Compensation Plans

Equity Incentive Plans

2014 Equity and Cash Incentive Plan

At the Company’s annual shareholder meeting on April 30, 2014, shareholders approved the 2014 Equity and Cash Incentive Plan (“2014 Plan”). The 2014 Plan is intended to facilitate the Company’s ability to attract and retain staff, provide additional incentive to employees and directors, and promote the success of the Company’s business. The 2014 Plan authorizes the issuance of 600,000 Common Shares of the Company in various forms of equity awards. The 2014 Plan also authorizes cash incentive awards. As of September 30, 2014, there were 584,650 Common Shares available for awards under the 2014 Plan. The 2014 Plan provides that the Board of Directors, or a committee appointed by the Board, may grant awards and otherwise administer the 2014 Plan. Restricted stock units and restricted stock grants issued under the 2014 Plan, which vest over time, are recorded as deferred compensation in the equity section of the balance sheet on the grant date and then recognized as compensation expense based on the grant date price over the vesting period of the respective grant. Stock grants issued under the 2014 Plan are recorded as compensation expense based on the grant date price.

2011 Equity and Cash Incentive Plan and 2005 Employee and Director Equity Incentive Plan

There are no longer any Common Shares available for future issuance under either the 2011 or 2005 equity incentive plans, although outstanding grants under these plans remain issued and outstanding. Restricted stock grants issued under the 2011 and 2005 equity incentive plans, which vest over time, were recorded as deferred compensation in the equity section of the balance sheet on the grant date and then recognized as compensation expense based on the grant date price over the vesting period of the respective grant. Stock grants issued under the 2011 and 2005 equity incentive plans were recorded as compensation expense based on the grant date price.

Restricted Stock Transactions

The Company issues restricted stock units and restricted stock awards (collectively, "Restricted Stock"). Restricted stock units represent shares which may be issued in the future, whereas restricted stock awards represent shares issued and outstanding upon grant with vesting restrictions. The following table represents a roll-forward of outstanding Restricted Stock and related activity during the nine months ended September 30, 2014 and the year ended December 31, 2013:



	Shares		Weighted-Average Grant Date Price per Share
Outstanding Restricted Stock as of December 31, 2012	319,988		$	74.22
Grants issued	32,000		85.63
Grants vested	(39,749	)	80.77
Grants forfeited	(140	)	77.81
Outstanding Restricted Stock as of December 31, 2013	312,099		$	74.17
Grants issued	41,013		120.27
Grants vested	(18,187	)	61.08
Grants forfeited	(7,813	)	78.00
Total Outstanding Restricted Stock as of September 30, 2014	327,112		$	80.95

Total deferred compensation related to unvested Restricted Stock grants was $11.5 million as of September 30, 2014. Compensation expense related to restricted stock units is calculated based upon the fair market value of the Common Shares on grant date reduced by the present value of expected dividends during the requisite service period discounted at the appropriate risk-free interest rate and is further adjusted for estimated forfeitures. Compensation expense related to restricted stock grants is calculated based upon the fair market value of the Common Shares on grant date adjusted for estimated forfeitures. Compensation expense recognition of deferred equity compensation over the remaining service periods is as follows:



Three Months Remaining In
2014		2015		2016		2017		2018		2019		Total
$	1,476,596	$	4,877,480	$	2,188,337	$	1,671,996	$	939,958	$	299,377	$	11,453,744

Stock Grant Transactions

The following table represents stock grant transactions during the nine months ended September 30, 2014 and 2013:

401(k) Plan

The Company sponsors a 401(k) plan under which all employees are eligible to participate. Employees may contribute a portion of their compensation, subject to certain limits based on federal tax laws. The Company makes matching contributions of Common Shares of the Company with a value equal to 200 percent of the first six percent of an employee’s compensation contributed to the plan. Employees become fully vested in the matching contributions after six plan years of employment. The following table summarizes the Company’s expenses attributable to the plan during the three and nine months ended September 30, 2014 and 2013:



	September 30, 2014		September 30, 2013
Three Months Ended	$	344,868	$	301,958
Nine Months Ended	1,002,871		866,740

Deferred Compensation Plans

On April 24, 2013, the Board of Directors approved the Diamond Hill Fixed Term Deferred Compensation Plan and the Diamond Hill Variable Term Deferred Compensation Plan (collectively the “Plans”). Under the Plans, participants may elect to voluntarily defer, for a minimum of five years, certain incentive compensation, which the Company then contributes into the Plans. Each participant is responsible for designating investment options for assets they contribute, and the distribution paid to each participant reflects any gains or losses on the assets realized while in the Plans. Assets held in the Plans are included in the Company’s investment portfolio and the associated obligation to participants is included in deferred compensation liability. Assets held in the Plans consist of the Diamond Hill Funds. These assets and the associated obligations are both recorded at fair value. The first deferrals into the Plans were made during the first quarter of 2014 and are valued at $4.0 million as of September 30, 2014. Amounts contributed to the Plans are expensed in the year in which the compensation was earned; however, a tax deduction for federal and state income taxes is deferred until amounts are distributed from the Plans and reflected as a deferred tax asset.

Shares Issued

Grant Date Value

September 30, 2014

September 30, 2013