market capitalization-weighted index measuring performance of the largest 1,000 companies on a market capitalization basis, in the Russell 3000 Index. The Russell 2000 index is a market capitalization-weighted index measuring performance of the smallest 2,000 companies, on a market capitalization basis, in the Russell 3000 Index. Both the Russell 1000 and Russell 2000 Indexes are unmanaged, do not incur fees, and cannot be invested in directly.

Past performance does not guarantee future results.

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 at www.diamond-hill.com. Read the prospectus carefully before you invest. Diamond Hill Capital Management, Inc., a registered investment adviser, serves as Investment Adviser to the Diamond Hill Funds and is paid a fee for its services. The Diamond Hill Funds are distributed by BHIL Distributors, Inc. (Member FINRA), an affiliated company. Investors may obtain a copy of the current prospectus at 888-226-5595 or www.diamond-hill.com. Like all mutual funds, Diamond Hill Funds are not FDIC insured, may lose value, and have no bank guarantee.

Page  2 Diamond Hill Funds Semi-Annual Report June 30, 2012

Mission Statement, Pledge and Fundamental Principles

Mission The mission of Diamond Hill is to serve our clients through a disciplined intrinsic value-based approach to investing, while maintaining a long-term perspective, and aligning our interests with those of our clients.

To successfully pursue our mission, we are:

COMMITTED to the Graham-Buffett investment philosophy, with goals to outperform benchmarks and our peers over 5-year rolling periods and achieve absolute returns sufficient for the risk of the asset class.

DRIVEN by our conviction to create lasting value for clients and shareholders.

MOTIVATED through our ownership of Diamond Hill funds and company stock.

Investment Philosophy At Diamond Hill, the investment philosophy, which is rooted in the teachings of Benjamin Graham and the methods of Warren Buffett, drives the investment process — not the opposite.

Most simply, we invest in a company when its market price is at a discount to our appraisal of the intrinsic value of the business (or at a premium for short positions).

There are four guiding principles to our investment philosophy:

^¿   Treat every investment as a partial ownership interest in that company

^¿   Always invest with a margin of safety to ensure the protection of capital, as well as return on capital

^¿   Possess a long-term investment temperament

^¿   Recognize that market price and intrinsic value tend to converge over a reasonable period of time

“Investment is most intelligent when it is most businesslike.”

— BENJAMIN GRAHAM

Pledge Consistent with our mission & investment philosophy, we pledge the following to all of our clients:

Our investment discipline is to assess the economics of the underlying business, its management, and the price that must be paid to own a piece of it. We seek to concentrate our investments in businesses that are available at prices below intrinsic value (above intrinsic value for short positions) and are managed or controlled by trustworthy and capable people. Benjamin Graham pioneered this discipline during the 1930s and many others have practiced it with great success ever since, most notably Warren Buffett.

We will communicate with our clients about our investment performance in a manner that will allow them to properly assess whether we are deserving of their trust.

Our investment team will be comprised of people with integrity, sound experience and education, in combination with a strong work ethic and independence of thought. Especially important is that each possesses the highest level of character, business ethics and professionalism.

Our employees will enjoy a working environment that supports professional and personal growth, thereby enhancing employee satisfaction, the productivity of the firm and the experience of our clients.

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  3

“Invest With Us” means we will invest the capital you entrust to us with the same care that we invest our own capital. To this end, Diamond Hill employees and affiliates are significant investors in the same portfolios in which our clients invest and are collectively one of the largest shareholders in the Diamond Hill Funds. In addition, all Diamond Hill employees are subject to a Code of Ethics, which prohibits the purchase of any individual security that is eligible for purchase in one of Diamond Hill’s portfolios. The Code of Ethics also prohibits the purchase of third-party mutual funds that primarily invest in U.S. equity securities. Investment in the Diamond Hill mutual funds is encouraged, and third-party mutual funds can only be purchased in strategies not managed by Diamond Hill.

Our fundamental equity principles Valuation

Every share of stock has an intrinsic value that is independent of its current stock market price.

At any point in time, the stock market price may be higher or lower than intrinsic value.

Over short periods of time, the stock market price is heavily influenced by the emotions of market participants, which are far more difficult to predict than intrinsic value. While stock market prices may experience extreme fluctuations on a particular day, we believe intrinsic value is far less volatile.

Over sufficiently long periods of time, five years or longer, the stock market price tends to converge with intrinsic value.

Intrinsic Value Estimate

We believe that we can determine a reasonable approximation of intrinsic value in some cases.

Intrinsic value can be determined if we have a reasonable basis for projecting the future cash flows of a business and use an appropriate discount rate.

A five-year discounted cash flow analysis is the primary methodology used to determine whether there is a discrepancy between the current market price and our estimate of intrinsic value.

In order to forecast the amount and timing of cash flows, we concentrate on the fundamental economic drivers of the business and the management. This might encompass the level of industry competition, regulatory factors, the threat of technological obsolescence, and a variety of other factors.

The Diamond Hill investment process continually compares market price to our estimate of intrinsic value, which is updated over time as new information is available.

Suitable Investments

We only invest in a business when the stock market price is lower than our conservative assessment of per share intrinsic value (or at a premium for short positions).

We concentrate our investments in businesses whose per share intrinsic value is likely to increase. We seek to invest in businesses that possess a competitive advantage and significant growth prospects as well as outstanding managers and employees.

Risk & Return

We intend to achieve our return from both the closing of the gap between our purchase price and intrinsic value and the increase in per share intrinsic value. For short positions, an increasing intrinsic value may shorten the holding period.

We define risk as the permanent loss of capital rather than price volatility. We manage risk by investing in companies selling at a discount (premium for short positions) to our estimate of intrinsic value, with a full understanding of the fundamental drivers of intrinsic value. In addition, we carefully consider business risks that could impact our estimate of intrinsic value.

Page  4 Diamond Hill Funds Semi-Annual Report June 30, 2012

Our fundamental fixed income principles Business Analysis

We leverage the industry analysis conducted by our research team to identify attractive corporate bonds and other senior corporate securities. Our business analysis focuses on the fundamental economic drivers of the business.

We evaluate the quality of a firm’s management and their treatment of bondholders and stockholders. Managements that focus on growth without regard to return on invested capital or long-term cost of capital are more likely to destroy value for bondholders and stockholders. In contrast, managements that understand the competitive dynamics of their business and prudent capital allocation often produce value for both bondholders and stockholders.

We seek to invest in corporate bonds of companies with improving competitive positions and return on invested capital.

Valuation

We focus on the intrinsic value of the business in relation to the amount of debt in the capital structure. We also evaluate the sources and uses of cash for the business including capital expenditures, working capital, interest charges and the maturity schedule of loans and bonds.

The liquidity and expected volatility of a corporate bond are also important factors in valuation. Because of our long-term time horizon, we will invest in less liquid or more volatile securities; however, we require a higher yield as compensation.

Suitable Investments

Our core competency is the evaluation of credit risk rather than interest rate risk so we typically favor lower duration, shorter maturity corporate bonds. We focus almost entirely on the secondary market for corporate bonds rather than the primary (new issue) market.

We primarily invest in investment grade and below-investment grade (high yield) corporate bonds, including a significant allocation to defensive high yield corporate bonds (due to low duration and higher credit quality).

Risk & Return

Our objectives are to generate an attractive cash distribution in excess of the current rate of inflation and an attractive total return while minimizing the risk of a permanent loss of capital over a five-year time horizon.

We expect to achieve our return objective by investing in corporate bonds when we believe the market price discounts a greater risk of default or a greater loss upon default than is warranted. An additional source of return exists when the market price provides attractive compensation for short-term illiquidity or volatility, both of which are of less concern to a long-term investor.

Our definition of risk is a permanent loss of capital. We seek to avoid a permanent loss of capital and to earn a sufficient return on capital to grow our purchasing power.

We focus on credit risk, interest rate risk, liquidity risk, call and prepayment risk, reinvestment risk and other risks when evaluating corporate bonds.

“You simply have to behave according to what is rational than according to what is fashionable.”

— WARREN BUFFETT

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  5

Diamond Hill Small Cap Fund

Schedule of Investments

June 30, 2012 (Unaudited)

	Shares		Fair Value
Common Stocks — 87.5%
Consumer Discretionary — 12.2%
Aaron’s, Inc.		473,815	$	13,413,703
Callaway Golf Co.^		731,916		4,325,624
Carter’s, Inc.*^		88,100		4,634,060
Global Sources Ltd.*		997,942		6,586,417
Hanesbrands, Inc.*^		373,785		10,365,058
Hillenbrand, Inc.		574,910		10,566,846
K-Swiss, Inc., Class A*^		727,206		2,239,794
Live Nation Entertainment, Inc.*^		754,585		6,927,090
Steiner Leisure Ltd.*^		523,247		24,283,893
Tenneco, Inc.*^		479,570		12,862,067
				96,204,552
Consumer Staples — 8.5%
B&G Foods, Inc.^		443,040		11,784,864
Diamond Foods, Inc.^		163,510		2,917,018
Energizer Holdings, Inc.*^		431,250		32,451,563
Flowers Foods, Inc.		473,161		10,991,530
Harris Teeter Supermarkets, Inc.^		221,220		9,067,808
				67,212,783
Energy — 9.9%
Berry Petroleum Co., Class A^		548,820		21,766,201
Carrizo Oil & Gas, Inc.*^		235,411		5,534,513
Cimarex Energy Co.		241,295		13,300,180
Denbury Resources, Inc.*^		638,515		9,647,962
Exterran Holdings, Inc.*		299,658		3,820,639
Forest Oil Corp.*^		222,020		1,627,407
Lone Pine Resources, Inc.*		135,984		373,956
Southwestern Energy Co.*^		208,230		6,648,784
Whiting Petroleum Corp.*^		375,300		15,432,336
				78,151,978
Financials — 25.6%
Alleghany Corp.*		40,532		13,770,747
Assurant, Inc.^		781,180		27,216,311
Assured Guaranty Ltd.		2,416,472		34,072,255
City National Corp.		101,775		4,944,230
First Niagara Financial Group, Inc.		464,715		3,555,070
HCC Insurance Holdings, Inc.^		385,625		12,108,625
Horace Mann Educators Corp.		683,490		11,947,405

	Shares		Fair Value
Financials — 25.6% continued
Huntington Bancshares, Inc.		1,126,818	$	7,211,635
iStar Financial, Inc. REIT*^		1,963,930		12,667,348
Mid-America Apartment Communities, Inc. REIT		127,569		8,705,309
National Penn Bancshares, Inc.^		659,430		6,310,745
Old Republic International Corp.^		1,707,885		14,158,367
Popular, Inc.*		204,328		3,393,888
Redwood Trust, Inc. REIT^		445,375		5,558,280
Selective Insurance Group, Inc.		601,250		10,467,763
Sterling Bancorp		493,537		4,925,499
United Fire Group, Inc.		505,995		10,792,873
White Mountains Insurance Group Ltd.		11,351		5,922,384
Winthrop Realty Trust REIT^		378,925		4,607,728
				202,336,462
Health Care — 7.2%
Alere, Inc.*^		504,655		9,810,493
Greatbatch, Inc.*^		374,260		8,499,445
LifePoint Hospitals, Inc.*		429,225		17,589,640
Myriad Genetics, Inc.*^		794,180		18,877,659
STERIS Corp.^		62,035		1,946,038
				56,723,275
Industrials — 17.9%
AAR Corp.^		515,497		6,948,900
Alaska Air Group, Inc.*		246,500		8,849,350
Allegiant Travel Co.*^		216,945		15,116,728
Apogee Enterprises, Inc.		239,828		3,854,036
Brink's Co., The		445,435		10,325,183
Corrections Corp. of America		459,405		13,529,477
Hub Group, Inc., Class A*^		312,975		11,329,695
Kaydon Corp.^		90,730		1,940,715
Kennametal, Inc.^		711,655		23,591,363
NACCO Industries, Inc., Class A		105,325		12,244,031
Saia, Inc.*		601,720		13,171,651
Toro Co., The		152,880		11,204,575
Trinity Industries, Inc.		375,845		9,388,608
				141,494,312

Page  6 Diamond Hill Funds Semi-Annual Report June 30, 2012

Diamond Hill Small Cap Fund

Schedule of Investments (Continued)

June 30, 2012 (Unaudited)

	Shares			Fair Value
Common Stocks — 87.5% continued
Information Technology — 3.3%
Broadridge Financial Solutions, Inc.^		274,155		$	5,831,277
CoreLogic, Inc.*^		605,225			11,081,670
CSG Systems International, Inc.*^		561,947			9,710,444
					26,623,391
Utilities — 2.9%
Cleco Corp.^		308,315			12,896,816
UGI Corp.		349,690			10,291,377
					23,188,193
Total Common Stocks				$	691,934,946
Registered Investment Company —12.9%
Federated Prime Obligations Fund, 0.13%†S		102,202,011			102,202,011
Total Investment Securities — 100.4%
(Cost $718,977,601)**				$	794,136,957
Net Other Assets (Liabilities) — (0.4)%			��		(3,410,580	)
Net Assets — 100.0%				$	790,726,377

^ All or a portion of the security is on loan. The total fair value of the securities on loan, as of June 30, 2012, was $102,018,762.

* Non-income producing security.

† This security, which was purchased using cash collateral received from securities on loan, represents collateral for securities loaned as of June 30, 2012.

^S   Rate represents the daily yield on June 30, 2012.

** Represents cost for financial reporting purposes.

REIT – Real Estate Investment Trust

See accompanying Notes to Financial Statements.

Diamond Hill Small-Mid Cap Fund

Schedule of Investments

June 30, 2012 (Unaudited)

	Shares		Fair Value
Common Stocks — 91.3%
Consumer Discretionary — 7.7%
Aaron's, Inc.		18,215	$	515,666
Callaway Golf Co.^		110,620		653,764
Hanesbrands, Inc.*^		23,170		642,504
Hillenbrand, Inc.		55,045		1,011,727
Leggett & Platt, Inc.^		46,490		982,334
Staples, Inc.^		80,775		1,054,114
Steiner Leisure Ltd.*		23,690		1,099,453
Tenneco, Inc.*^		40,385		1,083,126
				7,042,688
Consumer Staples — 12.2%
B&G Foods, Inc.^		48,990		1,303,134
ConAgra Foods, Inc.		132,890		3,445,838
Energizer Holdings, Inc.*^		33,020		2,484,755
Flowers Foods, Inc.		53,947		1,253,189
Harris Teeter Supermarkets, Inc.		30,070		1,232,569
Molson Coors Brewing Co., Class B		36,035		1,499,416
				11,218,901
Energy — 12.0%
Berry Petroleum Co., Class A		27,870		1,105,324
Cimarex Energy Co.		31,525		1,737,658
Denbury Resources, Inc.*		118,768		1,794,584
Energen Corp.		20,650		931,934
Exterran Holdings, Inc.*		58,705		748,489
Noble Energy, Inc.		36,130		3,064,547
Southwestern Energy Co.*^		23,635		754,666
Whiting Petroleum Corp.*		22,950		943,704
				11,080,906
Financials — 21.6%
Alleghany Corp.*		4,864		1,652,544
Assurant, Inc.^		51,195		1,783,634
Assured Guaranty Ltd.		276,210		3,894,561
First Niagara Financial Group, Inc.^		144,610		1,106,266
First Republic Bank*		15,580		523,488
Hartford Financial Services Group, Inc., The^		103,320		1,821,532
HCC Insurance Holdings, Inc.		48,255		1,515,207
Huntington Bancshares, Inc.^		112,854		722,266
iStar Financial, Inc. REIT*^		180,655		1,165,225
National Penn Bancshares, Inc.		102,040		976,523
Popular, Inc.*		48,158		799,904
Selective Insurance Group, Inc.		38,260		666,107
SunTrust Banks, Inc.		35,085		850,109

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  7

Diamond Hill Small-Mid Cap Fund

Schedule of Investments (Continued)

June 30, 2012 (Unaudited)

	Shares		Fair Value
Common Stocks — 91.3% continued
Financials — 21.6% continued
White Mountains Insurance Group Ltd.		760	$	396,530
XL Group plc		93,815		1,973,867
				19,847,763
Health Care — 13.1%
Boston Scientific Corp.*		142,110		805,764
CareFusion Corp.*		36,790		944,767
Forest Laboratories, Inc.*		92,535		3,237,800
Greatbatch, Inc.*		41,685		946,666
Life Technologies Corp.*^		23,800		1,070,762
LifePoint Hospitals, Inc.*^		21,605		885,373
Myriad Genetics, Inc.*^		46,540		1,106,256
Quest Diagnostics, Inc.^		51,525		3,086,347
				12,083,735
Industrials — 14.7%
Alaska Air Group, Inc.*		25,685		922,092
Brink's Co., The		38,320		888,258
Corrections Corp. of America		49,625		1,461,456
Dover Corp.		55,838		2,993,475
Fluor Corp.^		15,445		762,056
Hub Group, Inc., Class A*^		33,030		1,195,686
Kennametal, Inc.		27,520		912,288
Parker Hannifin Corp.^		7,640		587,363
Southwest Airlines Co.		282,689		2,606,393
Toro Co., The		15,985		1,171,541
				13,500,608
Information Technology — 8.0%
Broadridge Financial Solutions, Inc.		83,440		1,774,769
CoreLogic, Inc.*		92,950		1,701,914
CSG Systems International, Inc.*		48,395		836,266
Juniper Networks, Inc.*		97,765		1,594,547
Linear Technology Corp.		46,570		1,459,038
				7,366,534
Utilities — 2.0%
Cleco Corp.		10,615		444,025
UGI Corp.		46,990		1,382,916
				1,826,941
Total Common Stocks			$	83,968,076

	Shares		Fair Value
Registered Investment Company —17.9%
Federated Prime Obligations Fund, 0.13%†S		16,481,184	$	16,481,184
Total Investment Securities — 109.2%
(Cost $92,264,010)**			$	100,449,260
Net Other Assets (Liabilities) — (9.2)%				(8,466,126	)
Net Assets — 100.0%			$	91,983,134

^ All or a portion of the security is on loan. The total fair value of the securities on loan, as of June 30, 2012, was $16,467,449.

* Non-income producing security.

† This security, which was purchased using cash collateral received from securities on loan, represents collateral for securities loaned as of June 30, 2012.

^S   Rate represents the daily yield on June 30, 2012.

** Represents cost for financial reporting purposes.

REIT — Real Estate Investment Trust

See accompanying Notes to Financial Statements.

Page  8 Diamond Hill Funds Semi-Annual Report June 30, 2012

Diamond Hill Large Cap Fund

Schedule of Investments

June 30, 2012 (Unaudited)

	Shares		Fair Value
Common Stocks — 96.2%
Consumer Discretionary — 8.4%
Comcast Corp., Class A		641,510	$	20,509,075
McDonald's Corp.		304,789		26,982,970
NIKE, Inc., Class B		202,220		17,750,872
VF Corp.^		199,365		26,605,259
Walt Disney Co., The^		694,495		33,683,007
				125,531,183
Consumer Staples — 14.0%
ConAgra Foods, Inc.		1,141,598		29,601,636
General Mills, Inc.		764,403		29,460,092
Kimberly-Clark Corp.^		451,410		37,814,616
PepsiCo, Inc.		581,725		41,104,688
Procter & Gamble Co., The		662,062		40,551,298
Sysco Corp.^		989,779		29,505,312
				208,037,642
Energy — 13.6%
Apache Corp.		316,663		27,831,511
Devon Energy Corp.		645,512		37,433,241
EOG Resources, Inc.		463,748		41,788,332
Exxon Mobil Corp.		409,985		35,082,417
Occidental Petroleum Corp.		704,547		60,428,996
				202,564,497
Financials — 19.0%
Charles Schwab Corp., The^		1,121,390		14,499,573
Chubb Corp., The^		420,985		30,656,128
Hartford Financial Services Group, Inc., The		2,139,900		37,726,437
JPMorgan Chase & Co.		1,010,103		36,090,980
PNC Financial Services Group, Inc.		608,520		37,186,657
Prudential Financial, Inc.		612,468		29,661,825
Travelers Cos., Inc., The		617,789		39,439,650
U.S. Bancorp^		819,003		26,339,136
Wells Fargo & Co.		925,890		30,961,762
				282,562,148
Health Care — 19.4%
Abbott Laboratories		764,732		49,302,272
Amgen, Inc.		267,545		19,541,487
Baxter International, Inc.		430,782		22,896,063
Boston Scientific Corp.*		2,383,480		13,514,332
Johnson & Johnson^		537,254		36,296,880
Medtronic, Inc.		1,175,092		45,511,313
Merck & Co., Inc.		768,425		32,081,744
Pfizer, Inc.^		2,057,242		47,316,566
Quest Diagnostics, Inc.^		372,085		22,287,891
			$	288,748,548

	Shares		Fair Value
Industrials — 11.2%
3M Co.^		339,702	$	30,437,299
Dover Corp.		474,833		25,455,797
Fluor Corp.		236,525		11,670,144
Illinois Tool Works, Inc.^		451,944		23,903,318
Parker Hannifin Corp.^		358,144		27,534,111
United Technologies Corp.		642,792		48,550,080
				167,550,749
Information Technology — 7.7%
Cisco Systems, Inc.^		1,485,818		25,511,495
International Business Machines Corp.		145,970		28,548,813
Juniper Networks, Inc.*		694,080		11,320,445
Linear Technology Corp.		447,995		14,035,683
Microsoft Corp.		1,178,185		36,040,679
				115,457,115
Materials — 2.9%
Air Products & Chemicals, Inc.		330,625		26,691,356
PPG Industries, Inc.		154,985		16,447,008
				43,138,364
Total Common Stocks			$	1,433,590,246
Registered Investment Company —12.1%
Federated Prime Obligations
Fund, 0.13%†S		180,207,753		180,207,753
Total Investment Securities — 108.3%
(Cost $1,463,152,257)**			$	1,613,797,999
Net Other Assets (Liabilities) — (8.3)%				(124,246,257	)
Net Assets — 100.0%			$	1,489,551,742

^ All or a portion of the security is on loan. The total fair value of the securities on loan, as of June 30, 2012, was $179,611,554.

* Non-income producing security.

† This security, which was purchased using cash collateral received from securities on loan, represents collateral for securities loaned as of June 30, 2012.

^S   Rate represents the daily yield on June 30, 2012.

** Represents cost for financial reporting purposes.

See accompanying Notes to Financial Statements.

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  9

Diamond Hill Select Fund

Schedule of Investments

June 30, 2012 (Unaudited)

	Shares		Fair Value
Common Stocks — 94.1%
Consumer Discretionary — 1.9%
McDonald's Corp.		11,305	$	1,000,832
Consumer Staples — 13.8%
ConAgra Foods, Inc.		70,403		1,825,550
General Mills, Inc.^		26,365		1,016,107
Kimberly-Clark Corp.^		15,110		1,265,765
PepsiCo, Inc.		15,370		1,086,044
Sysco Corp.^		65,585		1,955,089
				7,148,555
Energy — 11.2%
Apache Corp.		21,275		1,869,860
Cimarex Energy Co.		16,725		921,882
Devon Energy Corp.		24,245		1,405,968
Occidental Petroleum Corp.		18,915		1,622,339
				5,820,049
Financials — 22.9%
Assurant, Inc.^		20,325		708,123
Assured Guaranty Ltd.		118,435		1,669,933
Charles Schwab Corp., The		79,445		1,027,224
Hartford Financial Services
Group, Inc., The		89,460		1,577,180
iStar Financial, Inc. REIT*^		91,510		590,239
JPMorgan Chase & Co.		35,780		1,278,419
PNC Financial Services Group, Inc.		7,950		485,825
Prudential Financial, Inc.		38,260		1,852,932
U.S. Bancorp^		34,850		1,120,776
Wells Fargo & Co.		47,440		1,586,394
				11,897,045
Health Care — 21.1%
Abbott Laboratories^		20,870		1,345,489
Amgen, Inc.		18,310		1,337,362
Baxter International, Inc.		28,995		1,541,084
Boston Scientific Corp.*		90,750		514,553
Johnson & Johnson^		20,205		1,365,050
Medtronic, Inc.		40,526		1,569,572
Merck & Co., Inc.		27,040		1,128,920
Pfizer, Inc.		57,085		1,312,955
UnitedHealth Group, Inc.^		14,592		853,632
				10,968,617
Industrials — 13.9%
3M Co.		11,970		1,072,512
Dover Corp.		17,610		944,072
Illinois Tool Works, Inc.^		18,458		976,244
Parker Hannifin Corp.^		9,040		694,995
Southwest Airlines Co.		191,310		1,763,878
United Technologies Corp.		23,660		1,787,040
				7,238,741

	Shares		Fair Value
Information Technology — 6.9%
Cisco Systems, Inc.		30,875	$	530,123
International Business Machines Corp.		7,750		1,515,745
Microsoft Corp.		50,115		1,533,018
				3,578,886
Materials — 2.4%
Air Products & Chemicals, Inc.		15,470		1,248,893
Total Common Stocks			$	48,901,618
Registered Investment Company —16.9%
Federated Prime Obligations Fund, 0.13%†S		8,766,875		8,766,875
Total Investment Securities — 111.0%
(Cost $52,946,470)**			$	57,668,493
Net Other Assets (Liabilities) — (11.0)%				(5,695,109	)
Net Assets — 100.0%			$	51,973,384

^ All or a portion of the security is on loan. The total fair value of the securities on loan, as of June 30, 2012, was $8,699,601.

* Non-income producing security.

† This security, which was purchased using cash collateral received from securities on loan, represents collateral for securities loaned as of June 30, 2012.

^S   Rate represents the daily yield on June 30, 2012.

** Represents cost for financial reporting purposes.

REIT — Real Estate Investment Trust

See accompanying Notes to Financial Statements.

Page  10 Diamond Hill Funds Semi-Annual Report June 30, 2012

Diamond Hill Long-Short Fund

Schedule of Investments

June 30, 2012 (Unaudited)

	Shares		Fair Value
Common Stocks — 86.6%
Consumer Discretionary — 7.8%
Comcast Corp., Class A^		849,825	$	27,168,905
McDonald’s Corp.		349,364		30,929,195
NIKE, Inc., Class B		188,795		16,572,425
VF Corp.		271,080		36,175,626
Walt Disney Co., The^		954,451		46,290,874
				157,137,025
Consumer Staples — 11.8%
ConAgra Foods, Inc.		1,349,480		34,992,016
General Mills, Inc.^		920,962		35,493,876
Kimberly-Clark Corp.^		610,210		51,117,292
PepsiCo, Inc.		638,130		45,090,266
Procter & Gamble Co., The		676,995		41,465,944
Sysco Corp.^		930,172		27,728,427
				235,887,821
Energy — 12.5%
Apache Corp.		370,596		32,571,682
Cimarex Energy Co.^		234,800		12,942,176	��
Devon Energy Corp.		677,170		39,269,088
EOG Resources, Inc.^		627,810		56,571,959
Exxon Mobil Corp.^		497,233		42,548,228
Occidental Petroleum Corp.		786,123		67,425,769
				251,328,902
Financials — 18.8%
Assurant, Inc.^		450,820		15,706,569
Assured Guaranty Ltd.¯		3,826,370		53,951,817
Charles Schwab Corp., The		1,516,550		19,608,992
Chubb Corp., The^		230,925		16,815,959
Hartford Financial Services Group, Inc., The^		2,333,738		41,143,801
JPMorgan Chase & Co.		1,367,450		48,858,988
PNC Financial Services Group, Inc.		625,085		38,198,944
Prudential Financial, Inc.		650,550		31,506,136
Travelers Cos., Inc., The^		705,905		45,064,975
U.S. Bancorp¯		1,016,592		32,693,599
Wells Fargo & Co.¯		1,057,335		35,357,282
				378,907,062
Health Care — 16.1%
Abbott Laboratories¯		849,665		54,777,903
Amgen, Inc.		375,620		27,435,285
Baxter International, Inc.		505,971		26,892,359
Boston Scientific Corp.*		3,236,530		18,351,125
Johnson & Johnson^		460,440		31,107,326
Medtronic, Inc.		1,141,577		44,213,277
Merck & Co., Inc.		887,555		37,055,421

	Shares		Fair Value
Health Care — 16.1% continued
Pfizer, Inc.		2,279,820	$	52,435,860
Quest Diagnostics, Inc.^		494,675		29,631,033
				321,899,589
Industrials — 9.9%
3M Co.¯		369,240		33,083,904
Dover Corp.		599,675		32,148,577
Fluor Corp.^		292,675		14,440,585
Illinois Tool Works, Inc.^		551,360		29,161,430
Parker Hannifin Corp.^		467,780		35,962,926
United Technologies Corp.^		701,480		52,982,784
				197,780,206
Information Technology — 6.8%
Cisco Systems, Inc.		1,830,335		31,426,852
International Business Machines Corp.		247,235		48,354,221
Juniper Networks, Inc.*		918,940		14,987,912
Microsoft Corp.¯		1,323,849		40,496,541
				135,265,526
Materials — 2.9%
Air Products & Chemicals, Inc.¯		441,448		35,638,097
PPG Industries, Inc.		211,375		22,431,115
				58,069,212
Total Common Stocks			$	1,736,275,343
Registered Investment Companies — 16.2%
Federated Prime Obligations Fund, 0.13%†S		224,265,270		224,265,270
JPMorgan Prime Money Market Fund, Capital Shares, 0.17%S		100,000,000		100,000,000
Total Registered Investment Companies			$	324,265,270
Total Investment Securities — 102.8%
(Cost $1,802,502,413)**			$	2,060,540,613
Segregated Cash With Brokers — 16.9%				338,068,917

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  11

Diamond Hill Long-Short Fund

Schedule of Investments (Continued)

June 30, 2012 (Unaudited)

	Shares	Fair Value
Securities Sold Short — (15.8)%
(Proceeds $273,425,677)		$	(316,441,133	)
Net Other Assets (Liabilities) — (3.9)%			(78,426,749	)
Net Assets — 100.0%		$	2,003,741,648

^ All or a portion of the security is on loan. The total fair value of the securities on loan, as of June 30, 2012, was $223,945,349.

^¯   Security position is either entirely or partially held in a segregated account as collateral for securities sold short and aggregates to a total market value of $187,616,042.

* Non-income producing security.

† This security, which was purchased using cash collateral received from securities on loan, represents collateral for securities loaned as of June 30, 2012.

^S   Rate represents the daily yield on June 30, 2012.

** Represents cost for financial reporting purposes.

See accompanying Notes to Financial Statements.

Diamond Hill Long-Short Fund

Schedule of Investments Sold Short

June 30, 2012 (Unaudited)

	Shares		Fair Value
Common Stocks — 14.3%
Consumer Discretionary — 6.2%
Brunswick Corp.		1,414,430	$	31,428,635
Gap, Inc., The		144,745		3,960,223
Life Time Fitness, Inc.*		800,599		37,235,859
Macy's, Inc.		521,535		17,914,727
Panera Bread Co., Class A*		76,865		10,718,056
Red Robin Gourmet Burgers, Inc.*		402,845		12,290,801
Sonic Corp.*		454,550		4,554,591
Tractor Supply Co.		70,489		5,854,816
				123,957,708
Consumer Staples — 3.5%
Campbell Soup Co.		811,335		27,082,362
Colgate-Palmolive Co.		170,015		17,698,562
Kraft Foods, Inc., Class A		664,995		25,682,107
				70,463,031
Financials — 0.6%
Cincinnati Financial Corp.		213,670		8,134,417
MBIA, Inc.*		399,060		4,313,838
				12,448,255
Industrials — 1.7%
Boeing Co., The		475,585		35,335,966
Information Technology — 1.2%
Advent Software, Inc.*		230,890		6,259,428
Akamai Technologies, Inc.*		550,075		17,464,881
				23,724,309
Telecommunication Services — 1.1%
AT&T, Inc.		597,895		21,320,936
Total Common Stocks Sold Short			$	287,250,205
Exchange Traded Fund — 1.5%
iShares Russell 2000 Index Fund		366,490	$	29,190,928
Total Securities Sold Short — 15.8%
(Proceeds $273,425,677)			$	316,441,133

* Non-dividend expense producing security.

Percentages disclosed are based on total net assets of the Fund at June 30, 2012.

See accompanying Notes to Financial Statements.

Page  12 Diamond Hill Funds Semi-Annual Report June 30, 2012

Diamond Hill Research Opportunities Fund

Schedule of Investments

June 30, 2012 (Unaudited)

	Shares		Fair Value
Common Stocks — 81.7%
Consumer Discretionary — 12.9%
Autozone, Inc.*		563	$	206,717
Callaway Golf Co.		9,900		58,509
Groupon, Inc.*^		40,995		435,777
Hillenbrand, Inc.		9,772		179,609
Jarden Corp.		10,500		441,210
Liquidity Services, Inc.*		4,825		246,992
McDonald’s Corp.¯		4,100		362,973
NIKE, Inc., Class B		2,510		220,328
Staples, Inc.		23,945		312,482
Steiner Leisure Ltd.*		3,870		179,606
Target Corp.		1,770		102,996
Tempur-Pedic International, Inc.*		3,800		88,882
TJX Cos., Inc., The		3,346		143,644
Vail Resorts, Inc.		3,500		175,280
VF Corp.		1,969		262,763
				3,417,768
Consumer Staples — 6.3%
Anheuser-Busch InBev NV, SP ADR^		2,000		159,300
B&G Foods, Inc.		3,665		97,489
Core-Mark Holding Co., Inc.		6,000		288,840
Diamond Foods, Inc.^		7,200		128,448
Energizer Holdings, Inc.*		10,000		752,500
Molson Coors Brewing Co., Class B		6,000		249,660
				1,676,237
Energy — 4.9%
Apache Corp.		3,338		293,377
Cimarex Energy Co.		3,955		217,999
Devon Energy Corp.¯		6,510		377,515
Occidental Petroleum Corp.		4,775		409,552
				1,298,443
Financials — 15.3%
Assured Guaranty Ltd.		42,100		593,610
First Niagara Financial Group, Inc.^		27,000		206,550
Hartford Financial Services
Group, Inc., The		35,400		624,102
iStar Financial, Inc. REIT*^		79,150		510,517
JPMorgan Chase & Co.		6,100		217,953
Popular, Inc.*		30,700		509,927
Prudential Financial, Inc.		12,900		624,747
Redwood Trust, Inc. REIT		12,800		159,744
Wells Fargo & Co.		4,950		165,528
Winthrop Realty Trust REIT^		22,000		267,520
XL Group plc		8,600		180,944
			$	4,061,142

	Shares/ Par Value		Fair Value
Health Care — 10.8%
Alere, Inc.*^		17,000	$	330,480
Amgen, Inc.		3,698		270,102
Boston Scientific Corp.*		68,536		388,599
CareFusion Corp.*		6,200		159,216
Express Scripts Holding Co.*		2,800		156,324
Forest Laboratories, Inc.*		9,045		316,485
Life Technologies Corp.*		5,225		235,073
Medtronic, Inc.		3,180		123,161
Myriad Genetics, Inc.*^		4,740		112,670
Natus Medical, Inc.*		28,100		326,522
Quest Diagnostics, Inc.		1,800		107,820
Teva Pharmaceutical Industries Ltd., SP ADR^		9,050		356,932
				2,883,384
Industrials — 13.4%
AAR Corp.^		27,800		374,744
Alaska Air Group, Inc.*		13,000		466,700
Allegiant Travel Co.*		1,900		132,392
Corrections Corp. of America		9,200		270,940
Hub Group, Inc., Class A*		7,500		271,500
Illinois Tool Works, Inc.^		3,700		195,693
Kennametal, Inc.		6,900		228,735
Parker Hannifin Corp.^		2,940		226,027
Saia, Inc.*		17,000		372,130
Southwest Airlines Co.		90,000		829,800
United Technologies Corp.		2,610		197,134
				3,565,795
Information Technology — 18.1%
Apple Computer, Inc.*		1,125		657,000
Cisco Systems, Inc.		41,557		713,534
International Business Machines Corp.		4,694		918,052
Juniper Networks, Inc.*		37,986		619,552
Linear Technology Corp.		12,979		406,632
Microsoft Corp.¯		39,502		1,208,366
Stamps.Com, Inc.*		10,725		264,586
				4,787,722
Total Common Stocks			$	21,690,491
Corporate Bond — 0.4%
Financials — 0.4%
MGIC Investment Corp., 5.38%, 11/1/15^	$	150,000		111,938

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  13

Diamond Hill Research Opportunities Fund

Schedule of Investments (Continued)

June 30, 2012 (Unaudited)

	Shares/ Par Value		Fair Value
Registered Investment Company — 9.1%
Federated Prime Obligations Fund, 0.13%†S	$	2,425,207	$	2,425,207
Total Investment Securities — 91.2%
(Cost $22,990,162)**			$	24,227,636
Segregated Cash With Brokers — 4.3%				1,140,249
Securities Sold Short — (5.3)%
(Proceeds $1,339,269)				(1,399,156	)
Net Other Assets (Liabilities) — 9.8%				2,592,965
Net Assets — 100.0%			$	26,561,694

* Non-income producing security.

^ All or a portion of the security is on loan. The total fair value of the securities on loan, as of June 30, 2012, was $2,425,001.

^¯   Security position is either entirely or partially held in a segregated account as collateral for securities sold short and aggregates to a total market value of $1,019,969.

^†  This security, which was purchased using cash collateral received from securities on loan, represents collateral for securities loaned as of June 30, 2012.

^S   Rate represents the daily yield on June 30, 2012.

** Represents cost for financial reporting purposes.

ADR — American Depository Receipt

REIT — Real Estate Investment Trust

See accompanying Notes to Financial Statements.

Diamond Hill Research Opportunities Fund

Schedule of Investments Sold Short

June 30, 2012 (Unaudited)

	Shares		Fair Value
Common Stocks — 5.3%
Consumer Discretionary — 1.9%
Brunswick Corp.		900	$	19,998
Gap, Inc., The		2,164		59,207
Life Time Fitness, Inc.*		3,923		182,459
Macy’s, Inc.		4,389		150,762
Panera Bread Co., Class A*		200		27,888
Red Robin Gourmet Burgers, Inc.*		1,100		33,561
Sonic Corp.*		3,700		37,074
				510,949
Financials — 0.8%
Cincinnati Financial Corp.		3,800		144,666
MBIA, Inc.*		5,300		57,293
				201,959
Industrials — 0.6%
Boeing Co., The		2,000		148,600
Information Technology — 2.0%
Advent Software, Inc.*		5,024		136,201
Akamai Technologies, Inc.*		12,644		401,447
				537,648
Total Securities Sold Short — 5.3%
(Proceeds $1,339,269)			$	1,399,156

* Non-dividend expense producing security

Percentages disclosed are based on total net assets of the Fund at June 30, 2012.

See accompanying Notes to Financial Statements.

Page  14 Diamond Hill Funds Semi-Annual Report June 30, 2012

Diamond Hill Financial Long-Short Fund

Schedule of Investments

June 30, 2012 (Unaudited)

	Shares		Fair Value
Preferred Stock — 1.4%
REITs & Real Estate Management — 1.4%
iStar Financial, Inc., Series F, 0.49%		8,017	$	141,901
Total Preferred Stock			$	141,901
Common Stocks — 85.3%
Banking Services — 32.2%
City National Corp.		2,305		111,977
First Niagara Financial Group, Inc.		20,615		157,705
First of Long Island Corp., The^		7,140		206,846
First Republic Bank*		2,805		94,248
Huntington Bancshares, Inc.¯		20,826		133,286
National Penn Bancshares, Inc.		5,130		49,094
PNC Financial Services Group, Inc.¯		7,154		437,181
Popular, Inc.*^		25,940		430,863
Sterling Bancorp		15,935		159,031
SunTrust Banks, Inc.		10,452		253,252
Tower Financial Corp.*		7,810		79,272
U.S. Bancorp¯		10,823		348,068
Wells Fargo & Co.¯		23,301		779,185
				3,240,008
Capital Markets — 2.3%
Charles Schwab Corp., The		17,495		226,210
Consumer Financial Services — 0.6%
Discover Financial Services		1,800		62,244
Financial Services — 12.7%
Bank of America Corp.		8,260		67,567
Bank of New York Mellon Corp., The¯		11,514		252,732
CME Group, Inc.		415		111,266
JPMorgan Chase & Co.		16,005		571,858
Morgan Stanley¯		19,005		277,283
				1,280,706
Insurance — 27.6%
ACE Ltd.^		2,190		162,345
Assurant, Inc.¯		2,335		81,351
Assured Guaranty Ltd.		39,525		557,302
Chubb Corp., The		755		54,979
Hartford Financial Services Group, Inc., The		26,043		459,138
HCC Insurance Holdings, Inc.		3,675		115,395
Horace Mann Educators Corp.		6,903		120,664

	Shares/ Par Value		Fair Value
Insurance — 27.6% continued
Old Republic International Corp.	$	7,450	$	61,761
Prudential Financial, Inc.		9,725		470,982
Selective Insurance Group, Inc.		8,900		154,949
Travelers Cos., Inc., The		2,670		170,453
United Fire Group, Inc.		4,375		93,319
XL Group plc		13,095		275,519
				2,778,157
IT Services — 1.2%
CoreLogic, Inc.*		6,790		124,325
REITs & Real Estate Management — 8.7%
iStar Financial, Inc. REIT*^		63,415		409,027
Redwood Trust, Inc. REIT		20,215		252,283
Winthrop Realty Trust REIT^		17,330		210,733
				872,043
Total Common Stocks			$	8,583,693
Corporate Bonds — 2.5%
Banking Services — 1.1%
Synovus Financial Corp., 4.88%, 2/15/13	$	105,000		105,000
Financial Services —1.4%
MGIC Investment Corp., 5.38%, 11/1/15		190,000		141,788
Total Corporate Bonds			$	246,788
Registered Investment Company — 9.6%
Federated Prime Obligations Fund, 0.13%†S		965,154		965,154
Total Investment Securities — 98.8%
(Cost $9,135,560)**			$	9,937,536
Segregated Cash With Brokers — 6.3%				630,177
Securities Sold Short — (6.2)%
(Proceeds $536,737)				(627,322	)
Net Other Assets (Liabilities) — 1.1%				119,172
Net Assets — 100.0%			$	10,059,563

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  15

Diamond Hill Financial Long-Short Fund

Schedule of Investments (Continued)

June 30, 2012 (Unaudited)

^ All or a portion of the security is on loan. The total fair value of the securities on loan, as of June 30, 2012, was $939,135.

* Non-income producing security.

^¯   Security position is either entirely or partially held in a segregated account as collateral for securities sold short and aggregates to a total market value of $1,600,938.

^†  This security, which was purchased using cash collateral received from securities on loan, represents collateral for securities loaned as of June 30, 2012.

^S   Rate represents the daily yield on June 30, 2012.

** Represents cost for financial reporting purposes.

REIT — Real Estate Investment Trust

See accompanying Notes to Financial Statements.

Diamond Hill Financial Long-Short Fund

Schedule of Investments Sold Short

June 30, 2012 (Unaudited)

	Shares		Fair Value
Common Stocks — 6.2%
Banking Services — 4.7%
Bank of the Ozarks, Inc.		8,815	$	265,155
Home Bancshares, Inc.		4,095		125,225
Lakeland Bancorp, Inc.		4,810		50,601
WesBanco, Inc.		1,675		35,611
				476,592
Financial Services — 0.8%
Moody’s Corp.		2,130		77,852
Insurance — 0.7%
Cincinnati Financial Corp.		1,345		51,204
MBIA, Inc.*		2,005		21,674
				72,878
Total Securities Sold Short — 6.2%
(Proceeds $536,737)			$	627,322

* Non-dividend expense producing security.

Percentages disclosed are based on total net assets of the Fund at June 30, 2012.

See accompanying Notes to Financial Statements.

Page  16 Diamond Hill Funds Semi-Annual Report June 30, 2012

Diamond Hill Strategic Income Fund

Schedule of Investments

June 30, 2012 (Unaudited)

	Shares/ Par Value		Fair Value
Collateralized Debt Obligations — 0.6%
Alesco Preferred Funding III, 5/4/34*#	$	724,100	$	119,969
Alesco Preferred Funding Ltd., Series 6A, Class PPNE, 3/23/35*#		336,608		103,557
Alesco Preferred Funding VI PNN, 3/23/35*#		621,631		192,214
Fort Sheridan ABS CDO Ltd., Series 2005-1A, Class PPN2, 11/5/41*#		611,948		210,186
Taberna Preferred Funding Ltd., Series 2005-1A, Class PPN2, 7/5/35*#		1,175,564		346,745
Total Collateralized Debt Obligations			$	972,671
Preferred Stocks — 0.7%
Eagle Hospitality Properties Trust, Inc., Series A REIT, 8.25%††		21,007		60,920
Hartford Financial Services Group, Inc., Series F, 0.45%^		60,135		1,124,525
Total Preferred Stocks			$	1,185,445
Corporate Bonds — 88.6%
Consumer Discretionary — 7.5%
Expedia, Inc., 7.46%, 8/15/18	$	1,700,000		1,958,818
Goodyear Tire & Rubber Co., The, 8.25%, 8/15/20^		975,000		1,032,282
Goodyear Tire & Rubber Co., The, 8.75%, 8/15/20		2,500,000		2,665,625
Jarden Corp., 8.00%, 5/1/16		2,650,000		2,888,500
Tenneco, Inc., 7.75%, 8/15/18^		4,115,000		4,464,775
				13,010,000
Consumer Staples — 5.0%
B&G Foods, Inc., 7.63%, 1/15/18		4,918,000		5,286,850
TreeHouse Foods, Inc., 7.75%, 3/1/18		3,075,000		3,332,531
				8,619,381

	Shares/ Par Value		Fair Value
Energy — 6.1%
Anadarko Petroleum Corp., 5.95%, 9/15/16	$	4,400,000	$	4,994,898
Bristow Group, Inc., 7.50%, 9/15/17		1,665,000		1,727,437
Carrizo Oil & Gas, Inc., 8.63%, 10/15/18		3,650,000		3,814,250
				10,536,585
Financials — 24.1%
AmSouth Bank, Series AI, 4.85%, 4/1/13		1,850,000		1,873,125
CNA Financial Corp., 6.50%, 8/15/16^	$	2,165,000	$	2,437,104
Discover Financial Services, 6.45%, 6/12/17		2,700,000		3,030,680
First Horizon National Corp., 4.50%, 5/15/13		1,400,000		1,421,038
First Horizon National Corp., 5.38%, 12/15/15		3,000,000		3,166,110
First Tennessee Bank NA, 5.05%, 1/15/15		1,150,000		1,184,909
iStar Financial, Inc., 9.00%, 6/1/17^		2,000,000		1,960,000
iStar Financial, Inc., Series B, 5.70%, 3/1/14^		5,275,000		4,971,688
MGIC Investment Corp., 5.38%, 11/1/15^		4,085,000		3,048,431
Nuveen Investments, Inc., 10.50%, 11/15/15		3,000,000		3,045,000
Regions Financial Corp., 5.75%, 6/15/15		4,000,000		4,200,000
Symetra Financial Corp., 6.13%, 4/1/16††		4,750,000		4,858,105
Synovus Financial Corp., 4.88%, 2/15/13		1,530,000		1,530,000
Zions Bancorp., 7.75%, 9/23/14		4,380,000		4,750,806
				41,476,996
Health Care — 7.3%
Alere, Inc., 7.88%, 2/1/16		4,125,000		4,228,125
HealthSouth Corp., 7.25%, 10/1/18^		3,133,000		3,336,645
Mylan, Inc., 7.63%, 7/15/17††,^		4,600,000		5,060,000
				12,624,770

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  17

Diamond Hill Strategic Income Fund

Schedule of Investments (Continued)

June 30, 2012 (Unaudited)

	Shares/ Par Value		Fair Value
Industrials — 27.0%
Avis Budget Car Rental, 9.63%, 3/15/18^	$	5,800,000	$	6,351,000
BE Aerospace, Inc., 8.50%, 7/1/18		5,020,000		5,490,625
Continental Airlines, Inc., 6.75%, 9/15/15††		6,525,000		6,704,437
Corrections Corp. of America, 7.75%, 6/1/17		2,050,000		2,219,125
Crown Americas LLC/Crown Americas Capital Corp. II, 7.63%, 5/15/17		2,260,000		2,440,800
Iron Mountain, Inc., 6.63%, 1/1/16		4,075,000		4,083,150
Kansas City Southern, 8.00%, 2/1/18^		3,215,000		3,580,867
Triumph Group, Inc., 8.00%, 11/15/17		3,775,000		4,114,750
United Rentals North America, Inc., 10.88%, 6/15/16		4,110,000		4,618,613
UR Merger Sub Corp., 9.25%, 12/15/19^		2,776,000		3,081,360
Wabtec Corp., 6.88%, 7/31/13^		3,650,000		3,814,250
				46,498,977
Information Technology — 4.0%
KLA-Tencor Corp., 6.90%, 5/1/18		4,478,000		5,351,241
ManTech International Corp., 7.25%, 4/15/18		1,500,000		1,575,000
				6,926,241
Materials — 2.6%
Owens-Brockway Packaging, Inc., 7.38%, 5/15/16^		4,075,000		4,543,625
Telecommunication Services — 2.5%
Level 3 Financing, Inc., 10.00%, 2/1/18		3,950,000		4,275,875
Utilities — 2.5%
Source Gas LLC, 5.90%, 4/1/17††		4,000,000		4,218,348
Total Corporate Bonds			$	152,730,798

	Shares/ Par Value		Fair Value
Registered Investment Company — 9.7%
Federated Prime Obligations Fund, 0.13%†S	$	16,794,458	$	16,794,458
Total Investment Securities — 99.6%
(Cost $167,310,375)**			$	171,683,372
Net Other Assets (Liabilities) — 0.4%				721,257
Net Assets — 100.0%			$	172,404,629

* Non-income producing security.

^#  Restricted and illiquid securities not registered under the Securities Act of 1933 and valued at fair value by management:

	Acquisition Date		Current Cost		Fair Value		Value as a % of Net Assets
Alesco Preferred Funding III		March-04	$	724,100	$	119,969		0.1%
Alesco Preferred Funding Ltd., Series 6A, Class PPNE		March-05		336,608		103,557		0.1%
Alesco Preferred Funding VI PNN		December-04		621,631		192,214		0.1%
Fort Sheridan ABS CDO Ltd., Series 2005-1A, Class PPN2		March-05		511,640		210,186		0.1%
Taberna Preferred Funding Ltd., Series 2005-1A, Class PPN2		March-05		1,038,401		346,745		0.2%
			$	3,232,380	$	972,671		0.6%

^††  Restricted securities not registered under the Securities Act of 1933 and deemed liquid based on procedures approved by the Board of Trustees are as follows:

	Acquisition Date		Current Cost		Fair Value		Value as a % of Net Assets
Continential Airlines, Inc.		December-11	$	6,401,683	$	6,704,437		3.9%
Eagle Hospitality Properties Trust, Inc.		February-07		494,217		60,920		0.0%
Mylan, Inc.		September-10		4,897,406		5,060,000		2.9%
Source Gas LLC		March-10		3,881,691		4,218,348		2.4%
Symetra Financial Corp.		February-11		4,922,876		4,858,105		2.8%
			$	20,597,873	$	20,901,810		12.0%

^ All or a portion of the security is on loan. The total fair value of the securities on loan, as of June 30, 2012, was $16,123,080.

^†  This security, which was purchased using cash collateral received from securities on loan, represents collateral for securities loaned as of June 30, 2012.

^S   Rate represents the daily yield on June 30, 2012.

** Represents cost for financial reporting purposes.

REIT – Real Estate Investment Trust

See accompanying Notes to Financial Statements.

Page  18 Diamond Hill Funds Semi-Annual Report June 30, 2012

Diamond Hill Funds

Tabular Presentation of Schedules of Investments

June 30, 2012 (Unaudited)

The illustrations below provide each Fund’s sector allocation. We hope it will be useful to shareholders as it summarizes key information about each Fund’s investments.

Diamond Hill Small Cap Fund
Sector Allocation	% of Net Assets
Consumer Discretionary		12.2%
Consumer Staples		8.5%
Energy		9.9%
Financials		25.6%
Health Care		7.2%
Industrials		17.9%
Information Technology		3.3%
Utilities		2.9%
Cash and Cash Equivalents		12.9%
Other
Net Other Assets (Liabilities)		-0.4%
Total		100%
Diamond Hill Small-Mid Cap Fund
Sector Allocation	% of Net Assets
Consumer Discretionary		7.7%
Consumer Staples		12.2%
Energy		12.0%
Financials		21.6%
Health Care		13.1%
Industrials		14.7%
Information Technology		8.0%
Utilities		2.0%
Cash and Cash Equivalents		17.9%
Other
Net Other Assets (Liabilities)		-9.2%
Total		100.0%
Diamond Hill Large Cap Fund
Sector Allocation	% of Net Assets
Consumer Discretionary		8.4%
Consumer Staples		14.0%
Energy		13.6%
Financials		19.0%
Health Care		19.4%
Industrials		11.2%
Information Technology		7.7%
Materials		2.9%
Cash and Cash Equivalents		12.1%
Other
Net Other Assets (Liabilities)		-8.3%
Total		100.0%

Diamond Hill Select Fund
Sector Allocation	% of Net Assets
Consumer Discretionary		1.9%
Consumer Staples		13.8%
Energy		11.2%
Financials		22.9%
Health Care		21.1%
Industrials		13.9%
Information Technology		6.9%
Materials		2.4%
Cash and Cash Equivalents		16.9%
Other
Net Other Assets (Liabilities)		-11.0%
Total		100.0%

Diamond Hill Long-Short Fund
Sector Allocation	% of Long Portfolio		% of Net Assets
Long Portfolio
Consumer Discretionary		7.6%		7.8	%
Consumer Staples		11.4%		11.8	%
Energy		12.2%		12.5	%
Financials		18.4%		18.8	%
Health Care		15.6%		16.1	%
Industrials		9.6%		9.9	%
Information Technology		6.6%		6.8	%
Materials		2.8%		2.9	%
Cash and Cash Equivalents		15.8%		16.2	%
Total		100.0%
Sector Allocation	% of Short Portfolio		% of Net Assets
Short Portfolio
Consumer Discretionary		39.2%		-6.2%
Consumer Staples		22.3%		-3.5%
Financials		3.9%		-0.6%
Industrials		11.2%		-1.7%
Information Technology		7.5%		-1.2%
Telecommunication Services		6.7%		-1.1%
Exchange Traded Fund		9.2%		-1.5%
Total		100.0%
Other
Segregated Cash With Brokers				16.9%
Net Other Assets (Liabilities)				-3.9%
				100.0%

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  19

Diamond Hill Funds

Tabular Presentation of Schedules of Investments (Continued)

June 30, 2012 (Unaudited)

Diamond Hill Research Opportunities Fund
Sector Allocation	% of Long Portfolio		% of Net Assets
Long Portfolio
Consumer Discretionary		14.1%		12.9%
Consumer Staples		6.9%		6.3%
Energy		5.4%		4.9%
Financials		16.7%		15.3%
Health Care		11.9%		10.8%
Industrials		14.7%		13.4%
Information Technology		19.8%		18.1%
Corporate Bonds
Financials		0.5%		0.4%
Cash and Cash Equivalents		10.0%		9.1%
Total		100.0%
Sector Allocation	% of Short Portfolio		% of Net Assets
Short Portfolio
Consumer Discretionary		36.5%		-1.9%
Financials		14.4%		-0.8%
Industrials		10.6%		-0.6%
Information Technology		38.5%		-2.0%
		100.0%
Other
Segregated Cash With Brokers				4.3%
Net Other Assets (Liabilities)				9.8%
				100.0%

Diamond Hill Financial Long-Short Fund
Sector Allocation	% of Long Portfolio		% of Net Assets
Long Portfolio
Common Stocks
Banking Services		32.6%		32.2%
Capital Markets		2.3%		2.3%
Consumer Financial Services		0.6%		0.6%
Financial Services		12.9%		12.7%
Insurance		28.0%		27.6%
IT Services		1.3%		1.2%
REITs & Real Estate Management		8.8%		8.7%
Corporate Bonds
Banking Services		1.0%		1.1%
Financial Services		1.4%		1.4%
Preferred Stocks
REITs & Real Estate Management		1.4%		1.4%
Cash and Cash Equivalents		9.7%		9.6%
		100.0%
Sector Allocation	% of Short Portfolio		% of Net Assets
Short Portfolio
Common Stocks
Banking Services		76.0%		-4.7%
Financial Services		12.4%		-0.8%
Insurance		11.6%		-0.7%
Total		100.0%
Other
Segregated Cash With Brokers				6.3%
Net Other Assets (Liabilities)				1.1%
				100.0%

Diamond Hill Strategic Income Fund
Sector Allocation	% of Net Assets
Corporate Bonds		88.6%
Preferred Stocks		0.7%
Collateralized Debt Obligations		0.6%
Cash and Cash Equivalents		9.7%
Other
Net Other Assets (Liabilities)		0.4%
Total		100.0%

Page  20 Diamond Hill Funds Semi-Annual Report June 30, 2012

Diamond Hill Funds

Statements of Assets & Liabilities

June 30, 2012 (Unaudited)

	Small Cap Fund			Small-Mid Cap Fund		Large Cap Fund			Select Fund
Assets
Total investment securities, at cost	$	718,977,601		$	92,264,010	$	1,463,152,257		$	52,946,470
Investment securities, at value - including $102,018,762, $16,467,449, $179,611,554 and $8,699,601 of securities loaned	$	794,136,957		$	100,449,260	$	1,613,797,999		$	57,668,493
Cash		99,556,572			5,866,604		52,536,831			2,957,865
Receivable for securities sold		-			-		-			124,403
Receivable for fund shares issued		850,287			3,115,002		3,221,679			40
Receivable for dividends and interest		618,687			105,679		2,313,167			63,708
Total Assets		895,162,503			109,536,545		1,671,869,676			60,814,509
Liabilities
Payable for securities purchased		-			827,112		-			-
Payable for fund shares redeemed		1,463,910			169,470		1,020,013			30,773
Payable for return of collateral received		102,202,011			16,481,184		180,207,753			8,766,875
Payable to Investment Adviser		502,089			49,662		650,669			28,942
Payable to Administrator		151,408			14,978		289,822			9,664
Accrued distribution and service fees		107,675			10,179		134,991			4,365
Payable to accountant and custodian		9,033			826		14,686			506
Total Liabilities		104,436,126			17,553,411		182,317,934			8,841,125
Net Assets	$	790,726,377		$	91,983,134	$	1,489,551,742		$	51,973,384
Components of Net Assets
Paid-in capital	$	703,245,085		$	82,910,435	$	1,355,434,217		$	46,812,267
Accumulated net investment income (loss)		1,602,049			125,690		13,369,433			760,204
Accumulated net realized gains (losses) from investment transactions		10,719,887			761,759		(29,897,650	)		(321,110	)
Net unrealized appreciation (depreciation) on investments		75,159,356			8,185,250		150,645,742			4,722,023
Net Assets	$	790,726,377		$	91,983,134	$	1,489,551,742		$	51,973,384
Net Assets
Class A shares	$	412,785,254		$	17,542,300	$	551,464,717		$	8,605,978
Class C shares	$	31,959,454		$	8,508,044	$	30,776,708		$	3,236,191
Class I shares	$	294,224,216		$	43,968,546	$	852,404,737		$	34,479,034
Class Y shares	$	51,757,453		$	21,964,244	$	54,905,580		$	5,652,182
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value)
Class A Shares		17,185,282			1,430,369		35,566,796			855,281
Class C Shares		1,441,963			722,918		2,060,488			328,843
Class I Shares		12,109,187			3,559,665		54,719,555			3,426,478
Class Y Shares		2,128,902			1,776,860		3,521,342			561,205
Net asset value, offering (except Class A Shares) and redemption price per share:
Class A Shares	$	24.02		$	12.26	$	15.50		$	10.06
Class C Shares(A)	$	22.16		$	11.77	$	14.94		$	9.84
Class I Shares	$	24.30	��	$	12.35	$	15.58		$	10.06
Class Y Shares	$	24.31		$	12.36		15.59		$	10.07
Maximum offering price
Maximum sales charge - Class A Shares		5.00%			5.00%		5.00%			5.00%
(100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent) per share - Class A Shares	$	25.28		$	12.91	$	16.32		$	10.59

^(A)  Redemption price per share varies based upon holding period.

See accompanying Notes to Financial Statements.

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  21

Diamond Hill Funds

Statements of Assets & Liabilities

June 30, 2012 (Unaudited)

	Long-Short Fund			Research Opportunities Fund		Financial Long-Short Fund			Strategic Income Fund
Assets
Total investment securities, at cost	$	1,802,502,413		$	22,990,162	$	9,135,560		$	167,310,375
Investment securities, at value - including $223,945,349, $2,425,001, $939,135 and $16,123,080 of securities loaned	$	2,060,540,613		$	24,227,636	$	9,937,536		$	171,683,372
Cash		167,408,107			8,143,396		975,183			14,627,013
Deposit with brokers for securities sold short		338,068,917			1,140,249		630,177			-
Receivable for securities sold		-			275,865		318,753			-
Receivable for fund shares issued		3,149,768			-		1,274			97,846
Receivable for dividends and interest		2,729,663			23,251		16,242			3,051,769
Total Assets		2,571,897,068			33,810,397		11,879,165			189,460,000
Liabilities
Securities sold short, at value (proceeds $273,425,677, $1,339,269, $536,737 and $- )		316,441,133			1,399,156		627,322			-
Payable for securities purchased		20,835,662			3,402,746		-			-
Payable for expenses and fees on securities sold short		468,187			845		315			-
Payable for fund shares redeemed		4,082,719			-		214,466			123,790
Payable for return of collateral received		224,265,270			2,425,207		965,154			16,794,458
Payable to Investment Adviser		1,448,198			16,900		6,967			69,576
Payable to Administrator		397,547			3,387		2,049			34,604
Accrued distribution and service fees		194,014			241		2,139			31,205
Payable to accountant and custodian		22,690			221		1,190			1,738
Total Liabilities		568,155,420			7,248,703		1,819,602			17,055,371
Net Assets	$	2,003,741,648		$	26,561,694	$	10,059,563		$	172,404,629
Components of Net Assets
Paid-in capital	$	2,311,292,170		$	24,973,774	$	23,111,557		$	184,467,485
Accumulated net investment income (loss)		10,027,001			6,639		26,835			219,056
Accumulated net realized gains (losses) from investment transactions		(532,600,267	)		403,694		(13,790,220	)		(16,654,909	)
Net unrealized appreciation (depreciation) on investments		215,022,744			1,177,587		711,391			4,372,997
Net Assets	$	2,003,741,648		$	26,561,694	$	10,059,563		$	172,404,629
Net Assets
Class A shares	$	512,714,130		$	913,274	$	7,446,839		$	46,195,503
Class C shares	$	111,658,161		$	70,964	$	807,411		$	27,095,517
Class I shares	$	1,340,537,009		$	14,526,069	$	1,805,313		$	97,606,116
Class Y shares	$	38,832,348		$	11,051,387		-		$	1,507,493
Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value)
Class A Shares		29,820,191			51,649		626,326			4,183,583
Class C Shares		6,943,881			4,027		71,943			2,456,920
Class I Shares		77,012,163			820,446		152,150			8,855,894
Class Y Shares		2,228,599			623,798		-			136,871
Net asset value, offering (except Class A Shares) and redemption price per share:
Class A Shares	$	17.19		$	17.68	$	11.89		$	11.04
Class C Shares(A)	$	16.08		$	17.62	$	11.22		$	11.03
Class I Shares	$	17.41		$	17.71	$	11.87		$	11.02
Class Y Shares	$	17.42		$	17.72		-		$	11.01
Maximum offering price
Maximum sales charge - Class A Shares		5.00%			5.00%		5.00%			3.50%
(100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent) per share - Class A Shares	$	18.09		$	18.61	$	12.52		$	11.44

^(A)  Redemption price per share varies based upon holding period.

See accompanying Notes to Financial Statements.

Page  22 Diamond Hill Funds Semi-Annual Report June 30, 2012

Diamond Hill Funds

Statements of Operations

For the six months ended June 30, 2012 (Unaudited)

	Small Cap Fund			Small-Mid Cap Fund		Large Cap Fund			Select Fund
Investment Income
Dividends	$	5,952,803		$	512,296	$	16,359,157		$	544,987
Interest		46,191			2,910		25,967			1,383
Securities lending income		493,343			9,550		107,272			4,387
Total Investment Income		6,492,337			524,756		16,492,396			550,757
Expenses
Investment advisory fees		3,204,496			285,842		3,887,867		��	173,776
Administration fees		982,135			91,833		1,740,098			59,380
Distribution fees - Class A		536,140			23,086		688,143			10,689
Distribution and service fees - Class C		163,952			42,145		158,825			17,559
Accounting and custody fees		3,565			3,235		23,745			1,989
Net Expenses		4,890,288			446,141		6,498,678			263,393
Net Investment Income (Loss)		1,602,049			78,615		9,993,718			287,364
Realized and Unrealized Gains (Losses) on Investments
Net realized gains (losses) from security sales		9,399,780			1,499,902		33,462,947			1,175,013
Net change in unrealized appreciation (depreciation) on investments		22,843,022			1,939,193		(55,208	)		299,679
Net Realized and Unrealized Gains (Losses) on Investments		32,242,802			3,439,095		33,407,739			1,474,692
Change in Net Assets from Operations	$	33,844,851		$	3,517,710	$	43,401,457		$	1,762,056
	Long-Short Fund			Research Opportunities Fund		Financial Long-Short Fund			Strategic Income Fund
Investment Income
Dividends	$	19,311,259		$	94,078	$	106,294		$	54,494
Interest		115,667			7,552		11,894			5,312,289
Securities lending income		87,285			22,895		790			64,037
Total Investment Income		19,514,211			124,525		118,978			5,430,820
Expenses
Investment advisory fees		8,792,133			85,282		50,968			397,385
Administration fees		2,417,557			16,385		12,847			197,320
Distribution fees - Class A		645,747			788		9,363			52,978
Distribution and service fees - Class C		589,696			136		4,221			126,291
Accounting and custody fees		53,689			2,516		4,228			11,755
Expenses and fees on securities sold short		3,297,372			12,779		10,516			-
Net Expenses		15,796,194			117,886		92,143			785,729
Net Investment Income (Loss)		3,718,017			6,639		26,835			4,645,091
Realized and Unrealized Gains (Losses) on Investments
Net realized gains (losses) on security sales		70,069,164			296,736		390,581			831,689
Net realized gains (losses) on closed short positions		9,741,725			106,958		23,219			-
Net change in unrealized appreciation (depreciation) on investments		(34,413,448	)		1,177,587		762,574			2,502,677
Net Realized and Unrealized Gains (Losses) on Investments		45,397,441			1,581,281		1,176,374			3,334,366
Change in Net Assets from Operations	$	49,115,458		$	1,587,920	$	1,203,209		$	7,979,457

See accompanying Notes to Financial Statements.

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  23

Diamond Hill Funds

Statements of Changes in Net Assets

	Small Cap Fund						Small-Mid Cap Fund					Large Cap Fund						Select Fund
	For the six months ended June 30, 2012 (Unaudited)			For the year ended December 31, 2011			For the six months ended June 30, 2012 (Unaudited)		For the year ended December 31, 2011			For the six months ended June 30, 2012 (Unaudited)			For the year ended December 31, 2011			For the six months ended June 30, 2012 (Unaudited)		For the year ended December 31, 2011
From Operations
Net investment income (loss)	$	1,602,049		$	(1,965,273	)	$	78,615	$	78,384		$	9,993,718		$	15,667,010		$	287,364	$	472,841
Net realized gains (losses) from security sales		9,399,780			37,188,307			1,499,902		2,139,908			33,462,947			12,766,818			1,175,013		791,820
Net change in unrealized appreciation (depreciation) on investments		22,843,022			(95,394,991	)		1,939,193		(6,346,976	)		(55,208	)		2,373,247			299,679		(2,133,231	)
Change in Net Assets from Operations		33,844,851			(60,171,957	)		3,517,710		(4,128,684	)		43,401,457			30,807,075			1,762,056		(868,570	)
Distributions to Shareholders
From net investment income:
Class A		-			-			-		-			-			(6,627,845	)		-		(39,417	)
Class C		-			-			-		-			-			(108,384	)
Class I		-			(445,201	)		-		(40,001	)		-			(8,894,235	)		-		(266,183	)
From net realized gains on investments:
Class A		-			(16,023,649	)		-		(471,879	)		-			-
Class C		-			(1,266,765	)		-		(228,014	)		-			-
Class I		-			(11,544,894	)		-		(1,160,054	)		-			-
Change in Net Assets from Distributions to Shareholders		-			(29,280,509	)		-		(1,899,948	)		-			(15,630,464	)		-		(305,600	)
Change in net assets from capital transactions		(20,244,146	)		17,954,074			19,409,001		5,740,342			138,405,912			180,487,439			4,122,529		3,952,842
Total Change in Net Assets		13,600,705			(71,498,392	)		22,926,711		(288,290	)		181,807,369			195,664,050			5,884,585		2,778,672
Net Assets
Beginning of period		777,125,672			848,624,064			69,056,423		69,344,713			1,307,744,373			1,112,080,323			46,088,799		43,310,127
End of period	$	790,726,377		$	777,125,672		$	91,983,134	$	69,056,423		$	1,489,551,742		$	1,307,744,373		$	51,973,384	$	46,088,799
Accumulated Net Investment Income (Loss)	$	1,602,049		$	-		$	125,690	$	47,075		$	13,369,433		$	3,375,715		$	760,204	$	472,840

See accompanying Notes to Financial Statements.

Page  24 Diamond Hill Funds Semi-Annual Report June 30, 2012

Diamond Hill Funds

Statements of Changes in Net Assets

	Small Cap Fund						Small-Mid Cap Fund						Large Cap Fund						Select Fund
	For the six months ended June 30, 2012 (Unaudited)			For the year ended December 31, 2011			For the six months ended June 30, 2012 (Unaudited)			For the year ended December 31, 2011			For the six months ended June 30, 2012 (Unaudited)			For the year ended December 31, 2011			For the six months ended June 30, 2012 (Unaudited)			For the year ended December 31, 2011
From Capital Transactions:
Class A
Proceeds from shares sold	$	55,428,812		$	131,626,237		$	3,643,918		$	8,319,078		$	96,657,793		$	289,734,415		$	698,084		$	3,731,198
Reinvested distributions		-			14,169,771			-			407,144			388			6,334,730			-			36,147
Payments for shares redeemed		(93,136,067	)		(164,898,697	)		(4,377,367	)		(6,999,177	)		(159,593,016	)		(168,247,710	)		(464,089	)		(3,032,680	)
Change in Net Assets from Class A Share Transactions		(37,707,255	)		(19,102,689	)		(733,449	)		1,727,045			(62,934,835	)		127,821,435			233,995			734,665
Class C
Proceeds from shares sold		1,726,347			4,817,516			819,823			2,444,891			2,730,662			8,075,647			241,709			880,095
Reinvested distributions		-			1,125,427			-			165,889			108			90,617
Payments for shares redeemed		(2,689,456	)		(5,186,954	)		(776,981	)		(1,193,527	)		(3,409,964	)		(7,215,073	)		(758,188	)		(1,420,240	)
Change in Net Assets from Class C Share Transactions		(963,109	)		755,989			42,842			1,417,253			(679,194	)		951,191			(516,479	)		(540,145	)
Class I
Proceeds from shares sold		55,334,689			151,539,487			5,233,694			15,324,872			271,083,502			216,458,037			4,395,178			11,919,530
Reinvested distributions		134			9,502,510			-			1,007,091			-			7,384,792			-			246,689
Payments for shares redeemed		(90,568,980	)		(124,741,223	)		(6,763,168	)		(13,735,919	)		(124,342,743	)		(172,128,016	)		(5,752,805	)		(8,407,897	)
Change in Net Assets from Class I Share Transactions		(35,234,157	)		36,300,774			(1,529,474	)		2,596,044			146,740,759			51,714,813			(1,357,627	)		3,758,322
Class Y
Proceeds from shares sold		53,822,788			-			21,710,834			-			55,538,838			-			5,783,463			-
Payments for shares redeemed		(162,413	)		-			(81,752	)		-			(259,656	)		-			(20,823	)		-
Change in Net Assets from Class Y Share Transactions		53,660,375			-			21,629,082			-			55,279,182			-			5,762,640			-
Change in net assets from capital transactions	$	(20,244,146	)	$	17,954,074		$	19,409,001		$	5,740,342		$	138,405,912		$	180,487,439		$	4,122,529		$	3,952,842
Shares
Class A Shares
Issued		2,262,658			5,243,052			291,395			655,207			6,101,473			19,355,285			67,296			393,761
Reinvested		-			633,427			-			35,967			26			421,472			-			3,711
Redeemed		(3,800,144	)		(6,584,334	)		(352,240	)		(570,129	)		(10,195,135	)		(11,213,426	)		(44,987	)		(308,761	)
Change in shares outstanding		(1,537,486	)		(707,855	)		(60,845	)		121,045			(4,093,636	)		8,563,331			22,309			88,711
Class C
Issued		75,982			201,229			68,847			199,391			179,770			555,863			24,046			97,843
Reinvested		-			54,316			-			15,205			8			6,236			-			-
Redeemed		(118,085	)		(224,894	)		(65,018	)		(103,138	)		(225,893	)		(504,137	)		(76,812	)		(148,897	)
Change in shares outstanding		(42,103	)		30,651			3,829			111,458			(46,115	)		57,962			(52,766	)		(51,054	)
Class I
Issued		2,233,556			5,987,256			424,674			1,189,658			16,996,303			14,534,993			430,204			1,196,597
Reinvested		6			419,571			-			88,232			-			489,708			-			25,380
Redeemed		(3,622,243	)		(4,913,993	)		(557,071	)		(1,130,873	)		(7,868,460	)		(11,492,104	)		(557,173	)		(837,541	)
Change in shares outstanding		(1,388,681	)		1,492,834			(132,397	)		147,017			9,127,843			3,532,597			(126,969	)		384,436
Class Y
Issued		2,135,505			-			1,783,502			-			3,537,732			-			563,158			-
Redeemed		(6,603	)		-			(6,642	)		-			(16,390	)		-			(1,953	)		-
Change in shares outstanding		2,128,902			-			1,776,860			-			3,521,342			-			561,205			-
Change in shares		(839,368	)		815,630			1,587,447			379,520			8,509,434			12,153,890			403,779			422,093

See accompanying Notes to financial statements.

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  25

Diamond Hill Funds

Statements of Changes in Net Assets

	Long-Short Fund						Research Opportunities Fund		Financial Long-Short Fund						Strategic Income Fund
	For the six months ended June 30, 2012 (Unaudited)			For the year ended December 31, 2011			For the period January  3, 2012(A) through June 30, 2012 (Unaudited)		For the six months ended June 30, 2012 (Unaudited)			For the year ended December 31, 2011			For the six months ended June 30, 2012 (Unaudited)			For the year ended December 31, 2011
From Operations
Net investment income (loss)	$	3,718,017		$	6,309,019		$	6,639	$	26,835		$	14,545		$	4,645,091		$	8,635,367
Net realized gains (losses) from security sales		70,069,164			(9,156,109	)		296,736		390,581			251,461			831,689			1,292,968
Net realized gains (losses) from closed short positions		9,741,725			4,274,910			106,958		23,219			66,927			-			-
Net change in unrealized appreciation (depreciation) on investments		(34,413,448	)		50,048,450			1,177,587		762,574			(2,061,015	)		2,502,677			(2,444,055	)
Change in Net Assets from Operations		49,115,458			51,476,270			1,587,920		1,203,209			(1,728,082	)		7,979,457			7,484,280
Distributions to Shareholders
From net investment income:
Class A		-			-			-		-			(24,449	)		(1,218,881	)		(2,447,874	)
Class C		-			-			-		-			-			(636,421	)		(1,200,578	)
Class I		-			(2,198,228	)		-		-			(10,300	)		(2,692,405	)		(4,886,777	)
Class Y		-			-			-		-			-			(44,112	)		-
Change in Net Assets from Distributions to Shareholders		-			(2,198,228	)		-		-			(34,749	)		(4,591,819	)		(8,535,229	)
Change in net assets from capital transactions		108,784,940			(127,006,915	)		24,973,774		(173,248	)		(1,004,214	)		22,986,461			3,564,997
Total Change in Net Assets		157,900,398			(77,728,873	)		26,561,694		1,029,961			(2,767,045	)		26,374,099			2,514,048
Net Assets
Beginning of period		1,845,841,250			1,923,570,123			-		9,029,602			11,796,647			146,030,530			143,516,482
End of period	$	2,003,741,648		$	1,845,841,250		$	26,561,694	$	10,059,563		$	9,029,602		$	172,404,629		$	146,030,530
Accumulated Net Investment Income (Loss)	$	10,027,001		$	6,308,984		$	6,639	$	26,835		$	-		$	219,056		$	165,784

^(A)  Commencement of operations.

See accompanying Notes to Financial Statements.

Page  26 Diamond Hill Funds Semi-Annual Report June 30, 2012

Diamond Hill Funds

Statements of Changes in Net Assets

	Long-Short Fund						Research Opportunities Fund			Financial Long-Short Fund						Strategic Income Fund
	For the six months ended June 30, 2012 (Unaudited)			For the year ended December 31, 2011			For the period January 3, 2012(A) through June 30, 2012 (Unaudited)			For the six months ended June 30, 2012 (Unaudited)			For the year ended December 31, 2011			For the six months ended June 30, 2012 (Unaudited)			For the year ended December 31, 2011
From Capital Transactions:
Class A
Proceeds from shares sold	$	85,854,278		$	189,806,993		$	1,275,946		$	1,091,567		$	2,865,147		$	9,463,610		$	26,060,492
Reinvested distributions		-			-			-			-			19,203			862,650			1,692,066
Payments for shares redeemed		(99,966,036	)		(390,748,620	)		(358,203	)		(1,190,937	)		(3,541,151	)		(3,911,514	)		(30,843,853	)
Change in Net Assets from Class A Share Transactions		(14,111,758	)		(200,941,627	)		917,743			(99,370	)		(656,801	)		6,414,746			(3,091,295	)
Class C
Proceeds from shares sold		3,833,009			7,670,004			71,500			31,000			149,651			4,225,315			4,116,876
Reinvested distributions		-			-			-			-			-			325,211			613,594
Payments for shares redeemed		(14,893,253	)		(70,332,026	)		-			(120,098	)		(565,644	)		(1,708,425	)		(5,145,192	)
Change in Net Assets from Class C Share Transactions		(11,060,244	)		(62,662,022	)		71,500			(89,098	)		(415,993	)		2,842,101			(414,722	)
Class I
Proceeds from shares sold		259,306,656			521,061,532			19,444,566			399,372			1,659,056			16,442,034			15,732,671
Reinvested distributions		26			859,426			-			-			8,655			2,000,763			3,563,436
Payments for shares redeemed		(164,831,793	)		(385,324,224	)		(6,242,454	)		(384,152	)		(1,599,131	)		(6,199,099	)		(12,225,093	)
Change in Net Assets from Class I Share Transactions		94,474,889			136,596,734			13,202,112			15,220			68,580			12,243,698			7,071,014
Class Y
Proceeds from shares sold		48,445,162			-			10,782,419			-			-			1,530,756			-
Reinvested distributions		-			-			-			-			-			37,703			-
Payments for shares redeemed		(8,963,109	)		-			-			-			-			(82,543	)		-
Change in Net Assets from Class Y Share Transactions		39,482,053			-			10,782,419			-			-			1,485,916			-
Change in net assets from capital transactions	$	108,784,940		$	(127,006,915	)	$	24,973,774		$	(173,248	)	$	(1,004,214	)	$	22,986,461		$	3,564,997
Shares
Class A Shares
Issued		4,935,480			11,487,001			71,020			93,872			243,557			856,434			2,377,879
Reinvested		-			-			-			-			1,820			78,201			154,925
Redeemed		(5,742,478	)		(23,834,152	)		(19,371	)		(100,314	)		(313,720	)		(354,190	)		(2,831,935	)
Change in shares outstanding		(806,998	)		(12,347,151	)		51,649			(6,442	)		(68,343	)		580,445			(299,131	)
Class C
Issued		234,029			491,072			4,027			2,755			13,408			383,002			377,761
Reinvested		-			-			-			-			-			29,517			56,269
Redeemed		(915,173	)		(4,522,291	)		-			(10,693	)		(52,707	)		(155,030	)		(471,092	)
Change in shares outstanding		(681,144	)		(4,031,219	)		4,027			(7,938	)		(39,299	)		257,489			(37,062	)
Class I
Issued		14,707,049			31,237,550			1,182,212			33,527			135,903			1,495,600			1,443,472
Reinvested		4			50,614			-			-			824			181,730			327,465
Redeemed		(9,343,471	)		(23,318,156	)		(361,766	)		(32,627	)		(139,844	)		(564,708	)		(1,124,068	)
Change in shares outstanding		5,363,582			7,970,008			820,446			900			(3,117	)		1,112,622			646,869
Class Y
Issued		2,740,689			-			623,798			-			-			141,013			-
Reinvested		-			-			-			-			-			3,427			-
Redeemed		(512,090	)		-			-			-			-			(7,569	)		-
Change in shares outstanding		2,228,599			-			623,798			-			-			136,871			-
Change in shares		6,104,039			(8,408,362	)		1,499,920			(13,480	)		(110,759	)		2,087,427			310,676

^(A)  Commencement of operations.

See accompanying Notes to financial statements.

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  27

Small Cap Fund

Financial Highlights

Selected data for a share outstanding throughout the periods indicated

Diamond Hill Small Cap Fund Class A	Net asset value at beginning of period		Net investment income (loss)			Net realized and unrealized gains (losses) on investments			Total from investment operations			Dividends from net investment income			Distributions from net realized gains			Total distributions			Net asset value at end of period		Total return(A)			Net assets at end of period (000's)		Ratio of net expenses to average net assets			Ratio of net investment income (loss) to average net assets			Portfolio turnover rate(B)
For the six months ended June 30, 2012 (Unaudited)		23.04		0.04			0.94			0.98			-			-			-		$	24.02		4.25	%(C)	$	412,785		1.30	%(D)		0.31	%(D)		7	%(C)
For the year ended December 31, 2011		25.80		(0.08	)		(1.80	)		(1.88	)		-			(0.88	)		(0.88	)	$	23.04		(7.17	)%	$	431,313		1.33	%		(0.32	)%		28	%
For the year ended December 31, 2010		21.31		(0.05	)		4.95			4.90			-			(0.41	)		(0.41	)	$	25.80		22.99	%	$	501,237		1.37	%		(0.24	)%		35	%
For the year ended December 31, 2009		16.53		(0.01	)		4.79			4.78			-			-			-		$	21.31		28.92	%	$	438,722		1.38	%		(0.09	)%		47	%
For the year ended December 31, 2008		22.53		0.13			(5.98	)		(5.85	)		(0.12	)		(0.03	)		(0.15	)	$	16.53		(25.99	)%	$	308,832		1.35	%		0.75	%		47	%
For the year ended December 31, 2007		25.03		0.08			(1.00	)		(0.92	)		(0.08	)		(1.50	)		(1.58	)	$	22.53		(3.79	)%	$	315,378		1.39	%		0.29	%		21	%
Class C
For the six months ended June 30, 2012 (Unaudited)		21.34		(0.05	)		0.87			0.82			-			-			-		$	22.16		3.84	%(C)	$	31,959		2.05	%(D)		(0.43	)%(D)		7	%(C)
For the year ended December 31, 2011		24.14		(0.25	)		(1.67	)		(1.92	)		-			(0.88	)		(0.88	)	$	21.34		(7.83	)%	$	31,664		2.08	%		(1.07	)%		28	%
For the year ended December 31, 2010		20.12		(0.16	)		4.59			4.43			-			(0.41	)		(0.41	)	$	24.14		22.01	%	$	35,093		2.12	%		(0.96	)%		35	%
For the year ended December 31, 2009		15.72		(0.13	)		4.53			4.40			-			-			-		$	20.12		27.99	%	$	23,172		2.13	%		(0.83	)%		47	%
For the year ended December 31, 2008		21.44		(0.01	)		(5.68	)		(5.69	)		-			(0.03	)		(0.03	)	$	15.72		(26.55	)%	$	16,790		2.11	%		(0.03	)%		47	%
For the year ended December 31, 2007		24.00		(0.15	)		(0.91	)		(1.06	)		-			(1.50	)		(1.50	)	$	21.44		(4.51	)%	$	25,158		2.14	%		(0.46	)%		21	%
Class I
For the six months ended June 30, 2012 (Unaudited)		23.27		0.07			0.96			1.03			-			-			-		$	24.30		4.43	%(C)	$	294,224		1.05	%(D)		0.56	%(D)		7	%(C)
For the year ended December 31, 2011		26.01		(0.01	)		(1.82	)		(1.83	)		(0.03	)		(0.88	)		(0.91	)	$	23.27		(6.91	)%	$	314,149		1.04	%		(0.03	)%		28	%
For the year ended December 31, 2010		21.41		-	(E)		5.01			5.01			-			(0.41	)		(0.41	)	$	26.01		23.39	%	$	312,295		1.00	%		0.20	%		35	%
For the year ended December 31, 2009		16.55		0.04			4.83			4.87			(0.01	)		-			(0.01	)	$	21.41		29.43	%	$	106,561		0.99	%		0.30	%		47	%
For the year ended December 31, 2008		22.57		0.17			(5.97	)		(5.80	)		(0.19	)		(0.03	)		(0.22	)	$	16.55		(25.69	)%	$	38,967		0.98	%		1.17	%		47	%
For the year ended December 31, 2007		25.08		0.22			(1.05	)		(0.83	)		(0.18	)		(1.50	)		(1.68	)	$	22.57		(3.41	)%	$	32,057		0.98	%		0.69	%		21	%
Class Y(F)
For the period January 3, 2012 through June 30, 2012 (Unaudited)		23.27		0.06			0.98			1.04			-			-			-		$	24.31		4.47	%(C)	$	51,757		0.90	%(D)		0.89	%(D)		7	%(C)

^(A)  Total returns shown exclude the effect of applicable sales charges.

^(B)  Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued.

^(C)  Not annualized.

^(D)  Annualized.

^(E)  Amount is less than $0.005.

^(F)  Class Y commenced public offering and investment operations on January 3, 2012.

See accompanying Notes to Financial Statements.

Page  28 Diamond Hill Funds Semi-Annual Report June 30, 2012

Small-Mid Cap Fund

Financial Highlights

Selected data for a share outstanding throughout the periods indicated

Diamond Hill Small-Mid Cap Fund Class A	Net asset value at beginning of period		Net investment income (loss)			Net realized and unrealized gains (losses) on investments			Total from investment operations			Dividends from net investment income			Distributions from net realized gains			Total distributions			Net asset value at end of period		Total return(A)			Net assets at end of period (000's)		Ratio of net expenses to average net assets			Ratio of net investment income (loss) to average net assets			Ratio of gross expenses to average net assets			Portfolio turnover rate(B)
For the six months ended June 30, 2012 (Unaudited)		11.71		-	(C)		0.55			0.55			-			-			-		$	12.26		4.70	%(D)	$	17,542		1.26	%(E)		0.10	%(E)		1.26	%(E)		13	%(D)
For the year ended December 31, 2011		12.56		-	(C)		(0.53	)		(0.53	)		-			(0.32	)		(0.32	)	$	11.71		(4.19	)%	$	17,461		1.28	%		-	%(F)		1.28	%		48	%
For the year ended December 31, 2010		10.22		(0.04	)		2.38			2.34			-			-	(C)		-	(C)	$	12.56		23.03	%	$	17,216		1.32	%		(0.17	)%		1.32	%		35	%
For the year ended December 31, 2009		7.26		0.03			2.93			2.96			-			-			-		$	10.22		40.77	%	$	8,616		1.33	%		0.17	%		1.33	%		74	%
For the year ended December 31, 2008		10.50		0.10			(3.25	)		(3.15	)		(0.09	)		-			(0.09	)	$	7.26		(30.01	)%	$	7,557		1.32	%		1.11	%		1.32	%		91	%
For the year ended December 31, 2007		10.91		0.06			(0.15	)		(0.09	)		(0.04	)		(0.28	)		(0.32	)	$	10.50		(0.91	)%	$	10,549		1.33	%		0.54	%		1.34	%		39	%
Class C
For the six months ended June 30, 2012 (Unaudited)		11.28		(0.04	)		0.53			0.49			-			-			-		$	11.77		4.34	%(D)	$	8,508		2.01	%(E)		(0.64	)%(E)		2.01	%(E)		13	%(D)
For the year ended December 31, 2011		12.21		(0.06	)		(0.55	)		(0.61	)		-			(0.32	)		(0.32	)	$	11.28		(4.89	)%	$	8,110		2.02	%		(0.74	)%		2.02	%		48	%
For the year ended December 31, 2010		10.00		(0.05	)		2.26			2.21			-			-	(C)		-	(C)	$	12.21		22.14	%	$	7,417		2.07	%		(0.90	)%		2.07	%		35	%
For the year ended December 31, 2009		7.15		(0.04	)		2.89			2.85			-			-			-		$	10.00		39.86	%	$	4,361		2.08	%		(0.59	)%		2.08	%		74	%
For the year ended December 31, 2008		10.40		0.04			(3.22	)		(3.18	)		(0.07	)		-			(0.07	)	$	7.15		(30.54	)%	$	2,920		2.05	%		0.48	%		2.05	%		91	%
For the year ended December 31, 2007		10.85		(0.02	)		(0.15	)		(0.17	)		-			(0.28	)		(0.28	)	$	10.40		(1.65	)%	$	2,388		2.08	%		(0.21	)%		2.09	%		39	%
Class I
For the six months ended June 30, 2012 (Unaudited)		11.78		0.02			0.55			0.57			-			-			-		$	12.35		4.84	%(D)	$	43,969		1.00	%(E)		0.36	%(E)		1.00	%(E)		13	%(D)
For the year ended December 31, 2011		12.61		0.04			(0.54	)		(0.50	)		(0.01	)		(0.32	)		(0.33	)	$	11.78		(3.86	)%	$	43,485		0.99	%		0.29	%		0.99	%		48	%
For the year ended December 31, 2010		10.23		0.02			2.37			2.39			(0.01	)		-	(C)		(0.01	)	$	12.61		23.43	%	$	44,711		0.95	%		0.22	%		0.95	%		35	%
For the year ended December 31, 2009		7.25		0.04			2.96			3.00			(0.02	)		-			(0.02	)	$	10.23		41.36	%	$	26,110		0.94	%		0.54	%		0.94	%		74	%
For the year ended December 31, 2008		10.50		0.13			(3.26	)		(3.13	)		(0.12	)		-			(0.12	)	$	7.25		(29.77	)%	$	14,815		0.93	%		1.49	%		0.93	%		91	%
For the year ended December 31, 2007		10.91		0.09			(0.13	)		(0.04	)		(0.09	)		(0.28	)		(0.37	)	$	10.50		(0.44	)%	$	18,478		0.93	%		0.97	%		0.94	%		39	%
Class Y(G)
For the period January 3, 2012 through June 30, 2012 (Unaudited)		11.78		0.01			0.57			0.58			-			-			-		$	12.36		4.92	%(D)	$	21,964		0.85	%(E)		0.71	%(E)		0.85	%(E)		13	%(D)

^(A)  Total returns shown exclude the effect of applicable sales charges.

^(B)  Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued.

^(C)  Amount is less than $0.005.

^(D)  Not annualized.

^(E)  Annualized.

^(F)  Amount is less than 0.005%.

^(G)  Class Y commenced public offering and investment operations on January 3, 2012.

See accompanying Notes to Financial Statements.

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  29

Large Cap Fund

Financial Highlights

(For a share of beneficial interest outstanding throughout each period)

Diamond Hill Large Cap Fund Class A	Net asset value at beginning of period			Net investment income (loss)			Net realized and unrealized gains (losses) on investments			Total from investment operations			Dividends from net investment income			Distributions from net realized gains			Total distributions				Net asset value at end of period			Total return(A)			Net assets at end of period (000's)			Ratio of net expenses to average net assets			Ratio of net investment income (loss) to average net assets			Ratio of gross expenses to average net assets			Portfolio turnover rate(B)
For the six months ended June 30, 2012 (Unaudited)		$	14.96		0.10			0.44			0.54			-			-			-				$	15.50		3.61	%(C)		$	551,465		1.06	%(D)		1.27	%(D)		1.06	%(D)		18	%(C)
For the year ended December 31, 2011		$	14.78		0.18	(E)		0.17			0.35			(0.17	)		-			(0.17	)			$	14.96		2.35	%		$	593,124		1.12	%		1.19	%		1.12	%		16	%
For the year ended December 31, 2010		$	13.62		0.10			1.17			1.27			(0.11	)		-			(0.11	)			$	14.78		9.29	%		$	459,659		1.18	%		0.90	%		1.18	%		16	%
For the year ended December 31, 2009		$	10.47		0.10			3.06			3.16			(0.01	)		-			(0.01	)			$	13.62		30.21	%		$	344,456		1.18	%		0.91	%		1.18	%		31	%
For the year ended December 31, 2008		$	16.25		0.15			(5.69	)		(5.54	)		(0.14	)		(0.10	)		(0.24	)			$	10.47		(34.06	)%		$	254,688		1.16	%		1.23	%		1.16	%		28	%
For the year ended December 31, 2007		$	16.36		0.21			0.69			0.90			(0.19	)		(0.82	)		(1.01	)			$	16.25		5.42	%		$	309,617		1.18	%		1.15	%		1.19	%		44	%
Class C
For the six months ended June 30, 2012 (Unaudited)		$	14.46		0.04			0.44			0.48			-			-			-				$	14.94		3.32	%(C)		$	30,777		1.81	%(D)		0.52	%(D)		1.81	%(D)		18	%(C)
For the year ended December 31, 2011		$	14.29		0.06			0.16			0.22			(0.05	)		-			(0.05	)			$	14.46		1.55	%		$	30,465		1.87	%		0.45	%		1.87	%		16	%
For the year ended December 31, 2010		$	13.18		0.02			1.09			1.11			-	(F)		-			-	(F)			$	14.29		8.45	%		$	29,274		1.93	%		0.15	%		1.93	%		16	%
For the year ended December 31, 2009		$	10.19		0.02			2.97			2.99			-			-			-				$	13.18		29.34	%		$	25,454		1.93	%		0.17	%		1.93	%		31	%
For the year ended December 31, 2008		$	15.84		0.06			(5.55	)		(5.49	)		(0.06	)		(0.10	)		(0.16	)			$	10.19		(34.64	)%		$	20,656		1.91	%		0.48	%		1.91	%		28	%
For the year ended December 31, 2007		$	15.99		0.06			0.70			0.76			(0.09	)		(0.82	)		(0.91	)			$	15.84		4.68	%		$	27,084		1.93	%		0.43	%		1.93	%		44	%
Class I
For the six months ended June 30, 2012 (Unaudited)		$	15.01		0.10			0.47			0.57			-			-			-				$	15.58		3.80	%(C)		$	852,405		0.80	%(D)		1.54	%(D)		0.80	%(D)		18	%(C)
For the year ended December 31, 2011		$	14.82		0.22			0.17			0.39			(0.20	)		-			(0.20	)			$	15.01		2.60	%		$	684,156		0.83	%		1.49	%		0.83	%		16	%
For the year ended December 31, 2010		$	13.65		0.13			1.20			1.33			(0.16	)		-			(0.16	)	��		$	14.82		9.72	%		$	623,147		0.81	%		1.29	%		0.81	%		16	%
For the year ended December 31, 2009		$	10.49		0.11			3.11			3.22			(0.06	)		-			(0.06	)			$	13.65		30.71	%		$	347,998		0.79	%		1.28	%		0.79	%		31	%
For the year ended December 31, 2008		$	16.29		0.23			(5.74	)		(5.51	)		(0.19	)		(0.10	)		(0.29	)			$	10.49		(33.82	)%		$	141,416		0.78	%		1.67	%		0.78	%		28	%
For the year ended December 31, 2007		$	16.40		0.25			0.73			0.98			(0.27	)		(0.82	)		(1.09	)			$	16.29		5.88	%		$	84,129		0.78	%		1.60	%		0.78	%		44	%
Class Y(G)
For the period January 3, 2012 through June 30, 2012 (Unaudited)		$	15.01		0.08			0.50			0.58			-			-			-				$	15.59		3.86	%(C)		$	54,906		0.65	%(D)		1.62	%(D)		0.65	%(D)		18	%(C)

^(A)  Total returns shown exclude the effect of applicable sales charges.

^(B)  Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued.

^(C)  Not annualized.

^(D)  Annualized.

^(E)  Net investment income (loss) per share has been calculated using the average daily shares outstanding during the period.

^(F)  Amount is less than $0.005.

^(G)  Class Y commenced public offering and investment operations on January 3, 2012.

See accompanying Notes to Financial Statements.

Page  30 Diamond Hill Funds Semi-Annual Report June 30, 2012

Select Fund

Financial Highlights

(For a share of beneficial interest outstanding throughout each period)

Diamond Hill Select Fund Class A	Net asset value at beginning of period			Net investment income (loss)			Net realized and unrealized gains (losses) on investments			Total from investment operations			Dividends from net investment income			Distributions from net realized gains			Total distributions			Net asset value at end of period			Total return(A)			Net assets at end of period (000's)			��	Ratio of net expenses to average net assets			Ratio of net investment income (loss) to average net assets			Ratio of gross expenses to average net assets			Portfolio turnover rate(B)
For the six months ended June 30, 2012 (Unaudited)		$	9.69		0.05			0.32			0.37			-			-			-			$	10.06		3.82	%(C)		$	8,606			1.21	%(D)		1.01	%(D)		1.21	%(D)		19	%(C)
For the year ended December 31, 2011		$	9.99		0.08			(0.33	)		(0.25	)		(0.05	)		-			(0.05	)		$	9.69		(2.53	)%		$	8,071			1.23	%		0.92	%		1.23	%		26	%
For the year ended December 31, 2010		$	9.02		0.07			0.91			0.98			(0.01	)		-			(0.01	)		$	9.99		10.83	%		$	7,437			1.28	%		0.67	%		1.28	%		18	%
For the year ended December 31, 2009		$	6.82		0.04			2.16			2.20			-			-			-			$	9.02		32.26	%		$	6,910			1.28	%		0.60	%		1.28	%		57	%
For the year ended December 31, 2008		$	10.61		0.09			(3.55	)		(3.46	)		(0.08	)		(0.25	)		(0.33	)		$	6.82		(32.68	)%		$	4,030			1.28	%		1.10	%		1.28	%		85	%
For the year ended December 31, 2007		$	11.17		0.12			0.53			0.65			(0.09	)		(1.12	)		(1.21	)		$	10.61		5.63	%		$	6,841			1.29	%		0.90	%		1.29	%		55	%
Class C
For the six months ended June 30, 2012 (Unaudited)		$	9.51		0.03			0.30			0.33			-			-			-			$	9.84		3.47	%(C)		$	3,236			1.96	%(D)		0.26	%(D)		1.96	%(D)	��	19	%(C)
For the year ended December 31, 2011		$	9.83		0.02			(0.34	)		(0.32	)		-			-			-			$	9.51		(3.26	)%		$	3,630			1.98	%		0.15	%		1.98	%		26	%
For the year ended December 31, 2010		$	8.94		(0.01	)		0.90			0.89			-			-			-			$	9.83		9.96	%		$	4,254			2.03	%		(0.08	)%		2.03	%		18	%
For the year ended December 31, 2009		$	6.78		0.01			2.15			2.16			-			-			-			$	8.94		31.86	%		$	3,472			2.03	%		0.07	%		2.03	%		57	%
For the year ended December 31, 2008		$	10.56		0.02			(3.55	)		(3.53	)		-			(0.25	)		(0.25	)		$	6.78		(33.48	)%		$	3,366			2.01	%		0.28	%		2.02	%		85	%
For the year ended December 31, 2007		$	11.16		0.02			0.54			0.56			(0.04	)		(1.12	)		(1.16	)		$	10.56		4.78	%		$	6,912			2.03	%		0.23	%		2.04	%		55	%
Class I
For the six months ended June 30, 2012 (Unaudited)		$	9.68		0.07			0.31			0.38			-			-			-			$	10.06		3.93	%(C)		$	34,479			0.95	%(D)		1.26	%(D)		0.95	%(D)		19	%(C)
For the year ended December 31, 2011		$	9.98		0.11			(0.33	)		(0.22	)		(0.08	)		-			(0.08	)		$	9.68		(2.25	)%		$	34,388			0.95	%		1.21	%		0.95	%		26	%
For the year ended December 31, 2010		$	9.02		0.07			0.94			1.01			(0.05	)		-			(0.05	)		$	9.98		11.19	%		$	31,619			0.91	%		1.05	%		0.91	%		18	%
For the year ended December 31, 2009		$	6.75		0.05			2.22			2.27			-			-			-			$	9.02		33.63	%		$	23,122			0.89	%		1.29	%		0.89	%		57	%
For the year ended December 31, 2008		$	10.59		0.11			(3.58	)		(3.47	)		(0.12	)		(0.25	)		(0.37	)		$	6.75		(32.85	)%		$	7,489			0.87	%		1.58	%		0.87	%		85	%
For the year ended December 31, 2007		$	11.16		0.13			0.57			0.70			(0.15	)		(1.12	)		(1.27	)		$	10.59		6.10	%		$	4,667			0.88	%		1.37	%		0.89	%		55	%
Class Y(E)
For the period January 3, 2012 through June 30, 2012 (Unaudited)		$	9.68		0.04			0.35			0.39			-			-			-			$	10.07		4.03	%(C)		$	5,652			0.81	%(D)		1.39	%(D)		0.81	%(D)		19	%(C)

^(A)  Total returns shown exclude the effect of applicable sales charges.

^(B)  Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued.

^(C)  Not annualized.

^(D)  Annualized.

^(E)  Class Y commenced public offering and investment operations on January 3, 2012.

See accompanying Notes to Financial Statements.

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  31

Long-Short Fund

Financial Highlights

(For a share of beneficial interest outstanding throughout each period)

Diamond Hill Long-Short Fund Class A	Net asset value at beginning of period			Net investment income (loss)			Net realized and unrealized gains (losses) on investments			Total from investment operations			Dividends from net investment income			Distributions from net realized gains			Total distributions			Net asset value at end of period			Total return(A)			Net assets at end of period (000's)			Ratio of net expenses to average net assets			Ratio of net investment income (loss) to average net assets			Ratio of net expenses to average net assets, excluding expenses and fees on securities sold short			Portfolio turnover rate(B)
For the six months ended June 30, 2012 (Unaudited)		$	16.75		0.02			0.42			0.44			-			-			-			$	17.19		2.63	%(C)		$	512,714		1.75	%(D)		0.25	%(D)		1.41	%(D)		26	%(C)
For the year ended December 31, 2011		$	16.26		0.03	(E)		0.46			0.49			-			-			-			$	16.75		3.01	%		$	512,870		1.67	%		0.21	%		1.43	%		50	%
For the year ended December 31, 2010		$	16.31		-	(F)		(0.05	)		(0.05	)		-			-			-			$	16.26		(0.31	)%		$	698,670		1.81	%		0.01	%		1.48	%		43	%
For the year ended December 31, 2009		$	13.83		-	(F)		2.48			2.48			-			-			-			$	16.31		17.93	%		$	965,382		1.85	%		-	%(G)		1.48	%		44	%
For the year ended December 31, 2008		$	18.40		0.16			(4.52	)		(4.36	)		(0.15	)		(0.06	)		(0.21	)		$	13.83		(23.65	)%		$	1,110,982		1.62	%		0.95	%		1.45	%		59	%
For the year ended December 31, 2007		$	18.57		0.44			0.16			0.60			(0.42	)		(0.35	)		(0.77	)		$	18.40		3.14	%		$	965,259		1.69	%		2.46	%		1.48	%		59	%
Class C
For the six months ended June 30, 2012 (Unaudited)		$	15.72		(0.04	)		0.40			0.36			-			-			-			$	16.08		2.29	%(C)		$	111,658		2.50	%(D)		(0.50	)%(D)		2.16	%(D)		26	%(C)
For the year ended December 31, 2011		$	15.37		(0.08	)(E)		0.43			0.35			-			-			-			$	15.72		2.28	%		$	119,850		2.43	%		(0.54	)%		2.19	%		50	%
For the year ended December 31, 2010		$	15.54		(0.19	)		0.02			(0.17	)		-			-			-			$	15.37		(1.09	)%		$	179,214		2.56	%		(0.73	)%		2.23	%		43	%
For the year ended December 31, 2009		$	13.28		(0.12	)		2.38			2.26			-			-			-			$	15.54		17.02	%		$	256,445		2.60	%		(0.76	)%		2.23	%		44	%
For the year ended December 31, 2008		$	17.65		0.04			(4.32	)		(4.28	)		(0.03	)		(0.06	)		(0.09	)		$	13.28		(24.26	)%		$	278,069		2.37	%		0.22	%		2.20	%		59	%
For the year ended December 31, 2007		$	17.88		0.27			0.16			0.43			(0.31	)		(0.35	)		(0.66	)		$	17.65		2.41	%		$	303,392		2.44	%		1.72	%		2.23	%		59	%
Class I
For the six months ended June 30, 2012 (Unaudited)		$	16.93		0.04			0.44			0.48			-			-			-			$	17.41		2.84	%(C)		$	1,340,537		1.49	%(D)		0.51	%(D)		1.15	%(D)		26	%(C)
For the year ended December 31, 2011		$	16.42		0.09	(E)		0.45			0.54			(0.03	)		-			(0.03	)		$	16.93		3.29	%		$	1,213,122		1.39	%		0.52	%		1.15	%		50	%
For the year ended December 31, 2010		$	16.42		0.04			(0.03	)		0.01			(0.01	)		-			(0.01	)		$	16.42		0.03	%		$	1,045,686		1.46	%		0.42	%		1.11	%		43	%
For the year ended December 31, 2009		$	13.87		0.05			2.50			2.55			-	(F)		-			-	(F)		$	16.42		18.39	%		$	733,909		1.47	%		0.37	%		1.10	%		44	%
For the year ended December 31, 2008		$	18.46		0.19			(4.51	)		(4.32	)		(0.21	)		(0.06	)		(0.27	)		$	13.87		(23.36	)%		$	657,662		1.24	%		1.33	%		1.08	%		59	%
For the year ended December 31, 2007		$	18.63		0.48			0.19			0.67			(0.49	)		(0.35	)		(0.84	)		$	18.46		3.59	%		$	500,425		1.29	%		2.87	%		1.08	%		59	%
Class Y(H)
For the period January 3, 2012 through June 30, 2012 (Unaudited)		$	16.93		0.03			0.46			0.49			-			-			-			$	17.42		2.89	%(C)		$	38,832		1.34	%(D)		0.69	%(D)		1.00	%(D)		26	%(C)

^(A)  Total returns shown exclude the effect of applicable sales charges.

^(B)  Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued.

^(C)  Not annualized.

^(D)  Annualized.

^(E)  Net investment income (loss) per share has been calculated using the average daily shares outstanding during the period.

^(F)  Amount is less than $0.005.

^(G)  Amount is less than 0.005%

^(H)  Class Y commenced public offering and investment operations on January 3, 2012.

See accompanying Notes to Financial Statements.

Page  32 Diamond Hill Funds Semi-Annual Report June 30, 2012

Research Opportunities Fund

Financial Highlights

(For a share of beneficial interest outstanding throughout each period)

Diamond Hill Research Opportunities Fund(C) Class A	Net asset value at beginning of period		Net investment income (loss)			Net realized and unrealized gains (losses) on investments		Total from investment operations		Net asset value at end of period		Total return(A)			Net assets at end of period (000's)		Ratio of net expenses to average net assets			Ratio of net investment income (loss) to average net assets			Ratio of net expenses to average net assets, excluding expenses and fees on securities sold short			Portfolio turnover rate(B)
For the period January 3, 2012 through June 30, 2012 (Unaudited)	$	16.60		(0.01	)		1.09		1.08	$	17.68		6.51	%(D)	$	913		1.67	%(E)		(0.11	)%(E)		1.52	%(E)		25	%(D)
Class C
For the period January 3, 2012 through June 30, 2012 (Unaudited)	$	16.60		(0.02	)		1.04		1.02	$	17.62		6.14	%(D)	$	71		2.41	%(E)		(0.62	)%(E)		2.26	%(E)		25	%(D)
Class I
For the period January 3, 2012 through June 30, 2012 (Unaudited)	$	16.60		-	(F)		1.11		1.11	$	17.71		6.69	%(D)	$	14,526		1.42	%(E)		0.04	%(E)		1.27	%(E)		25	%(D)
Class Y
For the period January 3, 2012 through June 30, 2012 (Unaudited)	$	16.60		0.01			1.11		1.12	$	17.72		6.75	%(D)	$	11,051		1.27	%(E)		0.16	%(E)		1.12	%(E)		25	%(D)

^(A)  Total returns shown exclude the effect of applicable sales charges.

^(B)  Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued.

^(C)  Fund commenced public offering and investment operations on January 3, 2012.

^(D)  Not annualized.

^(E)  Annualized.

^(F)  Amount is less than $0.005.

See accompanying Notes to Financial Statements.

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  33

Financial Long-Short Fund

Financial Highlights

(For a share of beneficial interest outstanding throughout each period)

Financial Long-Short Fund Class A	Net asset value at beginning of period			Net investment income (loss)			Net realized and unrealized gains (losses) on investments			Total from investment operations			Dividends from net investment income			Distributions from net realized gains			Total distributions			Net asset value at end of period			Total return(A)			Net assets at end of period (000's)			Ratio of net expenses to average net assets			Ratio of net investment income (loss) to average net assets			Ratio of gross expenses to average net assets			Ratio of net expenses to average net assets, excluding expenses and fees on securities sold short			Portfolio turnover rate(B)
For the six months ended June 30, 2012 (Unaudited)		$	10.51		0.03			1.35			1.38			-			-			-			$	11.89		13.13	%(C)		$	7,447		1.79	%(D)		0.51	%(D)		1.79	%(D)		1.59	%(D)		25	%(C)
For the year ended December 31, 2011		$	12.18		0.02			(1.65	)		(1.63	)		(0.04	)		-			(0.04	)		$	10.51		(13.39	)%		$	6,650		1.66	%		0.14	%		1.66	%		1.54	%		52	%
For the year ended December 31, 2010		$	10.43		0.02			1.73			1.75			-			-			-			$	12.18		16.78	%		$	8,543		1.71	%		0.09	%		1.71	%		1.56	%		60	%
For the year ended December 31, 2009		$	8.48		0.16	(E)		1.94			2.10			(0.15	)		-			(0.15	)		$	10.43		24.73	%		$	8,053		1.77	%		1.92	%		1.77	%		1.58	%		85	%
For the year ended December 31, 2008		$	16.20		0.45			(7.74	)		(7.29	)		(0.42	)		(0.01	)		(0.43	)		$	8.48		(44.98	)%		$	7,596		1.85	%		2.37	%		1.85	%		1.56	%		74	%
For the year ended December 31, 2007		$	20.90		0.49			(4.04	)		(3.55	)		(0.47	)		(0.68	)		(1.15	)		$	16.20		(17.05	)%		$	27,597		1.81	%		2.17	%		1.82	%		1.59	%		55	%
Class C							��
For the six months ended June 30, 2012 (Unaudited)		$	9.96		(0.01	)		1.27			1.26			-			-			-			$	11.22		12.65	%(C)		$	807		2.54	%(D)		(0.11	)%(D)		2.54	%(D)		2.34	%(D)		25	%(C)
For the year ended December 31, 2011		$	11.58		(0.07	)(E)		(1.55	)		(1.62	)		-			-			-			$	9.96		(13.99	)%		$	795		2.41	%		(0.60	)%		2.41	%		2.29	%		52	%
For the year ended December 31, 2010		$	9.99		(0.10	)		1.69			1.59			-			-			-			$	11.58		15.92	%		$	1,381		2.46	%		(0.66	)%		2.46	%		2.31	%		60	%
For the year ended December 31, 2009		$	8.12		0.09	(E)		1.84			1.93			(0.06	)		-			(0.06	)		$	9.99		23.81	%		$	1,295		2.52	%		1.17	%		2.52	%		2.33	%		85	%
For the year ended December 31, 2008		$	15.60		0.21			(7.31	)		(7.10	)		(0.37	)		(0.01	)		(0.38	)		$	8.12		(45.49	)%		$	1,866		2.58	%		1.76	%		2.58	%		2.30	%		74	%
For the year ended December 31, 2007		$	20.10		0.34			(3.88	)		(3.54	)		(0.28	)		(0.68	)		(0.96	)		$	15.60		(17.68	)%		$	3,287		2.56	%		1.42	%		2.57	%		2.34	%		55	%
Class I
For the six months ended June 30, 2012 (Unaudited)		$	10.47		0.05			1.35			1.40			-			-			-			$	11.87		13.37	%(C)		$	1,805		1.54	%(D)		0.87	%(D)		1.54	%(D)		1.33	%(D)		25	%(C)
For the year ended December 31, 2011		$	12.14		0.07			(1.67	)		(1.60	)		(0.07	)		-			(0.07	)		$	10.47		(13.21	)%		$	1,584		1.37	%		0.47	%		1.37	%		1.25	%		52	%
For the year ended December 31, 2010		$	10.37		0.08			1.71			1.79			(0.02	)		-			(0.02	)		$	12.14		17.29	%		$	1,873		1.34	%		0.45	%		1.34	%		1.19	%		60	%
For the year ended December 31, 2009		$	8.43		0.21	(E)		1.92			2.13			(0.19	)		-			(0.19	)		$	10.37		25.31	%		$	671		1.38	%		2.45	%		1.38	%		1.19	%		85	%
For the year ended December 31, 2008		$	16.18		0.63			(7.89	)		(7.26	)		(0.48	)		(0.01	)		(0.49	)		$	8.43		(44.79	)%		$	709		1.47	%		2.80	%		1.47	%		1.18	%		74	%
For the year ended December 31, 2007		$	20.90		0.37			(3.83	)		(3.46	)		(0.58	)		(0.68	)		(1.26	)		$	16.18		(16.61	)%		$	2,464		1.41	%		2.96	%		1.42	%		1.18	%		55	%

^(A)  Total returns shown exclude the effect of applicable sales charges.

^(B)  Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued.

^(C)  Not annualized.

^(D)  Annualized.

^(E)  Net investment income (loss) per share has been calculated using the average daily shares outstanding during the period.

See accompanying Notes to Financial Statements.

Page  34 Diamond Hill Funds Semi-Annual Report June 30, 2012

Strategic Income Fund

Financial Highlights

(For a share of beneficial interest outstanding throughout each period)

Diamond Hill Strategic Income Fund Class A	Net asset value at beginning of period			Net investment income (loss)		Net realized and unrealized gains (losses) on investments			Total from investment operations			Dividends from net investment income			Distributions from net realized gains			Return of capital			Total distributions			Net asset value at end of period			Total return(A)			Net assets at end of period (000's)			Ratio of net expenses to average net assets			Ratio of net investment income to average net assets			Ratio of gross expenses to average net assets			Portfolio turnover rate(B)
For the six months ended June 30, 2012 (Unaudited)		$	10.79		0.31		0.25			0.56			(0.31	)		-			-			(0.31	)		$	11.04		5.25	%(C)		$	46,196		1.02	%(D)		5.81	%(D)		1.02	%(D)		15	%(C)
For the year ended December 31, 2011		$	10.86		0.65		(0.09	)		0.56			(0.63	)		-			-			(0.63	)		$	10.79		5.21	%		$	38,895		1.02	%		5.80	%		1.02	%		36	%
For the year ended December 31, 2010		$	10.15		0.64		0.69			1.33			(0.62	)		-			-			(0.62	)		$	10.86		13.33	%		$	42,360		1.06	%		5.81	%		1.06	%		68	%
For the year ended December 31, 2009		$	8.28		0.69		1.86			2.55			(0.68	)		-			-			(0.68	)		$	10.15		32.13	%		$	41,048		1.08	%		7.64	%		1.08	%		83	%
For the year ended December 31, 2008		$	10.41		0.71		(2.19	)		(1.48	)		(0.64	)		-			(0.01	)		(0.65	)		$	8.28		(14.79	)%		$	31,268		1.06	%		6.60	%		1.06	%		95	%
For the year ended December 31, 2007		$	11.71		0.68		(1.20	)		(0.52	)		(0.67	)		(0.11	)		-			(0.78	)		$	10.41		(4.78	)%		$	54,435		1.08	%		6.15	%		1.09	%		142	%
Class C
For the six months ended June 30, 2012 (Unaudited)		$	10.78		0.27		0.25			0.52			(0.27	)		-			-			(0.27	)		$	11.03		4.89	%(C)		$	27,096		1.77	%(D)		5.06	%(D)		1.77	%(D)		15	%(C)
For the year ended December 31, 2011		$	10.85		0.56		(0.08	)		0.48			(0.55	)		-			-			(0.55	)		$	10.78		4.48	%		$	23,717		1.77	%		5.06	%		1.77	%		36	%
For the year ended December 31, 2010		$	10.15		0.54		0.70			1.24			(0.54	)		-			-			(0.54	)		$	10.85		12.39	%		$	24,264		1.81	%		5.06	%		1.81	%		68	%
For the year ended December 31, 2009		$	8.27		0.58		1.91			2.49			(0.61	)		-			-			(0.61	)		$	10.15		31.34	%		$	22,120		1.83	%		6.88	%		1.83	%		83	%
For the year ended December 31, 2008		$	10.41		0.65		(2.21	)		1.56			(0.57	)		-			(0.01	)		(0.58	)		$	8.27		(15.51	)%		$	14,730		1.80	%		5.87	%		1.81	%		95	%
For the year ended December 31, 2007		$	11.70		0.62		(1.22	)		(0.60	)		(0.58	)		(0.11	)		-			(0.69	)		$	10.41		(5.43	)%		$	24,638		1.83	%		5.35	%		1.84	%		142	%
Class I
For the six months ended June 30, 2012 (Unaudited)		$	10.77		0.33		0.25			0.58			(0.33	)		-			-			(0.33	)		$	11.02		5.38	%(C)		$	97,606		0.76	%(D)		6.07	%(D)		0.76	%(D)		15	%(C)
For the year ended December 31, 2011		$	10.84		0.67		(0.08	)		0.59			(0.66	)		-			-			(0.66	)		$	10.77		5.53	%		$	83,418		0.73	%		6.10	%		0.73	%		36	%
For the year ended December 31, 2010		$	10.13		0.64		0.72			1.36			(0.65	)		-			-			(0.65	)		$	10.84		13.77	%		$	76,893		0.69	%		6.18	%		0.69	%		68	%
For the year ended December 31, 2009		$	8.26		0.73		1.85			2.58			(0.71	)		-			-			(0.71	)		$	10.13		32.69	%		$	64,407		0.69	%		8.05	%		0.69	%		83	%
For the year ended December 31, 2008		$	10.40		0.70		(2.15	)		(1.45	)		(0.68	)		-			(0.01	)		(0.69	)		$	8.26		(14.55	)%		$	50,185		0.67	%		7.05	%		0.68	%		95	%
For the year ended December 31, 2007		$	11.69		0.71		(1.17	)		(0.46	)		(0.72	)		(0.11	)		-			(0.83	)		$	10.40		(4.31	)%		$	70,205		0.68	%		6.62	%		0.68	%		142	%
Class Y(E)
For the period January 3, 2012 through June 30, 2012 (Unaudited)		$	10.77		0.32		0.25			0.57			(0.33	)		-			-			(0.33	)		$	11.01		5.36	%(C)		$	1,507		0.61	%(D)		6.22	%(D)		0.61	%(D)		15	%(C)

^(A)  Total returns shown exclude the effect of applicable sales charges.

^(B)  Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued.

^(C)  Not annualized.

^(D)  Annualized.

^(E)  Class Y commenced public offering and investment operations on January 3, 2012.

See accompanying Notes to Financial Statements.

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  35

Diamond Hill Funds

Notes to Financial Statements

June 30, 2012 (Unaudited)

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 Research Opportunities Fund (“Research Opportunities 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.

With the exception of the Financial Long-Short Fund, the Funds offer four classes of shares: Class A, Class C, Class I and Class Y. The Financial Long-Short Fund offers 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, exchange privileges of each class of shares and sales charges. Class A has a maximum sales charge on purchases of 5.00% as a percentage of the original purchase price except for Strategic Income Fund which is 3.50%. Class C has a contingent deferred sales charge of 1.00% for shares redeemed within a year of the purchase date.

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 — The Funds record their investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation techniques used by the Funds maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. 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 Funds’ own assumptions in determining the fair value of investments)

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. Investments in other investment companies are valued at their reported net asset value. In each of these types of situations, valuations are typically categorized as Level 1 in the fair value hierarchy.

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 debt investments of sufficient credit quality maturing in less than 61 days are valued at amortized cost, which approximates fair value. In each of these situations, valuations are typically categorized as Level 2 in the fair value hierarchy.

Securities for which market quotations are not readily available (e.g., an approved pricing service does not provide a price, certain stale prices, or an event occurs that materially affects the furnished price) are valued by the Fair Value Committee. In these cases, the Fair Value 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

Page  36 Diamond Hill Funds Semi-Annual Report June 30, 2012

Diamond Hill Funds

Notes to Financial Statements (Continued)

June 30, 2012 (Unaudited)

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. Depending on the source and relative significance of the valuation inputs in these instances, the valuations for these securities may be classified as Level 2 or Level 3 in the fair value hierarchy.

Approximately 0.6% of the Strategic Income Fund’s net assets are being valued using estimates provided by the Fair Value Committee. The Fair Value Committee relied heavily upon analysis of the Strategic Income Fund’s portfolio manager in the absence of readily ascertainable fair values. These values may differ from the values that would have been used had a ready market for these securities existed, and the differences could be material.

Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The Trust determines transfers between fair value hierarchy levels at the reporting period end. There were no transfers between Levels 1, 2 or 3 during the period ended June 30, 2012.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, short-term debt securities of sufficient credit quality maturing in less than 61 days are valued using amortized cost in accordance with rules under the 1940 Act. 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.

The following is a summary of the inputs used to value the Funds’ investments as of June 30, 2012:

	Level 1 – Quoted Prices			Level 2 – Other Significant Observable Inputs
Investments in Securities: (Assets)
Small Cap Fund
Common Stocks*	$	691,934,946		$	-
Registered Investment Company		102,202,011			-
Total		794,136,957			-
Small-Mid Cap Fund
Common Stocks*		83,968,076			-
Registered Investment Company		16,481,184			-
Total		100,449,260			-
Large Cap Fund
Common Stocks*		1,433,590,246			-
Registered Investment Company		180,207,753			-
Total		1,613,797,999			-
Select Fund
Common Stocks*		48,901,618			-
Registered Investment Company		8,766,875			-
Total		57,668,493			-
Long-Short Fund
Common Stocks*		1,736,275,343			-
Registered Investment Companies		324,265,270			-
Total		2,060,540,613	��		-
Research Opportunities Fund
Common Stocks*		21,690,491			-
Corporate Bond*		-			111,938
Registered Investment Company		2,425,207			-
Total		24,115,698			111,938

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  37

Diamond Hill Funds

Notes to Financial Statements (Continued)

June 30, 2012 (Unaudited)

	Level 1 – Quoted Prices			Level 2 – Other Significant Observable Inputs
Financial Long-Short Fund
Preferred Stock*		141,901			-
Common Stocks*		8,583,693			-
Corporate Bonds*		-			246,788
Registered Investment Company		965,154			-
Total		9,690,748			246,788
Strategic Income Fund
Collateralized Debt Obligations		-			972,671
Preferred Stocks*		1,124,525			60,920
Corporate Bonds*		-			152,730,798
Registered Investment Company		16,794,458			-
Total		17,918,983			153,764,389
Investments in Securities Sold Short: (Liabilities)
Long-Short Fund
Common Stocks*		(287,250,205	)		-
Exchange Traded Fund		(29,190,928	)		-
Total		(316,441,133	)		-
Research Opportunities Fund
Common Stocks*		(1,399,156	)		-
Financial Long-Short Fund
Common Stocks*		(627,322	)		-

* See Schedule of Investments and Schedule of Investments Sold Short for industry classification.

Short sales — The Long-Short Fund, Research Opportunities Fund, Financial Long-Short Fund and Strategic Income Fund are permitted to make short sales of securities. Short sales are effective when it is believed that the price of a particular security will decline, and involves the sale of a security which the Fund does not own in hope of purchasing the same security at a later date at a lower price. To make delivery to the buyer, a Fund must borrow the security, and the Fund is obligated to return the security to the lender, which is accomplished by a later purchase of the security by the Fund. 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.

A Fund will incur a loss as a result of a short sale if the price of the security increases between the date of the short sale and the date on which the Fund purchases the security to replace the borrowed security. The use of short sales may cause a Fund to have higher expenses (especially dividend expenses) than those of other equity mutual funds. Short sales are speculative transactions and involve special risks, including greater reliance on the ability of Diamond Hill Capital Management, Inc. to accurately anticipate the future value of a security.

Securities lending — Under the terms of the securities lending agreement with Citibank, N.A. (“Citibank”), Citibank 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 each Fund’s Schedule 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, the Funds pay Citibank 15% of the net securities lending income plus any costs and other charges incurred by each Fund with Citibank to be paid as credits. The securities lending income is first used to offset custody and accounting fees for each Fund and any remaining amount is paid to each Fund as securities lending income.

Page  38 Diamond Hill Funds Semi-Annual Report June 30, 2012

Diamond Hill Funds

Notes to Financial Statements (Continued)

June 30, 2012 (Unaudited)

As of June 30, 2012, the value of securities loaned and the collateral held were as follows:

	Fair Value of Securities Loaned		Fair Value of Collateral Received
Small Cap Fund	$	102,018,762	$	102,202,011
Small-Mid Cap Fund		16,467,449		16,481,184
Large Cap Fund		179,611,554		180,207,753
Select Fund		8,699,601		8,766,875
Long-Short Fund		223,945,349		224,265,270
Research Opportunities Fund		2,425,001		2,425,207
Financial Long-Short Fund		939,135		965,154
Strategic Income Fund		16,123,080		16,794,458

Security transactions — Throughout the reporting period, investment transactions are recorded no later than the first business day following trade date. For financial reporting purposes, investments are reported on trade date on the last business day of the reporting period. 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. 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 once the issuers provide information about the actual composition of the distributions.

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. The Funds have analyzed their tax positions taken on Federal income tax returns for all open tax years (tax years ended December 31, 2008 through 2011) and have concluded that no provision for income tax is required in their financial statements.

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, Research Opportunities Fund, and Financial Long-Short Fund. 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. These differences are primarily due to differing treatments for paydown gains and losses on mortgage-backed securities, expiring capital loss carry-forwards 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.

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  39

Diamond Hill Funds

Notes to Financial Statements (Continued)

June 30, 2012 (Unaudited)

Investment Transactions

For the six months ended June 30, 2012, 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	$	46,657,852	$	58,065,913
Small-Mid Cap Fund		23,133,414		9,471,468
Large Cap Fund		358,666,293		243,645,608
Select Fund		11,749,231		8,986,232
Long-Short Fund		475,115,548		436,943,139
Research Opportunities Fund		12,937,551		3,625,253
Financial Long-Short Fund		2,242,830		2,765,953
Strategic Income Fund		39,684,791		22,473,398

The Funds pay commissions on the purchase and sale of investment securities. The commissions are treated as transaction costs and, therefore, 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. No portion of the commissions paid during the period was used to purchase so-called “soft dollar” services as defined in Section 28(e) of the Securities Exchange Act of 1934. The Funds paid the following commissions during the six months ended June 30, 2012:

	Total Commissions		Total Commissions Used to Pay for Soft Dollars Services		Commissions as a % of Average Net Assets
Small Cap Fund	$	162,426	$	-		0.02	%
Small-Mid Cap Fund		36,169		-		0.05
Large Cap Fund		376,668		-		0.03
Select Fund		14,720		-		0.03
Long-Short Fund		675,368		-		0.03
Research Opportunities Fund		12,033		-		0.07
Financial Long-Short Fund		5,771		-		0.06
Strategic Income Fund		-		-		0.00

Investment Advisory Fees and Other Transactions with Affiliates

The Small Cap Fund, Small-Mid Cap Fund, Large Cap Fund, Select Fund, Long-Short Fund, Research Opportunities 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%, 0.55%, 0.70%, 0.90%, 1.00%, 1.00% and 0.50% of the Fund’s 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 0.25% for Class A Shares, Class C Shares and Class I Shares and 0.10% for Class Y shares of each class’ average daily net assets. Prior to February 29, 2012, the fees paid by Class A shares, Class C shares and Class I shares were paid at an annual rate of 0.26%, 0.26% and 0.24% of each class’ average daily net assets, respectively. These administrative fees are used to pay most of the Funds’ operating expenses except advisory, distribution, fund accounting, custody, brokerage, taxes, interest and 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 and Class Y shares are not subject to any distribution or shareholder-servicing fees. The Trust entered into a Distribution Agreement on behalf of the Funds with BHIL Distributors, Inc. (“Distributor”), an affiliate of DHCM. Pursuant to the Distribution Agreement, the Distributor acts as principal underwriter of each Fund’s shares.

Page  40 Diamond Hill Funds Semi-Annual Report June 30, 2012

Diamond Hill Funds

Notes to Financial Statements (Continued)

June 30, 2012 (Unaudited)

For the six months ended June 30, 2012, the Distributor received the following amounts in sales commissions from the sales of Class A shares of the Funds as follows:

Small Cap Fund	$	7,447
Small-Mid Cap Fund		1,161
Large Cap Fund		11,369
Select Fund		215
Long-Short Fund		8,142
Research Opportunities Fund		-
Financial Long-Short Fund		1,119
Strategic Income Fund		1,902

DHCM, as the financing agent for Class C shares, received contingent deferred sales charges relating to the redemptions of Class C shares of the Funds for the six months ended June 30, 2012 as follows:

Small Cap Fund	$	550
Small-Mid Cap Fund		273
Large Cap Fund		4,350
Select Fund		-
Long-Short Fund		1,115
Research Opportunities Fund		-
Financial Long-Short Fund		74
Strategic Income Fund		427

Certain Officers of the Trust are affiliated with DHCM or the Distributor. Such Officers receive no compensation from the Funds for serving in their respective roles.

Trustee Fees

The Independent Trustees are compensated for their services to the Funds by DHCM as part of the administration services agreement. Collectively, the Independent Trustees were paid $85,500 in fees during the six months ended June 30, 2012.

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 may differ from the character of distributions shown on the Statements of Changes in Net Assets, as items such as short-term capital gains are treated as ordinary income for tax purposes.

The tax character of distributions paid during 2011 was as follows:

	Small Cap Fund		Small-Mid Cap Fund		Large Cap Fund		Select Fund
	2011		2011		2011		2011
Distributions paid from:
Ordinary income	$	1,610,834	$	40,001	$	15,630,464	$	305,600
Long-term capital gains		27,669,675		1,859,946		-		-
Total distributions	$	29,280,509	$	1,899,947	$	15,630,464	$	305,600
	Long-Short Fund		Financial Long-Short Fund		Strategic Income Fund
Distributions paid from:
Ordinary income	$	2,198,228	$	34,749	$	8,535,229
Total distributions	$	2,198,228	$	34,749	$	8,535,229

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  41

Diamond Hill Funds

Notes to Financial Statements (Continued)

June 30, 2012 (Unaudited)

The following information is computed on a tax basis for each item as of December 31, 2011:

	Small Cap Fund			Small-Mid Cap Fund			Large Cap Fund			Select Fund
Tax cost of portfolio investments	$	667,737,465		$	63,363,940		$	1,153,668,469		$	43,216,606
Gross unrealized appreciation		113,481,471			9,355,819			160,441,714			5,929,057
Gross unrealized depreciation		(61,354,106	)		(3,761,291	)		(11,143,071	)		(2,410,093	)
Net unrealized appreciation		52,127,365			5,594,528			149,298,643			3,518,964
Undistributed ordinary income		469,137			47,075			3,375,715			472,840
Undistributed capital gains		1,039,939			-			-			-
Capital loss carryforwards		-			-			(61,958,289	)		(488,344	)
Qualified Late Year Capital Losses deferred		-			(86,614	)		-			(104,398	)
Accumulated earnings	$	53,636,441		$	5,554,989		$	90,716,069		$	3,399,062
	Long-Short Fund			Financial Long-Short Fund			Strategic Income Fund
Tax cost of portfolio investments	$	1,099,563,910		$	8,241,992		$	147,442,171
Gross unrealized appreciation		337,841,589			1,034,823			5,927,941
Gross unrealized depreciation		(92,420,874	)		(1,353,962	)		(4,081,702	)
Net unrealized appreciation (depreciation)		245,420,715			(319,139	)		1,846,239
Undistributed ordinary income		6,308,984			-			189,865
Capital loss carryforwards		(608,395,679	)		(13,835,471	)		(17,486,599	)
Qualified Late Year Capital Losses deferred		-			(100,593	)		-
Accumulated deficit	$	(356,665,980	)	$	(14,255,203	)	$	(15,450,495	)

The difference between book basis and tax basis net unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.

As of the latest tax year ended December 31, 2011, the following Funds had capital loss carry forwards (“CLFCs”) as summarized in the tables below. CLCFs subject to expiration are applied as short-term capital loss regardless of whether the originating capital loss was short term or long term. CLCFs that are not subject to expiration must be utilized before those that are subject to expire.

CLCFs subject to expiration:

	Amount		Expires December 31,
Large Cap Fund	$	20,679,102		2016
		41,279,187		2017
	$	61,958,289
Select Fund	$	488,344		2017
Long-Short Fund	$	101,454,175		2016
		417,551,311		2017
		69,177,097		2018
	$	588,182,583
Financial Long-Short Fund	$	7,295,343		2016
		6,540,128		2017
	$	13,835,471
Strategic Income Fund	$	12,138,231		2016
		5,271,854		2017
	$	17,410,085

Page  42 Diamond Hill Funds Semi-Annual Report June 30, 2012

Diamond Hill Funds

Notes to Financial Statements (Continued)

June 30, 2012 (Unaudited)

CLCFs not subject to expiration:

	Short-Term Amount		Long-Term Amount		Total
Long-Short Fund	$	20,213,096	$	-	$	20,213,096
Strategic Income Fund		-		76,514		76,514

As of the latest tax year ended December 31, 2011, Large Cap Fund, Select Fund and Financial Long-Short Fund utilized $13,197,470, $905,868 and $498,301, respectively, of CLCFs.

The Funds also elected to defer until their subsequent tax year capital losses incurred after October 31, 2011. The CLCFs and “Qualified Late Year Capital Loses” losses may be utilized in future years to offset net realized capital gains, if any, prior to distributing such gains to shareholders.

The tax character of current year distributions paid and the tax basis of the current components of accumulated earnings (deficit) and any net CLCFs will be determined at the end of the current tax year.

As of June 30, 2012, the Funds’ federal tax cost of investment securities and net unrealized appreciation (depreciation) were as follows:

Fund	Federal Tax Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation			Net Unrealized Appreciation (Depreciation)
Small Cap Fund	$	719,166,569	$	127,399,723	$	(52,429,335	)	$	74,970,388
Small-Mid Cap Fund		92,822,750		10,000,244		(2,373,734	)		7,626,510
Large Cap Fund		1,464,472,120		172,701,289		(23,375,410	)		149,325,879
Select Fund		53,819,355		5,817,943		(1,968,805	)		3,849,138
Long-Short Fund		1,806,480,715		300,367,195		(46,307,297	)		254,059,898
Research Opportunities Funs		23,015,817		1,841,328		(629,509	)		1,211,819
Financial Long-Short Fund		9,423,235		1,417,060		(902,759	)		514,301
Strategic Income Fund		167,334,456		7,546,612		(3,197,696	)		4,348,916

Line of Credit

The Trust has entered into an uncommitted short-term, demand note line of credit agreement with Citibank, N.A. Under the agreement, the Trust may borrow up to $20 million. The purpose of the agreement is to meet temporary or emergency cash needs, including redemption requests that might otherwise require the untimely disposition of securities. There were no loans outstanding for the period.

Subsequent Events

The Funds evaluated events from June 30, 2012 through the date that these financial statements were issued. There were no subsequent events to report that would have a material impact on the Funds’ financial statements.

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  43

Diamond Hill Funds

Other Items

June 30, 2012

(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 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 fourth 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 8, 2012, 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 trailing five year performance history of each applicable fund as of March 31, 2012, noting that five of the seven funds beat their benchmark and that three Funds ranked in the 1st quartile of their respective peer group, one ranked in the 2^nd quartile and four in the 3rd quartile. The Trustees also noted that the Adviser continued to invest significant resources in its investment team, by growing its research team to 18 associates over the last seven years 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 March 16, 2012 were below the average 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 below the average total expenses of comparable funds within each Fund’s respective peer group.

d) With limited exceptions, investment advisory fees charged by the Adviser to the Funds were comparable to the 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 (who is also the Administrator) has a history of voluntarily reducing its fees under the Administration Agreement when asset growth allows for the sharing of the economies of scale realized by the Administrator.

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.

Page  44 Diamond Hill Funds Semi-Annual Report June 30, 2012

Diamond Hill Funds

Other Items

June 30, 2012

(Unaudited) (Continued)

g) The ancillary benefits received by the Adviser as a result of its relationship with the Funds. The Trustees 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 noted that the Adviser also has the ability to leverage services to other affiliated and non-affiliated funds. 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, including long-term performance, (2) the reasonableness of the investment advisory fees compared to those paid by comparable mutual funds, (3) the reasonableness of the total expenses compared to those paid by comparable mutual funds, (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, 2012 Page  45

Diamond Hill Funds

Schedule of Shareholder Expenses

Hypothetical Example of a $1,000 Investments at Beginning of Period

(Unaudited)

As a Fund shareholder, you may incur two types of costs: (1) transaction costs, including wire redemption fees and sales charges (loads) as applicable; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transactional costs or other fees that may be apply, such as fees for low balance accounts. Therefore, the examples are useful in comparing ongoing costs only and will not help you determine the relative total cost of owning different funds. In addition, if these transactional costs and other fees were included, your costs would have been higher.

These examples are based on an investment of $1,000 invested at January 1, 2012 and held for the entire period from January 1, 2012 through June 30, 2012.

The Actual Expense example below provides information about actual account values and actual expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Expenses paid during the period" to estimate the expenses you paid on your account during this period.

The Hypothetical Expense example below provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in this Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

	Account value at the beginning of the period ($)				Account value at the end of the period ($)				Expenses paid during the period ($)*				Funds annualized expense ratio (%)
	Actual		Hypothetical		Actual		Hypothetical		Actual		Hypothetical		Actual
Small Cap Fund
Class A		1,000.00		1,000.00		1,042.50		1,018.40		6.60		6.52		1.30
Class C		1,000.00		1,000.00		1,038.40		1,014.67		10.39		10.27		2.05
Class I		1,000.00		1,000.00		1,044.30		1,019.64		5.34		5.27		1.05
Class Y**		1,000.00		1,000.00		1,044.70		1,020.16		4.53		4.47		0.90
Small-Mid Cap Fund
Class A		1,000.00		1,000.00		1,047.00		1,018.60		6.41		6.32		1.26
Class C		1,000.00		1,000.00		1,043.40		1,014.87		10.21		10.07		2.01
Class I		1,000.00		1,000.00		1,048.40		1,019.89		5.09		5.02		1.00
Class Y**		1,000.00		1,000.00		1,049.20		1,020.41		4.28		4.22		0.85
Large Cap Fund
Class A		1,000.00		1,000.00		1,036.10		1,019.59		5.37		5.32		1.06
Class C		1,000.00		1,000.00		1,033.20		1,015.86		9.15		9.07		1.81
Class I		1,000.00		1,000.00		1,038.00		1,020.89		4.05		4.02		0.80
Class Y**		1,000.00		1,000.00		1,038.60		1,021.39		3.26		3.23		0.65
Select Fund
Class A		1,000.00		1,000.00		1,038.20		1,018.85		6.13		6.07		1.21
Class C		1,000.00		1,000.00		1,034.70		1,015.12		9.92		9.82		1.96
Class I		1,000.00		1,000.00		1,039.30		1,020.14		4.82		4.77		0.95
Class Y**		1,000.00		1,000.00		1,040.30		1,020.61		4.06		4.02		0.81
Long-Short Fund
Class A		1,000.00		1,000.00		1,026.30		1,016.16		8.82		8.77		1.75
Class C		1,000.00		1,000.00		1,022.90		1,012.43		12.57		12.51		2.50
Class I		1,000.00		1,000.00		1,028.40		1,017.45		7.51		7.47		1.49
Class Y**		1,000.00		1,000.00		1,028.90		1,018.00		6.69		6.65		1.34

Page  46 Diamond Hill Funds Semi-Annual Report June 30, 2012

Diamond Hill Funds

Schedule of Shareholder Expenses

Hypothetical Example of a $1,000 Investments at Beginning of Period

(Unaudited) Continued

	Account value at the beginning of the period ($)				Account value at the end of the period ($)				Expenses paid during the period ($)*				Funds annualized expense ratio (%)
	Actual		Hypothetical		Actual		Hypothetical		Actual		Hypothetical		Actual
Research Opportunities Fund
Class A**		1,000.00		1,000.00		1,065.10		1,016.38		8.48		8.28		1.67
Class C**		1,000.00		1,000.00		1,061.40		1,012.74		12.22		11.93		2.41
Class I**		1,000.00		1,000.00		1,066.90		1,017.61		7.22		7.05		1.42
Class Y**		1,000.00		1,000.00		1,067.50		1,018.34		6.46		6.30		1.27
Financial Long-Short Fund
Class A		1,000.00		1,000.00		1,131.30		1,015.96		9.49		8.97		1.79
Class C		1,000.00		1,000.00		1,126.50		1,012.23		13.43		12.71		2.54
Class I		1,000.00		1,000.00		1,133.70		1,017.21		8.17		7.72		1.54
Strategic Income Fund
Class A		1,000.00		1,000.00		1,052.50		1,019.79		5.21		5.12		1.02
Class C		1,000.00		1,000.00		1,048.90		1,016.06		9.02		8.87		1.77
Class I		1,000.00		1,000.00		1,053.80		1,021.08		3.88		3.82		0.76
Class Y**		1,000.00		1,000.00		1,053.60		1,021.59		3.08		3.03		0.61

* Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year (to reflect the one-half year period).

** For the period from January 3, 2012 (Commencement of Operations) through June 30, 2012.

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. The 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, 2012 Page  47

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Page  48 Diamond Hill Funds Semi-Annual Report June 30, 2012

NOTICE OF PRIVACY POLICY FOR DIAMOND HILL FUNDS

We value you as a shareholder and take your personal privacy seriously. In order to enhance our ability to provide you with the best service possible, Diamond Hill Funds (referred to as “we” or “us” or the “Funds”) collect, use and share certain information about you. This policy explains what information we collect and with whom we share it. The practices described in this policy are applicable to all customers, including prospective, current and former customers. The policy also explains how we protect the security and confidentiality of certain customer information.

SAFEGUARDING PRIVACY

Diamond Hill Funds maintain physical, electronic and procedural safeguards that comply with federal standards to ensure the safety of non-public personal customer information. In addition, we require service providers to the Funds to maintain policies and procedures designed to assure only appropriate access to, and use of, information about customers and to maintain physical, electronic and procedural safeguards that comply with federal standards to guard non-public personal customer information.

INFORMATION WE COLLECT AND SOURCES OF INFORMATION

We may collect information about our customers to help identify you, evaluate your application, service and manage your account and offer services and products you may find valuable. We collect this information from a variety of sources including:

• Information we receive from you on applications or other forms, such as your name, address, date of birth, social security number and investment information;

• Information about your transactions and experiences with us, such as your account balance, transaction history and investment selections; and

• Information you supply in written, telephonic or electronic communications with the Funds or service providers to the Funds.

INFORMATION WE SHARE

We may disclose all non-public personal information we collect, as described above, to companies that perform services on our behalf, including those that assist us in responding to inquiries, processing transactions, preparing and mailing account statements and other forms of shareholder services, provided they use the information solely for these purposes and they enter into a confidentiality agreement regarding the information. We also may disclose non-public personal information as otherwise permitted by law.

QUESTIONS?

Questions regarding this policy may be directed to: 888-226-5595

Diamond Hill Funds Semi-Annual Report June 30, 2012 Page  49

325 John H. McConnell Blvd., Suite 200

Columbus, Ohio 43215

614.255.3333

www.diamond-hill.com

Investment Adviser

Diamond Hill Capital Management, Inc.

Distributor

BHIL Distributors, Inc.

For additional information, call:

Diamond Hill Funds

TOLLFREE 888.226.5595

Item 2. Code of Ethics.

Not applicable.

Item 3. Audit Committee Financial Expert.

Not applicable.

Item 4. Principal Accountant Fees and Services.

Not applicable.

Item 5. Audit Committee of Listed Registrants.

Not applicable.

Item 6. Schedule of Investments.

(a) Not applicable.

(b) Not applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders.

Not applicable.

Item 11. Controls and Procedures.

(a)The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the registrant’s disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures are adequately designed and are operating effectively to ensure that information required to be disclosed by the registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b)There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d))) that occurred during the second fiscal quarter of the period covered by this report that have materially affected or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits.

(a)(1)	Not applicable.
(a)(2)	Certificationsrequired by Item 12(a) of Form N-CSR are filed herewith.
(a)(3)	Not applicable.
(b)	Certificationrequired by Item 12(b) of Form N-CSR is furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant)	Diamond Hill Funds
By (Signature and Title)	/s/ James F. Laird, Jr.
	James F. Laird, Jr., President

Date     September 05, 2012

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)	/s/ James F. Laird, Jr.
	James F. Laird, Jr., President

Date     September 05, 2012

By (Signature and Title)	/s/ Trent M. Statczar
	Trent M. Statczar, Treasurer

Date     September 05, 2012