Diamond Hill 2013 Annual Shareholder Letter – ValueWalk Premium
Diamond Hill Capital

Diamond Hill 2013 Annual Shareholder Letter

Diamond Hill Capital

Dear Fellow Shareholders:

From the beginning, we have placed our fiduciary responsibility to our clients at the top of our corporate objectives. The fulfillment of this responsibility is necessary (but not sufficient) for our continued business success. Through separate accounts, mutual funds, and limited partnerships, all of our strategies have provided our clients with competitive investment returns since their respective inceptions. For the five-year period beginning in 2008 (the year of the financial crisis) through the end of 2012, our clients' investment results were closer to average, yet improving in the last six months of 2012. My belief is that over the next five years, we will achieve better than average results for our clients, continuing to fulfill our primary corporate objective as a fiduciary to our clients with competitive long-term investment results.

Financial Results

Revenue was $67 million in 2012 compared with $64 million in 2011 and $41 million in 2007. Assets under management (AUM) finished the year at $9.4 billion, up from $8.7 billion in 2011 and $4.4 billion in 2007. Our operating profit margin of 36.7% was slightly ahead of 2011. We believe that our growth and profitability last year was above average for our industry and much better than average for companies similar in size. These financial results are consistent with meeting our secondary corporate goal to grow the intrinsic value per share value of Diamond Hill. With our existing strategy offerings, we estimate AUM capacity in the range of $20 to $30 billion.

Five years ago, Diamond Hill paid its first cash dividend, and we have paid a cash dividend each year since. In total, we have paid $46 per share in cash dividends, about 60% of which represented a return of capital. It is important to note that during the past five years, our tangible book value per share has declined due to these dividends, from $17.52 at the end of 2007 to $6.86 at the end of 2012. The dividends of $46 per share and the $10.66

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