Quarterly Guide. March 31, Long-Short Fund (Closed to new investors.) Small Cap Fund (Closed to new investors.) Research Opportunities Fund

Transcription

1 Quarterly Guide March 31, 216 Small Cap Fund (Closed to new investors.) Small-Mid Cap Fund Mid Cap Fund Large Cap Fund Select Fund Long-Short Fund (Closed to new investors.) Financial Long-Short Fund Research Opportunities Fund Corporate Credit Fund High Yield Fund

2 Our Mission At Diamond Hill, we serve our clients by providing investment strategies that deliver lasting value through a shared commitment to our intrinsic value-based investment philosophy, long-term perspective, disciplined approach and alignment with our clients interests. VALUE We believe market price and intrinsic value are independent in the short-term but tend to converge over time. LONG-TERM We maintain a long-term focus both in investment analysis and management of our business. DISCIPLINE We invest with discipline to increase potential return and protect capital. PARTNERSHIP We align our interests with those of our clients through significant personal investment in our strategies. DIAMOND HILL IS A REGISTERED TRADEMARK OF DIAMOND HILL INVESTMENT GROUP, INC. 216 DIAMOND HILL CAPITAL MANAGEMENT, INC. ALL RIGHTS RESERVED

3 Table of Contents Investment Philosophy... 2 Long Only Equities Small Cap Fund (Closed to new investors.)... 4 Small-Mid Cap Fund... 6 Mid Cap Fund... 8 Large Cap Fund...1 Select Fund...12 Alternatives Long-Short Fund (Closed to new investors.)...14 Financial Long-Short Fund...16 Research Opportunities Fund...18 Fixed Income Corporate Credit Fund...2 High Yield Fund...22 Performance Update...24

4 Investment Philosophy We believe that a company s intrinsic value is independent of its stock price and that intrinsic value can be reasonably estimated using a discounted cash flow methodology. Our entire investment team shares the same investment philosophy, which drives our investment process. We focus on the fundamentals of intrinsic value, which are far less volatile than market price, and our actions are ultimately dictated by the price to intrinsic value relationship. MARKET PRICE VS. INTRINSIC VALUE Hypothetical Long Example 1 Premium Discount Market Price Intrinsic Value Price / Intrinsic Value Opportunity for excess return Time There is no guarantee that a discount to intrinsic value will be achieved or that market price and/or intrinsic value will increase over time. 1 The inverse is true for short positions. Equity Investment Principles Valuation We believe that every share of stock has an intrinsic value that is independent of its current market price, and at any point in time, the market price may be higher or lower than intrinsic value. Over short periods of time, the market price is heavily influenced by the emotions of market participants, which are far more difficult to predict than intrinsic value. While 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 market price tends to converge with intrinsic value. Intrinsic Value Estimate We believe that we can determine a reasonable approximation of intrinsic value if we are confident in projecting the future cash flows of a business and use an appropriate discount rate. 2 DIAMOND HILL CAPITAL MANAGEMENT, INC. QUARTERLY GUIDE MARCH 31, 216 DIAMOND-HILL.COM

5 Equity Investment Principles Suitable Investments We only invest when the 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 invest in businesses that possess a competitive advantage, conservative balance sheet, and outstanding managers and employees. For short positions, the inverse is often true, and a growing intrinsic value is a detriment to the performance of the position. Risk & Return (continued) 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. Fixed Income Investment Principles Fundamental Credit Analysis We work closely with our research team to understand the fundamental economic drivers of the business and to assess whether there is adequate financial strength and flexibility to meet ongoing commitments. We evaluate the quality of a firm s management and their treatment of bondholders and stockholders. We believe 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 employ prudent capital allocation often produce value for both bondholders and stockholders. Valuation Bond investors are senior to equity investors in the capital structure, and the equity value of the company is the starting point for measuring our discount or premium to intrinsic value. To estimate the intrinsic value of the company, we look at discounted cash flows as well as private and public comparable firms. 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 when we receive compensation that exceeds what we deem necessary. Suitable Investments We generally invest in corporate bonds of companies with stable-to-improving fundamentals that are likely to meet our return objectives over the long term (five years). Our core competency is the evaluation of credit risk. We are committed to maintaining an asset level that will allow us to always be nimble in the secondary market and selective in the new issue market, even if that means closing strategies. We are comfortable owning (across all of our strategies) 5% of an issue but generally do not want to own more than 1%. We are willing to commit meaningful client capital to our best ideas. Risk & Return We define risk as the permanent loss of capital rather than short-term price volatility. We also focus on limiting longer-term downside volatility and drawdowns. 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 primary focus is on valuing the underlying business and associated credit risk, rather than interest rate risk. DIAMOND HILL CAPITAL MANAGEMENT, INC. QUARTERLY GUIDE MARCH 31, 216 DIAMOND-HILL.COM 3

6 Small Cap Fund (Closed to new investors.) As of March 31, 216 OBJECTIVE Long-term capital appreciation by investing in companies selling for less than our estimate of intrinsic value. INVESTMENT STRATEGY To estimate intrinsic value, the business must be understandable, and we must be able to reasonably forecast its cash flows. We seek businesses with sustainable competitive advantages, conservative balance sheets, and management with an ownership mentality. Investments are sold when the stock price reaches our estimate of intrinsic value, our estimate of intrinsic value is revised such that there is no longer a discount to intrinsic value, a holding reaches our stated maximum position size, or to raise proceeds for a more attractive opportunity. PORTFOLIO MANAGEMENT PORTFOLIO GUIDELINES Fund Guidelines Typically 5 8 positions Maximum sector exposure is 3% Market Capitalization The Fund typically invests at least 8% of its net assets in small capitalization companies, defined as those companies with a market capitalization below $3. billion (or, if greater, the maximum market capitalization of companies generally within the capitalization range of the Russell 2 Index) at the time of purchase. TOP TEN HOLDINGS Avis Budget Group, Inc. Industrials 4.5% Alere, Inc. Health Care 2.9 Brown & Brown, Inc. Financials 2.8 DST Systems, Inc. Info. Technology 2.8 Navigators Group, Inc. Financials 2.7 Aircastle Ltd. Industrials 2.2 Hub Group, Inc. (Cl A) Industrials 2.2 Popular, Inc. Financials 2.1 Enstar Group Ltd. Financials 2. Vail Resorts, Inc. Cons. Discretionary 2. Total as % of Net Assets 26.2% BEST & WORST PERFORMERS 2 SECURITY NAME SECTOR ALLOCATION Small Cap Fund 1Q16 CONTRIBUTION POSITION AS OF 1Q16 Best Alere, Inc. 1.% 2.9% Hub Group, Inc. (Cl A) UGI Corp Brown & Brown, Inc Aircastle Ltd Worst Avis Budget Group, Inc. -1.1% 4.5% Concordia Healthcare Corp istar, Inc Trinity Industries, Inc Greatbatch, Inc The holdings identified do not represent all of the securities purchased, sold, or recommended for the adviser s clients. The reader should not assume that an investment in the securities identified was or will be profitable. To obtain the contribution calculation methodology and a complete list of every holding s contribution to the overall portfolio s performance during the measurement period, contact or info@diamond-hill.com. Russell 2 Index Tom Schindler, CFA Jason Downey, CFA Chris Welch, CFA Portfolio Manager Asst. Portfolio Asst. Portfolio Manager Manager GROWTH OF $1, SINCE INCEPTION 1 $5, 4, 3, 2, 1, Small Cap Fund Class I $46, Russell 2 Index $28,238 1 The chart represents a comparison of a hypothetical $1, investment and the reinvestment of dividends and capital gains in Class I shares versus the benchmark(s). The Index is unmanaged and does not incur fees. The Fund s performance is before taxes and reflects the deduction of fees and expenses. An investor should consider the Fund s investment objectives, risks, charges and expenses carefully before investing. The prospectus or summary prospectus contain this and other important information about the Fund(s) and are available at diamond-hill.com or by calling Please read the prospectus or summary prospectus carefully before investing. The Diamond Hill Funds are distributed by BHIL Distributors, Inc. (Member FINRA/SIPC), an affiliated company. 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. Diamond Hill Funds are not FDIC insured, may lose value, and have no bank guarantee Financials 26.9% Industrials 18.4 Health Care 8.9 Cons. Discretionary 8.2 Info. Technology 7.2 Consumer Staples 5.3 Utilities 3. Energy 2.4 Telecom.1 Materials. Other. Cash & Equiv Financials 26.1% Industrials 12.8 Health Care 13.9 Cons. Discretionary 14. Info. Technology 18. Consumer Staples 3.6 Utilities 4.3 Energy 2.5 Telecom.9 Materials 3.9 Other. Cash & Equiv.. 4 DIAMOND HILL CAPITAL MANAGEMENT, INC. QUARTERLY GUIDE MARCH 31, 216 DIAMOND-HILL.COM

7 PERIOD AND AVERAGE ANNUAL TOTAL RETURNS AS OF MARCH 31, 216 RETURNS AT NAV (WITHOUT SALES CHARGE) CALENDAR YEAR RETURNS Return % 6% Small Cap Fund Class I Russell 2 Index SINCE INCEPTION 1-YR 5-YR 3-YR 1-YR YTD 1Q16 Class A 1.39% 5.34% 7.24% 6.68% -5.8%.52%.52% Class C Class I Class Y BENCHMARK Russell 2 Index RETURNS AT POP (WITH SALES CHARGE) Class A Class C PORTFOLIO STATISTICS Inception...December 29, 2 Total Net Assets...$1.7B Distributions... Annual Median Market Capitalization...$2.6B Portfolio Turnover Rate (12 months trailing)...17% Active Share...97% Number of Equity Securities in Portfolio...74 % of Net Assets in Cash & Equivalents % SINCE INCEPTION RISK STATISTICS (CLASS I SHARES) Annualized Standard Deviation (%) Beta (%)...82 Sharpe Ratio...59 Alpha (%) R-squared (%) Upside / Downside Capture Ratio (%)...88 / 72 MORNINGSTAR CLASSIFICATION Small Value LIPPER CLASSIFICATION Small-Cap Core FEES AND EXPENSES CLASS A CLASS C CLASS I CLASS Y Ticker DHSCX DHSMX DHSIX DHSYX CUSIP 25264S K S S692 Minimum Initial Investment $5, $5, $5, $5, Maximum Front-End Sales Charge 5.% None None None Contingent Deferred Sales Charge None 1.% None None Management Fee.8%.8%.8%.8% Distribution Fee (12b-1).25% 1.% None None Other Expenses.26%.26%.22%.12% Total Expense Ratio 1.31% 2.6% 1.2%.92% Risk Disclosure: There are specialized risks associated with small capitalization issues, such as market illiquidity and greater market volatility, than large capitalization issues. The performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor s shares, when redeemed, may be worth more or less than their original cost. The Fund s current performance may be lower or higher than the performance data quoted. Investors may obtain performance information current to the most recent month-end, within 7 business days, at diamond-hill.com. Performance returns assume reinvestment of all distributions. Returns for periods less than one year are not annualized. Class C, Class I, and Class Y shares include Class A share performance achieved prior to the creation of Class C, Class I, and Class Y shares. Fund holdings, sector allocations, and portfolio statistics subject to change without notice. The Russell 2 Index is an unmanaged market capitalization-weighted index comprised of the smallest 2, companies by market capitalization in the Russell 3 Index, which is comprised of the 3, largest U.S. companies by total market capitalization. This index does not incur fees and expenses (which would lower the return) and is not available for direct investment. Key Definitions: Active Share measures the difference between portfolio holdings and the benchmark. The higher the active share, the greater the difference. Standard Deviation measures the volatility of the Fund s returns. Beta measures the Fund s sensitivity to market movements. Sharpe Ratio uses the Fund s standard deviation and excess return to determine reward per unit of risk. Alpha measures excess return relative to the market that is attributable to active portfolio management. R-squared represents the percentage of the portfolio s movements that can be explained by general market movements. Upside / Downside Capture Ratio measures a manager s ability to generate excess return above the benchmark return in up markets and retain more of the excess return in down markets. DIAMOND HILL CAPITAL MANAGEMENT, INC. QUARTERLY GUIDE MARCH 31, 216 DIAMOND-HILL.COM 5

8 Small-Mid Cap Fund * As of March 31, 216 OBJECTIVE Long-term capital appreciation by investing in companies selling for less than our estimate of intrinsic value. INVESTMENT STRATEGY To estimate intrinsic value, the business must be understandable, and we must be able to reasonably forecast its cash flows. We seek businesses with sustainable competitive advantages, conservative balance sheets, and management with an ownership mentality. Investments are sold when the stock price reaches our estimate of intrinsic value, our estimate of intrinsic value is revised such that there is no longer a discount to intrinsic value, a holding reaches our stated maximum position size, or to raise proceeds for a more attractive opportunity. PORTFOLIO MANAGEMENT PORTFOLIO GUIDELINES Fund Guidelines Typically 5 7 positions Maximum sector exposure is 3% Market Capitalization The Fund typically invests at least 8% of its net assets in small and medium capitalization companies, defined as those companies with a market capitalization between $5 million and $1 billion (or, if greater, the maximum market capitalization of companies generally within the capitalization range of the Russell 25 Index) at the time of purchase. TOP TEN HOLDINGS Willis Towers Watson PLC Financials 5.1% Boston Scientific Corp. Health Care 3.9 Jarden Corp. Cons. Discretionary 3.3 Hub Group, Inc. (Cl A) Industrials 3. Cimarex Energy Co. Energy 2.9 BorgWarner, Inc. Cons. Discretionary 2.7 Colfax Corp. Industrials 2.5 LifePoint Health, Inc. Health Care 2.5 Post Holdings, Inc. Consumer Staples 2.5 Brown & Brown, Inc. Financials 2.4 Total as % of Net Assets 3.9% BEST & WORST PERFORMERS 2 SECURITY NAME 1Q16 CONTRIBUTION POSITION AS OF 1Q16 Best Hub Group, Inc. (Cl A).7% 3.% Colfax Corp Whirlpool Corp UGI Corp Post Holdings, Inc Worst Nationstar Mortgage Holdings, Inc. -.5% 1.4% Willis Towers Watson PLC Flowers Foods, Inc istar, Inc BorgWarner, Inc The holdings identified do not represent all of the securities purchased, sold, or recommended for the adviser s clients. The reader should not assume that an investment in the securities identified was or will be profitable. To obtain the contribution calculation methodology and a complete list of every holding s contribution to the overall portfolio s performance during the measurement period, contact or info@diamond-hill.com. SECTOR ALLOCATION Small-Mid Cap Fund Russell 25 Index Chris Welch, CFA Jenny Hubbard, CFA Tom Schindler, CFA Portfolio Manager Asst. Portfolio Asst. Portfolio Manager Manager GROWTH OF $1, SINCE INCEPTION 1 $25, Small-Mid Cap Fund Class I $23,656 2, 15, 1, 5, Russell 25 Index $2,798 1 The chart represents a comparison of a hypothetical $1, investment and the reinvestment of dividends and capital gains in Class I shares versus the benchmark(s). The Index is unmanaged and does not incur fees. The Fund s performance is before taxes and reflects the deduction of fees and expenses. An investor should consider the Fund s investment objectives, risks, charges and expenses carefully before investing.the prospectus or summary prospectus contain this and other important information about the Fund(s) and are available at diamond-hill.com or by calling Please read the prospectus or summary prospectus carefully before investing. The Diamond Hill Funds are distributed by BHIL Distributors, Inc. (Member FINRA/SIPC), an affiliated company. 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. Diamond Hill Funds are not FDIC insured, may lose value, and have no bank guarantee. * Effective April 3, 216, the Fund will close to new investors Financials 26.9% Cons. Discretionary 15.9 Industrials 12.7 Consumer Staples 1.4 Info. Technology 9.6 Health Care 8.9 Utilities 3.3 Energy 2.9 Materials 2.2 Telecom. Other. Cash & Equiv. 7.3 Financials 25.3% Cons. Discretionary 14.9 Industrials 14.9 Consumer Staples 3.3 Info. Technology 15.1 Health Care 11.2 Utilities 5.3 Energy 3. Materials 6.3 Telecom.7 Other. Cash & Equiv.. 6 DIAMOND HILL CAPITAL MANAGEMENT, INC. QUARTERLY GUIDE MARCH 31, 216 DIAMOND-HILL.COM

9 PERIOD AND AVERAGE ANNUAL TOTAL RETURNS AS OF MARCH 31, 216 RETURNS AT NAV (WITHOUT SALES CHARGE) CALENDAR YEAR RETURNS Return % 45% SINCE INCEPTION 1-YR 5-YR 3-YR 1-YR YTD 1Q16 Class A 8.42% 8.2% 1.38% 1.44% -.55% 2.62% 2.62% Class C Class I Class Y BENCHMARK Russell 25 Index RETURNS AT POP (WITH SALES CHARGE) Class A Class C Small-Mid Cap Fund Class I Russell 25 Index 215 PORTFOLIO STATISTICS Inception...December 3, 25 Total Net Assets...$1.6B Distributions... Annual Median Market Capitalization...$4.8B Portfolio Turnover Rate (12 months trailing)...19% Active Share...95% Number of Equity Securities in Portfolio...58 % of Net Assets in Cash & Equivalents...7.3% SINCE INCEPTION RISK STATISTICS (CLASS I SHARES) Annualized Standard Deviation (%) Beta (%)...92 Sharpe Ratio...49 Alpha (%) R-squared (%) Upside / Downside Capture Ratio (%)...92 / 85 MORNINGSTAR CLASSIFICATION Mid-Cap Value LIPPER CLASSIFICATION Mid-Cap Value FEES AND EXPENSES CLASS A CLASS C CLASS I CLASS Y Ticker DHMAX DHMCX DHMIX DHMYX CUSIP 25264S S S S684 Minimum Initial Investment $2,5 $2,5 $2,5 $5, Maximum Front-End Sales Charge 5.% None None None Contingent Deferred Sales Charge None 1.% None None Management Fee.75%.75%.75%.75% Distribution Fee (12b-1).25% 1.% None None Other Expenses.25%.25%.21%.11% Total Expense Ratio 1.25% 2.%.96%.86% Risk Disclosure: There are specialized risks associated with small capitalization issues, such as market illiquidity and greater market volatility, than large capitalization issues. The performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor s shares, when redeemed, may be worth more or less than their original cost. The Fund s current performance may be lower or higher than the performance data quoted. Investors may obtain performance information current to the most recent month-end, within 7 business days, at diamond-hill.com. Performance returns assume reinvestment of all distributions. Returns for periods less than one year are not annualized. Class Y shares include Class A share performance achieved prior to the creation of Class Y shares. These total return figures may reflect the waiver of a portion of a Fund s advisory or administrative fees for certain periods. Without such waiver of fees, the total returns would have been lower. Fund holdings, sector allocations, and portfolio statistics subject to change without notice. The Russell 25 Index is an unmanaged market capitalization-weighted index comprised of the smallest 2,5 companies by market capitalization in the Russell 3 Index, which is comprised of the 3, largest U.S. companies by total market capitalization. This index does not incur fees and expenses (which would lower the return) and is not available for direct investment. Key Definitions: Active Share measures the difference between portfolio holdings and the benchmark. The higher the active share, the greater the risk. Standard Deviation measures the volatility of the Fund s returns. Beta measures the Fund s sensitivity to market movements. Sharpe Ratio uses the Fund s standard deviation and excess return to determine reward per unit of risk. Alpha measures excess return relative to the market that is attributable to active portfolio management. R-squared represents the percentage of the portfolio s movements that can be explained by general market movements. Upside / Downside Capture Ratio measures a manager s ability to generate excess return above the benchmark return in up markets and retain more of the excess return in down markets. DIAMOND HILL CAPITAL MANAGEMENT, INC. QUARTERLY GUIDE MARCH 31, 216 DIAMOND-HILL.COM 7

10 Mid Cap Fund As of March 31, 216 OBJECTIVE Long-term capital appreciation by investing in companies selling for less than our estimate of intrinsic value. INVESTMENT STRATEGY To estimate intrinsic value, the business must be understandable, and we must be able to reasonably forecast its cash flows. We seek businesses with sustainable competitive advantages, conservative balance sheets, and management with an ownership mentality. Investments are sold when the stock price reaches our estimate of intrinsic value, our estimate of intrinsic value is revised such that there is no longer a discount to intrinsic value, a holding reaches our stated maximum position size, or to raise proceeds for a more attractive opportunity. PORTFOLIO MANAGEMENT PORTFOLIO GUIDELINES Fund Guidelines Typically 4 6 positions Maximum sector exposure is 3% Market Capitalization The Fund typically invests at least 8% of its net assets in medium market capitalization companies, defined as those companies with a market capitalization between $1.5 billion and $2 billion (or, if greater, the maximum market capitalization of companies generally within the capitalization range of the Russell Midcap Index) at the time of purchase. TOP TEN HOLDINGS Willis Towers Watson PLC Financials 5.% Boston Scientific Corp. Health Care 4.5 Whirlpool Corp. Cons. Discretionary 3.3 Jarden Corp. Cons. Discretionary 3.1 Cimarex Energy Co. Energy 2.8 Loews Corp. Financials 2.8 BorgWarner, Inc. Cons. Discretionary 2.7 Post Holdings, Inc. Consumer Staples 2.5 LifePoint Health, Inc. Health Care 2.5 Molson Coors Brewing Co. (Cl B) Consumer Staples 2.4 Total as % of Net Assets 31.7% BEST & WORST PERFORMERS 2 SECURITY NAME 1Q16 CONTRIBUTION POSITION AS OF 1Q16 Best Whirlpool Corp..7% 3.3% Hub Group, Inc. (Cl A) Colfax Corp UGI Corp Post Holdings, Inc Worst Willis Towers Watson PLC -.5% 5.% Nationstar Mortgage Holdings, Inc Flowers Foods, Inc Endo International PLC BorgWarner, Inc The holdings identified do not represent all of the securities purchased, sold, or recommended for the adviser s clients. The reader should not assume that an investment in the securities identified was or will be profitable. To obtain the contribution calculation methodology and a complete list of every holding s contribution to the overall portfolio s performance during the measurement period, contact or info@diamond-hill.com. SECTOR ALLOCATION Mid Cap Fund Russell Midcap Index Chris Welch, CFA Chris Bingaman, CFA Jenny Hubbard, CFA Portfolio Manager Asst. Portfolio Asst. Portfolio Manager Manager GROWTH OF $1, SINCE INCEPTION 1 $2, 15, 1, 5, The chart represents a comparison of a hypothetical $1, investment and the reinvestment of dividends and capital gains in Class I shares versus the benchmark(s). The Index is unmanaged and does not incur fees. The Fund s performance is before taxes and reflects the deduction of fees and expenses. An investor should consider the Fund s investment objectives, risks, charges and expenses carefully before investing.the prospectus or summary prospectus contain this and other important information about the Fund(s) and are available at diamond-hill.com or by calling Please read the prospectus or summary prospectus carefully before investing. The Diamond Hill Funds are distributed by BHIL Distributors, Inc. (Member FINRA/SIPC), an affiliated company. 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. Diamond Hill Funds are not FDIC insured, may lose value, and have no bank guarantee. 215 Russell Midcap Index $11,294 Mid Cap Fund Class I $11, Financials 27.7% Cons. Discretionary 18.2 Consumer Staples 11.7 Industrials 11. Info. Technology 8. Health Care 7.3 Utilities 3.1 Materials 3.1 Energy 2.8 Telecom. Other. Cash & Equiv. 7. Financials 22.% Cons. Discretionary 16.8 Consumer Staples 6.3 Industrials 12.7 Info. Technology 14.7 Health Care 9. Utilities 6.9 Materials 5.6 Energy 4.4 Telecom 1.5 Other. Cash & Equiv.. 8 DIAMOND HILL CAPITAL MANAGEMENT, INC. QUARTERLY GUIDE MARCH 31, 216 DIAMOND-HILL.COM

11 PERIOD AND AVERAGE ANNUAL TOTAL RETURNS AS OF MARCH 31, 216 RETURNS AT NAV (WITHOUT SALES CHARGE) SINCE INCEPTION 1-YR YTD 1Q16 Class A 4.87% -.47% 2.99% 2.99% Class C Class I Class Y BENCHMARK Russell Midcap Index RETURNS AT POP (WITH SALES CHARGE) Class A Class C CALENDAR YEAR RETURNS Return % 2% Mid Cap Fund Class I Russell Midcap Index PORTFOLIO STATISTICS Inception...December 31, 213 Total Net Assets... $25M Distributions... Annual Median Market Capitalization...$7.B Portfolio Turnover Rate (12 months trailing)...24% Active Share...94% Number of Equity Securities in Portfolio...56 % of Net Assets in Cash & Equivalents...7.% SINCE INCEPTION RISK STATISTICS (CLASS I SHARES) Annualized Standard Deviation (%) Beta (%)...87 Sharpe Ratio...48 Alpha (%)...32 R-squared (%) Upside / Downside Capture Ratio (%)...91 / 9 MORNINGSTAR CLASSIFICATION Mid-Cap Value LIPPER CLASSIFICATION Mid-Cap Core FEES AND EXPENSES CLASS A CLASS C CLASS I CLASS Y Ticker DHPAX DHPCX DHPIX DHPYX CUSIP 25264S S S S593 Minimum Initial Investment $2,5 $2,5 $2,5 $5, Maximum Front-End Sales Charge 5.% None None None Contingent Deferred Sales Charge None 1.% None None Management Fee.65%.65%.65%.65% Distribution Fee (12b-1).25% 1.% None None Other Expenses.24%.24%.2%.1% Total Expense Ratio 1.14% 1.89%.85%.75% Risk Disclosure: There are specialized risks associated with small and mid capitalization issues, such as market illiquidity and greater market volatility, than large capitalization issues. The performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor s shares, when redeemed, may be worth more or less than their original cost. The Fund s current performance may be lower or higher than the performance data quoted. Investors may obtain performance information current to the most recent month-end, within 7 business days, at diamond-hill.com. Performance returns assume reinvestment of all distributions. Returns for periods less than one year are not annualized. Fund holdings, sector allocations, and portfolio statistics subject to change without notice. The Russell Midcap Index is an unmanaged market capitalization-weighted index measuring performance of the 8 smallest companies in the Russell 1 Index. The Russell 1 Index measures performance of the largest 1 companies in the Russell 3 Index. The Russell 3 Index measures the performance of the 3, largest U.S. companies by total market capitalization. This index does not incur fees and expenses (which would lower the return) and is not available for direct investment. Key Definitions: Active Share measures the difference between portfolio holdings and the benchmark. The higher the active share, the greater the risk. Standard Deviation measures the volatility of the Fund s returns. Beta measures the Fund s sensitivity to market movements. Sharpe Ratio uses the Fund s standard deviation and excess return to determine reward per unit of risk. Alpha measures excess return relative to the market that is attributable to active portfolio management. R-squared represents the percentage of the portfolio s movements that can be explained by general market movements. Upside / Downside Capture Ratio measures a manager s ability to generate excess return above the benchmark return in up markets and retain more of the excess return in down markets. DIAMOND HILL CAPITAL MANAGEMENT, INC. QUARTERLY GUIDE MARCH 31, 216 DIAMOND-HILL.COM 9

12 Large Cap Fund As of March 31, 216 OBJECTIVE Long-term capital appreciation by investing in companies selling for less than our estimate of intrinsic value. INVESTMENT STRATEGY To estimate intrinsic value, the business must be understandable, and we must be able to reasonably forecast its cash flows. We seek businesses with sustainable competitive advantages, conservative balance sheets, and management with an ownership mentality. Investments are sold when the stock price reaches our estimate of intrinsic value, our estimate of intrinsic value is revised such that there is no longer a discount to intrinsic value, a holding reaches our stated maximum position size, or to raise proceeds for a more attractive opportunity. PORTFOLIO MANAGEMENT PORTFOLIO GUIDELINES Fund Guidelines Typically 4 6 positions Maximum sector exposure is 3% Market Capitalization The Fund typically invests at least 8% of its net assets in large capitalization companies, defined as those companies with a market capitalization of $5 billion or greater. TOP TEN HOLDINGS Abbott Laboratories Health Care 3.6% Procter & Gamble Co. Consumer Staples 3.4 Sysco Corp. Consumer Staples 3.3 Citigroup, Inc. Financials 3.2 United Technologies Corp. Industrials 3.2 Pfizer, Inc. Health Care 3.1 Cisco Systems, Inc. Info. Technology 3. JPMorgan Chase & Co. Financials 2.9 TJX Cos., Inc. Cons. Discretionary 2.8 Morgan Stanley Financials 2.8 Total as % of Net Assets 31.3% BEST & WORST PERFORMERS 2 SECURITY NAME 1Q16 CONTRIBUTION POSITION AS OF 1Q16 Best Sysco Corp..5% 3.3% Whirlpool Corp TJX Cos., Inc Parker-Hannifin Corp Progressive Corp Worst Morgan Stanley -.7% 2.8% Citigroup, Inc American International Group, Inc JPMorgan Chase & Co Express Scripts Holding Co The holdings identified do not represent all of the securities purchased, sold, or recommended for the adviser s clients. The reader should not assume that an investment in the securities identified was or will be profitable. To obtain the contribution calculation methodology and a complete list of every holding s contribution to the overall portfolio s performance during the measurement period, contact or info@diamond-hill.com. SECTOR ALLOCATION Large Cap Fund Russell 1 Index Chuck Bath, CFA Austin Hawley, CFA Chris Welch, CFA Portfolio Manager Asst. Portfolio Asst. Portfolio Manager Manager GROWTH OF $1, SINCE INCEPTION 1 $3, 25, 2, 15, 1, 5, Large Cap Fund Class I $3,259 Russell 1 Index $23, The chart represents a comparison of a hypothetical $1, investment and the reinvestment of dividends and capital gains in Class I shares versus the benchmark(s). The Index is unmanaged and does not incur fees. The Fund s performance is before taxes and reflects the deduction of fees and expenses. An investor should consider the Fund s investment objectives, risks, charges and expenses carefully before investing. The prospectus or summary prospectus contain this and other important information about the Fund(s) and are available at diamond-hill.com or by calling Please read the prospectus or summary prospectus carefully before investing. The Diamond Hill Funds are distributed by BHIL Distributors, Inc. (Member FINRA/SIPC), an affiliated company. 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. Diamond Hill Funds are not FDIC insured, may lose value, and have no bank guarantee. Financials 25.6% Cons. Discretionary 17.2 Info. Technology 15.5 Health Care 15.1 Consumer Staples 1.9 Industrials 8.4 Energy 3.3 Materials 2.7 Utilities. Telecom. Other. Cash & Equiv. 1.3 Financials 16.3% Cons. Discretionary 14.1 Info. Technology 2.3 Health Care 13.7 Consumer Staples 9.1 Industrials 1.7 Energy 6.4 Materials 3.2 Utilities 3.5 Telecom 2.7 Other. Cash & Equiv.. 1 DIAMOND HILL CAPITAL MANAGEMENT, INC. QUARTERLY GUIDE MARCH 31, 216 DIAMOND-HILL.COM

13 PERIOD AND AVERAGE ANNUAL TOTAL RETURNS AS OF MARCH 31, 216 RETURNS AT NAV (WITHOUT SALES CHARGE) CALENDAR YEAR RETURNS Return % 45% SINCE INCEPTION 1-YR 5-YR 3-YR 1-YR YTD 1Q16 Class A 7.53% 6.59% 1.44% 1.51% -.8% 1.7% 1.7% Class C Class I Class Y BENCHMARK Russell 1 Index RETURNS AT POP (WITH SALES CHARGE) Class A Class C Large Cap Fund Class I Russell 1 Index PORTFOLIO STATISTICS Inception...June 29, 21 Total Net Assets...$3.6B Distributions... Annual Median Market Capitalization... $4.B Portfolio Turnover Rate (12 months trailing)...19% Active Share...79% Number of Equity Securities in Portfolio...5 % of Net Assets in Cash & Equivalents...1.3% SINCE INCEPTION RISK STATISTICS (CLASS I SHARES) Annualized Standard Deviation (%) Beta (%)...95 Sharpe Ratio...48 Alpha (%) R-squared (%) Upside / Downside Capture Ratio (%)...11 / 92 MORNINGSTAR CLASSIFICATION Large Value LIPPER CLASSIFICATION Large-Cap Core FEES AND EXPENSES CLASS A CLASS C CLASS I CLASS Y Ticker DHLAX DHLCX DHLRX DHLYX CUSIP 25264S S S S676 Minimum Initial Investment $2,5 $2,5 $2,5 $5, Maximum Front-End Sales Charge 5.% None None None Contingent Deferred Sales Charge None 1.% None None Management Fee.5%.5%.5%.5% Distribution Fee (12b-1).25% 1.% None None Other Expenses.24%.24%.2%.1% Total Expense Ratio.99% 1.74%.7%.6% Risk Disclosure: Overall equity market risks may affect the value of the fund. The performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor s shares, when redeemed, may be worth more or less than their original cost. The Fund s current performance may be lower or higher than the performance data quoted. Investors may obtain performance information current to the most recent month-end, within 7 business days, at diamond-hill.com. Performance returns assume reinvestment of all distributions. Returns for periods less than one year are not annualized. Class C, Class I, and Class Y shares include Class A share performance achieved prior to the creation of Class C, Class I, and Class Y shares. Fund holdings, sector allocations, and portfolio statistics subject to change without notice. The Russell 1 Index is an unmanaged market capitalization-weighted index comprised of the largest1, companies by market capitalization in the Russell 3 Index, which is comprised of the 3, largest U.S. companies by total market capitalization. This index does not incur fees and expenses (which would lower the return) and is not available for direct investment. Key Definitions: Active Share measures the difference between portfolio holdings and the benchmark. The higher the active share, the greater the difference. Standard Deviation measures the volatility of the Fund s returns. Beta measures the Fund s sensitivity to market movements. Sharpe Ratio uses the Fund s standard deviation and excess return to determine reward per unit of risk. Alpha measures excess return relative to the market that is attributable to active portfolio management. R-squared represents the percentage of the portfolio s movements that can be explained by general market movements. Upside / Downside Capture Ratio measures a manager s ability to generate excess return above the benchmark return in up markets and retain more of the excess return in down markets. DIAMOND HILL CAPITAL MANAGEMENT, INC. QUARTERLY GUIDE MARCH 31, 216 DIAMOND-HILL.COM 11

14 Select Fund As of March 31, 216 OBJECTIVE Long-term capital appreciation by investing in companies selling for less than our estimate of intrinsic value. INVESTMENT STRATEGY To estimate intrinsic value, the business must be understandable, and we must be able to reasonably forecast its cash flows. We seek businesses with sustainable competitive advantages, conservative balance sheets, and management with an ownership mentality. Investments are sold when the stock price reaches our estimate of intrinsic value, our estimate of intrinsic value is revised such that there is no longer a discount to intrinsic value, a holding reaches our stated maximum position size, or to raise proceeds for a more attractive opportunity. More concentrated and broader market capitalization strategy. PORTFOLIO MANAGEMENT PORTFOLIO GUIDELINES Fund Guidelines Typically 3 4 positions Maximum sector exposure is 35% Market Capitalization The Fund typically invests in securities with a market cap of $5 million or greater. We anticipate that each of the Fund s investments will also be held in one of the other Diamond Hill Funds. TOP TEN HOLDINGS Willis Towers Watson PLC Financials 5.2% Nationstar Mortgage Holdings, Inc. Financials 5. Avis Budget Group, Inc. Industrials 5. Liberty Global PLC (Cl A) Cons. Discretionary 5. Hub Group, Inc. (Cl A) Industrials 4.8 Apple, Inc. Info. Technology 4.6 Colfax Corp. Industrials 4.2 Franklin Resources, Inc. Financials 4.1 Twenty-First Century Fox, Inc. (Cl B) Cons. Discretionary 4. Whirlpool Corp. Cons. Discretionary 3.6 Total as % of Net Assets 45.6% BEST & WORST PERFORMERS 2 SECURITY NAME 1Q16 CONTRIBUTION POSITION AS OF 1Q16 Best Hub Group, Inc. (Cl A) 1.1% 4.8% Colfax Corp Whirlpool Corp Post Holdings, Inc Parker-Hannifin Corp Worst Valeant Pharmaceuticals International, Inc. -5.4% 2.8% Nationstar Mortgage Holdings, Inc Citigroup, Inc Willis Towers Watson PLC Allergan PLC The holdings identified do not represent all of the securities purchased, sold, or recommended for the adviser s clients. The reader should not assume that an investment in the securities identified was or will be profitable. To obtain the contribution calculation methodology and a complete list of every holding s contribution to the overall portfolio s performance during the measurement period, contact or info@diamond-hill.com. SECTOR ALLOCATION Select Fund Russell 3 Index Austin Hawley, CFA Portfolio Manager $25, 2, 15, 1, 5, 26 Rick Snowdon, CFA Portfolio Manager GROWTH OF $1, SINCE INCEPTION The chart represents a comparison of a hypothetical $1, investment and the reinvestment of dividends and capital gains in Class I shares versus the benchmark(s). The Index is unmanaged and does not incur fees. The Fund s performance is before taxes and reflects the deduction of fees and expenses. An investor should consider the Fund s investment objectives, risks, charges and expenses carefully before investing. The prospectus or summary prospectus contain this and other important information about the Fund(s) and are available at diamond-hill.com or by calling Please read the prospectus or summary prospectus carefully before investing. The Diamond Hill Funds are distributed by BHIL Distributors, Inc. (Member FINRA/ SIPC), an affiliated company. 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. Diamond Hill Funds are not FDIC insured, may lose value, and have no bank guarantee. 212 Select Fund Class I $2,9 Russell 3 Index $2, Financials 33.% Industrials 2.9 Cons. Discretionary 19.3 Info. Technology 1.7 Health Care 9.3 Consumer Staples 2.3 Energy 1.6 Utilities. Materials. Telecom. Other. Cash & Equiv. 2.9 Financials 17.% Industrials 1.9 Cons. Discretionary 14.1 Info. Technology 2.2 Health Care 13.7 Consumer Staples 8.7 Energy 6.1 Utilities 3.5 Materials 3.2 Telecom 2.6 Other. Cash & Equiv.. 12 DIAMOND HILL CAPITAL MANAGEMENT, INC. QUARTERLY GUIDE MARCH 31, 216 DIAMOND-HILL.COM

15 PERIOD AND AVERAGE ANNUAL TOTAL RETURNS AS OF MARCH 31, 216 RETURNS AT NAV (WITHOUT SALES CHARGE) CALENDAR YEAR RETURNS Return % 45% SINCE INCEPTION 1-YR 5-YR 3-YR 1-YR YTD 1Q16 Class A 6.67% 6.52% 9.44% 9.58% -1.8% -4.53% -4.53% Class C Class I Class Y BENCHMARK Russell 3 Index RETURNS AT POP (WITH SALES CHARGE) Class A Class C Select Fund Class I Russell 3 Index PORTFOLIO STATISTICS Inception...December 3, 25 Total Net Assets...$17M Distributions... Annual Median Market Capitalization... $1.7B Portfolio Turnover Rate (12 months trailing)...85% Active Share...92% Number of Equity Securities in Portfolio...33 % of Net Assets in Cash & Equivalents...2.9% SINCE INCEPTION RISK STATISTICS (CLASS I SHARES) Annualized Standard Deviation (%) Beta (%)...94 Sharpe Ratio...44 Alpha (%)...14 R-squared (%) Upside / Downside Capture Ratio (%)...96 / 95 MORNINGSTAR CLASSIFICATION Large Blend LIPPER CLASSIFICATION Multi-Cap Core FEES AND EXPENSES CLASS A CLASS C CLASS I CLASS Y Ticker DHTAX DHTCX DHLTX DHTYX CUSIP 25264S S S S668 Minimum Initial Investment $2,5 $2,5 $2,5 $5, Maximum Front-End Sales Charge 5.% None None None Contingent Deferred Sales Charge None 1.% None None Management Fee.7%.7%.7%.7% Distribution Fee (12b-1).25% 1.% None None Other Expenses.24%.24%.2%.1% Total Expense Ratio 1.19% 1.94%.9%.8% Risk Disclosure: Because this Fund expects to hold a concentrated portfolio of a limited number of securities, a decline in the value of these investments would cause the Fund s value to decline to a greater degree than a less concentrated portfolio. There are specialized risks associated with small capitalization issues, such as market illiquidity and greater market volatility, than large capitalization issues. The performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor s shares, when redeemed, may be worth more or less than their original cost. The Fund s current performance may be lower or higher than the performance data quoted. Investors may obtain performance information current to the most recent month-end, within 7 business days, at diamond-hill.com. Performance returns assume reinvestment of all distributions. Returns for periods less than one year are not annualized. Class Y shares include Class A share performance achieved prior to the creation of Class Y shares. These total return figures may reflect the waiver of a portion of a Fund s advisory or administrative fees for certain periods. Without such waiver of fees, the total returns would have been lower. Fund holdings, sector allocations and portfolio statistics subject to change without notice. The Russell 3 Index is an unmanaged market capitalization-weighted index comprised of the 3, largest U.S. companies by total market capitalization. This index does not incur fees and expenses (which would lower the return) and is not available for direct investment. Key Definitions: Active Share measures the difference between portfolio holdings and the benchmark. The higher the active share, the greater the difference. Standard Deviation measures the volatility of the Fund s returns. Beta measures the Fund s sensitivity to market movements. Sharpe Ratio uses the Fund s standard deviation and excess return to determine reward per unit of risk. Alpha measures excess return relative to the market that is attributable to active portfolio management. R-squared represents the percentage of the portfolio s movements that can be explained by general market movements. Upside / Downside Capture Ratio measures a manager s ability to generate excess return above the benchmark return in up markets and retain more of the excess return in down markets. DIAMOND HILL CAPITAL MANAGEMENT, INC. QUARTERLY GUIDE MARCH 31, 216 DIAMOND-HILL.COM 13

16 Long-Short Fund (Closed to new investors.) As of March 31, 216 OBJECTIVE Long-term capital appreciation by investing in companies selling for less than and shorting companies selling for more than our estimate of intrinsic value. INVESTMENT STRATEGY To estimate intrinsic value, the business must be understandable, and we must be able to reasonably forecast its cash flows. For long positions, we seek businesses with sustainable competitive advantages, conservative balance sheets, and management with an ownership mentality. The inverse is often true for our short positions. Seek positive total returns on both long and short positions. The strategy maintains a long-bias; however the short positions reduce net exposure and therefore tend to reduce volatility compared to long-only funds. PORTFOLIO MANAGEMENT Chris Bingaman, CFA Ric Dillon, CFA Chuck Bath, CFA Portfolio Manager Portfolio Manager Asst. Portfolio Manager GROWTH OF $1, SINCE INCEPTION 1,2 $3, 25, 2, 15, 1, 5, PORTFOLIO GUIDELINES Fund Guidelines A long-biased fund with typically 4 6 long positions and 2 4 short positions Total long positions are generally between 8 1% of net assets Total short positions are generally between 1 4% of net assets Exposure Guidelines Maximum gross market exposure (long % + short %) = Up to 14% Target net market exposure (long % short %) = 4 75% TOP FIVE LONG HOLDINGS Citigroup, Inc. Financials 3.5% Abbott Laboratories Health Care 3.3 Willis Towers Watson PLC Financials 3.2 Twenty-First Century Fox, Inc. (Cl B) Cons. Discretionary 2.9 MetLife, Inc. Financials 2.9 TOP FIVE SHORT HOLDINGS Cincinnati Financial Corp. Financials (1.9)% Campbell Soup Co. Consumer Staples (1.8) Industrial Select Sector SPDR Fund Industrials (1.8) Consolidated Edison, Inc. Utilities (1.4) Best Buy Co., Inc. Cons. Discretionary (1.3) Long-Short Fund Class I $27, Russell 1 Index $19,945 6%/4% Blended Index $17,56 1 The chart represents a comparison of a hypothetical $1, investment and the reinvestment of dividends and capital gains in Class I shares versus the benchmark(s). The Index is unmanaged and does not incur fees. The Fund s performance is before taxes and reflects the deduction of fees and expenses. 2 The Fund was long-only from inception through June 22. An investor should consider the Fund s investment objectives, risks, charges and expenses carefully before investing. The prospectus or summary prospectus contain this and other important information about the Fund(s) and are available at diamond-hill.com or by calling Please read the prospectus or summary prospectus carefully before investing. The Diamond Hill Funds are distributed by BHIL Distributors, Inc. (Member FINRA/ SIPC), an affiliated company. 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. Diamond Hill Funds are not FDIC insured, may lose value, and have no bank guarantee BEST & WORST PERFORMERS 3 SECURITY NAME 1Q16 CONTRIBUTION POSITION AS OF 1Q16 Best Whirlpool Corp..6% 2.8% Long Alere, Inc..5. Long Colfax Corp Long Parker-Hannifin Corp Long Cimarex Energy Co Long Worst Citigroup, Inc. -.8% 3.5% Long Morgan Stanley Long Campbell Soup Co. -.4 (1.8) Short Willis Towers Watson PLC Long Cincinnati Financial Corp. -.2 (1.9) Short 3 The holdings identified do not represent all of the securities purchased, sold, or recommended for the adviser s clients. The reader should not assume that an investment in the securities identified was or will be profitable. To obtain the contribution calculation methodology and a complete list of every holding s contribution to the overall portfolio s performance during the measurement period, contact or info@diamond-hill.com. SECTOR ALLOCATION LONG RUSSELL 1 PORTFOLIO INDEX SHORT PORTFOLIO Financials 28.5% 16.3% (4.7)% Cons. Discretionary (6.7) Info. Technology (2.2) Industrials (2.9) Health Care (3.6) Consumer Staples (4.5) Energy (.2) Utilities. 3.5 (1.4) Telecom. 2.7 (.7) Materials. 3.2 (.3) Other... Cash & Equiv DIAMOND HILL CAPITAL MANAGEMENT, INC. QUARTERLY GUIDE MARCH 31, 216 DIAMOND-HILL.COM

17 PERIOD AND AVERAGE ANNUAL TOTAL RETURNS AS OF MARCH 31, 216 RETURNS AT NAV (WITHOUT SALES CHARGE) CALENDAR YEAR RETURNS Return % 45% FEES AND EXPENSES SINCE INCEPTION 2 1-YR 5-YR 3-YR 1-YR YTD 1Q16 Class A 6.43% 4.11% 6.9% 6.21% -1.8%.39%.39% Class C Class I Class Y BENCHMARK Russell 1 Index %/4% Blended Index RETURNS AT POP (WITH SALES CHARGE) Class A Class C Long-Short Fund Class I Russell 1 Index 6%/4% Blended Index 214 CLASS A CLASS C CLASS I CLASS Y Ticker DIAMX DHFCX DHLSX DIAYX CUSIP 25264S E S S65 Minimum Initial Investment $2,5 $2,5 $2,5 $5, Maximum Front-End Sales Charge 5.% None None None Contingent Deferred Sales Charge None 1.% None None Management Fee.9%.9%.9%.9% Distribution Fee (12b-1).25% 1.% None None Other Expenses.76%.76%.72%.62% Total Expense Ratio % 2.66% 1.62% 1.52% 4 Includes dividend expense relating to short sales. If dividend expenses relating to short sales were excluded, the Total Expense Ratio for the Long-Short Fund would have been 1.41% for Class A, 2.16% for Class C, 1.12% for Class I, and 1.2% for Class Y. 215 PORTFOLIO STATISTICS Inception...June 3, 2 Total Net Assets...$4.3B Distributions... Annual Median Market Capitalization Long / (Short)...$34.4B / ($9.5B) Portfolio Turnover Rate (12 months trailing)...5%* Number of Long / (Short) Equity Securities in Portfolio / (36) Long / (Short) Securities (% of Net Assets)...86.% / (27.2)% Gross Exposure (Long + Short)...113% Net Exposure (Long Short)...59% % of Net Assets in Cash & Equivalents...14.% * This calculation is the lesser of long buys plus short sales or long sales plus short covers divided by the average gross value of portfolio securities excluding cash equivalents. SINCE INCEPTION RISK STATISTICS (CLASS I SHARES) Annualized Standard Deviation (%) Beta (%) Sharpe Ratio...43 Alpha (%) R-squared (%) Upside / Downside Capture Ratio (%)...78 / 62 Relative to the Russell 1 Index MORNINGSTAR CLASSIFICATION Long-Short Equity LIPPER CLASSIFICATION Alternative Long-Short Equity Risk Disclosure: The Fund uses short selling which incurs significant additional risk. Theoretically, stocks sold short have the risk of unlimited losses. Overall equity market risks may affect the value of the fund. The performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor s shares, when redeemed, may be worth more or less than their original cost. The Fund s current performance may be lower or higher than the performance data quoted. Investors may obtain performance information current to the most recent month-end, within 7 business days, at diamond-hill.com. Performance returns assume reinvestment of all distributions. Returns for periods less than one year are not annualized. Class C, Class I, and Class Y shares include Class A share performance achieved prior to the creation of Class C, Class I, and Class Y shares. Fund holdings, sector allocations, and portfolio statistics subject to change without notice. The Russell 1 Index is an unmanaged market capitalization-weighted index comprised of the largest 1, companies by market capitalization in the Russell 3 Index, which is comprised of the 3, largest U.S. companies by total market capitalization. The blended index represents a 6% weighting of the Russell 1 Index and a 4% weighting of the BofA Merrill Lynch U.S. T-Bill -3 Month Index. The BofA Merrill Lynch U.S. T-Bill -3 Month Index is comprised of U.S. dollar denominated U.S. Treasury Bills with a term to maturity of less than 3 months. These indexes do not incur fees and expenses (which would lower returns) and are not available for direct investment. Risk Statistic Definitions: Standard Deviation measures the volatility of the Fund s returns. Beta measures the Fund s sensitivity to market movements. Sharpe Ratio uses the Fund s standard deviation and excess return to determine reward per unit of risk. Alpha measures excess return relative to the market that is attributable to active portfolio management. R-squared represents the percentage of the portfolio s movements that can be explained by general market movements. Upside / Downside Capture Ratio measures a manager s ability to generate excess return above the benchmark return in up markets and retain more of the excess return in down markets. DIAMOND HILL CAPITAL MANAGEMENT, INC. QUARTERLY GUIDE MARCH 31, 216 DIAMOND-HILL.COM 15

18 Financial Long-Short Fund As of March 31, 216 OBJECTIVE Long-term capital appreciation by investing in financial services companies selling for less than and shorting companies selling for more than our estimate of intrinsic value. INVESTMENT STRATEGY To estimate intrinsic value, the business must be understandable, and we must be able to reasonably forecast its cash flows. For long positions, we seek businesses with sustainable competitive advantages, conservative balance sheets, and management with an ownership mentality. The inverse is often true for our short positions. Seek positive total returns on both long and short positions. PORTFOLIO MANAGEMENT Chris Bingaman, CFA Austin Hawley, CFA John Loesch, CFA Portfolio Manager Portfolio Manager Portfolio Manager GROWTH OF $1, SINCE INCEPTION 1,2 $4, 3, 2, 1, PORTFOLIO GUIDELINES Fund Guidelines A long-biased fund with typically 3 5 long positions and 5 25 short positions Total long positions are generally between 8 1% of net assets Total short positions are generally between 5 25% of net assets Exposure Guidelines Maximum gross market exposure (long % + short %) = Up to 125% Target net market exposure (long % short %) = 6 1% TOP FIVE LONG HOLDINGS Popular, Inc. Banks, Thrifts & Mortgage Finance 7.1% Citigroup, Inc. Banks, Thrifts & Mortgage Finance 6.8 Willis Towers Watson PLC Insurance 6.8 MetLife, Inc. Insurance 5. Fortress Investment Group LLC (Cl A) Capital Markets 5. TOP FIVE SHORT HOLDINGS Cincinnati Financial Corp. Insurance (3.3)% Hanover Insurance Group, Inc. Insurance (3.) Selective Insurance Group, Inc. Insurance (2.) First American Financial Corp. Insurance (1.5) Westamerica Bancorp Banks, Thrifts & Mortgage Finance (1.5) Financial Long-Short Fund Class I $32,26 28 Russell 3 Financials Index $22,974 8%/2% Blended Index $22,486 1 The chart represents a comparison of a hypothetical $1, investment and the reinvestment of dividends and capital gains in Class I shares versus the benchmark(s). The Index is unmanaged and does not incur fees. The Fund s performance is before taxes and reflects the deduction of fees and expenses. 2 The Fund was long-only from inception through April 26. An investor should consider the Fund s investment objectives, risks, charges and expenses carefully before investing. The prospectus or summary prospectus contain this and other important information about the Fund(s) and are available at diamond-hill.com or by calling Please read the prospectus or summary prospectus carefully before investing. The Diamond Hill Funds are distributed by BHIL Distributors, Inc. (Member FINRA/ SIPC), an affiliated company. 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. Diamond Hill Funds are not FDIC insured, may lose value, and have no bank guarantee BEST & WORST PERFORMERS 3 SECURITY NAME INDUSTRY ALLOCATION LONG PORTFOLIO 1Q16 CONTRIBUTION RUSSELL 3 FINANCIALS INDEX POSITION AS OF 1Q16 Best Franklin Resources, Inc..4% 4.7% Long Brown & Brown, Inc Long Popular, Inc Long Vantiv, Inc. (Cl A) Long Enstar Group Ltd Long Worst Citigroup, Inc. -1.4% 6.8% Long Nationstar Mortgage Holdings, Inc Long istar, Inc Long Morgan Stanley Long Willis Towers Watson PLC Long 3 The holdings identified do not represent all of the securities purchased, sold, or recommended for the adviser s clients. The reader should not assume that an investment in the securities identified was or will be profitable. To obtain the contribution calculation methodology and a complete list of every holding s contribution to the overall portfolio s performance during the measurement period, contact or info@diamond-hill.com. SHORT PORTFOLIO Banks, Thrifts & Mortgage Finance 36.% 27.2% (1.5)% Insurance (1.7) Diversified Financial Services Consumer Financial Services Capital Markets REITs & Real Estate Management IT Services/ Other (1.3) Cash & Equiv DIAMOND HILL CAPITAL MANAGEMENT, INC. QUARTERLY GUIDE MARCH 31, 216 DIAMOND-HILL.COM

19 PERIOD AND AVERAGE ANNUAL TOTAL RETURNS AS OF MARCH 31, 216 RETURNS AT NAV (WITHOUT SALES CHARGE) CALENDAR YEAR RETURNS Return % 6% SINCE INCEPTION 2 1-YR 5-YR 3-YR 1-YR YTD 1Q16 Class A 6.26%.6% 6.86% 4.44% % -7.73% -7.73% Class C Class I BENCHMARK 4 Russell 3 Financials Index %/2% Blended Index RETURNS AT POP (WITH SALES CHARGE) Class A Class C FEES AND EXPENSES Financial Long-Short Fund Class I Russell 3 Financials Index 8%/2% Blended Index 214 CLASS A CLASS C CLASS I Ticker BANCX BSGCX DHFSX CUSIP 25264S S S825 Minimum Initial Investment $2,5 $2,5 $2,5 Maximum Front-End Sales Charge 5.% None None Contingent Deferred Sales Charge None 1.% None Management Fee 1.% 1.% 1.% Distribution Fee (12b-1).25% 1.% None Other Expenses.6%.6%.56% Total Expense Ratio % 2.6% 1.56% Includes dividend expense related to short sales. If dividend expenses related to short sales were excluded, the Total Expense Ratio for the Financial Long-Short Fund would have been 1.49% for Class A, 2.24% for Class C, and 1.2% for Class I PORTFOLIO STATISTICS Inception...August 1, 1997 Total Net Assets... $26M Distributions... Annual Median Market Capitalization Long / (Short)...$9.7B / ($3.9B) Portfolio Turnover Rate (12 months trailing)...47%* Number of Long / (Short) Equity Securities in Portfolio...37 / (7) Long / (Short) Securities (% of Net Assets) % / (13.5)% Gross Exposure (Long + Short)...113% Net Exposure (Long Short)...86% % of Net Assets in Cash & Equivalents...7% * This calculation is the lesser of long buys plus short sales or long sales plus short covers divided by the average gross value of portfolio securities excluding cash equivalents. SINCE INCEPTION RISK STATISTICS (CLASS I SHARES) Annualized Standard Deviation (%) Beta (%)...76 Sharpe Ratio...35 Alpha (%) R-squared (%) Upside / Downside Capture Ratio (%)...69 / 67 MORNINGSTAR CLASSIFICATION Financial LIPPER CLASSIFICATION Financial Services Risk Disclosure: The Fund uses short selling which incurs significant additional risk. Theoretically, stocks sold short have the risk of unlimited losses. Overall equity market risks may affect the value of the fund. The performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor s shares, when redeemed, may be worth more or less than their original cost. The Fund s current performance may be lower or higher than the performance data quoted. Investors may obtain performance information current to the most recent month-end, within 7 business days, at diamond-hill.com. Performance returns assume reinvestment of all distributions. Returns for periods less than one year are not annualized. Class C and Class I shares include Class A share performance achieved prior to the creation of Class C and Class I. Fund holdings, industry allocations, and portfolio statistics subject to change without notice. The Russell 3 Financials Index consists of Russell 3 companies involved in banking, mortgage finance, consumer finance, specialized finance, investment banking and brokerage, asset management and custody, corporate lending, insurance, financial investments and real estate, including REITS. The blended index represents a 8% weighting of the Russell 3 Financials Index and a 2% weighting of the BofA Merrill Lynch U.S. T-Bill -3 Month Index. The BofA Merrill Lynch U.S. T-Bill -3 Month Index is comprised of U.S. dollar denominated U.S. Treasury Bills with a term to maturity of less than 3 months. These indexes do not incur fees and expenses (which would lower returns) and are not available for direct investment. Risk Statistic Definitions: Standard Deviation measures the volatility of the Fund s returns. Beta measures the Fund s sensitivity to market movements. Sharpe Ratio uses the Fund s standard deviation and excess return to determine reward per unit of risk. Alpha measures excess return relative to the market that is attributable to active portfolio management. R-squared represents the percentage of the portfolio s movements that can be explained by general market movements. Upside / Downside Capture Ratio measures a manager s ability to generate excess return above the benchmark return in up markets and retain more of the excess return in down markets. DIAMOND HILL CAPITAL MANAGEMENT, INC. QUARTERLY GUIDE MARCH 31, 216 DIAMOND-HILL.COM 17

20 Research Opportunities Fund As of March 31, 216 OBJECTIVE Long-term capital appreciation by investing in companies selling for less than and shorting companies selling for more than our estimate of intrinsic value. Flexible mandate includes international and fixed income investments. INVESTMENT STRATEGY To estimate intrinsic value, the business must be understandable, and we must be able to reasonably forecast its cash flows. For long positions, we seek businesses with sustainable competitive advantages, conservative balance sheets, and management with an ownership mentality. The inverse is often true for our short positions. Seek positive total returns on both long and short positions. PORTFOLIO MANAGEMENT The Research Opportunities Fund is co-managed by Diamond Hill Research Analysts, each of whom is responsible for a sleeve of securities within one of five sector teams. GROWTH OF $1, SINCE INCEPTION 1 $3, 25, 2, 15, 1, 5, PORTFOLIO GUIDELINES Fund Guidelines Primarily invests in domestic equities Flexible mandate allows for international equities up to 2% and fixed income investments up to 2% Exposure Guidelines Maximum gross long position is 12% Maximum gross short position is 7% Maximum total gross exposure is 14% Typical net exposure = 6 95% TOP TEN EXPOSURES Hub Group, Inc. (Cl A) Industrials 6.2% Long GlaxoSmithKline PLC ADR Health Care 4.9 Long Liberty Global PLC (Cl A) Cons. Discretionary 3.9 Long Kirby Corp. Industrials 3.8 Long Cisco Systems, Inc. Info. Technology 3.8 Long CommScope Holding Co., Inc. Info. Technology 3.2 Long International Business Machines Corp. Info. Technology 3.1 Long Whirlpool Corp. Cons. Discretionary 2.7 Long Jarden Corp. Cons. Discretionary 2.7 Long Nationstar Mortgage Holdings, Inc. Financials 2.7 Long Total as % of Net Assets 37.% Russell 3 Index $3, %/25% Blended Index $23,243 Research Opportunities Fund Class I $24,213 1 The chart represents a comparison of a hypothetical $1, investment and the reinvestment of dividends and capital gains in Class I shares versus the benchmark(s). The Index is unmanaged and does not incur fees. The Fund s performance is before taxes and reflects the deduction of fees and expenses. An investor should consider the Fund s investment objectives, risks, charges and expenses carefully before investing. The prospectus or summary prospectus contain this and other important information about the Fund(s) and are available at diamond-hill.com or by calling Please read the prospectus or summary prospectus carefully before investing. The Diamond Hill Funds are distributed by BHIL Distributors, Inc. (Member FINRA/SIPC), an affiliated company. 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. Diamond Hill Funds are not FDIC insured, may lose value, and have no bank guarantee BEST & WORST PERFORMERS 2 SECURITY NAME SECTOR ALLOCATION LONG PORTFOLIO 1Q16 CONTRIBUTION RUSSELL 3 INDEX POSITION AS OF 1Q16 Best Hub Group, Inc. (Cl A) 1.5% 6.2% Long Kirby Corp Long Whirlpool Corp Long BioScrip, Inc Long LogMeIn, Inc..5 (1.6) Short Worst Valeant Pharmaceuticals International, Inc. -4.9% 2.3% Long Nationstar Mortgage Holdings, Inc Long Endo International PLC Long Concordia Healthcare Corp Long istar, Inc Long 2 The holdings identified do not represent all of the securities purchased, sold, or recommended for the adviser s clients. The reader should not assume that an investment in the securities identified was or will be profitable. To obtain the contribution calculation methodology and a complete list of every holding s contribution to the overall portfolio s performance during the measurement period, contact or info@diamond-hill.com. SHORT PORTFOLIO Info. Technology 21.% 2.2% (6.5)% Cons. Discretionary (5.9) Financials (3.9) Health Care (4.3) Industrials (.9) Consumer Staples (1.2) Telecom (.5) Energy (.6) Materials (.6) Utilities. 3.5 (1.) Other... Cash & Equiv.... PORTFOLIO BREAKDOWN NET EXPOSURE U.S. Equity 56.4% Non-U.S. Equity 15.3 Fixed Income DIAMOND HILL CAPITAL MANAGEMENT, INC. QUARTERLY GUIDE MARCH 31, 216 DIAMOND-HILL.COM