UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS
OF REGISTERED
MANAGEMENT INVESTMENT
COMPANY
Investment Company Act file number
811-05734
Diamond Hill Financial Trends Fund,
Inc.
(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) 255-3341
Date of fiscal year end:
12/31
Date of reporting period:
03/31/10
Form N-Q is to be used by registered
management investment companies, other than a small business investment company
registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports
with the Commission, not later than 60 days after the close of the first and
third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act
of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on
Form N-Q in its regulatory, disclosure review, inspection, and policy making
roles.
A registrant is required to disclose the
information specified by Form N-Q, and the Commission will make this information
public. A registrant is not required to respond to the collection of information
contained in Form N-Q unless the Form displays a currently valid Office of
Management and Budget ("OMB") control number. Please direct comments concerning
the accuracy of the information collection burden estimate and any suggestions
for reducing the burden to the Secretary, Securities and Exchange Commission,
450 Fifth Street, NW, Washington, DC 20549. The OMB has reviewed this collection
of information under the clearance requirements of 44 U.S.C. §
3507.
Item 1. Schedule of
Investments
Diamond Hill Financial Trends
Fund, Inc.
|
|
|
|
|
|
|
Schedule of
Investments
|
|
|
|
|
|
|
March 31, 2010
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Fair
|
|
|
|
Shares
|
|
|
Value
|
|
Preferred Stocks —
8.1%
|
|
|
|
|
|
|
Banking Services —
4.6%
|
|
|
|
|
|
|
Citizens Funding Trust I,
7.50%
|
|
|
9,544
|
|
|
$
|
154,231
|
|
Huntington Bancshares, Inc.,
Series A, 8.50%
|
|
|
890
|
|
|
|
872,200
|
|
Regions Financing Trust III,
8.88%
<
|
|
|
9,956
|
|
|
|
248,701
|
|
Wachovia Preferred Funding Corp.,
Series A, 7.25%
|
|
|
32,215
|
|
|
|
748,354
|
|
|
|
|
|
|
|
|
2,023,486
|
|
Financial Services —
1.9%
|
|
|
|
|
|
|
|
|
Countrywide Capital V,
7.00%
<
|
|
|
37,460
|
|
|
|
840,977
|
|
REITs and Real Estate Management —
1.6%
|
|
|
|
|
|
|
|
|
iStar Financial, Inc., Series F,
7.80%
|
|
|
36,660
|
|
|
|
531,203
|
|
LaSalle Hotel Properties, Series
E, 8.00%
|
|
|
8,506
|
|
|
|
202,188
|
|
|
|
|
|
|
|
|
733,391
|
|
Total Preferred
Stocks
|
|
|
|
|
|
|
3,597,854
|
|
Common Stocks —
80.6%
|
|
|
|
|
|
|
|
|
Asset Management —
0.5%
|
|
|
|
|
|
|
|
|
Affiliated Managers Group,
Inc.
*<
|
|
|
2,675
|
|
|
|
211,325
|
|
Banking Services —
30.9%
|
|
|
|
|
|
|
|
|
Bank of New York Mellon
Corp.†
|
|
|
43,818
|
|
|
|
1,353,100
|
|
BB&T Corp.
<
|
|
|
27,027
|
|
|
|
875,405
|
|
City National Corp.
<
|
|
|
4,250
|
|
|
|
229,372
|
|
Comerica,
Inc.
|
|
|
8,572
|
|
|
|
326,079
|
|
First California Financial Group,
Inc.
*
|
|
|
71,560
|
|
|
|
188,918
|
|
First Financial Holdings,
Inc.
<
|
|
|
55,805
|
|
|
|
840,423
|
|
First Niagara Financial Group,
Inc.
<
|
|
|
32,530
|
|
|
|
462,577
|
|
First of Long Island
Corp.
<
|
|
|
16,770
|
|
|
|
404,157
|
|
Huntington Bancshares,
Inc.
<
|
|
|
130,305
|
|
|
|
699,738
|
|
National Penn Bancshares,
Inc.
<
|
|
|
115,675
|
|
|
|
798,157
|
|
NewBridge Bancorp
*<
|
|
|
51,512
|
|
|
|
182,868
|
|
PNC Financial Services Group,
Inc.
|
|
|
20,185
|
|
|
|
1,205,044
|
|
Sterling
Bancorp
|
|
|
52,175
|
|
|
|
524,359
|
|
SunTrust Banks,
Inc.
|
|
|
24,735
|
|
|
|
662,651
|
|
U.S.
Bancorp
|
|
|
61,199
|
|
|
|
1,583,830
|
|
Wells Fargo &
Co.
|
|
|
92,800
|
|
|
|
2,887,936
|
|
Wilmington Trust Corp.
<
|
|
|
29,740
|
|
|
|
492,792
|
|
|
|
|
|
|
|
|
13,717,406
|
|
Consumer Financial Services —
1.7%
|
|
|
|
|
|
|
|
|
American Express
Co.
|
|
|
10,710
|
|
|
|
441,895
|
|
Discover Financial
Services
|
|
|
22,935
|
|
|
|
341,731
|
|
|
|
|
|
|
|
|
783,626
|
|
Financial Services —
14.2%
|
|
|
|
|
|
|
|
|
Bank of America
Corp.
|
|
|
80,145
|
|
|
|
1,430,588
|
|
Diamond Hill Financial Trends
Fund, Inc.
|
|
|
|
|
|
|
Schedule of
Investments
|
|
|
|
|
|
|
March 31, 2010
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Fair
|
|
|
|
Shares
|
|
|
Value
|
|
Financial Services — 14.2%
continued
|
|
|
|
|
|
|
JPMorgan Chase & Co.
†
|
|
|
63,123
|
|
|
$
|
2,824,754
|
|
Leucadia National
Corp.
*<
|
|
|
18,645
|
|
|
|
462,583
|
|
Morgan
Stanley
|
|
|
15,910
|
|
|
|
466,004
|
|
MVC Capital, Inc.
<
|
|
|
34,040
|
|
|
|
461,923
|
|
State Street
Corp.
|
|
|
14,564
|
|
|
|
657,419
|
|
|
|
|
|
|
|
|
6,303,271
|
|
Insurance —
30.7%
|
|
|
|
|
|
|
|
|
Alleghany Corp.
*<
|
|
|
1,617
|
|
|
|
470,136
|
|
Allstate
Corp.
|
|
|
42,000
|
|
|
|
1,357,020
|
|
Arch Capital Group
Ltd.
*<
|
|
|
8,890
|
|
|
|
677,863
|
|
Assurant,
Inc.
|
|
|
45,015
|
|
|
|
1,547,616
|
|
Assured Guaranty Ltd.
<
|
|
|
80,051
|
|
|
|
1,758,720
|
|
First American
Corp.
|
|
|
16,290
|
|
|
|
551,254
|
|
Hanover Insurance Group, Inc.,
The
†
|
|
|
6,765
|
|
|
|
295,022
|
|
Hartford Financial Services Group,
Inc.
|
|
|
15,347
|
|
|
|
436,162
|
|
Horace Mann Educators
Corp.
<
|
|
|
62,217
|
|
|
|
936,988
|
|
Marsh & McLennan Cos.,
Inc.
<
|
|
|
35,355
|
|
|
|
863,369
|
|
Old Republic International
Corp.
<
|
|
|
125,830
|
|
|
|
1,595,524
|
|
Prudential Financial,
Inc.
|
|
|
26,740
|
|
|
|
1,617,770
|
|
Travelers Cos., Inc., The
†
|
|
|
28,760
|
|
|
|
1,551,314
|
|
|
|
|
|
|
|
|
13,658,758
|
|
REITs and Real Estate Management —
2.6%
|
|
|
|
|
|
|
|
|
Mid-America Apartment Communities,
Inc. REIT
<
|
|
|
3,940
|
|
|
|
204,052
|
|
Redwood Trust, Inc.
REIT
<
|
|
|
62,285
|
|
|
|
960,435
|
|
|
|
|
|
|
|
|
1,164,487
|
|
Total Common
Stocks
|
|
|
|
|
|
|
35,838,873
|
|
|
|
|
|
|
|
|
|
|
Par
|
|
|
Fair
|
|
|
|
Value
|
|
|
Value
|
|
Corporate Bonds —
3.4%
|
|
|
|
|
|
|
|
|
Banking Services —
3.4%
|
|
|
|
|
|
|
|
|
AmSouth Bank, 5.20%,
4/01/15
|
|
|
440,000
|
|
|
|
409,917
|
|
First Horizon National Corp.,
4.50%, 5/15/13
|
|
|
725,000
|
|
|
|
683,337
|
|
Zions Bancorp., 7.75%,
9/23/14
|
|
|
415,000
|
|
|
|
418,577
|
|
|
|
|
|
|
|
|
1,511,831
|
|
Total Corporate
Bonds
|
|
|
|
|
|
|
1,511,831
|
|
Repurchase Agreement —
17.9%
|
|
|
|
|
|
|
|
|
BNP Paribas Securities
Corp.,
|
|
|
|
|
|
|
|
|
0.00%,
4/01/10,
|
|
|
|
|
|
|
|
|
Repurchase agreement is
collateralized by various U.S. Government Agency
securities
|
|
|
|
|
|
|
|
|
with a range of rates from 0%-5%,
and maturities from 7/1/2010 thru 7/13/2037
††
|
|
|
7,973,392
|
|
|
|
7,973,392
|
|
Diamond Hill Financial Trends
Fund, Inc.
|
|
|
|
|
|
|
Schedule of
Investments
|
|
|
|
|
|
|
March 31, 2010
(Unaudited)
|
|
|
|
|
|
|
|
|
Par
|
|
|
Fair
|
|
|
|
Value
|
|
|
Value
|
|
Registered Investment Company —
7.7%
|
|
|
|
|
|
|
JPMorgan U.S. Government Money
Market Fund-Capital Shares
|
|
|
3,409,000
|
|
|
$
|
3,409,000
|
|
|
|
|
|
|
|
|
|
|
Total Investment Securities —
117.7%
|
|
|
|
|
|
|
|
|
(Cost
$43,097,654)**
|
|
|
|
|
|
$
|
52,330,950
|
|
|
|
|
|
|
|
|
|
|
Segregated Cash With Brokers —
7.3%
|
|
|
|
|
|
|
3,227,973
|
|
|
|
|
|
|
|
|
|
|
Securities Sold Short —
(7.2)%
|
|
|
|
|
|
|
|
|
(Proceeds
$2,984,419)
|
|
|
|
|
|
|
(3,185,025
|
)
|
|
|
|
|
|
|
|
|
|
Liabilities In
Excess
|
|
|
|
|
|
|
|
|
Of Other Assets —
(17.8%)
|
|
|
|
|
|
|
(7,929,068
|
)
|
Net Assets —
100.0%
|
|
|
|
|
|
$
|
44,444,830
|
|
*
|
Non-income
producing security.
|
|
|
**
|
Represents cost
for financial reporting
purposes.
|
<
|
All or a portion
of the security is on loan. The total market value of the securities on
loan, as of March 31, 2010, was
$7,763,179.
|
†
|
Security position
is either entirely or partially held in a segregated account as collateral
for securities sold short aggregating a total market value of
$3,543,219.
|
†
†
|
Security position
represents collateral for securities loaned with a total market value of
$7,973,392.
|
REIT
-
Real Estate Investment
Trust
See Notes to Schedule of
Investments.
Diamond Hill Financial Trends
Fund, Inc.
|
|
|
|
|
|
|
Schedule of Securities Sold
Short
|
|
|
|
|
|
|
March 31, 2010
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Fair
|
|
|
|
Shares
|
|
|
Value
|
|
Common Stocks —
100.0%
|
|
|
|
|
|
|
Banking Services —
93.3%
|
|
|
|
|
|
|
First Financial Bankshares,
Inc.
|
|
|
11,280
|
|
|
$
|
581,484
|
|
Hancock Holding
Co.
|
|
|
4,420
|
|
|
|
184,800
|
|
Home Bancshares,
Inc.
|
|
|
24,805
|
|
|
|
655,844
|
|
M&T Bank
Corp.
|
|
|
8,405
|
|
|
|
667,189
|
|
Prosperity Bancshares,
Inc.
|
|
|
16,082
|
|
|
|
659,362
|
|
Westamerica
Bancorp.
|
|
|
3,850
|
|
|
|
221,953
|
|
|
|
|
|
|
|
|
2,970,632
|
|
Capital Markets —
6.7%
|
|
|
|
|
|
|
|
|
KBW, Inc.*
|
|
|
7,970
|
|
|
|
214,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Common Stocks Sold
Short
|
|
|
|
|
|
|
|
|
(Proceeds
$2,984,419)
|
|
|
|
|
|
|
3,185,025
|
|
|
|
|
|
|
|
|
|
|
* Non-dividend expense producing
security.
|
|
|
|
|
|
|
|
|
Diamond Hill Financial Trends Fund,
Inc.
Notes to Schedule of
Investments
March 31, 2010
(Unaudited)
Accounting policies
The Diamond Hill Financial Trends Fund,
Inc. (the “Fund”) is a diversified closed-end management investment company
registered under the Investment Company Act of 1940 (the “1940 Act”), as
amended.
Valuation of
investments
Security valuation
The Fund records its 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 to determine
fair value are further described below.
The net asset value of the common shares
of the Fund is determined daily as of the close of the NYSE, normally at 4:00
P.M. Eastern Time. Short-term debt investments of sufficient credit quality
maturing in less than 61 days are valued at amortized cost, and thereafter
assume a constant amortization to maturity of any discount or premium, which
approximates fair value. Investments in other investment companies are valued at
their reported net asset value. All other securities held by the Fund are valued
at the last sale price or official closing price (closing bid price or last
evaluated quote if no sale has occurred) as of the close of business on the
principal securities exchange (domestic or foreign) on which they trade or,
lacking any sales, at the closing bid price. Securities traded only in the
over-the-counter market are valued at the last bid price quoted by brokers
making markets in the securities at the close of trading. Securities for which
there are no such quotations, principally debt securities, are valued based on
the valuation provided by an independent pricing service, which utilizes both
dealer-supplied and electronic data processing techniques, which take into
account factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data.
Other assets and securities for which no
such quotations are readily available (e.g., an approved pricing service does
not provide a price, certain stale prices, or an event that materially affects
the furnished price) are valued at fair value as determined in good faith under
consistently applied procedures established by and under the general supervision
of the Board of Directors.
The valuation techniques described
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 Fund’s own assumptions in determining the fair value
of investments)
|
The inputs or methodology used for
valuing securities are not necessarily an indication of the risk associated with
investing in those securities. For example, 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 Investment Company Act of
1940. Generally, amortized cost approximates the current fair value of a
security, but since the value is not obtained from a quoted price in an active
market, such securities would be reflected as Level 2.
Diamond Hill Financial Trends
Fund, Inc.
|
|
|
|
|
|
|
Notes to Schedule of
Investments
|
|
|
|
|
|
|
|
|
March 31, 2010
(Unaudited)
|
|
|
|
|
|
|
|
|
The following is a summary of the
inputs used to value the Funds net assets as of March 31,
2010:
|
|
|
|
|
|
|
|
Diamond Hill Financial Trends
Fund, Inc.
|
|
|
|
|
|
|
|
|
Level 1
Quoted
prices
|
|
|
Other
Significant
Observable
Inputs
|
|
Investments in
Securities:
|
|
|
|
|
|
|
(Assets)
|
|
|
|
|
|
|
Common
Stocks*
|
|
$
|
35,838,873
|
|
|
$
|
–
|
|
Corporate
Bonds
|
|
|
–
|
|
|
|
1,511,831
|
|
Preferred
Stocks
|
|
|
–
|
|
|
|
3,597,854
|
|
Registered Investment
Companies
|
|
|
3,409,000
|
|
|
|
–
|
|
Repurchase
Agreements
|
|
|
–
|
|
|
|
7,973,392
|
|
Total
Assets
|
|
|
39,247,873
|
|
|
|
13,083,077
|
|
|
|
|
|
|
|
|
|
|
Investment in Securities Sold
Short:
|
|
|
|
|
|
|
|
|
(Liabilities)
|
|
|
|
|
|
|
|
|
Common
Stocks
|
|
$
|
(3,185,025
|
)
|
|
$
|
–
|
|
Total
Liabilities
|
|
|
(3,185,025
|
)
|
|
|
–
|
|
Total
|
|
$
|
36,062,848
|
|
|
|
13,083,077
|
|
The Fund had no Level 3 securities
at March 31, 2010
|
* See Schedule of Investments and
Schedule of Securities Sold Short for industry
classification.
Investment
transactions
Investment transactions are accounted
for no later than the first business day after trade date for daily net asset
value calculations throughout the period. However, for financial reporting
purposes, investment transactions are reported on trade date at the end of the
period. Net realized gains and losses on sales of investments are determined on
the identified cost basis.
Short sales
The Fund is 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, the 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.
The 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 the 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 Adviser’s ability to accurately anticipate the future
value of a security.
Securities lending
The Fund has a securities lending
agreement with JPMorgan Chase Bank, N.A. (“JPMorgan”). Under the terms of the
agreement, JPMorgan is authorized to loan securities on behalf of the Fund to
approved borrowers. In exchange, the Fund receives cash collateral in the amount
of at least 100% of the value of the securities loaned. The cash collateral is
invested in short term instruments as noted in the Schedule of Investments.
Although risk is mitigated by the collateral, the Fund 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 Fund from losses
incurred in the event of a borrower’s material default of the terms and
conditions of the borrower agreement. The agreement provides that after
predetermined rebates to brokers, net securities lending income shall first be
solely paid as credits and offset against costs
Diamond Hill Financial Trends Fund,
Inc.
Notes to Schedule of
Investments
March 31, 2010
(Unaudited)
and other charges incurred by the Fund
with JPMorgan. Any remaining securities lending revenue is then paid to the Fund
as securities lending income. The net securities lending income is presented in
the Statement of Operations.
As of March 31, 2010, the value of
securities loaned and the collateral held were as follows:
Market
Value
|
Value of
|
Of Securities
Loaned
|
Collateral
Received
|
$7,763,179
|
$7,973,392
|
Federal income taxes
The Fund qualifies as a “regulated
investment company” by complying with the applicable provisions of the Internal
Revenue Code and will not be subject to federal income tax on taxable income
that is distributed to shareholders. Therefore, no federal income tax provision
is required. The Fund has analyzed its tax positions taken on Federal income tax
returns for all open tax years (tax years ended December 31, 2006 through 2009)
and has concluded that no provision for income tax is required in the financial
statements.
|
Gross
|
Gross
|
Net
|
Federal Tax
|
Unrealized
|
Unrealized
|
Unrealized
|
Cost
|
Appreciation
|
Depreciation
|
Appreciation
|
$
43,448,974
|
$ 9,722,626
|
$ (840,650)
|
$
8,881,976
|
Use of estimates
The preparation of financial statements,
in accordance with 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 these estimates.
Subsequent events — The Fund evaluated
subsequent events from March 31, 2010, the date of this report, through May 26,
2010, the date this report was issued and available. There were no subsequent
events to report that would have a material impact on this
report.
Diamond Hill Financial Trends Fund,
Inc.
Controls and
Procedures
March 31, 2010
(Unaudited)
Item 2. Controls and
Procedures.
(a) The registrant's principal executive
officer and principal financial officer have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended) are effective based on their
evaluation of these controls and procedures as of a date within 90 days of the
filing date of this document.
(b) There were no significant changes in
the registrant's internal controls over financial reporting (as defined in Rule
30a-3(d) under the Investment Company Act of 1940, as amended) that occurred
during the registrant's last fiscal quarter that has materially affected, or is
reasonable likely to materially affect, the registrant's internal control over
financial reporting.
Diamond Hill Financial Trends Fund,
Inc.
Exhibits/Signatures
March 31, 2010
(Unaudited)
Item 3. Exhibits.
The certifications required by Rule
30a-2 under the Investment Company Act of 1940, as amended, are attached
hereto.
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 Financial
Trends Fund, Inc.
By (Signature and
Title)
/s/ James F. Laird,
Jr.
James F. Laird, Jr.
President
Date: May 26, 2010
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: May 26, 2010
By (Signature and
Title)
/s/ Gary R.
Young
Gary R. Young
Treasurer
Date: May 26, 2010