UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-09997
Baird Funds, Inc.
(Exact name of registrant as specified in charter)
777 East Wisconsin Avenue
Milwaukee, WI 53202
(Address of principal executive offices) (Zip code)
Charles M. Weber
Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, WI 53202
(Name and address of agent for service)
1-866-442-2473
Registrant's telephone number, including area code
Date of fiscal year end: December 31, 2009
Date of reporting period: December 31, 2009
Item 1. Reports to Stockholders.
![](https://capedge.com/proxy/N-CSR/0000898531-10-000257/baird-logo.jpg)
Annual Report - Baird Funds
Baird Short-Term Bond Fund
Baird Intermediate Bond Fund
Baird Intermediate Municipal Bond Fund
Baird Aggregate Bond Fund
Baird Core Plus Bond Fund
TABLE OF CONTENTS
Page | |
Letter to Shareholders | 1 |
2009 Bond Market Overview | 2 |
Baird Short-Term Bond Fund | 6 |
Baird Intermediate Bond Fund | 24 |
Baird Intermediate Municipal Bond Fund | 43 |
Baird Aggregate Bond Fund | 63 |
Baird Core Plus Bond Fund | 88 |
Additional Information on Fund Expenses | 107 |
Statements of Assets and Liabilities | 109 |
Statements of Operations | 110 |
Statements of Changes in Net Assets | 111 |
Financial Highlights | 116 |
Notes to the Financial Statements | 125 |
Report of Independent Registered Public Accounting Firm | 139 |
Directors and Officers | 140 |
Disclosure Regarding the Board of Directors’ Approval | |
of the Investment Advisory Agreement for Baird Bond Funds | 142 |
Additional Information | 145 |
Privacy Notice | A-1 |
This report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus.
Cautionary Note on Analyses, Opinions and Outlooks: In this report we offer analyses and opinions on the performance of individual securities, companies, industries, sectors, markets, interest rates and governmental policies, including predictions, forecasts and outlooks regarding possible future events. These can generally be identified as such because the context of the statements may include such words as “believe,” “should,” “will,” “expects,” “anticipates,” “hopes” and words of similar effect. These statements reflect the portfolio managers’ good faith beliefs and judgments and involve risks and uncertainties, including the risk that the portfolio managers’ analyses, opinions and outlooks are or will prove to be inaccurate. It is inherently difficult to correctly assess and explain the performance of particular securities, sectors, markets, interest rate movements, governmental actions or general economic trends and conditions, and many unforeseen factors contribute to the performance of Baird Funds. Investors are, therefore, cautioned not to place undue reliance on subjective judgments contained in this report.
![](https://capedge.com/proxy/N-CSR/0000898531-10-000257/baird-logo.jpg)
Baird Funds
1-866-442-2473
www.bairdfunds.com
February 26, 2010
Dear Shareholder,
We appreciate the confidence and trust that you have placed in our experienced investment team to help you achieve your financial goals. We are pleased to report that net assets of the eight mutual funds in our family have grown to more than $3.6 billion as of the end of 2009, an increase of more than 83% compared to the prior year.
In this Annual Report we review the bond market in 2009 and the performance and composition of each of the Baird Bond Funds. We are pleased with the performance of the Funds in 2009 and feel that patience was rewarded as unprecedented market volatility and pricing dislocation subsided. Thank you again for choosing Baird Funds.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000898531-10-000257/mestanek-signature.jpg)
Mary Ellen Stanek, CFA
President
Baird Funds
Page 1
2009 Bond Market Overview
Bonds Bounce Back (in a BIG way)
After nearly dying on the table in 2008, the bond market staged a remarkable recovery in 2009 as unprecedented Government intervention and ultra-aggressive Fed policy successfully turned investors’ paralyzing fear of risk back toward an eye for opportunity. In response to the dramatic turnaround in investor sentiment, sectors that plunged in 2008 skyrocketed in 2009. High yield securities (-26.16% in 2008 vs. +58.21% in 2009), Commercial mortgage-backed securities (CMBS) (–20.52% in 2008 vs. +28.45% in 2009), asset-backed securities (ABS) (-12.72% in 2008 vs. +24.72% in 2009) and investment grade corporate debt securities (-4.94% in 2008 vs. +18.68% in 2009) made the most dramatic comebacks from abysmal performances in 2008, while municipal securities (-2.47% in 2008 vs. +12.91% in 2009) and Treasury Inflation-Protected Securities (TIPS) (-2.35% in 2008 vs. +11.41% in 2009) also made impressive leaps from more modest declines the prior year. In contrast, U.S. Treasury securities, which had an impressive 13.74% return in 2008 on a historic flight to quality, fell in 2009 (-3.57%) as Treasury issuance surged and investors opted for more yieldy sectors. Direct secondary market purchases by the U.S. Government (several hundred $billion worth) of Government Agency debentures and Agency guaranteed mortgage pass-throughs (MBS Sector) enabled these two sectors to again post positive returns of 1.95% and 5.89%, respectively, in 2009 after impressive 2008 returns of 9.08% and 8.34%. While sector returns varied sharply, broader index returns in 2009 were surprisingly close to their returns in 2008. For example, the Barclays Capital Aggregate Index returned 5.93% this year after 5.24% last year.
Total Returns of Selected Barclays Capital (BC) Sectors and Indices
Sector/Index | 4th Quarter | 2009 | 2008 |
U.S. Treasury Sector | -1.30% | -3.57% | 13.74% |
Gov’t Agency Sector | -0.03% | 1.95% | 9.08% |
Corporate Sector | 1.35% | 18.68% | -4.94% |
MBS Sector | 0.57% | 5.89% | 8.34% |
CMBS Sector | 3.27% | 28.45% | -20.52% |
ABS Sector | 1.34% | 24.72% | -12.72% |
Municipal Sector | -0.96% | 12.91% | -2.47% |
TIPS | 1.76% | 11.41% | -2.35% |
High Yield Sector | 6.19% | 58.21% | -26.16% |
BC Aggregate Index | 0.20% | 5.93% | 5.24% |
BC Gov’t/Credit Index | -0.21% | 4.52% | 5.70% |
BC Int. Gov’t/Credit Index | 0.31% | 5.24% | 5.08% |
BC 1-3 yr. Gov’t/Credit Index | 0.38% | 3.83% | 4.97% |
Yield Curve Steepens
While short-term yields remained low (pegged to the Fed’s 0% Fed Funds target), the yield curve steepened sharply in 2009 as stimulus-driven inflation concerns and heavy new Treasury supply pushed long-term Treasury yields higher by nearly 200 basis points (bps). The spread between 2-year and 30-year Treasuries briefly hit an all-time high of 375 bps on December 10, 2009 but ended the year at 350 bps. Rates remained volatile in 2009 with Treasury yields rising over 60 bps in December alone (see chart and table on next page).
Page 2
2009 Bond Market Overview
Treasury Yields (Source: Bloomberg)
![]() | Dec 31, | Nov 30, | Dec 31, | 1 Mo. | 1 Yr. | |
Maturity | 2008 | 2009 | 2009 | Change | Change | |
1 | 0.34% | 0.24% | 0.44% | 0.20% | 0.10% | |
2 | 0.76% | 0.66% | 1.14% | 0.48% | 0.38% | |
3 | 0.97% | 1.10% | 1.68% | 0.58% | 0.71% | |
5 | 1.55% | 2.00% | 2.68% | 0.68% | 1.13% | |
10 | 2.21% | 3.20% | 3.84% | 0.64% | 1.63% | |
30 | 2.68% | 4.19% | 4.64% | 0.45% | 1.96% | |
Heavy New Supply
Unprecedented Government stimulus resulted in record Treasury issuance. Net new supply of Treasury notes and bonds spiked to an all-time high of $1.5 trillion in 2009 from $340 billion in 2008 (see chart at right). Investment grade corporate issuance also surged to a record $918 billion (up from a prior record of $608 billion last year) as companies flocked to take advantage of strong investor demand and rebuilt liquidity into their balance sheets. Municipal issuance was steady at $410 billion with Build America Bonds (BABs) comprising approximately 16% ($65 billion). BABs, which are taxable, are effectively reducing true tax-exempt supply and could grow to as much as 30% of municipal issuance next year.
Fixed Rate Supply
![](https://capedge.com/proxy/N-CSR/0000898531-10-000257/frs-barchart.jpg)
![](https://capedge.com/proxy/N-CSR/0000898531-10-000257/frs-barchart.jpg)
Source: U.S. Treasury, Bond Buyer, Barclays Capital
Strong Demand Absorbs Supply
Heavy supply in 2009 was easily absorbed by strong investor demand. Disenchanted with near-zero money market yields, investors pulled over $545 billion out of money market funds during the year in search of higher yielding alternatives. The bond market was the chief beneficiary and fixed income mutual funds had inflows of over $380 billion (see next page left). This incoming flood of liquidity floated all boats higher in the bond market, but lower quality bonds dramatically outperformed higher quality issues in 2009. In both the taxable and tax-exempt markets, investors went searching for yield and BBBs outperformed AAAs by a very wide margin (see next page right).
Page 3
2009 Bond Market Overview
2009 Mutual Fund Flows | 2009 Returns by Rating |
![]() | ![]() |
Source: ICI | Source: Barclays Capital |
Yield Spreads Collapse
The remarkable recovery of the bond market in 2009 is best reflected in the collapse of yield spreads on non-Treasury sectors and the resulting huge excess returns (see table below). Many sectors went from being grossly undervalued early in the year to fairly valued and even rich in some cases by the end of 2009. Yield spreads on most sectors more than recovered from last year’s meltdown, tightening below 2007 year-end levels and even below their 10-year average spread. For example, in the asset-backed sector, the TALF program restored liquidity and helped tighten option-adjusted spreads from 955 bps to just 100 bps by year end, resulting in an excess return of 24.96%. ABS spreads are now tighter than where they finished
Option-Adjusted Spreads and Excess Returns
Source: Barclays Capital
Excess Returns vs. | ||||||
Option-Adjusted Spreads (bps) | U.S. Treasuries (bps) | |||||
12/31/2007 | 12/31/2008 | 12/31/2009 | 10 yr Avg OAS | 2008 | 2009 | |
U.S. Aggregate Index | 91 | 213 | 61 | 75 | -710 | 746 |
U.S. Agency (non-mortgage) Sector | 43 | 93 | 30 | 43 | -110 | 238 |
Mortgage and ABS Sectors | ||||||
U.S. Agency Pass-Throughs | 87 | 145 | 18 | 51 | -232 | 495 |
Asset-Backed Securities | 242 | 955 | 100 | 160 | -2223 | 2496 |
CMBS | 170 | 1010 | 473 | 201 | -3274 | 2960 |
Corporate Sectors | ||||||
U.S. Investment Grade | 198 | 555 | 172 | 175 | -1988 | 2276 |
Industrial | 181 | 500 | 138 | 173 | -1756 | 2312 |
Utility | 189 | 537 | 161 | 179 | -2039 | 2780 |
Financial Institutions | 220 | 629 | 226 | 177 | -2209 | 2141 |
U.S. High Yield | 569 | 1669 | 617 | 616 | -3832 | 5955 |
Page 4
2009 Bond Market Overview
2007 (242 bps) and also below the 10-year average of 160 bps. Direct Government purchases in 2009 of Agency debentures and Agency pass-through MBS tightened spreads in these sectors to just 30 and 19 bps, respectively, on December 31, 2009. With an end in sight to further Government purchases and spreads well below 2007 year-end levels and their 10-year averages, we see very limited value in these sectors as we head into 2010. We are also cautious on high yield and many industrial credits given uncertain credit fundamentals and relatively tight yield spreads. Two sectors where we still see good relative value (albeit on a selective basis) are Finance and CMBS. Government support and the deleveraging of financial institutions’ balance sheets, although painful to equity holders, have strengthened the position of bondholders of financial companies and while significant challenges lie ahead for the commercial real estate market, we believe bondholders can also find adequate protection in certain senior CMBS structures where very strong structural credit enhancement provides a significant margin of safety. We believe these two sectors offer bondholders unique protection and, while spreads have come in significantly, they are still wider than long-term averages and 2007 year-end levels.
Outlook
While the “super sale” opportunities of early 2009 are clearly gone, we do still see value in the bond market in 2010. However, in contrast to 2009 where a dramatic recovery from a state of disarray produced eye-popping returns for virtually all spread sector issues, we believe the bond market will be much more discriminating in 2010, focusing more closely once again on risk and the credit fundamentals of individual issues. As the market settles into the “new normal,” crisis-level volatility in yield spreads should subside. We expect solid, positive market returns, but it is [virtually] mathematically impossible for many spread sectors to once again produce returns of last years’ magnitude. Heavy Treasury supply will put upward pressure on interest rates and weigh on relative returns of this sector, but we do not anticipate significantly higher market yields overall. We believe the economy is fragile and while mammoth Government stimulus will likely contribute to inflation in the long run, weak employment dynamics will keep inflation in check for the short run. We agree with market consensus that the Fed will begin tightening later this year, but believe that surprises from the Fed will likely be from less action rather than more. As a result, we believe the yield curve will remain steep (particularly in the intermediate sector) providing strong roll-down potential to issues with very limited cash flow uncertainty (i.e. positive convexity). More limited Government buying of Agency debentures and mortgage pass-throughs will limit the relative return potential of these tight-spread sectors in 2010. Furthermore, we believe relative return prospects for Agency mortgage pass-throughs will dim as investors, who have been preoccupied with the virtue of Government guarantees in this sector, will once again become more sensitive to the risk of higher negative convexity. Expectations of higher marginal income tax rates and increased BABs issuance should provide technical support for [tax-exempt] municipals, but we are concerned about declining credit fundamentals in this sector and caution that prevalent downgrades could result in selective price declines in this sector.
Page 5
Baird Short-Term Bond Fund
The Baird Short-Term Bond Fund seeks an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Barclays Capital 1-3 Year U.S. Government/Credit Bond Index. The Barclays Capital 1-3 Year U.S. Government/Credit Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt issues, including government and corporate securities, with maturities between one and three years.
The improved market conditions resulted in strong relative performance for the Fund in 2009. The Fund outperformed its benchmark index in 2009. The primary factors for the outperformance were:
• | The Fund’s overweight to the corporate sector which performed well in 2009; |
• | Price recovery from certain corporate securities with sound fundamental value whose market prices had fallen in 2008 and subsequently appreciated in value in 2009; |
• | The Fund’s underweight to U.S. Treasuries which underperformed all other market sectors for the year; and |
• | Price appreciation of non-Agency mortgage-backed and asset-backed securities. |
The Fund maintained its duration-neutral strategy, holding a broadly diversified portfolio of 296 securities at year end.
We are greatly encouraged by the Fund’s performance in 2009 and are very optimistic regarding the individual issues and the overall structure of the portfolio. The portfolio’s yield advantage over the benchmark remains historically high and we remain confident that the portfolio will realize this yield advantage over time and outperform its benchmark through the completion of this historic credit cycle.
Portfolio Characteristics
Quality Distribution* | Sector Weightings* |
![]() | ![]() |
Net Assets: | $606,248,576 | Annualized Expense Ratio: | ||||
SEC 30-Day Yield:** | Institutional Class: | 0.30 | % | |||
Institutional Class: | 2.96% | Portfolio Turnover Rate: | 55.5 | % | ||
Average Effective Duration: | 1.86 years | Total Number of Holdings: | 296 | |||
Average Effective Maturity: | 2.44 years |
* | Percentages shown are based on the Fund’s total net assets. |
** | SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2009. |
Page 6
Baird Short-Term Bond Fund
Institutional Class* |
Value of a $25,000 Investment |
![]() |
Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (8/31/04), assuming reinvestment of all distributions.
* | The Baird Short-Term Bond Fund is currently offering only the Institutional Class shares to investors. |
Page 7
Baird Short-Term Bond Fund
Average Annual Total Returns
Since | |||
For the Periods Ended December 31, 2009 | One Year | Five Years | Inception(1) |
Institutional Class | 8.14% | 3.73% | 3.51% |
Barclays Capital 1-3 Year U.S. Government/Credit Bond Index(2) | 3.83% | 4.32% | 4.05% |
(1) | For the period from August 31, 2004 (commencement of operations) to December 31, 2009. |
(2) | The Barclays Capital 1-3 Year U.S. Government/Credit Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt including government and corporate securities with maturities between one and three years. This index does not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. |
The returns shown in the table above and the line graph on the previous page reflect reinvestment of dividends and/or capital gains distributions in additional shares. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Past performance does not guarantee future results. Investment returns and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
For information about the performance of the Fund as of the most recent month-end, please call 1-866-44BAIRD or visit www.bairdfunds.com. Mutual fund performance changes over time and current performance may be lower or higher than that stated.
Page 8
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.0% | |||||||
Asset Backed Securities – 1.9% | |||||||
$ | 43,629 | Bombardier Capital | |||||
Mortgage Securitization, | |||||||
Series 1998-A, Class A3, | |||||||
6.23%, 04/15/2028 | $ | 40,771 | |||||
600,000 | Chase Issuance Trust, | ||||||
Series 2005-A10, | |||||||
Class A10, 4.65%, | |||||||
12/17/2012 | 618,378 | ||||||
73,912 | CitiFinancial Mortgage | ||||||
Securities, Inc., | |||||||
Series 2004-1, Class AF2, | |||||||
2.645%, 04/25/2034 | 73,443 | ||||||
Countrywide Asset-Backed | |||||||
Certificates: | |||||||
98,856 | Series 2005-13, Class AF2, | ||||||
5.294%, 04/25/2036 | 97,953 | ||||||
2,000,000 | Series 2006-13, Class 1AF2, | ||||||
5.884%, 01/25/2037 | 1,886,875 | ||||||
2,495,000 | Series 2006-13, Class 1AF3, | ||||||
5.944%, 01/25/2037 | 1,291,997 | ||||||
1,500,000 | Series 2006-9, Class 1AF3, | ||||||
5.859%, 10/25/2046 | 780,474 | ||||||
679,305 | Credit Based Asset | ||||||
Servicing and Securities, | |||||||
Series 2005-CB8, Class AF2, | |||||||
5.303%, 12/25/2035 | 630,327 | ||||||
2,752,306 | GMAC Mortgage | ||||||
Corporation Loan Trust, | |||||||
Series 2005-HE3, Class A2, | |||||||
0.416%, 02/25/2036 | 1,113,188 | ||||||
Green Tree Financial | |||||||
Corporation: | |||||||
109,326 | Series 1996-3, Class A5, | ||||||
7.35%, 05/15/2027 | 109,490 | ||||||
51,704 | Series 1998-2, Class A5, | ||||||
6.24%, 12/01/2028 | 47,320 | ||||||
1,675,119 | Series 1997-5, Class A6, | ||||||
6.82%, 05/15/2029 | 1,671,849 | ||||||
580,301 | Series 1998-3, Class A5, | ||||||
6.22%, 03/01/2030 | 565,526 | ||||||
1,557,883 | Residential Asset | ||||||
Securities Corporation, | |||||||
2006-KS7, Class A2, | |||||||
0.331%, 09/25/2036 | 1,496,965 | ||||||
2,000,000 | Renaissance Home | ||||||
Equity Loan Trust, | |||||||
Series 2007-2, Class AF2, | |||||||
5.675%, 06/25/2037 | 1,064,660 | ||||||
301,328 | Residential Asset | ||||||
Mortgage Products, Inc., | |||||||
Series 2003-RS7, Class AI6, | |||||||
5.34%, 08/25/2033 | 280,231 | ||||||
11,769,447 | |||||||
Commercial Mortgage Backed Securities – 2.0% | |||||||
3,080,116 | GMAC Commercial | ||||||
Mortgage Securities, Inc., | |||||||
Series 2001-C1, Class A2, | |||||||
6.465%, 04/15/2034 | 3,190,963 | ||||||
5,377,303 | Morgan Stanley Dean | ||||||
Witter Capital I, | |||||||
Series 2001-Top1, Class A4, | |||||||
6.66%, 02/15/2033 | 5,535,929 | ||||||
Salomon Brothers Mortgage | |||||||
Securities VII: | |||||||
2,704,717 | Series 2001-C2, Class A3, | ||||||
6.50%, 11/13/2036 | 2,835,011 | ||||||
486,648 | Series 2000-C2, Class A2, | ||||||
7.455%, 07/18/2033 | 487,765 | ||||||
12,049,668 | |||||||
Financial – 29.0% | |||||||
2,500,000 | Aegon NV, | ||||||
4.75%, 06/01/2013 f | 2,513,662 |
The accompanying notes are an integral part of these financial statements.
Page 9
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.0% (cont.) | |||||||
Financial – 29.0% (cont.) | |||||||
$ | 500,000 | AIG SunAmerica Global | |||||
Financing VI, | |||||||
6.30%, 05/10/2011 | |||||||
(Acquired 11/23/2009; | |||||||
Cost $497,667)* | $ | 497,343 | |||||
Allstate Corporation: | |||||||
1,675,000 | 6.125%, 02/15/2012 | 1,813,653 | |||||
1,000,000 | 6.20%, 05/16/2014 | 1,105,913 | |||||
3,330,000 | American Express | ||||||
Centurion, | |||||||
0.325%, 07/13/2010 | 3,323,590 | ||||||
1,350,000 | American General | ||||||
Finance Corporation | |||||||
Notes, 4.00%, 03/15/2011 | 1,220,550 | ||||||
950,000 | American Honda | ||||||
Finance Corporation, | |||||||
0.397%, 02/21/2012 | |||||||
(Acquired 10/19/2009; | |||||||
Cost $926,373)* | 927,932 | ||||||
3,125,000 | Ameriprise Financial, Inc., | ||||||
5.35%, 11/15/2010 | 3,228,853 | ||||||
1,100,000 | Amsouth Bank NA, | ||||||
4.85%, 04/01/2013 | 978,207 | ||||||
2,160,000 | Axa Financial, Inc., | ||||||
7.75%, 08/01/2010 | 2,241,672 | ||||||
2,200,000 | Bancwest Corporation | ||||||
Subordinated Notes, | |||||||
8.30%, 01/15/2011 | 2,234,646 | ||||||
1,000,000 | Bank of Ireland, | ||||||
1.171%, 01/15/2010 f | 999,328 | ||||||
1,000,000 | Bank of Scotland PLC, | ||||||
0.374%, 12/08/2010 | |||||||
(Acquired 05/14/2009; | |||||||
Cost $957,409)* f | 981,746 | ||||||
646,000 | Bank One Corporation | ||||||
Subordinated Notes, | |||||||
10.00%, 08/15/2010 | 681,896 | ||||||
Bank Tokyo – | |||||||
Mitsubishi UFJ Ltd.: | |||||||
250,000 | 8.40%, 04/15/2010 f | 253,984 | |||||
1,900,000 | 7.40%, 06/15/2011 @ | 2,048,825 | |||||
Barclays Bank PLC | |||||||
Senior Unsecured Notes: f | |||||||
600,000 | 5.45%, 09/12/2012 | 648,861 | |||||
2,000,000 | 2.50%, 01/23/2013 | 1,997,698 | |||||
2,500,000 | CDP Financial Inc., | ||||||
3.00%, 11/25/2014 | |||||||
(Acquired 11/20/2009; | |||||||
Cost $2,499,200)* f | 2,439,525 | ||||||
500,000 | Charles Schwab | ||||||
Corporation Senior Notes, | |||||||
8.05%, 03/01/2010 | 505,752 | ||||||
1,035,000 | Citicorp, | ||||||
7.25%, 10/15/2011 | 1,090,144 | ||||||
Citigroup, Inc.: | |||||||
100,000 | 7.25%, 10/01/2010 | 103,610 | |||||
1,200,000 | 6.50%, 01/18/2011 | 1,254,858 | |||||
723,000 | 5.125%, 02/14/2011 | 745,979 | |||||
CIT Group, Inc.: | |||||||
191,367 | 7.00%, 05/01/2013 | ||||||
(Callable 02/24/2010) | 178,450 | ||||||
287,050 | 7.00%, 05/01/2014 | ||||||
(Callable 02/24/2010) | 266,597 | ||||||
287,050 | 7.00%, 05/01/2015 | ||||||
(Callable 02/24/2010) | 256,910 | ||||||
478,417 | 7.00%, 05/01/2016 | ||||||
(Callable 02/24/2010) | 421,007 | ||||||
669,783 | 7.00%, 05/01/2017 | ||||||
(Callable 02/24/2010) | 581,037 |
The accompanying notes are an integral part of these financial statements.
Page 10
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2009 |
Principal | ||||||||
Amount | Value | |||||||
LONG-TERM INVESTMENTS – 97.0% (cont.) | ||||||||
Financial – 29.0% (cont.) | ||||||||
$ | 1,388,000 | Corestates Capital Trust I, | ||||||
8.00%, 12/15/2026 | ||||||||
(Callable 03/15/2010) | ||||||||
(Acquired 01/26/2006 | ||||||||
through 09/30/2009; | ||||||||
Aggregate Cost | ||||||||
$1,345,210)* | $ | 1,357,628 | ||||||
979,000 | Deutsche Bank Trust | |||||||
Corporation Subordinated | ||||||||
Notes, 7.25%, 10/15/2011 | 1,042,507 | |||||||
2,000,000 | Developers Diversified | |||||||
Realty Corporation, | ||||||||
5.00%, 05/03/2010 | 1,999,952 | |||||||
Export-Import Bank | ||||||||
Korea Notes: f | ||||||||
850,000 | 4.625%, 03/16/2010 | 854,608 | ||||||
1,815,000 | 5.125%, 02/14/2011 | 1,874,712 | ||||||
3,440,000 | Fifth Third Bank, | |||||||
4.20%, 02/23/2010 | 3,453,653 | |||||||
1,000,000 | First Empire Capital Trust | |||||||
I, 8.234%, 02/01/2027 | ||||||||
(Callable 02/22/2010) | 894,647 | |||||||
1,500,000 | First Hawaiian Capital | |||||||
Trust I, Series B, | ||||||||
8.343%, 07/01/2027 | ||||||||
(Callable 03/15/2010) | 1,425,000 | |||||||
1,500,000 | First National Bank | |||||||
of Omaha | ||||||||
Subordinated Notes, | ||||||||
7.32%, 12/01/2010 | 1,513,870 | |||||||
4,750,000 | First Tennessee Bank, | |||||||
0.59%, 02/14/2011 | 4,563,410 | |||||||
800,000 | First Union Capital I, | |||||||
Series A, 7.935%, | ||||||||
01/15/2027 (Callable | ||||||||
02/22/2010) | 777,776 | |||||||
3,335,000 | GE Global Insurance | |||||||
Holding Corp., | ||||||||
7.50%, 06/15/2010 | 3,421,933 | |||||||
General Electric Capital | ||||||||
Corporation Notes: | ||||||||
1,550,000 | 5.72%, 08/22/2011 | |||||||
(Callable 07/22/2010) | 1,576,223 | |||||||
250,000 | 6.00%, 06/15/2012 @ | 269,477 | ||||||
1,000,000 | 1.158%, 11/01/2012 | 964,405 | ||||||
250,000 | Genworth Global | |||||||
Funding Trust, | ||||||||
5.125%, 03/15/2011 | 254,062 | |||||||
787,000 | GMAC LLC, | |||||||
7.50%, 12/31/2013 | ||||||||
(Acquired 09/08/2006 | ||||||||
and 08/21/2007; | ||||||||
Cost $570,905 and | ||||||||
$395,816, respectively)* @ | 759,455 | |||||||
Goldman Sachs Group, Inc.: | ||||||||
273,000 | 7.80%, 01/28/2010 | 274,163 | ||||||
1,440,000 | 6.875%, 01/15/2011 | 1,527,013 | ||||||
3,450,000 | Goldman Sachs Group LP | |||||||
Senior Unsecured Notes, | ||||||||
8.00%, 03/01/2013 | ||||||||
(Acquired 04/16/2009 | ||||||||
through 10/20/2009; | ||||||||
Aggregate | ||||||||
Cost $3,788,397)* | 3,845,484 | |||||||
1,000,000 | Hartford Life | |||||||
Global Funding, | ||||||||
0.609%, 01/17/2012 | 956,614 | |||||||
HSBC Finance Corporation | ||||||||
Senior Unsecured Notes: | ||||||||
2,000,000 | 1.16%, 03/10/2010 | 2,000,000 | ||||||
1,000,000 | 0.38%, 03/12/2010 | 999,403 |
The accompanying notes are an integral part of these financial statements.
Page 11
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.0% (cont.) | |||||||
Financial – 29.0% (cont.) | |||||||
$ | 1,500,000 | HSBC USA Capital Trust II, | |||||
8.38%, 05/15/2027 | |||||||
(Callable 02/22/2010) | |||||||
(Acquired 11/06/2007; | |||||||
Cost $1,548,902)* | $ | 1,432,557 | |||||
Huntington National | |||||||
Bank Notes: | |||||||
1,000,000 | 4.375%, 01/15/2010 | 1,000,106 | |||||
1,300,000 | 8.00%, 04/01/2010 | 1,303,965 | |||||
ING SEC Life | |||||||
Institutional Fund Senior | |||||||
Unsecured Notes: | |||||||
2,000,000 | 0.699%, 01/15/2010 | 2,000,240 | |||||
180,000 | 4.25%, 01/15/2010 | ||||||
(Acquired 10/30/2009; | |||||||
Cost $180,202)* | 179,833 | ||||||
2,000,000 | ING USA Global Funding | ||||||
Notes, 0.44%, 10/01/2010 | 1,987,078 | ||||||
Invesco Ltd.: f | |||||||
2,680,000 | 5.625%, 04/17/2012 | 2,775,890 | |||||
325,000 | 5.375%, 02/27/2013 | 330,755 | |||||
J.P. Morgan Chase & Co.: | |||||||
1,725,000 | 5.75%, 01/02/2013 | 1,839,692 | |||||
500,000 | 4.65%, 06/01/2014 | 526,720 | |||||
2,246,000 | Jackson National Life Global, | ||||||
5.125%, 02/10/2011 | |||||||
(Acquired 07/21/2009 | |||||||
and 09/21/2009; | |||||||
Cost $2,013,359 and | |||||||
$248,968, respectively)* | 2,264,271 | ||||||
2,180,000 | John Hancock Global | ||||||
Funding II, 7.90%, | |||||||
07/02/2010 (Acquired | |||||||
02/24/2009 and 03/24/2009; | |||||||
Cost $2,028,992 and | |||||||
$178,534, respectively)* | 2,248,670 | ||||||
2,000,000 | Kookmin Bank, | ||||||
7.25%, 05/14/2014 | |||||||
(Acquired 05/26/2009; | |||||||
Cost $2,070,241)* f | 2,245,176 | ||||||
Korea Development | |||||||
Bank Senior Unsecured | |||||||
Notes: f | |||||||
4,480,000 | 4.625%, 09/16/2010 | 4,557,549 | |||||
150,000 | 5.30%, 01/17/2013 | 157,509 | |||||
2,000,000 | Landesbank | ||||||
Baden-Wurttemgerg | |||||||
Subordinated Notes, | |||||||
6.35%, 04/01/2012 f | 2,143,954 | ||||||
2,610,000 | Liberty Mutual Group, | ||||||
5.75%, 03/15/2014 | |||||||
(Acquired 09/03/2009 | |||||||
and 11/23/2009; | 2,572,609 | ||||||
Cost $2,205,716 and | |||||||
$110,327, respectively)* | |||||||
1,000,000 | Lincoln National | ||||||
Corporation, | |||||||
0.719%, 03/12/2010 | 998,382 | ||||||
Marsh & Mclennan | |||||||
Companies, Inc.: | |||||||
1,720,000 | 5.15%, 09/15/2010 | 1,763,268 | |||||
742,000 | 6.25%, 03/15/2012 | 783,099 | |||||
1,200,000 | 4.85%, 02/15/2013 | 1,218,333 | |||||
2,500,000 | M&I Marshall | ||||||
& Ilsley Bank, | |||||||
0.754%, 06/16/2010 | 2,468,480 | ||||||
2,671,000 | MBNA Capital, Series A, | ||||||
8.278%, 12/01/2026 | |||||||
(Callable 02/22/2010) | 2,577,515 | ||||||
1,600,000 | Met Life Global Funding I, | ||||||
2.875%, 09/17/2012 | |||||||
(Acquired 09/10/2009; | |||||||
Cost $1,595,440)* | 1,612,555 |
The accompanying notes are an integral part of these financial statements.
Page 12
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.0% (cont.) | |||||||
Financial – 29.0% (cont.) | |||||||
$ | 2,552,000 | Mercantile Bankshares | |||||
Corporation Subordinated | |||||||
Notes, Series B, | |||||||
4.625%, 04/15/2013 | $ | 2,582,902 | |||||
Merrill Lynch & Co.: | |||||||
1,500,000 | 2.709%, 05/12/2010 | 1,512,211 | |||||
300,000 | 6.05%, 08/15/2012 | 321,370 | |||||
2,087,000 | Monumental Global | ||||||
Funding II, | |||||||
5.65%, 07/14/2011 | 2,173,032 | ||||||
Monumental Global | |||||||
Funding III: | |||||||
350,000 | 0.674%, 01/25/2013 | ||||||
(Acquired 07/28/2009; | |||||||
Cost $308,988)* | 324,755 | ||||||
565,000 | 5.50%, 04/22/2013 | ||||||
(Acquired 09/23/2009 | |||||||
and 10/13/2009; | |||||||
Cost $329,159 and | |||||||
$253,556, respectively)* f | 581,330 | ||||||
1,020,000 | The Mony Group, Inc., | ||||||
8.35%, 03/15/2010 | 1,032,683 | ||||||
Morgan Stanley: | |||||||
750,000 | 0.363%, 01/15/2010 | 749,990 | |||||
2,636,000 | 8.00%, 06/15/2010 | 2,718,088 | |||||
910,000 | 6.75%, 04/15/2011 @ | 964,130 | |||||
250,000 | 5.625%, 01/09/2012 | 263,830 | |||||
355,000 | 6.60%, 04/01/2012 | 386,238 | |||||
278,000 | National City Bank of | ||||||
Kentucky Subordinated | |||||||
Notes, 6.30%, 02/15/2011 | 287,269 | ||||||
500,000 | National City Bank of | ||||||
Cleveland Subordinated | |||||||
Notes, 6.25%, 03/15/2011 | 522,135 | ||||||
1,150,000 | Nationwide Building | ||||||
Society, 4.25%, | |||||||
02/01/2010 (Acquired | |||||||
09/03/2009 | |||||||
and 10/20/2009; | |||||||
Cost $1,001,069 | |||||||
and $150,232, | |||||||
respectively)* f | 1,150,343 | ||||||
Nationwide | |||||||
Financial Services: | |||||||
1,500,000 | 6.25%, 11/15/2011 | 1,553,539 | |||||
350,000 | 5.90%, 07/01/2012 | 365,336 | |||||
1,300,000 | Nationwide Life | ||||||
Global Funding, | |||||||
5.35%, 03/15/2011 | |||||||
(Acquired 03/24/2009; | |||||||
Cost $1,221,758)* | 1,288,212 | ||||||
2,273,000 | NB Capital Trust IV, | ||||||
8.25%, 04/15/2027 | |||||||
(Callable 02/22/2010) | 2,250,270 | ||||||
1,000,000 | North Fork Capital Trust | ||||||
II, 8.00%, 12/15/2027 | |||||||
(Callable 02/22/2010) | 905,500 | ||||||
2,000,000 | Pooled Funding Trust II, | ||||||
2.625%, 03/30/2012 | |||||||
(Acquired 03/27/2009; | |||||||
Cost $1,998,800)* | 2,035,604 | ||||||
Pricoa Global Funding I: | |||||||
475,000 | 0.494%, 01/15/2010 | ||||||
(Acquired 06/23/2009; | |||||||
Cost $474,242)* | 474,976 | ||||||
2,010,000 | 4.20%, 01/15/2010 | ||||||
(Acquired 03/05/2009 | |||||||
and 04/02/2009; | |||||||
Cost $1,098,776 and | |||||||
$907,305, respectively)* | 2,009,968 |
The accompanying notes are an integral part of these financial statements.
Page 13
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.0% (cont.) | |||||||
Financial – 29.0% (cont.) | |||||||
$ | 3,225,000 | Principal Life Global, | |||||
6.25%, 02/15/2012 | |||||||
(Acquired 08/18/2009 | |||||||
through 09/29/2009; | |||||||
Aggregate | |||||||
Cost $3,386,436)* | $ | 3,386,337 | |||||
1,000,000 | Principal Life | ||||||
Income Funding, | |||||||
5.30%, 12/14/2012 | 1,060,564 | ||||||
Protective Life | |||||||
Secured Trust: | |||||||
3,500,000 | 4.00%, 04/01/2011 | 3,558,415 | |||||
846,000 | 5.45%, 09/28/2012 | 903,592 | |||||
1,000,000 | Rabobank Nederland | ||||||
Global Senior | |||||||
Unsecured Notes, | |||||||
4.20%, 05/13/2014 | |||||||
(Acquired 05/06/2009; | |||||||
Cost $998,170)* f @ | 1,034,824 | ||||||
2,000,000 | Royal Bank of Scotland, | ||||||
4.875%, 08/25/2014 | |||||||
�� | (Acquired 08/18/2009; | ||||||
Cost $1,994,040)* f @ | 2,027,370 | ||||||
2,675,000 | Santander Financial | ||||||
Issuances, | |||||||
6.375%, 02/15/2011 f | 2,788,356 | ||||||
SLM Corporation: | |||||||
3,835,000 | 4.00%, 01/15/2010 | 3,834,774 | |||||
520,000 | 4.50%, 07/26/2010 | 518,137 | |||||
1,724,000 | Sovereign Bancorp, Inc., | ||||||
4.80%, 09/01/2010 | 1,760,251 | ||||||
Sun Life Financial | |||||||
Global Funding: | |||||||
2,500,000 | 0.528%, 07/06/2010 | ||||||
(Acquired 01/30/2009 | |||||||
through 08/10/2009; | |||||||
Aggregate | |||||||
Cost $2,453,376)* | 2,489,497 | ||||||
1,000,000 | 0.438%, 07/06/2011 | ||||||
(Acquired 07/28/2009; | |||||||
Cost $958,695)* | 980,169 | ||||||
330,000 | Suntrust Banks, Inc., | ||||||
5.25%, 11/05/2012 | 342,394 | ||||||
1,000,000 | Trustreet Properties Inc., | ||||||
7.50%, 04/01/2015 | |||||||
(Callable 04/01/2010) | 1,034,113 | ||||||
825,000 | Toll Road Inv. Part II, | ||||||
Series 1999B, 0.00%, | |||||||
02/15/2010 | |||||||
(Acquired 03/10/2009; | |||||||
Cost $819,251)* ^ | 819,149 | ||||||
750,000 | UFJ Finance | ||||||
Aruba A.E.C., | |||||||
6.75%, 07/15/2013 f @ | 835,018 | ||||||
Union Planters | |||||||
Corporation: | |||||||
750,000 | 4.375%, 12/01/2010 | 748,885 | |||||
1,075,000 | 7.75%, 03/01/2011 | 1,068,817 | |||||
941,000 | Unitrin, Inc., | ||||||
4.875%, 11/01/2010 | 936,926 | ||||||
1,000,000 | Westfield Capital | ||||||
Corporation, | |||||||
4.375%, 11/15/2010 | |||||||
(Acquired 08/31/2009; | |||||||
Cost $1,006,643)* f | 1,027,500 |
The accompanying notes are an integral part of these financial statements.
Page 14
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.0% (cont.) | |||||||
Financial – 29.0% (cont.) | |||||||
$ | 2,500,000 | Westpac Banking | |||||
Corporation, | |||||||
1.90%, 12/14/2012 | |||||||
(Acquired 12/07/2009; | |||||||
Cost $2,498,700)* f | $ | 2,479,812 | |||||
2,774,000 | Willis North America, | ||||||
Inc., 5.125%, 07/15/2010 | 2,789,740 | ||||||
176,014,780 | |||||||
Industrial – 22.8% | |||||||
Aetna, Inc.: | |||||||
1,000,000 | 7.875%, 03/01/2011 | 1,064,350 | |||||
2,000,000 | 5.75%, 06/15/2011 | 2,097,412 | |||||
2,000,000 | Alcoa, Inc., | ||||||
6.50%, 06/01/2011 @ | 2,108,914 | ||||||
Allied Waste North | |||||||
Amer, Inc.: | |||||||
1,000,000 | 5.75%, 02/15/2011 | 1,040,463 | |||||
3,500,000 | 6.125%, 02/15/2014 | ||||||
(Callable 02/08/2010) | 3,560,844 | ||||||
1,000,000 | 7.25%, 03/15/2015 | ||||||
(Callable 03/15/2010) | 1,045,000 | ||||||
600,000 | Anheuser Busch | ||||||
Inbev Worldwide, | |||||||
3.00%, 10/15/2012 | |||||||
(Acquired 10/13/2009; | |||||||
Cost $599,112)* | 602,811 | ||||||
1,000,000 | AOL Time Warner, Inc., | ||||||
6.75%, 04/15/2011 | 1,059,501 | ||||||
3,275,000 | British Telecom | ||||||
PLC Notes, | |||||||
9.125%, 12/15/2010 f | 3,508,573 | ||||||
Bunge Limited Finance | |||||||
Corporation: | |||||||
2,450,000 | 7.800%, 10/15/2012 | 2,677,162 | |||||
1,400,000 | 5.875%, 05/15/2013 | 1,457,292 | |||||
CBS Corporation: | |||||||
1,825,000 | 7.70%, 07/30/2010 | 1,880,531 | |||||
2,300,000 | 6.625%, 05/15/2011 | 2,410,299 | |||||
4,920,000 | Cigna Corporation, | ||||||
7.00%, 01/15/2011 | 5,155,034 | ||||||
500,000 | Clear Channel | ||||||
Communications Senior | |||||||
Notes, 7.65%, 09/15/2010 | 491,875 | ||||||
2,738,000 | Comcast Cable Holdings, | ||||||
9.80%, 02/01/2012 | 3,098,882 | ||||||
1,841,000 | Comcast Holdings | ||||||
Corporation, | |||||||
10.625%, 07/15/2012 | 2,172,233 | ||||||
2,725,000 | Computer Sciences | ||||||
Corporation Senior Notes, | |||||||
7.375%, 06/15/2011 | 2,932,577 | ||||||
2,000,000 | Conagra Foods, Inc., | ||||||
6.75%, 09/15/2011 | 2,159,348 | ||||||
355,000 | Cox Communications, Inc., | ||||||
7.75%, 11/01/2010 | 371,637 | ||||||
3,850,000 | COX Enterprises, Inc., | ||||||
7.875%, 09/15/2010 | |||||||
(Acquired 07/13/2009 | |||||||
through 12/02/2009; | |||||||
Aggregate | |||||||
Cost $3,977,675)* | 4,001,486 | ||||||
3,875,000 | Deutsche Telekom | ||||||
International Finance BV, | |||||||
8.50%, 06/15/2010 f | 4,004,526 | ||||||
2,000,000 | Donnelley (R.R.) & Sons | ||||||
Co., 4.95%, 05/15/2010 | 2,014,280 | ||||||
780,000 | Duke Energy Field Services | ||||||
LLC, 6.875%, 02/01/2011 | 814,106 | ||||||
3,000,000 | Enterprise Products | ||||||
Operating LLC, | |||||||
7.625%, 02/15/2012 | 3,316,035 |
The accompanying notes are an integral part of these financial statements.
Page 15
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.0% (cont.) | |||||||
Industrial – 22.8% (cont.) | |||||||
$ | 2,875,000 | Fiserv, Inc., | |||||
6.125%, 11/20/2012 | $ | 3,130,504 | |||||
3,500,000 | Fortune Brands, Inc., | ||||||
5.125%, 01/15/2011 | 3,609,872 | ||||||
1,860,000 | France Telecom S.A., | ||||||
7.75%, 03/01/2011 f @ | 1,993,492 | ||||||
2,000,000 | General Electric Company, | ||||||
5.00%, 02/01/2013 | 2,115,920 | ||||||
2,250,000 | Health Care Service | ||||||
Corporation Notes, | |||||||
7.75%, 06/15/2011 | |||||||
(Acquired 06/15/2009 | |||||||
and 06/17/2009; Cost | |||||||
$2,104,841 and | |||||||
$261,596, respectively)* | 2,337,869 | ||||||
2,275,000 | Johnson Controls Inc. | ||||||
Senior Unsecured Notes, | |||||||
5.25%, 01/15/2011 @ | 2,387,396 | ||||||
2,065,000 | Kinder Morgan Energy | ||||||
Partners Senior Unsecured | |||||||
Notes, 6.75%, 03/15/2011 | 2,183,812 | ||||||
2,300,000 | Koninslijke KPN NV | ||||||
Senior Unsecured Notes, | |||||||
8.00%, 10/01/2010 f | 2,415,000 | ||||||
200,000 | Kraft Foods Inc. | ||||||
Senior Unsecured Notes, | |||||||
5.625%, 11/01/2011 | 212,413 | ||||||
750,000 | Laboratory Corporation | ||||||
of America Holdings, | |||||||
5.50%, 02/01/2013 | 781,094 | ||||||
968,000 | Lafarge S.A., | ||||||
6.15%, 07/15/2011 f | 1,008,736 | ||||||
4,135,000 | Masco Corporation, | ||||||
0.60%, 03/12/2010 | 4,118,142 | ||||||
3,120,000 | Motiva Enterprises LLC | ||||||
Senior Unsecured Notes, | |||||||
5.20%, 09/15/2012 | |||||||
(Acquired 05/13/2009 | |||||||
through 09/23/2009; | |||||||
Aggregate | |||||||
Cost $3,147,405)* | 3,205,925 | ||||||
3,325,000 | Nabors Industries Inc., | ||||||
5.375%, 08/15/2012 | 3,505,434 | ||||||
1,000,000 | New Cingular Wireless | ||||||
Services Inc., | |||||||
Senior Notes, | |||||||
7.875%, 03/01/2011 | 1,074,396 | ||||||
1,000,000 | New York Telephone | ||||||
Company, | |||||||
6.125%, 01/15/2010 | 1,001,035 | ||||||
1,128,000 | News America Inc., | ||||||
4.75%, 03/15/2010 | 1,130,761 | ||||||
3,795,000 | PEMEX Project Funding | ||||||
Master Trust, | |||||||
9.125%, 10/13/2010 | 4,003,725 | ||||||
2,300,000 | Posco, | ||||||
8.75%, 03/26/2014 | |||||||
(Acquired 03/19/2009 | |||||||
and 08/17/2009; | |||||||
Cost $1,984,160 and | |||||||
$341,770, respectively)* f | 2,721,022 | ||||||
700,000 | Reed Elsevier Capital Inc., | ||||||
1.65%, 06/15/2010 | 699,224 | ||||||
2,000,000 | Rio Tinto Alcan, Inc., | ||||||
6.45%, 03/15/2011 f | 2,098,304 | ||||||
4,000,000 | Simon Property Group LP, | ||||||
7.75%, 01/20/2011 | 4,175,656 | ||||||
Telecom Italia Capital: f | |||||||
2,475,000 | 4.00%, 01/15/2010 | 2,476,906 | |||||
120,000 | 5.25%, 11/15/2013 | 126,215 |
The accompanying notes are an integral part of these financial statements.
Page 16
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.0% (cont.) | |||||||
Industrial – 22.8% (cont.) | |||||||
$ | 2,560,000 | Telefonica Europe BV, | |||||
7.75%, 09/15/2010 f | $ | 2,678,036 | |||||
375,000 | Thomson Reuters | ||||||
Corporation, | |||||||
6.20%, 01/05/2012 f | 403,503 | ||||||
Time Warner, Inc: | |||||||
2,785,000 | 8.875%, 10/01/2012 | 3,196,851 | |||||
1,665,000 | 9.125%, 01/15/2013 | 1,931,954 | |||||
2,845,000 | Tyco International Finance, | ||||||
6.375%, 10/15/2011 f | 3,050,694 | ||||||
Unitedhealth Group, Inc., | |||||||
2,700,000 | 0.433%, 06/21/2010 | ||||||
(Callable 03/21/2010) | 2,695,729 | ||||||
280,000 | 5.25%, 03/15/2011 | 290,138 | |||||
1,500,000 | USX Corporation, | ||||||
9.125%, 01/15/2013 | 1,709,232 | ||||||
3,000,000 | Vale Inco Limited, | ||||||
7.75%, 05/15/2012 f | 3,300,837 | ||||||
1,500,000 | Verizon Communications, | ||||||
7.25%, 12/01/2010 | 1,585,164 | ||||||
1,600,000 | Verizon New Jersey, Inc., | ||||||
Series A, 5.875%, | |||||||
01/17/2012 | 1,704,709 | ||||||
Vodafone Group PLC: f | |||||||
1,105,000 | 7.75%, 02/15/2010 | 1,113,442 | |||||
1,000,000 | 5.50%, 06/15/2011 | 1,054,659 | |||||
Waste Management, Inc.: | |||||||
1,925,000 | 7.65%, 03/15/2011 | 2,039,563 | |||||
2,094,000 | 6.375%, 11/15/2012 @ | 2,303,637 | |||||
300,000 | Wellpoint, Inc., | ||||||
6.80%, 08/01/2012 | 330,996 | ||||||
1,000,000 | Wyeth, | ||||||
6.95%, 03/15/2011 | 1,068,262 | ||||||
138,015,430 | |||||||
Residential Mortgage Backed Securities – 5.6% | |||||||
625,689 | Bank of America | ||||||
Alternative Loan Trust, | |||||||
Series 2003-4, Class 2A1, | |||||||
5.00%, 06/25/2018 | 578,763 | ||||||
Citicorp Mortgage | |||||||
Securities, Inc.: | |||||||
557,784 | Series 2004-3, Class A2, | ||||||
5.25%, 05/25/2034 | 543,095 | ||||||
325,483 | Series 2004-4, Class A2, | ||||||
5.25%, 06/25/2034 | 322,935 | ||||||
Countrywide Alternative | |||||||
Loan Trust: | |||||||
936,211 | Series 2005-50CB, Class | ||||||
4A1, 5.00%, 11/25/2020 | 743,371 | ||||||
2,199,868 | Series 2005-34CB, Class | ||||||
1A6, 5.50%, 09/25/2035 | 2,044,958 | ||||||
574,815 | Series 2005-73CB, Class | ||||||
1A7, 5.50%, 01/25/2036 | 427,518 | ||||||
2,379,333 | Series 2006-28CB, Class | ||||||
A17, 6.00%, 10/25/2036 | 1,619,671 | ||||||
557,318 | Deutsche Alternative | ||||||
Securities, Inc. Mortgage, | |||||||
Series 2005-4, Class A2, | |||||||
5.05%, 09/25/2035 | 543,044 | ||||||
2,448,582 | Federal Home Loan Bank, | ||||||
Series 00-0582, Class H, | |||||||
4.75%, 10/25/2010 | 2,518,979 | ||||||
Federal Home Loan | |||||||
Mortgage Corporation | |||||||
(FHLMC): | |||||||
750,884 | Series 2672, Class QR, | ||||||
4.00%, 09/15/2010 | 766,758 | ||||||
149,760 | Series 2835, Class VK, | ||||||
5.50%, 11/15/2012 | 150,175 | ||||||
303,685 | Series R015, Class AN, | ||||||
3.75%, 02/15/2013 | 309,365 |
The accompanying notes are an integral part of these financial statements.
Page 17
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.0% (cont.) | |||||||
Residential Mortgage Backed Securities – 5.6% (cont.) | |||||||
$ | 566,018 | Series 3033, Class LU, | |||||
5.50%, 03/15/2013 | $ | 595,472 | |||||
1,752,672 | Series 3124, Class VP, | ||||||
6.00%, 06/15/2014 | 1,875,672 | ||||||
1,335,952 | Series R014, Class AL, | ||||||
5.50%, 10/15/2014 | 1,362,335 | ||||||
1,024,369 | Series R001, Class AE, | ||||||
4.375%, 04/15/2015 | 1,050,848 | ||||||
224,650 | Series 2789, Class VM, | ||||||
5.50%, 04/15/2015 | 234,386 | ||||||
1,208,696 | Series 2857, Class VA, | ||||||
5.00%, 09/15/2015 | 1,283,256 | ||||||
43,780 | Series 2541, Class JB, | ||||||
5.00%, 02/15/2016 | 44,167 | ||||||
4,238,593 | Series R007, Class AC, | ||||||
5.875%, 05/15/2016 | 4,352,844 | ||||||
770,087 | Series 2910, Class BD, | ||||||
4.50%, 11/15/2018 | 799,559 | ||||||
33,968 | Series 5, Class B, | ||||||
1.013%, 05/15/2019 | 33,891 | ||||||
310,889 | Series 2970, Class DA, | ||||||
5.50%, 01/15/2023 | 322,445 | ||||||
Federal National | |||||||
Mortgage Association | |||||||
(FNMA): | |||||||
328,737 | 5.50%, 07/01/2015 | 344,365 | |||||
167,198 | Series 2003-27, Class OJ, | ||||||
5.00%, 07/25/2015 | 167,949 | ||||||
597,170 | Series 2002-74, Class TD, | ||||||
5.00%, 12/25/2015 | 599,202 | ||||||
325,274 | Series 2003-24, Class LC, | ||||||
5.00%, 12/25/2015 | 328,846 | ||||||
438,416 | Series 2006-B1, Class AB, | ||||||
6.00%, 06/25/2016 | 455,747 | ||||||
2,879,076 | Series 2004-W6, Class 1A4, | ||||||
5.50%, 07/25/2034 | 2,984,792 | ||||||
1,177,193 | Series 2004-W6, | ||||||
Class 1A6, 5.50%, | |||||||
07/25/2034 | 1,202,760 | ||||||
2,782,499 | Series 2004-W10, Class | ||||||
A24, 5.00%, 08/25/2034 | 2,852,931 | ||||||
1,053,330 | J.P. Morgan Alternative | ||||||
Loan Trust, | |||||||
Series 2006-S2, Class A2, | |||||||
5.81%, 05/25/2036 | 1,045,115 | ||||||
400,624 | Merrill Lynch Mortgage | ||||||
Investors Trust, | |||||||
Series 2005-A8, Class | |||||||
A1C1, 5.25%, 08/25/2036 | 372,630 | ||||||
253,006 | Residential Accredit Loans | ||||||
Inc., Series 2003-QS17, | |||||||
Class CB3, 5.50%, | |||||||
09/25/2033 | 247,630 | ||||||
Washington Mutual, Inc. | |||||||
Pass-Thru Certificates: | |||||||
436,027 | Series 2004-CB4, Class | ||||||
21A, 5.50%, 12/25/2019 | 427,660 | ||||||
396,003 | Series 2004-CB4, Class | ||||||
22A, 6.00%, 12/25/2019 | 394,704 | ||||||
33,947,838 | |||||||
Taxable Municipal Bonds – 0.2% | |||||||
386,527 | Educational Enhancement | ||||||
Funding Corporation, | |||||||
6.72%, 06/01/2025 | 337,999 | ||||||
255,000 | Missouri State Housing | ||||||
Development Revenue | |||||||
Bond, 5.74%, 03/01/2037 | |||||||
(Callable 09/01/2015) | 248,477 | ||||||
345,000 | Pomona California Public | ||||||
Financing Authority | |||||||
Lease Revenue, | |||||||
4.60%, 10/01/2010 | 345,445 |
The accompanying notes are an integral part of these financial statements.
Page 18
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.0% (cont.) | |||||||
Taxable Municipal Bonds – 0.2% (cont.) | |||||||
$ | 135,000 | Redding California | |||||
Redevelopment Agency | |||||||
Tax Allocation, | |||||||
6.00%, 09/01/2010 | $ | 136,131 | |||||
130,000 | Richmond Joint Powers | ||||||
Financing Authority | |||||||
Tax Allocation, | |||||||
7.35%, 09/01/2010 | 131,366 | ||||||
144,792 | Tobacco Settlement | ||||||
Financing Corporation, | |||||||
Series 2001-A, Class A, | |||||||
6.36%, 05/15/2025 | 139,884 | ||||||
1,339,302 | |||||||
Utilities – 10.7% | |||||||
600,000 | Baltimore Gas & | ||||||
Electric Co. Senior | |||||||
Unsecured Notes, | |||||||
6.125%, 07/01/2013 | 648,338 | ||||||
4,718,000 | Chugach Electric | ||||||
Association, | |||||||
6.55%, 03/15/2011 | 4,968,606 | ||||||
2,014,000 | Commonwealth Edison | ||||||
Co., Series 98, | |||||||
6.15%, 03/15/2012 | 2,172,655 | ||||||
3,500,000 | Constellation | ||||||
Energy Group, | |||||||
Inc., 7.00%, 04/01/2012 | 3,797,612 | ||||||
3,055,000 | DCP Midstream LLC, | ||||||
7.875%, 08/16/2010 | 3,176,051 | ||||||
1,744,000 | DTE Energy Company, | ||||||
7.05%, 06/01/2011 | 1,847,754 | ||||||
500,000 | Duke Energy Corp., | ||||||
6.30%, 02/01/2014 | 549,809 | ||||||
1,000,000 | Energy Transfer Partners | ||||||
L.P., 9.70%, 03/15/2019 | 1,235,103 | ||||||
1,786,000 | Enterprise Products | ||||||
Operating LLC, | |||||||
4.95%, 06/01/2010 | 1,810,329 | ||||||
1,733,519 | GG1C Funding | ||||||
Corporation, | |||||||
5.129%, 01/15/2014 | |||||||
(Callable 02/22/2010) | |||||||
(Acquired 04/02/2009; | |||||||
Cost $1,654,195)* | 1,720,674 | ||||||
1,585,000 | Hydro-Quebec, | ||||||
11.75%, 02/01/2012 f | 1,886,061 | ||||||
3,000,000 | Indiana Michigan Power, | ||||||
Series E, | |||||||
6.375%, 11/01/2012 | 3,277,146 | ||||||
1,075,000 | Keyspan Corporation, | ||||||
7.625%, 11/15/2010 | 1,133,579 | ||||||
4,095,000 | Monongahela Power | ||||||
Company, Series A, | |||||||
7.36%, 01/15/2010 | 4,101,843 | ||||||
1,500,000 | National Rural Utilities, | ||||||
7.25%, 03/01/2012 | 1,648,857 | ||||||
4,050,000 | NiSource Finance | ||||||
Corporation, | |||||||
7.875%, 11/15/2010 | 4,245,858 | ||||||
155,000 | Old Dominion | ||||||
Electric Company, | |||||||
6.25%, 06/01/2011 | 163,296 | ||||||
1,548,000 | ONEOK, Inc., | ||||||
7.125%, 04/15/2011 | 1,637,271 | ||||||
Pepco Holdings, Inc. | |||||||
Senior Unsecured Notes: | |||||||
1,670,000 | 1.293%, 06/01/2010 | ||||||
(Callable 02/22/2010) | 1,658,297 | ||||||
3,756,000 | 6.45%, 08/15/2012 | 4,031,202 | |||||
2,250,000 | PPL Energy Supply, | ||||||
LLC Senior Notes, | |||||||
6.40%, 11/01/2011 | 2,417,674 |
The accompanying notes are an integral part of these financial statements.
Page 19
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.0% (cont.) | |||||||
Utilities – 10.7% (cont.) | |||||||
$ | 1,384,000 | Progress Energy, Inc., | |||||
7.10%, 03/01/2011 | $ | 1,464,859 | |||||
PSE&G Power LLC: | |||||||
3,475,000 | 7.75%, 04/15/2011 | 3,718,417 | |||||
1,000,000 | 6.95%, 06/01/2012 | 1,092,455 | |||||
2,094,000 | Sempra Energy, | ||||||
7.95%, 03/01/2010 | 2,117,034 | ||||||
3,000,000 | TECO Finance Inc., | ||||||
7.00%, 05/01/2012 | 3,201,702 | ||||||
850,000 | United Energy Distribution, | ||||||
4.70%, 04/15/2011 | |||||||
(Acquired 11/17/2009; | |||||||
Cost $872,348)* f | 870,626 | ||||||
Williams Companies, | |||||||
Inc. Notes: | |||||||
2,950,000 | 6.375%, 10/01/2010 | ||||||
(Acquired 07/09/2008 | |||||||
through 09/02/2009; | |||||||
Aggregate | |||||||
Cost $2,980,247)* | 3,003,395 | ||||||
1,000,000 | 8.125%, 03/15/2012 | 1,093,464 | |||||
64,689,967 | |||||||
U.S. Government Agency Issues – 14.3% | |||||||
Federal Farm Credit Bank: | |||||||
5,000,000 | 2.125%, 06/18/2012 | 5,062,185 | |||||
1,350,000 | 2.25%, 06/25/2012 | ||||||
(Callable 06/25/2010) | 1,355,770 | ||||||
7,000,000 | 3.00%, 09/22/2014 @ | 7,022,386 | |||||
Federal Home Loan Bank: | |||||||
5,000,000 | 2.05%, 09/28/2012 | ||||||
(Callable 03/29/2010) @ | 5,009,410 | ||||||
5,000,000 | 2.00%, 11/09/2012 | ||||||
(Callable 11/09/2012) @ | 4,971,955 | ||||||
Federal Home Loan | |||||||
Mortgage Corporation: | |||||||
5,000,000 | 2.25%, 08/24/2012 | ||||||
(Callable 08/24/2010) @ | 5,025,205 | ||||||
3,390,000 | 2.80%, 08/19/2013 | ||||||
(Callable 08/19/2010) @ | 3,420,283 | ||||||
5,000,000 | 2.00%, 05/28/2013 | ||||||
(Callable 05/28/2010) @ | 4,940,725 | ||||||
Federal National Mortgage | |||||||
Association (FNMA): | |||||||
3,000,000 | 2.00%, 09/28/2012 | ||||||
(Callable 09/28/2010) @ | 2,994,594 | ||||||
10,500,000 | 3.625%, 02/12/2013 @ | 11,012,925 | |||||
13,150,000 | 4.375%, 03/15/2013 @ | 14,131,963 | |||||
21,750,000 | 2.75%, 03/13/2014 @ | 21,934,722 | |||||
86,882,123 | |||||||
U.S. Treasury Obligations – 10.5 % | |||||||
U.S. Treasury Bonds: | |||||||
36,500,000 | 3.125%, 08/31/2013 @ | 37,928,646 | |||||
25,600,000 | 2.25%, 05/31/2014 @ | 25,425,997 | |||||
63,354,643 | |||||||
Total Long-Term | |||||||
Investments | |||||||
(Cost $587,248,367) | 588,063,198 | ||||||
Shares | |||||||
SHORT-TERM INVESTMENT – 1.5% | |||||||
Money Market Mutual Fund – 1.5% | |||||||
9,151,851 | Short-Term Investment | ||||||
Company Liquid | |||||||
Assets Portfolio – | |||||||
AIM Fund, 0.18% « | 9,151,851 | ||||||
Total Short-Term | |||||||
Investment | |||||||
(Cost $9,151,851) | 9,151,851 |
The accompanying notes are an integral part of these financial statements.
Page 20
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 24.8% | |||||||
Commercial Paper – 0.1% | |||||||
$ | 1,183,999 | Atlantic East | |||||
Funding LLC, 3.059%, | |||||||
03/25/2010 † ** | $ | 692,136 | |||||
Total Commercial Paper | 692,136 | ||||||
Shares | |||||||
Investment Companies – 24.7% | |||||||
149,465,929 | Mount Vernon Securities | ||||||
Lending Trust Prime | |||||||
Portfolio, 0.20% « | 149,465,929 | ||||||
101,512 | Reserve Primary Fund † ** | 85,625 | |||||
Total Investment | |||||||
Companies | 149,551,554 | ||||||
Total Investments | |||||||
Purchased With Cash | |||||||
Proceeds From | |||||||
Securities Lending | |||||||
(Cost $150,751,440) | 150,243,690 | ||||||
Total Investments | |||||||
(Cost $747,151,658) | |||||||
– 123.3% | 747,458,739 | ||||||
Assets Relating to Securities | |||||||
Lending (Note 6) – 0.1% | |||||||
Support | |||||||
Agreement ** ^ a | 470,875 | ||||||
Cash Contribution | |||||||
from Transfer | |||||||
Agent/Administrator € | 19,558 | ||||||
Total (Cost $0) | 490,433 | ||||||
Liabilities in Excess of | |||||||
Other Assets – (23.4%) | (141,700,596 | ) | |||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 606,248,576 |
* | Restricted Security Deemed Liquid | |
** | Illiquid | |
@ | This security or portion of this security is out on loan at December 31, 2009. | |
f | Foreign Security | |
^ | Non-Income Producing | |
« | 7-Day Yield | |
† | Priced at fair value by the Valuation Committee as delegated by the Baird Funds’ Board of Directors. | |
a | The Fund’s transfer agent and administrator and securities lending agent entered into a support agreement with the Fund to cover potential losses realized by the Fund on its investment in Atlantic East Funding, LLC (up to a certain amount), which investment was made by the Fund’s securities lending agent. | |
€ | Pursuant to a loss reimbursement agreement, the Fund’s transfer agent and administrator made a cash contribution to the Fund to cover anticipated losses realized from the Fund’s ownership of shares of the Reserve Primary Fund, which investment was made by the Fund’s securities lending agent. |
The accompanying notes are an integral part of these financial statements.
Page 21
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2009 |
Summary of Fair Value Exposure at December 31, 2009
The Fund has adopted authoritative fair valuation accounting standards which establish a definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion on changes in valuation techniques and related inputs during the period. These inputs are summarized into three broad levels and described below:
Level 1 – | Quoted prices in active markets for identical securities. |
Level 2 – | Other significant observable inputs (including quoted prices for similar securities, quoted prices for identical securities in inactive markets, dealer indications, interest rates, yield curves, benchmark yields, issuer spreads, prepayment speeds, cash flows, credit risk, default rates, information about issuers, sectors and markets, inputs corroborated by observable market data, etc.) |
Level 3 – | Significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in pricing the security) |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2009:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 11,769,447 | $ | — | $ | 11,769,447 | ||||||||
Commercial Mortgage Backed Securities | — | 12,049,668 | — | 12,049,668 | ||||||||||||
Corporate Debt Securities | — | 378,720,177 | — | 378,720,177 | ||||||||||||
Residential Mortgage Backed Securities | — | 33,947,838 | — | 33,947,838 | ||||||||||||
Taxable Municipal Bonds | — | 1,339,302 | — | 1,339,302 | ||||||||||||
U.S. Government Agency Issues | — | 86,882,123 | — | 86,882,123 | ||||||||||||
U.S. Treasury Obligations | — | 63,354,643 | — | 63,354,643 | ||||||||||||
Total Fixed Income | — | 588,063,198 | — | 588,063,198 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Money Market Mutual Fund | 9,151,851 | — | — | 9,151,851 | ||||||||||||
Total Short-Term Investment | 9,151,851 | — | — | 9,151,851 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 692,136 | — | 692,136 | ||||||||||||
Money Market Mutual Funds | 149,465,929 | — | 85,625 | 149,551,554 | ||||||||||||
Total Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | 149,465,929 | 692,136 | 85,625 | 150,243,690 | ||||||||||||
Total Investments | $ | 158,617,780 | $ | 588,755,334 | $ | 85,625 | $ | 747,458,739 | ||||||||
Other Assets Relating to Securities Lending Investments | 19,558 | 470,875 | — | 490,433 |
Page 22
Schedule of Investments December 31, 2009 |
Level 3 Reconciliation Disclosure
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
Description | Investments in Securities | |||
Balance as of December 31, 2008 | $ | 725,642 | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | — | |||
Change in unrealized appreciation (depreciation) | (15,887 | ) | ||
Net purchases (sales/paydowns) | (49,966 | ) | ||
Transfers in and/or out of Level 3 * | (574,164 | ) | ||
Balance as of December 31, 2009 | $ | 85,625 |
* | The information used in the above reconciliation represents fiscal year to date activity for any investments identified as using Level 3 inputs at either the beginning or end of the current fiscal period. Transfers in or out of Level 3 represents either the beginning value (for transfers in) or ending value (for transfers out) of any security or instrument where a change in the pricing level occurred from the beginning to the end of the period. |
Page 23
The Baird Intermediate Bond Fund seeks an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Barclays Capital Intermediate U.S. Government/Credit Bond Index. The Barclays Capital Intermediate U.S. Government/Credit Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt issues, including government and corporate securities, with maturities between one and ten years.
The improved market conditions resulted in strong performance for the Fund in 2009. The Fund also outperformed its benchmark index in 2009. The primary factors for the outperformance were:
• | The Fund’s overweight to the corporate sector which performed well in 2009; |
• | Price recovery from certain corporate securities with sound fundamental value whose market prices had fallen in 2008 and subsequently appreciated in value in 2009; |
• | The Fund’s underweight to U.S. Treasuries which underperformed all other market sectors for the year; and |
• | Price appreciation of non-Agency mortgage-backed and asset-backed securities. |
The Fund maintained its duration-neutral strategy, holding a broadly diversified portfolio of 320 securities at year end.
We are greatly encouraged by the Fund’s performance in 2009 and are very optimistic regarding the individual issues and the overall structure of the portfolio. The portfolio’s yield advantage over the benchmark remains historically high and we remain confident that the portfolio will realize this yield advantage over time and outperform its benchmark through the completion of this historic credit cycle.
Portfolio Characteristics
Quality Distribution* | Sector Weightings* |
![]() | ![]() |
Net Assets: | $534,457,848 | Annualized Expense Ratio: | ||||
SEC 30-Day Yield:** | Institutional Class: | 0.30 | % | |||
Institutional Class: | 4.17% | Investor Class: | 0.55 | %*** | ||
Investor Class: | 3.92% | Portfolio Turnover Rate: | 38.6 | % | ||
Average Effective Duration: | 3.85 years | Total Number of Holdings: | 320 | |||
Average Effective Maturity: | 4.95 years |
* | Percentages shown are based on the Fund’s total net assets. |
** | SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2009. |
*** | Includes 0.25% 12b-1 fee. |
Page 24
Baird Intermediate Bond Fund
Institutional Class |
Value of a $25,000 Investment |
![]() |
Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.
Investor Class |
Value of a $10,000 Investment |
![]() |
Growth of a hypothetical investment of $10,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.
Page 25
Average Annual Total Returns
Since | |||
For the Periods Ended December 31, 2009 | One Year | Five Years | Inception(1) |
Institutional Class Shares | 11.76% | 4.62% | 5.87% |
Investor Class Shares | 11.51% | 4.34% | 5.60% |
Barclays Capital Intermediate U.S. Government/Credit Bond Index(2) | 5.24% | 4.66% | 5.73% |
(1) | For the period from September 29, 2000 (commencement of operations) through December 31, 2009. |
(2) | The Barclays Capital Intermediate U.S. Government/Credit Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt including government and corporate securities with maturities between one and 10 years. This index does not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. |
The returns shown in the table above and line graphs on the previous page reflect reinvestment of dividends and/or capital gains distributions in additional shares. The returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
For information about the performance of the Fund as of the most recent month-end, please call 1-866-44BAIRD or visit www.bairdfunds.com. Mutual fund performance changes over time and current performance may be lower or higher than that stated.
Page 26
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.7% | |||||||
Asset Backed Securities – 1.9% | |||||||
$ | 133,924 | Amresco Residential | |||||
Securities Mortgage | |||||||
Loan Trust, | |||||||
Series 1998-1, Class A6, | |||||||
6.51%, 08/25/2027 | $ | 115,725 | |||||
750,000 | Chase Issuance Trust, | ||||||
Series 2005-A10, Class | |||||||
A10, 4.65%, 12/17/2012 | 772,973 | ||||||
188,124 | CitiFinancial Mortgage | ||||||
Securities, Inc., | |||||||
Series 2004-1, Class AF2, | |||||||
2.645%, 04/25/2034 | 186,930 | ||||||
6,096 | Cityscape Home Equity | ||||||
Loan Trust, 1997-C, Class | |||||||
A4, 7.00%, 07/25/2028 | 6,009 | ||||||
Countrywide Asset-Backed | |||||||
Certificates: | |||||||
1,906,978 | Series 2006-S3, Class A2, | ||||||
6.085%, 06/25/2021 | 853,323 | ||||||
122,739 | Series 2006-S2, Class A2, | ||||||
5.627%, 07/25/2027 | 96,799 | ||||||
116,667 | Series 2004-12, Class AF6, | ||||||
4.634%, 03/25/2035 | 90,848 | ||||||
4,000,000 | Series 2006-13, Class 1AF2, | ||||||
5.884%, 01/25/2037 | 3,773,750 | ||||||
375,000 | Series 2006-13, Class 1AF3, | ||||||
5.944%, 01/25/2037 | 194,188 | ||||||
1,380,000 | Series 2006-9, Class 1AF3, | ||||||
5.859%, 10/25/2046 | 718,036 | ||||||
Delta Funding Home | |||||||
Equity Loan Trust: | |||||||
54,442 | Series 1997-2, Class A6, | ||||||
7.04%, 06/25/2027 | 54,301 | ||||||
29,321 | Series 1999-1, Class A6F, | ||||||
6.34%, 12/15/2028 | 28,286 | ||||||
538,268 | Series 1999-2, Class A7F, | ||||||
7.03%, 08/15/2030 | 469,937 | ||||||
23,696 | Equivantage Home | ||||||
Equity Loan Trust, | |||||||
Series 1996-3, Class A3, | |||||||
7.70%, 09/25/2027 | 19,698 | ||||||
196,593 | GMAC Mortgage | ||||||
Corporation Loan Trust, | |||||||
Series 2005-HE3, Class A2, | |||||||
0.416%, 02/25/2036 | 79,513 | ||||||
Green Tree Financial | |||||||
Corporation: | |||||||
125,319 | Series 1993-4, Class A5, | ||||||
7.05%, 01/15/2019 | 125,269 | ||||||
805,191 | Series 1998-2, Class A5, | ||||||
6.24%, 12/01/2028 | 736,918 | ||||||
1,060,017 | Series 1998-3, Class A5, | ||||||
6.22%, 03/01/2030 | 1,033,028 | ||||||
400,339 | Series 1998-4, Class A5, | ||||||
6.18%, 04/01/2030 | 365,731 | ||||||
47,223 | IMC Home Equity Loan | ||||||
Trust, Series 1998-1, Class | |||||||
A6, 7.02%, 06/20/2029 | 39,484 | ||||||
100,000 | MBNA Master | ||||||
Credit Card Trust, | |||||||
Series 2005-4A, Class A4, | |||||||
0.273%, 11/15/2012 | 99,673 | ||||||
173,325 | Oakwood Mortgage | ||||||
Investors, Inc., | |||||||
Series 1999-B, Class A3, | |||||||
6.45%, 11/15/2017 | 141,624 | ||||||
18,374 | Residential Asset | ||||||
Mortgage Products, Inc., | |||||||
Series 2003-RS7, Class | |||||||
AI6, 5.34%, 08/25/2033 | 17,087 |
The accompanying notes are an integral part of these financial statements.
Page 27
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.7% (cont.) | |||||||
Asset Backed Securities – 1.9% (cont.) | |||||||
$ | 96,298 | Structured Asset Securities | |||||
Corporation, Series | |||||||
2005-2XS, Class 1A2A, | |||||||
4.51%, 02/25/2035 | $ | 89,763 | |||||
10,108,893 | |||||||
Commercial Mortgage Backed Securities – 1.7% | |||||||
4,013,485 | GMAC Commercial | ||||||
Mortgage Securities Inc., | |||||||
Series 2001-C1, Class A2, | |||||||
6.465%, 04/15/2034 | 4,157,922 | ||||||
5,000,000 | Wachovia Bank | ||||||
Commercial Mortgage | |||||||
Trust, Series 2005-C22, | |||||||
Class A4, 5.265%, | |||||||
12/15/2044 | 4,880,914 | ||||||
9,038,836 | |||||||
Financial – 20.6% | |||||||
American General Finance | |||||||
Corporation Notes: | |||||||
25,000 | 4.625%, 09/01/2010 | 24,229 | |||||
550,000 | 4.00%, 03/15/2011 | 497,261 | |||||
2,000,000 | Ameriprise Financial, Inc., | ||||||
5.35%, 11/15/2010 | 2,066,466 | ||||||
630,000 | AmSouth Bancorporation | ||||||
Subordinated Debentures, | |||||||
6.75%, 11/01/2025 | 450,923 | ||||||
1,475,000 | ANZ National (Int’l) LTD, | ||||||
2.375%, 12/21/2012 | |||||||
(Acquired 12/15/2009; | |||||||
Cost $1,473,171)* f | 1,464,256 | ||||||
600,000 | Banco Santander Chile, | ||||||
7.375%, 07/18/2012 f | 660,528 | ||||||
1,900,000 | Bancwest Corporation | ||||||
Subordinated Notes, | |||||||
8.30%, 01/15/2011 | 1,929,921 | ||||||
835,000 | Bank of America | ||||||
Corporation | |||||||
Subordinated Notes, | |||||||
10.20%, 07/15/2015 | 972,981 | ||||||
1,500,000 | Bank of Tokyo – | ||||||
Mitsubishi/UFJ NY, | |||||||
7.40%, 06/15/2011 f | 1,617,494 | ||||||
1,043,000 | Bank One Corporation | ||||||
Subordinated Notes, | |||||||
10.00%, 08/15/2010 | 1,100,956 | ||||||
2,695,000 | BankAmerica Institutional, | ||||||
8.07%, 12/31/2026 | |||||||
(Acquired 01/04/2006 | |||||||
through 11/06/2007; | |||||||
Aggregate | |||||||
Cost $2,771,091)* | 2,641,100 | ||||||
2,500,000 | Banponce Trust I, Series A, | ||||||
8.327%, 02/01/2027 | |||||||
(Callable 02/22/2010) | 1,635,095 | ||||||
1,500,000 | Barclays Bank PLC, | ||||||
5.00%, 09/22/2016 f @ | 1,532,718 | ||||||
2,150,000 | BB&T Corporation, | ||||||
6.85%, 04/30/2019 @ | 2,411,446 | ||||||
1,000,000 | Bear Stearns Cos., Inc., | ||||||
6.40%, 10/02/2017 | 1,090,081 | ||||||
1,000,000 | BOI Capital Funding II, | ||||||
5.571%, 02/01/2049 | |||||||
(Callable 02/01/2016) | |||||||
(Acquired 01/20/2006; | |||||||
Cost $1,000,000)* f | 420,000 | ||||||
1,000,000 | CDP Financial Inc., | ||||||
4.40%, 11/25/2019 | |||||||
(Acquired 11/20/2009; | |||||||
Cost $997,520)* f | 957,890 | ||||||
CIT Group Funding: | |||||||
22,051 | 10.25%, 05/01/2013 | ||||||
(Callable 02/19/2010) | 22,492 |
The accompanying notes are an integral part of these financial statements.
Page 28
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.7% (cont.) | |||||||
Financial – 20.6% (cont.) | |||||||
$ | 33,076 | 10.25%, 05/01/2014 | |||||
(Callable 02/08/2010) | $ | 33,655 | |||||
33,076 | 10.25%, 05/01/2015 | ||||||
(Callable 02/23/2010) @ | 33,407 | ||||||
55,127 | 10.25%, 05/01/2016 | ||||||
(Callable 02/23/2010) | 55,403 | ||||||
77,178 | 10.25%, 05/01/2017 | ||||||
(Callable 02/23/2010) | 77,564 | ||||||
CIT Group, Inc.: | |||||||
19,535 | 7.00%, 05/01/2013 | ||||||
(Callable 02/23/2010) | 18,216 | ||||||
29,303 | 7.00%, 05/01/2014 | ||||||
(Callable 02/23/2010) | 27,215 | ||||||
29,302 | 7.00%, 05/01/2015 | ||||||
(Callable 02/23/2010) | 26,225 | ||||||
48,839 | 7.00%, 05/01/2016 | ||||||
(Callable 02/23/2010) | 42,978 | ||||||
68,374 | 7.00%, 05/01/2017 | ||||||
(Callable 02/23/2010) | 59,314 | ||||||
Citigroup, Inc.: | |||||||
1,000,000 | 5.50%, 04/11/2013 | 1,036,765 | |||||
550,000 | 6.01%, 01/15/2015 | 561,604 | |||||
1,760,000 | Corestates Capital Trust I, | ||||||
8.00%, 12/15/2026 | |||||||
(Callable 03/15/2010) | |||||||
(Acquired 11/29/2005 | |||||||
and 10/10/2007; | |||||||
Cost $267,026 and | |||||||
$1,540,532, respectively)* | 1,721,488 | ||||||
375,000 | Corp Andina | ||||||
De Fomento Notes, | |||||||
7.375%, 01/18/2011 f | 394,925 | ||||||
1,900,000 | Countrywide Financial | ||||||
Corporation Subordinated | |||||||
Notes, 6.25%, 05/15/2016 | 1,932,615 | ||||||
172,000 | Dresdner Bank-New York | ||||||
Subordinated Debentures, | |||||||
7.25%, 09/15/2015 | 172,007 | ||||||
1,000,000 | Export-Import | ||||||
Bank Korea Notes, | |||||||
5.125%, 02/14/2011 f | 1,032,899 | ||||||
416,065 | First National Bank of | ||||||
Chicago Pass-Thru | |||||||
Certificates, Series 1993-A, | |||||||
8.08%, 01/05/2018 | 456,524 | ||||||
2,600,000 | First National | ||||||
Bank of Omaha | |||||||
Subordinated Notes, | |||||||
7.32%, 12/01/2010 | 2,624,042 | ||||||
2,125,000 | First Union Capital I, Series | ||||||
A, 7.935%, 01/15/2027 | |||||||
(Callable 02/22/2010) | 2,065,968 | ||||||
1,546,000 | FMR LLC Notes, | ||||||
4.75%, 03/01/2013 | |||||||
(Acquired 02/26/2003 | |||||||
through 12/01/2009; | |||||||
Aggregate | |||||||
Cost $1,565,529)* | 1,556,286 | ||||||
2,300,000 | GE Global Insurance | ||||||
Holding Corporation, | |||||||
7.50%, 06/15/2010 | 2,359,954 | ||||||
General Electric | |||||||
Capital Corporation: | |||||||
800,000 | 6.00%, 06/15/2012 @ | 862,326 | |||||
800,000 | 4.375%, 09/21/2015 @ | 809,948 | |||||
2,000,000 | 5.625%, 09/15/2017 | 2,060,460 | |||||
1,150,000 | Genworth Financial Inc. | ||||||
Notes, 5.75%, | |||||||
06/15/2014 @ | 1,099,851 |
The accompanying notes are an integral part of these financial statements.
Page 29
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.7% (cont.) | |||||||
Financial – 20.6% (cont.) | |||||||
$ | 1,975,000 | Glencore Funding LLC, | |||||
6.00%, 04/15/2014 | |||||||
(Acquired 03/31/2004 | |||||||
through 12/04/2006; | |||||||
Aggregate | |||||||
Cost $1,951,110)* | $ | 2,020,575 | |||||
GMAC LLC: | |||||||
1,025,000 | 7.75%, 01/19/2010 @ | 1,025,475 | |||||
80,000 | 7.50%, 12/31/2013 | ||||||
(Acquired 02/26/2007 | |||||||
and 09/26/2007; | |||||||
Cost $236,064 and | |||||||
$21,994, respectively)* | 77,200 | ||||||
200,000 | 6.75%, 12/01/2014 | 189,969 | |||||
96,000 | 8.00%, 12/31/2018 | ||||||
(Acquired 02/26/2007 | |||||||
and 09/26/2007; | |||||||
Cost $327,582 and | |||||||
$30,002, respectively)* | 84,480 | ||||||
Goldman Sachs | |||||||
Group, Inc. Notes: | |||||||
1,125,000 | 5.15%, 01/15/2014 | 1,190,094 | |||||
1,000,000 | 6.00%, 05/01/2014 @ | 1,093,768 | |||||
1,800,000 | Great West Life & | ||||||
Annuity Insurance, | |||||||
7.153%, 05/16/2046 | |||||||
(Callable 05/16/2016) | |||||||
(Acquired 05/16/2006 | |||||||
and 11/08/2007; | |||||||
Cost $1,000,000 and | |||||||
$792,736, respectively)* | 1,584,000 | ||||||
HSBC Finance | |||||||
Corporation Notes: | |||||||
2,000,000 | 8.00%, 07/15/2010 | 2,072,640 | |||||
100,000 | 5.00%, 06/30/2015 | 103,300 | |||||
2,000,000 | Huntington National | ||||||
Bank Notes, | |||||||
8.00%, 04/01/2010 | 2,006,100 | ||||||
Invesco Ltd. Notes: f | |||||||
500,000 | 5.625%, 04/17/2012 | 517,890 | |||||
500,000 | 5.375%, 02/27/2013 | 508,854 | |||||
Istar Financial, Inc.: | |||||||
1,050,000 | 5.95%, 10/15/2013 | 611,625 | |||||
75,000 | 5.85%, 03/15/2017 | 42,000 | |||||
J.P. Morgan Chase & Co.: | |||||||
500,000 | 6.625%, 03/15/2012 | 545,831 | |||||
575,000 | 5.75%, 01/02/2013 | 613,231 | |||||
2,000,000 | Jackson National Life Global, | ||||||
5.125%, 02/10/2011 | |||||||
(Acquired 07/21/2009; | |||||||
Cost $2,013,359)* | 2,016,270 | ||||||
2,000,000 | Key Bank NA, | ||||||
7.413%, 05/06/2015 | 2,040,744 | ||||||
3,000,000 | KFW, | ||||||
4.875%, 06/17/2019 f | 3,170,172 | ||||||
2,600,000 | Kookmin Bank, | ||||||
7.25%, 05/14/2014 | |||||||
(Acquired 06/12/2009; | |||||||
Cost $2,639,837)* f | 2,918,729 | ||||||
350,000 | Korea Development Bank | ||||||
Senior Unsecured Notes, | |||||||
4.625%, 09/16/2010 f | 356,059 | ||||||
Liberty Mutual Group: | |||||||
746,000 | 7.25%, 09/01/2012 | ||||||
(Acquired 08/03/2004 | |||||||
through 09/30/2009; | |||||||
Aggregate Cost $776,548)* | 769,788 | ||||||
500,000 | 5.75%, 03/15/2014 | ||||||
(Acquired 09/03/2009; | |||||||
Cost $441,143)* | 492,837 |
The accompanying notes are an integral part of these financial statements.
Page 30
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.7% (cont.) | |||||||
Financial – 20.6% (cont.) | |||||||
$ | 775,000 | Marsh & McLennan | |||||
Companies, Inc., | |||||||
5.375%, 07/15/2014 | $ | 792,605 | |||||
500,000 | MBIA Insurance Corp., | ||||||
14.00%, 01/15/2033 | |||||||
(Callable 01/15/2013) | |||||||
(Acquired 01/11/2008; | |||||||
Cost $500,000)* | 215,000 | ||||||
Merrill Lynch & Co.: | |||||||
1,000,000 | 5.70%, 05/02/2017 | 980,172 | |||||
1,000,000 | 6.875%, 04/25/2018 | 1,077,438 | |||||
375,000 | Met Life Global | ||||||
Funding Senior Notes, | |||||||
4.50%, 05/05/2010 | |||||||
(Acquired 08/04/2005 | |||||||
and 03/22/2007; | |||||||
Cost $123,925 and | |||||||
$249,528, respectively)* | 378,350 | ||||||
2,500,000 | Monumental Global | ||||||
Funding II Senior | |||||||
Unsecured Notes, | |||||||
5.65%, 07/14/2011 | 2,603,058 | ||||||
1,075,000 | The Mony Group, Inc., | ||||||
8.35%, 03/15/2010 | 1,088,367 | ||||||
Morgan Stanley Notes: | |||||||
1,000,000 | 5.625%, 01/09/2012 | 1,055,322 | |||||
100,000 | 4.75%, 04/01/2014 | 100,575 | |||||
1,400,000 | 6.625%, 04/01/2018 | 1,513,635 | |||||
750,000 | Morgan Stanley | ||||||
Dean Witter & Co., | |||||||
6.75%, 10/15/2013 | 819,599 | ||||||
1,530,000 | National Australia Bank | ||||||
Ltd. Subordinated Notes, | |||||||
Series A, 8.60%, | |||||||
05/19/2010 f | 1,576,986 | ||||||
350,000 | National Bank of Hungary | ||||||
Yankee Debentures, | |||||||
8.875%, 11/01/2013 f | 377,994 | ||||||
2,725,000 | National City Bank | ||||||
of Cleveland, | |||||||
4.50%, 03/15/2010 | 2,741,715 | ||||||
534,000 | National City Bank of | ||||||
Kentucky Subordinated | |||||||
Notes, 6.30%, 02/15/2011 | 551,804 | ||||||
2,320,000 | Navigators Group Inc. | ||||||
Senior Unsecured Notes, | |||||||
7.00%, 05/01/2016 | 2,265,176 | ||||||
1,260,000 | NB Capital Trust IV, | ||||||
8.25%, 04/15/2027 | |||||||
(Callable 02/22/2010) | 1,247,400 | ||||||
1,000,000 | North Fork Capital Trust II, | ||||||
8.00%, 12/15/2027 | |||||||
(Callable 02/22/2010) | 905,500 | ||||||
1,500,000 | Pooled Funding Trust I, | ||||||
2.74%, 02/15/2012 | |||||||
(Acquired 08/10/2009; | |||||||
Cost $1,522,036)* | 1,530,756 | ||||||
894,000 | Pricoa Global Funding I, | ||||||
0.494%, 01/15/2010 | |||||||
(Acquired 07/13/2009; | |||||||
Cost $893,383)* | 893,955 | ||||||
Protective Life Corporation | |||||||
Senior Notes: | |||||||
475,000 | 5.45%, 09/28/2012 | 507,336 | |||||
75,000 | 4.30%, 06/01/2013 | 71,756 | |||||
2,000,000 | Rabobank Nederland Global | ||||||
Senior Unsecured Notes, | |||||||
4.20%, 05/13/2014 | |||||||
(Acquired 05/06/2009; | |||||||
Cost $1,996,340)* f @ | 2,069,648 | ||||||
1,650,000 | Regions Bank, | ||||||
7.50%, 05/15/2018 | 1,508,324 |
The accompanying notes are an integral part of these financial statements.
Page 31
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.7% (cont.) | |||||||
Financial – 20.6% (cont.) | |||||||
$ | 1,800,000 | Santander Financial | |||||
Issuances, 6.375%, | |||||||
02/15/2011 f | $ | 1,876,277 | |||||
1,300,000 | Schwab Capital Trust I, | ||||||
7.50%, 11/15/2037 | |||||||
(Callable 11/15/2017) | 1,259,492 | ||||||
SLM Corporation Notes: | |||||||
1,516,000 | 4.50%, 07/26/2010 | 1,510,570 | |||||
250,000 | 5.375%, 05/15/2014 | 230,593 | |||||
1,000,000 | Sovereign Bancorp Inc., | ||||||
8.75%, 05/30/2018 | 1,155,486 | ||||||
1,000,000 | St. Paul Travelers, Inc., | ||||||
6.25%, 06/20/2016 | 1,096,318 | ||||||
1,000,000 | TECO Finance Inc., | ||||||
7.00%, 05/01/2012 | 1,067,234 | ||||||
1,046,000 | Toll Road Inv. Partnership | ||||||
II, 0.00%, 02/15/2011 | |||||||
(Acquired 09/28/2004; | |||||||
Cost $993,334)* ^ | 971,353 | ||||||
1,320,000 | Transamerica Finance | ||||||
Corporation Debentures, | |||||||
0.00%, 03/01/2010 | |||||||
(Callable 02/22/2010) ^ | 1,313,734 | ||||||
850,000 | UFJ Finance Aruba A.E.C., | ||||||
6.75%, 07/15/2013 f @ | 946,353 | ||||||
650,000 | Unionbancal Corporation, | ||||||
5.25%, 12/16/2013 | 667,751 | ||||||
1,000,000 | Washington Mutual | ||||||
Financial Corporation, | |||||||
6.875%, 05/15/2011 | 1,050,717 | ||||||
1,495,000 | Westdeutsche Landesbank | ||||||
Subordinated Notes, | |||||||
4.796%, 07/15/2015 f | 1,559,472 | ||||||
110,246,928 | |||||||
Industrial – 17.2% | |||||||
Allied Waste North | |||||||
America, Inc.: | |||||||
1,000,000 | 5.75%, 02/15/2011 | 1,040,463 | |||||
3,100,000 | 7.25%, 03/15/2015 | ||||||
(Callable 03/15/2010) | 3,239,500 | ||||||
Ameritech Capital | |||||||
Funding Debentures: | |||||||
1,045,179 | 9.10%, 06/01/2016 | 1,192,819 | |||||
1,008,000 | 6.45%, 01/15/2018 | 1,060,545 | |||||
1,000,000 | Anadarko Petroleum | ||||||
Corporation Senior | |||||||
Unsecured Notes, | |||||||
6.95%, 06/15/2019 | 1,134,016 | ||||||
British Telecommunications | |||||||
PLC: f | |||||||
750,000 | 9.125%, 12/15/2010 | 803,490 | |||||
2,000,000 | 5.95%, 01/15/2018 | 2,032,706 | |||||
Bunge Ltd. Finance | |||||||
Corporation Notes: | |||||||
800,000 | 5.35%, 04/15/2014 | 817,816 | |||||
1,085,000 | 5.10%, 07/15/2015 | 1,075,725 | |||||
2,400,000 | CBS Corporation | ||||||
Senior Notes, | |||||||
7.70%, 07/30/2010 | 2,473,027 | ||||||
1,250,000 | Clear Channel | ||||||
Communications Senior | |||||||
Unsubordinated Notes, | |||||||
5.50%, 12/15/2016 | 693,750 | ||||||
Comcast Cable Holdings: | |||||||
1,731,000 | 9.80%, 02/01/2012 | 1,959,154 | |||||
125,000 | 8.375%, 03/15/2013 | 144,087 | |||||
525,000 | Comcast Corporation, | ||||||
6.50%, 01/15/2017 | 581,209 | ||||||
75,000 | Comcast Holdings | ||||||
Corporation, | |||||||
10.625%, 07/15/2012 | 88,494 |
The accompanying notes are an integral part of these financial statements.
Page 32
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.7% (cont.) | |||||||
Industrial – 17.2% (cont.) | |||||||
$ | 1,281,000 | COX | |||||
Communications Inc., | |||||||
7.125%, 10/01/2012 | $ | 1,422,981 | |||||
2,000,000 | COX Enterprises, Inc., | ||||||
7.875%, 09/15/2010 | |||||||
(Acquired 07/13/2009 | |||||||
and 08/12/2009; | |||||||
Cost $1,026,472 and | |||||||
$1,032,756, respectively)* | 2,078,694 | ||||||
CSX Corporation: | |||||||
1,775,000 | 5.75%, 03/15/2013 | 1,920,206 | |||||
450,000 | 6.25%, 04/01/2015 | 495,653 | |||||
1,000,000 | D.R. Horton Inc. | ||||||
Unsubordinated Notes, | |||||||
6.50%, 04/15/2016 | 975,000 | ||||||
Deutsche Telekom | |||||||
International Finance BV: f | |||||||
2,165,000 | 8.50%, 06/15/2010 | 2,237,367 | |||||
1,300,000 | 6.00%, 07/08/2019 | 1,387,972 | |||||
Donnelley (R.R.) | |||||||
& Sons Co.: | |||||||
1,500,000 | 4.95%, 05/15/2010 | 1,510,710 | |||||
1,000,000 | 8.60%, 08/15/2016 | 1,088,609 | |||||
875,000 | 6.125%, 01/15/2017 | 865,033 | |||||
2,000,000 | Enterprise Products | ||||||
Operating LLC, | |||||||
7.625%, 02/15/2012 | 2,210,690 | ||||||
2,300,000 | Fiserv, Inc., | ||||||
6.125%, 11/20/2012 | 2,504,403 | ||||||
1,260,000 | GTE Corporation | ||||||
Debentures, | |||||||
6.84%, 04/15/2018 | 1,380,277 | ||||||
1,375,000 | Hanson Australia Funding, | ||||||
5.25%, 03/15/2013 f | 1,354,375 | ||||||
650,000 | Hanson PLC Notes, | ||||||
6.125%, 08/15/2016 f | 620,750 | ||||||
1,195,000 | Health Care Service | ||||||
Corporation Notes, | |||||||
7.75%, 06/15/2011 | |||||||
(Acquired 06/20/2001 | |||||||
through 10/19/2006; | |||||||
Aggregate | |||||||
Cost $1,216,524)* | 1,241,668 | ||||||
420,000 | Highmark, Inc. Notes, | ||||||
6.80%, 08/15/2013 | |||||||
(Acquired 08/14/2003 | |||||||
and 03/13/2008; | |||||||
Cost $399,088 and | |||||||
$20,599, respectively)* | 439,441 | ||||||
Historic Time Warner Inc.: | |||||||
1,847,000 | 9.125%, 01/15/2013 | 2,143,135 | |||||
250,000 | 6.875%, 06/15/2018 | 275,741 | |||||
2,000,000 | Humana Inc., | ||||||
7.20%, 06/15/2018 | 2,045,476 | ||||||
2,300,000 | Hutchison Whampoa | ||||||
International LTD, | |||||||
7.625%, 04/09/2019 | |||||||
(Acquired 10/16/2009; | |||||||
Cost $2,620,643)* f | 2,642,861 | ||||||
1,000,000 | Ingersoll-Rand | ||||||
Company Debentures, | |||||||
6.391%, 11/15/2027 f | 1,057,135 | ||||||
1,175,000 | Johnson Controls Inc. | ||||||
Senior Notes, | |||||||
5.50%, 01/15/2016 | 1,195,062 | ||||||
675,000 | Laboratory Corporation | ||||||
of America Holdings, | |||||||
5.50%, 02/01/2013 | 702,985 | ||||||
625,000 | Lafarge S.A. Notes, | ||||||
6.50%, 07/15/2016 f | 662,623 | ||||||
500,000 | Limited Brands, Inc., | ||||||
5.25%, 11/01/2014 | 482,500 |
The accompanying notes are an integral part of these financial statements.
Page 33
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.7% (cont.) | |||||||
Industrial – 17.2% (cont.) | |||||||
$ | 400,000 | Marathon Global | |||||
Funding Corporation, | |||||||
6.00%, 07/01/2012 f | $ | 431,936 | |||||
75,000 | Martin Marietta Materials, | ||||||
Inc., 6.60%, 04/15/2018 | 77,203 | ||||||
Masco Corporation: | |||||||
795,000 | 0.554%, 03/12/2010 | 791,759 | |||||
1,625,000 | 6.125%, 10/03/2016 @ | 1,548,529 | |||||
650,000 | Nabors Industrials, Inc., | ||||||
6.15%, 02/15/2018 | 675,572 | ||||||
2,307,000 | Nextel Communications | ||||||
Senior Notes, | |||||||
6.875%, 10/31/2013 | |||||||
(Callable 03/15/2010) | 2,237,790 | ||||||
700,000 | PCCW-HWT Capital II | ||||||
Ltd., 6.00%, 07/15/2013 | |||||||
(Acquired 07/10/2003; | |||||||
Cost $696,731)* f | 725,946 | ||||||
925,000 | Pearson Dollar Finance | ||||||
PLC, 5.70%, 06/01/2014 | |||||||
(Acquired 09/28/2005 | |||||||
and 12/14/2007; | |||||||
Cost $610,317 and | |||||||
$321,181, respectively)* f | 976,665 | ||||||
2,750,000 | PEMEX Project Funding | ||||||
Master Trust, | |||||||
9.125%, 10/13/2010 f | 2,901,250 | ||||||
2,045,000 | Plum Creek Timberlands, | ||||||
5.875%, 11/15/2015 | 2,094,045 | ||||||
800,000 | Premcor Refining Group, | ||||||
7.50%, 06/15/2015 | |||||||
(Callable 02/22/2010) | 794,121 | ||||||
100,000 | Qwest Capital Funding, | ||||||
Inc., 7.25%, 02/15/2011 | 101,500 | ||||||
1,000,000 | Reed Elsevier Capital Notes, | ||||||
4.625%, 06/15/2012 | 1,039,475 | ||||||
Rio Tinto Alcan, Inc.: f | |||||||
127,000 | 6.45%, 03/15/2011 | 133,242 | |||||
450,000 | 5.00%, 06/01/2015 | 461,995 | |||||
1,800,000 | Rio Tinto Financial USA | ||||||
Ltd., 6.50%, 07/15/2018 f | 1,977,264 | ||||||
500,000 | Sprint Nextel Corporation, | ||||||
6.00%, 12/01/2016 | 456,250 | ||||||
1,175,000 | Sunoco, Inc. Senior | ||||||
Unsecured Notes, | |||||||
5.75%, 01/15/2017 | 1,187,956 | ||||||
TCI Communications, | |||||||
Inc. Debentures: | |||||||
550,000 | 7.875%, 08/01/2013 | 624,269 | |||||
1,583,000 | 8.75%, 08/01/2015 | 1,875,524 | |||||
Telecom Italia Capital: f | |||||||
1,360,000 | 4.95%, 09/30/2014 @ | 1,409,609 | |||||
725,000 | 5.25%, 10/01/2015 @ | 758,022 | |||||
1,725,000 | Telefonica Emisiones, | ||||||
S.A.U., 6.421%, | |||||||
06/20/2016 f | 1,914,633 | ||||||
1,000,000 | Time Warner Cable, Inc., | ||||||
5.85%, 05/01/2017 @ | 1,050,674 | ||||||
1,470,000 | Transocean, Inc., | ||||||
6.625%, 04/15/2011 f | 1,542,412 | ||||||
500,000 | Tyco Electronics Group | ||||||
S. A., 6.55%, | |||||||
10/01/2017 f | 516,981 | ||||||
Tyco International | |||||||
Finance: f | |||||||
1,575,000 | 6.375%, 10/15/2011 | 1,688,873 | |||||
650,000 | 6.00%, 11/15/2013 | 712,000 | |||||
United AirLines, Inc. | |||||||
Pass-Thru Certificates: | |||||||
188,123 | Series 1991-A, Class A-2, | ||||||
10.02%, 03/22/2014 | 51,734 | ||||||
245,275 | Series 2000-2, Class C, | ||||||
7.762%, 04/29/2049 § | 264,897 |
The accompanying notes are an integral part of these financial statements.
Page 34
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.7% (cont.) | |||||||
Industrial – 17.2% (cont.) | |||||||
$ | 1,500,000 | Vale Overseas Limited, | |||||
6.25%, 01/23/2017 f @ | $ | 1,564,674 | |||||
250,000 | Verizon Communications, | ||||||
Inc. Senior Unsecured Notes, | |||||||
5.55%, 02/15/2016 | 269,499 | ||||||
650,000 | Verizon New York Inc. | ||||||
Senior Unsecured Notes, | |||||||
8.625%, 11/15/2010 | 689,671 | ||||||
1,000,000 | Vodafone Group PLC | ||||||
Senior Unsecured Notes, | |||||||
7.75%, 02/15/2010 f | 1,007,640 | ||||||
2,000,000 | Vulcan Materials Co., | ||||||
7.00%, 06/15/2018 | 2,181,370 | ||||||
25,000 | Waste Management, Inc., | ||||||
5.00%, 03/15/2014 | 26,359 | ||||||
1,450,000 | Wellpoint, Inc., | ||||||
6.80%, 08/01/2012 | 1,599,815 | ||||||
500,000 | Willamette Industries, | ||||||
Inc. Notes, | |||||||
6.60%, 06/05/2012 | 509,491 | ||||||
92,148,793 | |||||||
Residential Mortgage Backed Securities – 11.6% | |||||||
Bank of America | |||||||
Alternative Loan Trust: | |||||||
384,258 | Series 2003-11, Class 4A1, | ||||||
4.75%, 01/25/2019 | 374,652 | ||||||
1,113,853 | Series 2004-2, Class 5A1, | ||||||
5.50%, 03/25/2019 | 950,643 | ||||||
1,362,755 | Series 2004-11, Class 4A1, | ||||||
5.50%, 12/25/2019 | 1,332,093 | ||||||
59,304 | Series 2005-6, Class 7A1, | ||||||
5.50%, 07/25/2020 | 54,411 | ||||||
767,940 | Series 2006-2, Class 7A1, | ||||||
6.00%, 03/25/2021 | 665,588 | ||||||
1,108,825 | Series 2006-3, Class 6A1, | ||||||
6.00%, 04/25/2036 | 961,040 | ||||||
1,107,287 | Series 2006-4, | ||||||
Class 3CB4, | |||||||
6.00%, 05/25/2046 | 910,038 | ||||||
815,742 | Bank of America | ||||||
Funding Corporation, | |||||||
Series 2003-3, Class 1A41, | |||||||
5.50%, 10/25/2033 | 799,690 | ||||||
Citicorp Mortgage | |||||||
Securities, Inc.: | |||||||
1,160,896 | Series 2004-5, Class 1A25, | ||||||
5.50%, 10/25/2014 | 1,115,609 | ||||||
70,757 | Series 2004-4, Class A2, | ||||||
5.25%, 06/25/2034 | 70,203 | ||||||
1,077,800 | Series 2004-4, Class A5, | ||||||
5.50%, 06/25/2034 | 1,061,579 | ||||||
Countrywide Alternative | |||||||
Loan Trust: | |||||||
276,787 | Series 2005-5R, Class A2, | ||||||
4.75%, 12/25/2018 | 256,250 | ||||||
1,076,643 | Series 2005-50CB, Class | ||||||
4A1, 5.00%, 11/25/2020 | 854,877 | ||||||
1,180,002 | Series 2005-85CB, Class | ||||||
3A1, 5.25%, 02/25/2021 | |||||||
(Acquired 09/26/2007 | |||||||
through 01/28/2009; | |||||||
Aggregate Cost $1,109,905)* | 889,262 | ||||||
1,813,972 | Series 2006-7CB, Class | ||||||
3A1, 5.25%, 05/25/2021 | 1,283,385 | ||||||
125,000 | Series 2005-10CB, Class | ||||||
1A6, 5.50%, 05/25/2035 | 92,667 | ||||||
115,523 | Series 2005-11CB, Class | ||||||
2A1, 5.50%, 06/25/2035 | 89,136 | ||||||
1,086,354 | Series 2005-34CB, Class | ||||||
1A6, 5.50%, 09/25/2035 | 1,009,856 |
The accompanying notes are an integral part of these financial statements.
Page 35
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.7% (cont.) | |||||||
Residential Mortgage Backed Securities – 11.6% (cont.) | |||||||
$ | 487,880 | Countrywide Home | |||||
Loans, Inc., Series | |||||||
2003-18, Class A3, | |||||||
5.25%, 07/25/2033 | $ | 483,745 | |||||
Credit Suisse First Boston | |||||||
Mortgage Securities Corp.: | |||||||
66,888 | Series 2005-11, Class 5A1, | ||||||
5.25%, 12/25/2020 | 61,167 | ||||||
111,339 | Series 2005-3, Class 3A27, | ||||||
5.50%, 07/25/2035 | 98,010 | ||||||
Federal Gold Loan Mortgage | |||||||
Corporation (FGLMC) | |||||||
Pass-Thru Certificates: | |||||||
575,092 | 5.00%, 08/01/2011 | 598,811 | |||||
830,173 | 6.00%, 06/01/2021 | 888,006 | |||||
38,599 | 6.00%, 07/01/2028 | 41,397 | |||||
Federal Home Loan | |||||||
Mortgage Corporation | |||||||
(FHLMC): | |||||||
986,930 | Series 3033, Class LU, | ||||||
5.50%, 03/15/2013 | 1,038,287 | ||||||
1,219,512 | Series 2695, Class UA, | ||||||
5.50%, 09/15/2014 | 1,260,886 | ||||||
3,842,619 | Series R014, Class AL, | ||||||
5.50%, 10/15/2014 | 3,918,507 | ||||||
371,160 | Series R001, Class AE, | ||||||
4.375%, 04/15/2015 | 380,754 | ||||||
1,718,867 | Series R003, Class VA, | ||||||
5.50%, 08/15/2016 | 1,828,913 | ||||||
2,189,430 | Series 3122, Class VA, | ||||||
6.00%, 01/15/2017 | 2,341,000 | ||||||
1,545,818 | Series R010, Class VA, | ||||||
5.50%, 04/15/2017 | 1,643,076 | ||||||
2,635,613 | Series R009, Class AJ, | ||||||
5.75%, 12/15/2018 | 2,746,414 | ||||||
4,317 | Series 74, Class F, | ||||||
6.00%, 10/15/2020 | 4,491 | ||||||
150,000 | Series 2673, Class NC, | ||||||
5.50%, 05/15/2021 | 155,567 | ||||||
34,310 | Series 1395, Class G, | ||||||
6.00%, 10/15/2022 | 36,380 | ||||||
2,409,389 | Series 2970, Class DA, | ||||||
5.50%, 01/15/2023 | 2,498,951 | ||||||
Federal National Mortgage | |||||||
Association (FNMA): | |||||||
550,369 | Series 2006-B2, Class AB, | ||||||
5.50%, 05/25/2014 | 569,734 | ||||||
379,036 | Series 2003-24, Class PC, | ||||||
5.00%, 11/25/2015 | 382,934 | ||||||
78,971 | Series 2005-6, Class VE, | ||||||
5.50%, 04/25/2016 | 83,641 | ||||||
1,244,006 | Series 2006-B1, Class AB, | ||||||
6.00%, 06/25/2016 | 1,293,182 | ||||||
32,992 | Series 2003-35, Class TD, | ||||||
5.00%, 12/25/2016 | 33,642 | ||||||
20,671 | Series 1989-2, Class D, | ||||||
8.80%, 01/25/2019 | 22,717 | ||||||
1,506 | Series G-29, Class O, | ||||||
8.50%, 09/25/2021 | 1,648 | ||||||
118,878 | Series 1991-137, Class H, | ||||||
7.00%, 10/25/2021 | 131,012 | ||||||
92,269 | Series 1992-136, Class PK, | ||||||
6.00%, 08/25/2022 | 99,496 | ||||||
60,675 | Series 1993-32, Class H, | ||||||
6.00%, 03/25/2023 | 64,568 | ||||||
4,479,918 | Series 2002-85, Class PD, | ||||||
5.50%, 05/25/2031 | 4,653,865 | ||||||
95,506 | Series 2004-90, Class YB, | ||||||
4.00%, 07/25/2032 | 98,379 | ||||||
2,082,726 | Series 2004-W6, Class 1A6, | ||||||
5.50%, 07/25/2034 | 2,127,960 |
The accompanying notes are an integral part of these financial statements.
Page 36
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.7% (cont.) | |||||||
Residential Mortgage Backed Securities – 11.6% (cont.) | |||||||
$ | 2,683,124 | Series 2004-W10, | |||||
Class A24, | |||||||
5.00%, 08/25/2034 | $ | 2,751,041 | |||||
GMAC Mortgage | |||||||
Corporation Loan Trust: | |||||||
126,256 | Series 2003-J1, Class A2, | ||||||
5.25%, 03/25/2018 | 124,069 | ||||||
1,263,117 | Series 2004-J4, Class A2, | ||||||
5.50%, 09/25/2034 | 1,239,422 | ||||||
312,395 | Government National | ||||||
Mortgage Association | |||||||
(GNMA), | |||||||
Series 1999-4, Class ZB, | |||||||
6.00%, 02/20/2029 | 335,748 | ||||||
J.P. Morgan Alternative | |||||||
Loan Trust: | |||||||
2,801,681 | Series 2005-S1, Class 3A1, | ||||||
5.50%, 10/25/2020 | 2,402,442 | ||||||
1,183,510 | Series 2006-A1, Class 2A1, | ||||||
5.80%, 03/25/2036 | 747,802 | ||||||
1,579,995 | Series 2006-S2, Class A2, | ||||||
5.81%, 05/25/2036 | 1,567,673 | ||||||
610,789 | Lehman Mortgage Trust, | ||||||
Series 2006-4, Class 3A1, | |||||||
5.00%, 08/25/2021 | 546,656 | ||||||
Master Alternative | |||||||
Loans Trust: | |||||||
1,749,447 | Series 2004-1, Class 1A1, | ||||||
5.00%, 01/25/2019 | 1,653,227 | ||||||
404,722 | Series 2004-3, Class 1A1, | ||||||
5.00%, 03/25/2019 | 382,462 | ||||||
312,850 | Series 2005-3, Class 4A1, | ||||||
5.50%, 03/25/2020 | 293,933 | ||||||
60,094 | Merrill Lynch Mortgage | ||||||
Investors Inc., Series | |||||||
2005-A8, Class A1C1, | |||||||
5.25%, 08/25/2036 | 55,895 | ||||||
Residential Accredit | |||||||
Loans, Inc.: | |||||||
47,052 | Series 2004-QS6, Class A1, | ||||||
5.00%, 05/25/2019 | 46,346 | ||||||
46,372 | Series 2004-QS13, Class | ||||||
CB, 5.00%, 09/25/2019 | 43,822 | ||||||
254,437 | Salomon Brothers | ||||||
Mortgage Securities VII, | |||||||
Series 2003-UP2, Class A2, | |||||||
4.00%, 06/25/2033 | 250,836 | ||||||
Washington Mutual, Inc. | |||||||
Pass-Thru Certificates: | |||||||
1,941,628 | Series 2004-CB1, Class 5A, | ||||||
5.00%, 06/25/2019 | 1,931,919 | ||||||
2,673,705 | Series 2004-CB3, Class 3A, | ||||||
5.50%, 10/25/2019 | 2,693,758 | ||||||
935,784 | Series 2004-CB3, Class 4A, | ||||||
6.00%, 10/25/2019 | 931,778 | ||||||
621,339 | Series 2004-CB4, Class | ||||||
21A, 5.50%, 12/25/2019 | 609,415 | ||||||
792,007 | Series 2004-CB4, Class | ||||||
22A, 6.00%, 12/25/2019 | 789,408 | ||||||
61,755,771 | |||||||
Taxable Municipal Bonds – 0.4% | |||||||
900,000 | California State, | ||||||
5.45%, 04/01/2015 | 905,535 | ||||||
1,430,000 | Tobacco Settlement | ||||||
Authority Iowa, | |||||||
6.50%, 06/01/2023 | |||||||
(Callable 06/01/2015) | 1,204,274 |
The accompanying notes are an integral part of these financial statements.
Page 37
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.7% (cont.) | |||||||
Taxable Municipal Bonds – 0.4% (cont.) | |||||||
187,586 | Tobacco Settlement | ||||||
Financing Corporation, | |||||||
Series 2001-A, Class A, | |||||||
6.36%, 05/15/2025 | $ | 181,227 | |||||
2,291,036 | |||||||
Utilities – 5.2% | |||||||
2,415,000 | Baltimore Gas & Electric | ||||||
Co. Senior Unsecured Notes, | |||||||
6.125%, 07/01/2013 | 2,609,560 | ||||||
Dominion Resources Inc.: | |||||||
450,000 | 6.25%, 06/30/2012 | 486,035 | |||||
1,000,000 | 5.15%, 07/15/2015 | 1,058,371 | |||||
600,000 | Energy Transfer Partners, | ||||||
5.65%, 08/01/2012 | 637,711 | ||||||
2,500,000 | Kinder Morgan Finance, | ||||||
5.70%, 01/05/2016 f | 2,400,000 | ||||||
259,556 | Kiowa Power Partners LLC, | ||||||
4.811%, 12/30/2013 | |||||||
(Acquired 11/19/2004; | |||||||
Cost $259,556)* | 262,061 | ||||||
300,000 | Korea Electric Power | ||||||
Corporation, | |||||||
6.75%, 08/01/2027 f | 281,229 | ||||||
1,000,000 | Korea Hydro & Nuclear | ||||||
Power Company Senior | |||||||
Unsecured Notes, | |||||||
6.25%, 06/17/2014 | |||||||
(Acquired 06/10/2009; | |||||||
Cost $989,350)* f | 1,091,109 | ||||||
1,475,000 | National Grid PLC | ||||||
Senior Unsecured Notes, | |||||||
6.30%, 08/01/2016 f | 1,604,139 | ||||||
NiSource Finance | |||||||
Corporation: | |||||||
1,175,000 | 7.875%, 11/15/2010 | 1,231,823 | |||||
1,000,000 | 10.75%, 03/15/2016 | 1,232,184 | |||||
1,875,000 | ONEOK, Inc. Senior Notes, | ||||||
7.125%, 04/15/2011 | 1,983,129 | ||||||
400,000 | ONEOK Partners LP Notes, | ||||||
5.90%, 04/01/2012 | 424,021 | ||||||
1,250,000 | Pepco Holdings, Inc., | ||||||
6.45%, 08/15/2012 | 1,341,588 | ||||||
1,775,000 | PPL Energy Supply, | ||||||
LLC Bonds, Series A, | |||||||
5.70%, 10/15/2015 | 1,846,160 | ||||||
388,000 | PPL Energy Supply, | ||||||
LLC Senior Notes, | |||||||
6.40%, 11/01/2011 | 416,915 | ||||||
900,000 | Progress Energy, Inc. | ||||||
Senior Notes, | |||||||
6.85%, 04/15/2012 | 976,942 | ||||||
PSE&G Power LLC: | |||||||
275,000 | 7.75%, 04/15/2011 | 294,263 | |||||
425,000 | 5.00%, 04/01/2014 | 438,991 | |||||
144,000 | 5.32%, 09/15/2016 | ||||||
(Acquired 06/25/2001; | |||||||
Cost $126,829)* @ | 148,157 | ||||||
805,763 | RGS (I&M) Funding | ||||||
Corporation Debentures, | |||||||
9.82%, 12/07/2022 | 945,362 | ||||||
1,400,000 | Spectra Energy Capital, | ||||||
5.668%, 08/15/2014 | 1,515,410 | ||||||
1,340,000 | Transcontinental | ||||||
Gas Pipe Line | |||||||
Corporation Senior Notes, | |||||||
8.875%, 07/15/2012 | 1,535,864 | ||||||
Vectren Utility Holdings: | |||||||
1,000,000 | 6.625%, 12/01/2011 | 1,049,516 | |||||
575,000 | 5.25%, 08/01/2013 | 590,142 |
The accompanying notes are an integral part of these financial statements.
Page 38
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.7% (cont.) | |||||||
Utilities – 5.2% (cont.) | |||||||
$ | 1,375,000 | Williams Companies, Inc. | |||||
Senior Unsecured Notes, | |||||||
8.125%, 03/15/2012 | $ | 1,503,513 | |||||
251,896 | Yosemite Securities Trust | ||||||
I, 8.25%, 11/15/2004 | |||||||
(Acquired 04/26/2001; | |||||||
Cost $251,896)* § | 157 | ||||||
27,904,352 | |||||||
U.S. Government Agency Issues – 16.5% | |||||||
7,000,000 | Federal Farm Credit Bank, | ||||||
3.00%, 09/22/2014 @ | 7,022,386 | ||||||
Federal Home Loan | |||||||
Mortgage Corporation | |||||||
(FHLMC): | |||||||
225,000 | 4.50%, 07/15/2013 | 242,832 | |||||
5,000,000 | 3.00%, 12/30/2014 | ||||||
(Callable 12/30/2010) | 4,950,545 | ||||||
Federal National Mortgage | |||||||
Association (FNMA): | |||||||
34,175,000 | 3.625%, 02/12/2013 @ | 35,844,449 | |||||
32,125,000 | 2.75%, 03/13/2014 @ | 32,397,838 | |||||
7,500,000 | 2.625%, 11/20/2014 | 7,441,845 | |||||
87,899,895 | |||||||
U.S. Treasury Obligations – 20.6% | |||||||
U.S. Treasury Bonds: | |||||||
34,700,000 | 2.375%, 03/31/2016 @ | 33,198,149 | |||||
36,800,000 | 9.125%, 05/15/2018 @ | 51,658,000 | |||||
10,000,000 | 7.875%, 02/15/2021 @ | 13,440,620 | |||||
10,000,000 | 6.25%, 08/15/2023 @ | 11,943,750 | |||||
110,240,519 | |||||||
Total Long-Term | |||||||
Investments | |||||||
(Cost $510,645,866) | 511,635,023 | ||||||
SHORT-TERM INVESTMENTS – 3.7% | |||||||
Money Market Mutual Funds – 3.7% | |||||||
10,694,906 | Dreyfus Institutional | ||||||
Cash Advantage | |||||||
Fund, 0.13% « | 10,694,906 | ||||||
8,854,748 | Short-Term Investment | ||||||
Company Liquid Assets | |||||||
Portfolio – AIM Fund, | |||||||
0.18% « | 8,854,748 | ||||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $19,549,654) | 19,549,654 | ||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 37.4% | |||||||
Commercial Paper – 0.3% | |||||||
2,991,787 | Atlantic East Funding LLC, | ||||||
3.059%, 03/25/2010 † ** | 1,748,924 | ||||||
Total Commercial Paper | 1,748,924 | ||||||
Shares | |||||||
Investment Companies – 37.1% | |||||||
197,320,789 | Mount Vernon | ||||||
Securities Lending Trust | |||||||
Prime Portfolio, 0.20% « | 197,320,789 | ||||||
720,516 | Reserve Primary Fund † ** | 607,755 | |||||
Total Investment | |||||||
Companies | 197,928,544 |
The accompanying notes are an integral part of these financial statements.
Page 39
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2009 |
Shares | Value | ||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 37.4% (cont.) | |||||||
Total Investments | |||||||
Purchased With Cash | |||||||
Proceeds From | |||||||
Securities Lending | |||||||
(Cost $201,033,092) | $ | 199,677,468 | |||||
Total Investments | |||||||
(Cost $731,228,612) | |||||||
– 136.8% | 730,862,145 | ||||||
Assets Relating to Securities | |||||||
Lending (Note 6) – 0.2% | |||||||
Support | |||||||
Agreement ** ^ a | 1,189,830 | ||||||
Cash Contribution | |||||||
from Transfer | |||||||
Agent/Administrator € | 138,822 | ||||||
Total (Cost $0) | 1,328,652 | ||||||
Liabilities in Excess of | |||||||
Other Assets – (37.0%) | (197,732,949 | ) | |||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 534,457,848 |
* | Restricted Security Deemed Liquid | |
** | Illiquid | |
@ | This security or portion of this security is out on loan at December 31, 2009. | |
f | Foreign Security | |
^ | Non-Income Producing | |
§ | Security in Default | |
« | 7-Day Yield | |
† | Priced at fair value by the Valuation Committee as delegated by the Baird Funds’ Board of Directors. | |
a | The Fund’s transfer agent and administrator and securities lending agent entered into a support agreement with the Fund to cover potential losses realized by the Fund on its investment in Atlantic East Funding, LLC (up to a certain amount), which investment was made by the Fund’s securities lending agent. | |
€ | Pursuant to a loss reimbursement agreement, the Fund’s transfer agent and administrator made a cash contribution to the Fund to cover anticipated losses realized from the Fund’s ownership of shares of the Reserve Primary Fund, which investment was made by the Fund’s securities lending agent. |
The accompanying notes are an integral part of these financial statements.
Page 40
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2009 |
Summary of Fair Value Exposure at December 31, 2009
The Fund has adopted authoritative fair valuation accounting standards which establish a definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion on changes in valuation techniques and related inputs during the period. These inputs are summarized into three broad levels and described below:
Level 1 – | Quoted prices in active markets for identical securities. |
Level 2 – | Other significant observable inputs (including quoted prices for similar securities, quoted prices for identical securities in inactive markets, dealer indications, interest rates, yield curves, benchmark yields, issuer spreads, prepayment speeds, cash flows, credit risk, default rates, information about issuers, sectors and markets, inputs corroborated by observable market data, etc.) |
Level 3 – | Significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in pricing the security) |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2009:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 10,108,893 | $ | — | $ | 10,108,893 | ||||||||
Commercial Mortgage Backed Securities | — | 9,038,836 | — | 9,038,836 | ||||||||||||
Corporate Debt Securities | — | 230,300,073 | — | 230,300,073 | ||||||||||||
Residential Mortgage Backed Securities | — | 61,755,771 | — | 61,755,771 | ||||||||||||
Taxable Municipal Bonds | — | 2,291,036 | — | 2,291,036 | ||||||||||||
U.S. Government Agency Issues | — | 87,899,895 | — | 87,899,895 | ||||||||||||
U.S. Treasury Obligations | — | 110,240,519 | — | 110,240,519 | ||||||||||||
Total Fixed Income | — | 511,635,023 | — | 511,635,023 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 19,549,654 | — | — | 19,549,654 | ||||||||||||
Total Short-Term Investments | 19,549,654 | — | — | 19,549,654 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 1,748,924 | — | 1,748,924 | ||||||||||||
Money Market Mutual Funds | 197,320,789 | — | 607,755 | 197,928,544 | ||||||||||||
Total Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | 197,320,789 | 1,748,924 | 607,755 | 199,677,468 | ||||||||||||
Total Investments | $ | 216,870,443 | $ | 513,383,947 | $ | 607,755 | $ | 730,862,145 | ||||||||
Other Assets Relating to | ||||||||||||||||
Securities Lending Investments | 138,822 | 1,189,830 | — | 1,328,652 |
Page 41
Schedule of Investments December 31, 2009 |
Level 3 Reconciliation Disclosure
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
Description | Investments in Securities | |||
Balance as of December 31, 2008 | $ | 2,371,982 | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | — | |||
Change in unrealized appreciation (depreciation) | (112,761 | ) | ||
Net purchases (sales) | (1,542,765 | ) | ||
Transfers in and/or out of Level 3 * | (108,701 | ) | ||
Balance as of December 31, 2009 | $ | 607,755 |
* | The information used in the above reconciliation represents fiscal year to date activity for any investments identified as using Level 3 inputs at either the beginning or end of the current fiscal period. Transfers in or out of Level 3 represents either the beginning value (for transfers in) or ending value (for transfers out) of any security or instrument where a change in the pricing level occurred from the beginning to the end of the period. |
Page 42
The Baird Intermediate Municipal Bond Fund seeks current income that is substantially exempt from federal income tax. A secondary objective is to provide total return with relatively low volatility of principal. The Fund strives to achieve an annual rate of return, before Fund expenses, greater than the annual rate of the total return of the Barclays Capital 7-Year General Obligation Bond Index. The Barclays Capital 7-Year General Obligation Bond Index is an unmanaged, market value weighted index consisting of investment grade state and local general obligation bonds that have been issued as part of an offering of at least $50 million; have a minimum amount outstanding of at least $5 million; have been issued within the last five years; and have a maturity of six to eight years.
The Fund generated solid investment returns in 2009 though underperformed its benchmark index given its high quality bias. The Fund’s focus on high quality issues led to its relative underperformance for the year as lower quality issues significantly outperformed higher quality issues. The Fund had more than 70% of its investments in pre-refunded bonds that have U.S. Government securities held in escrow to fund the payment of interest and principal on the bonds.
We continue to emphasize high quality, intermediate holdings. The Fund was comprised of a broadly diversified portfolio of over 220 securities at year end.
We feel that the expectations of higher marginal income tax rates and increased Build America Bonds (BABs) issuance should provide a continuation of strong demand for tax-exempt municipals. However, we remain concerned that declining credit fundamentals in many municipalities could result in prevalent quality rating downgrades and selective price declines in the market. We believe the Fund is well-positioned with its focus on high quality holdings, especially its significant weighting in pre-refunded bonds that have U.S. Government credit quality and essentially no risk to quality rating downgrades.
Portfolio Characteristics
Quality Distribution* | Sector Weightings* |
![]() | ![]() |
Net Assets: | $729,976,806 | Annualized Expense Ratio: | ||||
SEC 30-Day Yield:** | Institutional Class: | 0.30 | % | |||
Institutional Class: | 1.87% | Investor Class: | 0.55 | %*** | ||
Investor Class: | 1.62% | Portfolio Turnover Rate: | 0.7 | % | ||
Average Effective Duration: | 4.87 years | Total Number of Holdings: | 228 | |||
Average Effective Maturity: | 5.42 years |
* | Percentages shown are based on the Fund’s total net assets. |
** | SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2009. |
*** | Includes 0.25% 12b-1 fee. |
Page 43
Baird Intermediate Municipal Bond Fund
Institutional Class |
Value of a $25,000 Investment |
![]() |
Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (3/30/01), assuming reinvestment of all distributions.
Investor Class |
Value of a $10,000 Investment |
![]() |
Growth of a hypothetical investment of $10,000 made on the Fund’s inception date (3/30/01), assuming reinvestment of all distributions.
Page 44
Baird Intermediate Municipal Bond Fund
Average Annual Total Returns
Since | |||
For the Periods Ended December 31, 2009 | One Year | Five Years | Inception(1) |
Institutional Class Shares | 6.22% | 4.49% | 5.21% |
Investor Class Shares | 5.95% | 4.23% | 4.94% |
Barclays Capital 7-Year General Obligation Bond Index(2) | 6.93% | 4.63% | 5.08% |
(1) | For the period from March 30, 2001 (commencement of operations) through December 31, 2009. |
(2) | The Barclays Capital 7-Year General Obligation Bond Index is an unmanaged, market value weighted index comprised of investment grade state and local general obligation bonds that have been issued as part of an offering of at least $50 million, have a minimum amount outstanding of at least $5 million, have been issued within the last five years and have a maturity of six to eight years. This index does not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. |
The returns shown in the table above and line graphs on the previous page reflect reinvestment of dividends and/or capital gains distributions in additional shares. The returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
For information about the performance of the Fund as of the most recent month-end, please call 1-866-44BAIRD or visit www.bairdfunds.com. Mutual fund performance changes over time and current performance may be lower or higher than that stated.
Page 45
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 92.0% | |||||||
Alabama – 2.6% | |||||||
$ | 1,000,000 | Alabama State Public | |||||
School & College | |||||||
Authority, 5.00%, | |||||||
05/01/2019 | $ | 1,109,960 | |||||
Montgomery Alabama | |||||||
Special Care | |||||||
Facility Revenue: | |||||||
11,385,000 | 5.00%, 11/15/2021 | ||||||
(Pre-refunded to | |||||||
11/15/2014) | 12,913,322 | ||||||
3,985,000 | 5.25%, 11/15/2029 | ||||||
(Pre-refunded to | |||||||
11/15/2014) | 4,565,774 | ||||||
18,589,056 | |||||||
Alaska – 0.1% | |||||||
1,000,000 | Alaska State Housing | ||||||
Finance Corporation, | |||||||
5.00%, 06/01/2017 | |||||||
(Callable 06/01/2015) | |||||||
(Insured by NPFGC) | 1,058,580 | ||||||
Arizona – 1.9% | |||||||
Arizona Health | |||||||
Facilities Authority | |||||||
Hospital Revenue: | |||||||
3,000,000 | 6.00%, 02/15/2032 | ||||||
(Pre-refunded to | |||||||
02/15/2012) | 3,338,820 | ||||||
1,415,000 | 6.375%, 12/01/2037 | ||||||
(Pre-refunded to | |||||||
12/01/2012) | 1,640,919 | ||||||
2,375,000 | Arizona School | ||||||
Facilities Board Revenue, | |||||||
5.75%, 07/01/2018 | |||||||
(Pre-refunded to | |||||||
07/01/2014) | 2,811,335 | ||||||
1,540,000 | Phoenix Arizona Civic | ||||||
Corporation of Wastewater | |||||||
Systems Revenue, | |||||||
5.00%, 07/01/2015 | |||||||
(Partially Pre-refunded, | |||||||
NPFGC Insured) | 1,731,130 | ||||||
Pima County Arizona | |||||||
Industrial Development | |||||||
Authority: | |||||||
1,000,000 | 7.125%, 07/01/2024 | ||||||
(Pre-refunded to | |||||||
07/01/2014) | 1,223,670 | ||||||
2,770,000 | 7.50%, 07/01/2034 | ||||||
(Pre-refunded to | |||||||
07/01/2014) | 3,290,178 | ||||||
14,036,052 | |||||||
Arkansas – 0.0% | |||||||
175,000 | Springdale Arkansas Sales | ||||||
& Use Tax Revenue, 4.00%, | |||||||
07/01/2016 (Callable | |||||||
07/01/2011) (Pre-refunded | |||||||
to various dates) | 176,313 | ||||||
California – 8.5% | |||||||
2,760,000 | Bakersfield California | ||||||
Certificates Participation, | |||||||
0.00%, 04/15/2021 | |||||||
(ETM) ^ | 1,746,528 | ||||||
2,510,000 | Coalinga California | ||||||
Regional Medical Center, | |||||||
5.125%, 03/01/2032 | |||||||
(Pre-refunded to | |||||||
03/01/2015) | 2,847,821 | ||||||
3,000,000 | Contra Costa County | ||||||
California Certificate | |||||||
Participation, 0.00%, | |||||||
11/01/2014 (ETM) ^ | 2,725,650 |
The accompanying notes are an integral part of these financial statements.
Page 46
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 92.0% (cont.) | |||||||
California – 8.5% (cont.) | |||||||
$ | 2,860,000 | Golden State Tobacco | |||||
Securitization Corporation | |||||||
Asset Backed Bonds, | |||||||
5.50%, 06/01/2043 | |||||||
(Pre-refunded to | |||||||
06/01/2013) | $ | 3,239,093 | |||||
Golden State Tobacco | |||||||
Securitization Corporation | |||||||
Revenue Bonds: | |||||||
4,200,000 | 6.25%, 06/01/2033 | ||||||
(Pre-refunded to | |||||||
various dates) | 4,697,028 | ||||||
550,000 | 5.00%, 06/01/2038 | ||||||
(Pre-refunded to | |||||||
06/01/2013) | 613,811 | ||||||
11,565,000 | 5.625%, 06/01/2038 | ||||||
(Pre-refunded to | |||||||
06/01/2013) | 13,145,820 | ||||||
3,810,000 | 6.75%, 06/01/2039 | ||||||
(Pre-refunded to | |||||||
06/01/2013) | 4,472,445 | ||||||
2,025,000 | 6.625%, 06/01/2040 | ||||||
(Pre-refunded to | |||||||
06/01/2013) | 2,368,723 | ||||||
1,570,000 | Mount Diablo California | ||||||
Hospital District Revenue, | |||||||
5.00%, 12/01/2013 (ETM) | 1,701,487 | ||||||
2,975,000 | Pittsburg California | ||||||
Redevelopment Agency | |||||||
Residential Mortgage | |||||||
Revenue, 9.60%, | |||||||
06/01/2016 (ETM) | 4,200,194 | ||||||
1,600,000 | Port Oakland California | ||||||
Revenue, 5.00%, | |||||||
11/01/2017 (Insured | |||||||
by NPFGC) | 1,715,328 | ||||||
14,000,000 | San Joaquin Hills California | ||||||
Transportation Corridor | |||||||
Agency Toll Road | |||||||
Revenue, 0.00%, | |||||||
01/01/2023 (ETM) ^ | 8,331,960 | ||||||
14,635,000 | San Marcos California | ||||||
Public Facilities Authority | |||||||
Revenue, 0.00%, | |||||||
09/01/2019 (ETM) ^ | 9,853,892 | ||||||
165,000 | Santa Rosa California | ||||||
Hospital Revenue, 10.30%, | |||||||
03/01/2011 (Callable | |||||||
03/18/2010) (ETM) | 175,293 | ||||||
61,835,073 | |||||||
Colorado – 8.9% | |||||||
2,000,000 | Adams County Colorado | ||||||
Single Family Mortgage | |||||||
Revenue, 8.875%, | |||||||
08/01/2012 (ETM) | 2,407,620 | ||||||
1,000,000 | Aspen Grove Colorado | ||||||
Business Improvement | |||||||
District, 7.625%, 12/01/2025 | |||||||
(Pre-refunded 12/01/2011) | 1,117,320 | ||||||
Colorado Springs Colorado | |||||||
Utilities Revenue Bonds: | |||||||
(ETM) | |||||||
30,000 | 5.80%, 11/15/2010 | 31,419 | |||||
9,830,000 | 5.875%, 11/15/2017 | 11,176,120 | |||||
1,000,000 | Conservatory Metropolitan | ||||||
District Colorado, 6.75%, | |||||||
12/01/2034 (Pre-refunded | |||||||
to 12/01/2013) | 1,209,860 | ||||||
12,745,000 | Dawson Ridge | ||||||
Metropolitan District | |||||||
No. 1 Colorado, 0.00%, | |||||||
10/01/2022 (ETM) ^ | 7,534,589 |
The accompanying notes are an integral part of these financial statements.
Page 47
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 92.0% (cont.) | |||||||
Colorado – 8.9% (cont.) | |||||||
Denver Colorado | |||||||
Convention Center | |||||||
& Hotel Authority | |||||||
Revenue Bonds: | |||||||
$ | 1,000,000 | 5.00%, 12/01/2021 | |||||
(Pre-refunded to | |||||||
12/01/2013) | $ | 1,133,810 | |||||
1,500,000 | 5.00%, 12/01/2023 | ||||||
(Pre-refunded to | |||||||
12/01/2013) | 1,700,715 | ||||||
5,065,000 | 5.00%, 12/01/2024 | ||||||
(Pre-refunded to | |||||||
12/01/2013) | 5,742,748 | ||||||
7,975,000 | Denver Colorado Health | ||||||
& Hospital Authority | |||||||
Healthcare Revenue, | |||||||
6.25%, 12/01/2033 | |||||||
(Pre-refunded to | |||||||
12/01/2014) | 9,641,376 | ||||||
5,460,000 | Pueblo County Colorado | ||||||
Certificate Participation, | |||||||
6.50%, 12/01/2024 | |||||||
(Pre-refunded to | |||||||
12/01/2010) | 5,753,147 | ||||||
Regional Transportation | |||||||
District Colorado | |||||||
Sales Tax Revenue: | |||||||
8,370,000 | 5.00%, 11/01/2023 | ||||||
(Pre-refunded | |||||||
11/01/2013) | 9,567,245 | ||||||
6,750,000 | 5.00%, 11/01/2036 | ||||||
(Pre-refunded | |||||||
11/01/2016) | 7,856,933 | ||||||
64,872,902 | |||||||
Delaware – 0.2% | |||||||
1,230,000 | Delaware State Economic | ||||||
Development Authority | |||||||
Revenue, 6.75%, | |||||||
01/01/2013 (ETM) | 1,318,622 | ||||||
Florida – 9.5% | |||||||
4,240,000 | Bartram Springs | ||||||
Community Development | |||||||
District Special Assessment, | |||||||
6.65%, 05/01/2034 | |||||||
(Pre-refunded to | |||||||
05/01/2013) | 4,836,271 | ||||||
1,925,000 | Brevard County Florida | ||||||
School Board, | |||||||
5.00%, 07/01/2020 | |||||||
(Callable 07/01/2017) | |||||||
(Insured by AMBAC) | 1,981,884 | ||||||
5,000,000 | Coral Gables Florida | ||||||
Health Facility Authority | |||||||
Hospital Revenue, 5.00%, | |||||||
08/15/2029 (Pre-refunded | |||||||
to 08/15/2014) | 5,776,350 | ||||||
2,260,000 | Dade County Florida | ||||||
Health Facility Authority | |||||||
Hospital Revenue, 5.75%, | |||||||
05/01/2021 (ETM) | 2,577,869 | ||||||
2,500,000 | Florida State Department | ||||||
of Management Services, | |||||||
5.00%, 08/01/2018 | 2,744,450 | ||||||
4,675,000 | Florida State Mid-Bay | ||||||
Bridge Authority Revenue, | |||||||
6.875%, 10/01/2022 | |||||||
(ETM) | 6,133,974 | ||||||
1,500,000 | Gulf Environmental | ||||||
Services Inc. Florida | |||||||
Revenue Bonds, 5.00%, | |||||||
10/01/2018 (ETM) | 1,658,265 |
The accompanying notes are an integral part of these financial statements.
Page 48
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 92.0% (cont.) | |||||||
Florida – 9.5% (cont.) | |||||||
Highlands County Florida | |||||||
Health Facilities Revenue: | |||||||
$ | 9,650,000 | 5.875%, 11/15/2029 | |||||
(Pre-refunded to | |||||||
11/15/2013) | $ | 11,124,713 | |||||
3,000,000 | 5.375%, 11/15/2035 | ||||||
(Pre-refunded to | |||||||
11/15/2013) | 3,402,750 | ||||||
2,000,000 | Hillsborough County | ||||||
Florida School Board | |||||||
Master Lease Program, | |||||||
5.50%, 07/01/2018 | |||||||
(Insured by NPFGC) | 2,252,380 | ||||||
2,100,000 | Islands At Doral (SW) | ||||||
Community Development | |||||||
District, 6.375%, | |||||||
05/01/2035 (Pre-refunded | |||||||
to 05/01/2013) | 2,372,727 | ||||||
300,000 | Jacksonville Florida Health | ||||||
Facility Authority Hospital | |||||||
Revenue, 11.50%, | |||||||
10/01/2012 (Callable | |||||||
03/18/2010) (ETM) | 385,179 | ||||||
1,470,000 | Miami Beach Florida Resort | ||||||
Tax Revenue, 6.25%, | |||||||
10/01/2022 (ETM) | 1,820,668 | ||||||
3,000,000 | Miami Dade County | ||||||
Florida Entitlement | |||||||
Revenue Bonds, | |||||||
5.00%, 08/01/2015 | |||||||
(Insured by NPFGC) | 3,238,440 | ||||||
2,020,000 | Miami-Dade County | ||||||
Florida Water & Sewer | |||||||
Revenue, 5.00%, | |||||||
10/01/2013 (Insured | |||||||
by NPFGC) | 2,198,225 | ||||||
3,885,000 | Oakstead Florida Community | ||||||
Development District | |||||||
Capital Improvement | |||||||
Revenue Bonds, 6.875%, | |||||||
05/01/2033 (Pre-refunded | |||||||
to 05/01/2012) | 4,362,350 | ||||||
1,060,000 | Orange County Florida | ||||||
Health Facilities Authority | |||||||
Revenue Bond, 6.25%, | |||||||
10/01/2013 (ETM) | 1,231,328 | ||||||
1,000,000 | Orlando Florida Utilities | ||||||
Commission Water & | |||||||
Electric Revenue, 6.75%, | |||||||
10/01/2017 (ETM) | 1,185,100 | ||||||
1,000,000 | Palm Beach County | ||||||
Florida Revenue, | |||||||
5.00%, 11/01/2018 | |||||||
(Callable 11/01/2017) | 1,078,360 | ||||||
1,000,000 | Sarasota County Florida | ||||||
School Board, 5.00%, | |||||||
07/01/2015 (Insured | |||||||
by NPFGC) | 1,093,590 | ||||||
4,000,000 | Seminole County Florida | ||||||
Water & Sewage Revenue, | |||||||
6.00%, 10/01/2019 (ETM) | 4,701,840 | ||||||
3,185,000 | Tallahassee Florida Student | ||||||
Housing Revenue, 6.625%, | |||||||
07/01/2022 (Pre-refunded | |||||||
to 07/01/2011) | 3,438,303 | ||||||
69,595,016 | |||||||
Georgia – 0.1% | |||||||
845,000 | Fulton County Georgia | ||||||
Hospital Authority | |||||||
Revenue, 7.875%, | |||||||
10/01/2013 (Callable | |||||||
03/18/2010) (ETM) | 958,982 |
The accompanying notes are an integral part of these financial statements.
Page 49
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 92.0% (cont.) | |||||||
Illinois – 9.6% | |||||||
Chicago Illinois Board | |||||||
of Education: | |||||||
$ | 1,000,000 | 5.00%, 12/01/2017 | |||||
(Insured by AMBAC) | $ | 1,089,770 | |||||
1,000,000 | 6.00%, 01/01/2020 | ||||||
(Insured by NPFGC) | 1,126,130 | ||||||
1,000,000 | Chicago Illinois General | ||||||
Obligation Project and | |||||||
Refunding, 5.00%, | |||||||
01/01/2017 (Callable | |||||||
01/01/2016) (FSA Insured) | 1,100,780 | ||||||
1,440,000 | Chicago Illinois | ||||||
Metropolitan Water | |||||||
Reclamation District | |||||||
General Obligation, 7.00%, | |||||||
12/01/2010 (ETM) | 1,527,178 | ||||||
1,000,000 | Chicago Illinois Public | ||||||
Building Community | |||||||
Building Revenue, 7.00%, | |||||||
01/01/2020 (ETM) | 1,281,310 | ||||||
2,305,000 | Cook County Illinois | ||||||
School District No. 097, | |||||||
9.00%, 12/01/2015 | |||||||
(Insured by NPFGC) | 3,034,786 | ||||||
1,430,000 | Cook County Illinois | ||||||
School District No. 100, | |||||||
8.10%, 12/01/2016 (ETM) | 1,942,355 | ||||||
2,000,000 | Cook County Illinois School | ||||||
District No. 159, 0.00%, | |||||||
12/01/2022 (ETM) ^ | 1,181,700 | ||||||
1,000,000 | Dupage County Illinois | ||||||
Stormwater Project, | |||||||
5.60%, 01/01/2021 | 1,139,300 | ||||||
10,000,000 | Illinois Development | ||||||
Financial Authority, 0.00%, | |||||||
07/15/2023 (ETM) ^ | 5,634,600 | ||||||
2,330,000 | Illinois Finance Authority | ||||||
Revenue, 5.50%, | |||||||
08/15/2043 (Pre-refunded | |||||||
to 08/15/2014) | 2,726,450 | ||||||
1,000,000 | Illinois Municipal Electric | ||||||
Agency Power Supply | |||||||
Revenue Bonds, | |||||||
5.25%, 02/01/2016 | 1,096,070 | ||||||
Illinois State: | |||||||
5,000,000 | 4.00%, 09/01/2019 | ||||||
(Callable 09/01/2018) | 5,036,200 | ||||||
3,000,000 | 6.00%, 11/01/2026 | ||||||
(Insured by NPFGC) | 3,515,280 | ||||||
2,000,000 | Illinois State Toll Highway | ||||||
Authority Priority Revenue | |||||||
Bonds, 5.50%, | |||||||
01/01/2016 (Insured | |||||||
by FSA) | 2,307,620 | ||||||
Illinois State Toll Highway | |||||||
Authority Revenue Bonds: | |||||||
1,020,000 | 5.00%, 01/01/2026 | ||||||
(Pre-refunded to | |||||||
07/01/2016) | 1,187,729 | ||||||
1,905,000 | 5.00%, 01/01/2031 | ||||||
(Pre-refunded to | |||||||
07/01/2016) | 2,218,258 | ||||||
6,750,000 | Kane Cook & Dupage | ||||||
Counties Illinois | |||||||
Community United | |||||||
School District No. 303, | |||||||
5.00%, 01/01/2014 | |||||||
(Insured by FSA) | 7,593,885 | ||||||
2,130,000 | Kane Cook & Dupage | ||||||
Counties Illinois School | |||||||
District No. 46 Elgin, | |||||||
0.00%, 01/01/2013 ^ | 2,016,045 |
The accompanying notes are an integral part of these financial statements.
Page 50
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 92.0% (cont.) | |||||||
Illinois – 9.6% (cont.) | |||||||
Lake County Illinois | |||||||
Community Consolidated | |||||||
School District: | |||||||
$ | 1,755,000 | 0.00%, 12/01/2012 ^ | |||||
(Insured by NPFGC) | $ | 1,624,024 | |||||
1,920,000 | 0.00%, 12/01/2013 ^ | ||||||
(Insured by NPFGC) | 1,711,315 | ||||||
1,875,000 | 0.00%, 12/01/2014 ^ | ||||||
(Insured by NPFGC) | 1,588,575 | ||||||
1,025,000 | Lake County Illinois | ||||||
Community High School | |||||||
District No. 124 Grant, | |||||||
5.00%, 12/01/2017 | 1,177,581 | ||||||
1,000,000 | Lake County Illinois | ||||||
Community High School | |||||||
District No. 128, | |||||||
5.00%, 01/01/2013 | 1,112,690 | ||||||
McHenry & Kane Counties | |||||||
Illinois Community School | |||||||
District No. 158: | |||||||
1,870,000 | 0.00%, 01/01/2013 ^ | ||||||
(Insured by NPFGC) | 1,648,349 | ||||||
1,970,000 | 0.00%, 01/01/2016 ^ | ||||||
(Insured by NPFGC) | 1,438,750 | ||||||
Metropolitan Pier & | |||||||
Exposition Authority Illinois: | |||||||
1,805,000 | 5.50%, 06/15/2016 (ETM) | 2,124,124 | |||||
1,895,000 | 5.50%, 12/15/2023 (ETM) | 2,223,801 | |||||
2,000,000 | Northwest Suburban | ||||||
Illinois Municipal Joint | |||||||
Action Revenue, 5.00%, | |||||||
05/01/2014 (ETM) | 2,300,720 | ||||||
2,745,000 | Round Lake Illinois, | ||||||
6.70%, 03/01/2033 | |||||||
(Pre-refunded to | |||||||
03/01/2013) | 3,163,997 | ||||||
1,390,000 | Southern Illinois | ||||||
University Revenue, | |||||||
5.25%, 04/01/2019 | |||||||
(Insured by NPFGC) | 1,546,820 | ||||||
950,000 | Winnebago & Boone | ||||||
Counties Illinois School | |||||||
District No. 205, | |||||||
5.00%, 02/01/2013 | |||||||
(Insured by AMBAC) | 1,031,463 | ||||||
1,360,000 | Winnebago County Illinois | ||||||
School District No. 122, | |||||||
0.00%, 01/01/2018 ^ | |||||||
(Insured by FSA) | 945,812 | ||||||
70,393,467 | |||||||
Indiana – 1.4% | |||||||
Hammond Indiana | |||||||
Multi-School Building | |||||||
Corporation Revenue Bonds: | |||||||
1,000,000 | 6.00%, 01/15/2018 (ETM) | 1,155,270 | |||||
1,330,000 | 5.00%, 07/15/2018 | ||||||
(Insured by NPFGC) | 1,505,254 | ||||||
655,000 | Indiana Toll Road | ||||||
Commission, 9.00%, | |||||||
01/01/2015 (ETM) | 802,139 | ||||||
3,460,000 | Indianapolis Local Public | ||||||
Improvement Bond | |||||||
Waterworks Project, | |||||||
5.50%, 07/01/2018 | |||||||
(Insured by NPFGC) | 3,819,875 | ||||||
1,650,000 | Purdue University | ||||||
Indiana Revenue, | |||||||
5.00%, 07/01/2015 | 1,863,856 |
The accompanying notes are an integral part of these financial statements.
Page 51
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 92.0% (cont.) | |||||||
Indiana – 1.4% (cont.) | |||||||
$ | 1,000,000 | South Bend Indiana | |||||
Community School | |||||||
Building Corporation, | |||||||
5.00%, 07/15/2017 | |||||||
(Insured by NPFGC) | $ | 1,117,400 | |||||
10,263,794 | |||||||
Iowa – 1.5% | |||||||
1,010,000 | Des Moines Iowa | ||||||
Metropolitan Wastewater | |||||||
Reclamation Authority, | |||||||
5.00%, 06/01/2015 | |||||||
(Callable 06/01/2014) | |||||||
(Insured by NPFGC) | 1,121,302 | ||||||
3,465,000 | Iowa Financial Authority | ||||||
Health Care Facility | |||||||
Revenue Bonds, | |||||||
9.25%, 07/01/2025 | |||||||
(Pre-refunded to | |||||||
07/01/2011) | 3,948,298 | ||||||
335,000 | Muscatine Iowa Electric | ||||||
Revenue, 6.70%, | |||||||
01/01/2013 (Callable | |||||||
07/01/2010) (ETM) | 363,941 | ||||||
5,275,000 | Tobacco Settlement | ||||||
Authority Iowa Revenue | |||||||
Bonds, 5.30%, 06/01/2025 | |||||||
(Pre-refunded to | |||||||
06/01/2011) | 5,570,294 | ||||||
11,003,835 | |||||||
Kansas – 0.3% | |||||||
1,865,000 | Wyandotte County | ||||||
Kansas Revenue, | |||||||
5.00%, 03/01/2019 | |||||||
(Callable 06/01/2014) | |||||||
(Insured by BHAC) | 2,134,231 | ||||||
Louisiana – 1.7% | |||||||
400,000 | Houma-Terrebonne | ||||||
Public Trust Financing | |||||||
Authority, 7.30%, | |||||||
04/01/2010 (ETM) | 406,492 | ||||||
1,000,000 | Houma-Terrebonne Public | ||||||
Trust Financing Authority | |||||||
Single Family Mortgage | |||||||
Revenue, 7.30%, | |||||||
04/01/2011 (ETM) | 1,083,420 | ||||||
1,450,000 | Jefferson Parish Louisiana | ||||||
Home Mortgage | |||||||
Authority, 7.10%, | |||||||
08/01/2010 (ETM) | 1,505,535 | ||||||
Louisiana Public Facilities | |||||||
Authority Revenue: | |||||||
280,000 | 5.50%, 05/15/2027 | ||||||
(Pre-refunded to | |||||||
05/15/2026) | 322,865 | ||||||
7,730,000 | 5.50%, 05/15/2032 | ||||||
(Pre-refunded to | |||||||
05/15/2026) | 9,091,408 | ||||||
12,409,720 | |||||||
Maine – 0.7% | |||||||
4,340,000 | Maine Health & Higher | ||||||
Education Facilities | |||||||
Authority, 5.00%, | |||||||
07/01/2035 (Pre-refunded | |||||||
to 07/01/2015) | 5,035,311 | ||||||
Massachusetts – 2.8% | |||||||
5,745,000 | Massachusetts State, | ||||||
5.00%, 08/01/2020 | |||||||
(Pre-refunded to | |||||||
08/01/2016) | 6,681,837 |
The accompanying notes are an integral part of these financial statements.
Page 52
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 92.0% (cont.) | |||||||
Massachusetts – 2.8% (cont.) | |||||||
$ | 3,000,000 | Massachusetts State Health | |||||
& Educational Facilities | |||||||
Authority Revenue, 6.35%, | |||||||
07/15/2032 (Pre-refunded | |||||||
to 07/15/2012) | $ | 3,413,040 | |||||
Massachusetts State | |||||||
Obligations Tax Revenue: | |||||||
1,000,000 | 5.25%, 01/01/2026 | ||||||
(Pre-refunded to | |||||||
01/01/2014) | 1,140,820 | ||||||
1,835,000 | 5.75%, 01/01/2032 | ||||||
(Pre-refunded to | |||||||
01/01/2014) | 2,128,710 | ||||||
Massachusetts State | |||||||
Water Resources | |||||||
Authority: (ETM) | |||||||
4,105,000 | 5.25%, 12/01/2015 | 4,648,420 | |||||
2,200,000 | 6.50%, 07/15/2019 | 2,681,536 | |||||
20,694,363 | |||||||
Michigan – 2.3% | |||||||
1,550,000 | Clarkston Michigan | ||||||
Community Schools, | |||||||
5.00%, 05/01/2013 | |||||||
(Insured by FSA) | 1,703,295 | ||||||
1,000,000 | Cornell Twp Michigan | ||||||
Economic Development | |||||||
Revenue, 5.875%, | |||||||
05/01/2018 (Pre-refunded | |||||||
to 05/01/2012) | 1,108,060 | ||||||
1,000,000 | Detroit Michigan City | ||||||
School District, | |||||||
5.00%, 05/01/2016 | |||||||
(Callable 05/01/2015) | |||||||
(Insured by FSA) | 1,043,050 | ||||||
2,185,000 | Detroit Michigan Sewer | ||||||
Disposal Revenue, 5.00%, | |||||||
07/01/2030 (Pre-refunded | |||||||
to 07/01/2015) | 2,516,617 | ||||||
1,550,000 | Harper Creek Michigan | ||||||
Community School District, | |||||||
5.00%, 05/01/2016 | |||||||
(Callable 05/01/2015) | |||||||
(Insured by FSA) | 1,664,995 | ||||||
1,390,000 | Jenison Michigan | ||||||
Public Schools, | |||||||
5.25%, 05/01/2015 | |||||||
(Insured by NPFGC) | 1,544,818 | ||||||
3,000,000 | Livonia Michigan Public | ||||||
Schools School District, | |||||||
5.00%, 05/01/2022 | |||||||
(Callable 05/01/2014) | |||||||
(Insured by NPFGC) | 3,080,610 | ||||||
4,000,000 | Michigan State Housing | ||||||
Development Authority, | |||||||
4.75%, 06/01/2016 | 4,046,040 | ||||||
16,707,485 | |||||||
Minnesota – 0.7% | |||||||
1,040,000 | Centennial Independent | ||||||
School District No. 12 | |||||||
Minnesota, 5.00%, | |||||||
02/01/2014 (Pre-refunded | |||||||
to 02/01/2012, | |||||||
FSA Insured) | 1,114,994 | ||||||
1,215,000 | Robbinsdale Independent | ||||||
School District No. 281, | |||||||
5.00%, 07/01/2020 | |||||||
(Pre-refunded to | |||||||
02/01/2012, FSA Insured) | 1,302,614 |
The accompanying notes are an integral part of these financial statements.
Page 53
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 92.0% (cont.) | |||||||
Minnesota – 0.7% (cont.) | |||||||
$ | 2,225,000 | Western Minnesota | |||||
Municipal Power Agency, | |||||||
6.375%, 01/01/2016 | |||||||
(ETM) | $ | 2,555,591 | |||||
4,973,199 | |||||||
Mississippi – 0.4% | |||||||
1,110,000 | Mississippi Development | ||||||
Bank Special Obligations, | |||||||
5.25%, 10/01/2030 | |||||||
(Pre-refunded to | |||||||
10/01/2015) | 1,286,923 | ||||||
850,000 | Mississippi Housing | ||||||
Financial Corporation, | |||||||
0.00%, 06/01/2015 | |||||||
(ETM) ^ | 738,879 | ||||||
1,000,000 | Mississippi State, | ||||||
5.00%, 11/01/2021 | |||||||
(Pre-refunded to | |||||||
11/01/2012) | 1,103,260 | ||||||
3,129,062 | |||||||
Missouri – 0.3% | |||||||
2,000,000 | St. Louis County Industrial | ||||||
Development Authority, | |||||||
6.625%, 11/15/2035 | |||||||
(Pre-refunded to | |||||||
11/15/2013) | 2,398,640 | ||||||
Nebraska – 1.7% | |||||||
1,640,000 | Nebraska Public Power | ||||||
District Revenue, | |||||||
5.00%, 01/01/2015 | |||||||
(Insured by NPFGC) | 1,827,009 | ||||||
9,150,000 | Omaha Nebraska Public | ||||||
Electric Power District | |||||||
Revenue, 6.20%, | |||||||
02/01/2017 (ETM) | 10,831,496 | ||||||
12,658,505 | |||||||
Nevada – 0.6% | |||||||
2,080,000 | Las Vegas Clark County | ||||||
Nevada Library District, | |||||||
5.00%, 01/01/2017 | 2,192,715 | ||||||
1,965,000 | Reno Nevada Capital | ||||||
Improvement Revenue, | |||||||
5.50%, 06/01/2019 | |||||||
(Pre-refunded to | |||||||
06/01/2012) | 2,177,377 | ||||||
4,370,092 | |||||||
New Jersey – 1.7% | |||||||
New Jersey Economic | |||||||
Development Authority | |||||||
Revenue Bonds: | |||||||
2,250,000 | 6.375%, 04/01/2018 | ||||||
(Pre-refunded to | |||||||
05/15/2014) | 2,690,010 | ||||||
3,000,000 | 6.375%, 04/01/2031 | ||||||
(Pre-refunded to | |||||||
05/15/2014) | 3,586,680 | ||||||
1,000,000 | New Jersey State | ||||||
Transportation Trust Fund | |||||||
Authority, 6.00%, | |||||||
12/15/2017 (Pre-refunded | |||||||
to 12/15/2011) | 1,102,230 | ||||||
1,630,000 | New Jersey State Turnpike | ||||||
Authority, 6.50%, | |||||||
01/01/2016 (ETM) | 1,925,698 |
The accompanying notes are an integral part of these financial statements.
Page 54
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 92.0% (cont.) | |||||||
New Jersey – 1.7% (cont.) | |||||||
$ | 2,500,000 | Tobacco Settlement | |||||
Financing Corporation, | |||||||
6.25%, 06/01/2043 | |||||||
(Pre-refunded to | |||||||
06/01/2013) | $ | 2,918,775 | |||||
12,223,393 | |||||||
New Mexico – 0.2% | |||||||
1,000,000 | New Mexico State | ||||||
Hospital Equipment Loan | |||||||
Council Hospital Revenue, | |||||||
5.25%, 07/01/2025 | |||||||
(Pre-refunded to | |||||||
07/01/2015) | 1,161,860 | ||||||
New York – 5.3% | |||||||
13,230,000 | Metropolitan Transit | ||||||
Authority New York, | |||||||
6.00%, 04/01/2020 | |||||||
(ETM) | 16,363,261 | ||||||
4,730,000 | New York City, New York | ||||||
Transitional Financial | |||||||
Authority Building Aid | |||||||
Revenue Bonds, | |||||||
5.00%, 01/15/2015 | |||||||
(Insured by FSA) | 5,221,589 | ||||||
2,000,000 | New York State Dormitory | ||||||
Authority and Personal | |||||||
Income Tax Revenue, | |||||||
5.00%, 12/15/2017 | 2,299,040 | ||||||
1,800,000 | New York State | ||||||
University Dormitory | |||||||
Authority Revenue, | |||||||
5.50%, 05/15/2013 | |||||||
(Insured by NPFGC) | 1,984,914 | ||||||
New York, New York: | |||||||
1,000,000 | 5.00%, 03/01/2016 | ||||||
(Callable 03/01/2015) | |||||||
(FGIC Insured) | 1,101,820 | ||||||
1,125,000 | 5.25%, 08/15/2021 | 1,235,970 | |||||
(Callable 08/15/2018) | |||||||
190,000 | TSASC Inc. New York, | ||||||
4.75%, 06/01/2022 | |||||||
(Callable 06/01/2016) | 184,393 | ||||||
7,775,000 | Westchester Tobacco Asset | ||||||
Securitization Corp. | |||||||
New York, 6.95%, | |||||||
07/15/2039 (Pre-refunded | |||||||
to 07/15/2017) | 10,059,217 | ||||||
38,450,204 | |||||||
North Carolina – 2.2% | |||||||
North Carolina | |||||||
Eastern Municipal | |||||||
Power Agency Power | |||||||
Systems Revenue: (ETM) | |||||||
2,370,000 | 5.00%, 01/01/2017 | 2,664,496 | |||||
245,000 | 6.40%, 01/01/2021 | 299,229 | |||||
4,900,000 | 4.50%, 01/01/2024 | ||||||
(Pre-refunded to | |||||||
01/01/2022) | 5,437,285 | ||||||
6,495,000 | North Carolina Medical | ||||||
Care Community Hospital | |||||||
Revenue, 5.25%, | |||||||
11/01/2029 (Pre-refunded | |||||||
to 11/01/2014) | 7,354,613 | ||||||
15,755,623 |
The accompanying notes are an integral part of these financial statements.
Page 55
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 92.0% (cont.) | |||||||
Ohio – 0.5% | |||||||
$ | 1,000,000 | Akron Ohio Community | |||||
Learning Center Income | |||||||
Tax Revenue, | |||||||
5.25%, 12/01/2016 | |||||||
(Callable 12/01/2013) | |||||||
(Insured by NPFGC) | $ | 1,071,960 | |||||
2,000,000 | Cincinnati Ohio City | ||||||
School District, | |||||||
5.00%, 12/01/2016 | |||||||
(Insured by FSA) | 2,259,640 | ||||||
105,000 | Miamisburg Ohio Water | ||||||
Revenue, 7.00%, | |||||||
11/15/2016 (Callable | |||||||
03/18/2010) (ETM) | 122,102 | ||||||
3,453,702 | |||||||
Oklahoma – 0.5% | |||||||
1,000,000 | Cherokee County | ||||||
Oklahoma Economic | |||||||
Development Authority, | |||||||
0.00%, 11/01/2011 | |||||||
(ETM) ^ | 978,640 | ||||||
2,360,000 | Tulsa County Oklahoma | ||||||
Home Financing Authority | |||||||
Single Family Mortgage | |||||||
Revenue, 6.90%, | |||||||
08/01/2011 (Callable | |||||||
08/01/2010) (ETM) | 2,590,714 | ||||||
3,569,354 | |||||||
Pennsylvania – 5.3% | |||||||
1,275,000 | Central Dauphin | ||||||
Pennsylvania School | |||||||
District, 6.75%, | |||||||
02/01/2024 (Pre-refunded | |||||||
to 02/01/2016) | 1,605,378 | ||||||
1,250,000 | Erie Pennsylvania Sewer | ||||||
Authority Revenue, | |||||||
5.125%, 06/01/2020 | |||||||
(ETM) | 1,426,362 | ||||||
6,720,000 | Pennsylvania Convention | ||||||
Center Authority Revenue | |||||||
Bonds, 6.00%, | |||||||
09/01/2019 (ETM) | 8,044,445 | ||||||
Pennsylvania Housing | |||||||
Finance Agency: | |||||||
2,130,000 | 3.70%, 04/01/2018 | 2,111,980 | |||||
1,760,000 | 3.75%, 10/01/2018 | 1,744,389 | |||||
1,025,000 | 3.90%, 04/01/2019 | 1,016,318 | |||||
1,675,000 | 3.90%, 10/01/2019 | ||||||
(Callable 04/01/2019) | 1,660,193 | ||||||
3,390,000 | Pennsylvania State Higher | ||||||
Education Facilities | |||||||
Authority Revenue, 5.00%, | |||||||
01/01/2029 (Pre-refunded | |||||||
to 01/01/2013) | 3,790,088 | ||||||
3,000,000 | Pennsylvania State Public | ||||||
School Building Authority | |||||||
Lease Revenue, 5.00%, | |||||||
11/15/2034 (Pre-refunded | |||||||
to 11/15/2014) | 3,440,100 | ||||||
1,790,000 | Philadelphia Pennsylvania | ||||||
Authority For Industrial | |||||||
Development Revenue, | |||||||
5.25%, 01/01/2027 | |||||||
(Pre-refunded to | |||||||
01/01/2017) | 2,098,721 | ||||||
3,350,000 | Philadelphia Pennsylvania | ||||||
Gas Works, 7.00%, | |||||||
05/15/2020 (ETM) | 4,032,194 |
The accompanying notes are an integral part of these financial statements.
Page 56
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 92.0% (cont.) | |||||||
Pennsylvania – 5.3% (cont.) | |||||||
Pittsburgh Pennsylvania | |||||||
Water & Sewer Authority | |||||||
Revenue Bonds: | |||||||
$ | 885,000 | 7.25%, | |||||
09/01/2014 (ETM) | $ | 1,017,706 | |||||
4,500,000 | 5.00%, 09/01/2029 | ||||||
(Pre-refunded to | |||||||
09/01/2015) | 5,176,485 | ||||||
1,500,000 | St. Mary Hospital | ||||||
Authority Pennsylvania | |||||||
Health Revenue, 5.375%, | |||||||
11/15/2034 (Pre-refunded | |||||||
to 11/15/2014) | 1,746,075 | ||||||
38,910,434 | |||||||
Puerto Rico – 0.4% | |||||||
1,625,000 | Puerto Rico Public | ||||||
Building Authority, 5.50%, | |||||||
07/01/2022 (Pre-refunded | |||||||
to 07/01/2014) | 1,886,820 | ||||||
1,080,000 | Puerto Rico Public Finance | ||||||
Corporation, 6.00%, | |||||||
08/01/2026 (ETM) | 1,344,298 | ||||||
3,231,118 | |||||||
South Carolina – 1.3% | |||||||
285,000 | Greenville South Carolina | ||||||
Waterworks Revenue, | |||||||
7.00%, 02/01/2010 (ETM) | 286,342 | ||||||
4,500,000 | Lexington County South | ||||||
Carolina Health Services | |||||||
District Hospital Revenue, | |||||||
5.50%, 11/01/2032 | |||||||
(Pre-refunded to | |||||||
11/01/2013) | 5,218,380 | ||||||
3,800,000 | South Carolina Jobs | ||||||
Economic Development | |||||||
Authority Hospital Facilities | |||||||
Revenue, 7.375%, | |||||||
12/15/2021 (Pre-refunded | |||||||
to 12/15/2010) | 4,119,618 | ||||||
9,624,340 | |||||||
South Dakota – 0.2% | |||||||
1,330,000 | Heartland Consumers | ||||||
Power District, 7.00%, | |||||||
01/01/2016 (ETM) | 1,554,398 | ||||||
Tennessee – 1.1% | |||||||
Metropolitan Government | |||||||
Nashville & Davidson County | |||||||
Tennessee H&E: (ETM) | |||||||
120,000 | 6.10%, 07/01/2010 | ||||||
(Callable 03/18/2010) | 123,432 | ||||||
1,000,000 | 0.00%, 06/01/2021 ^ | 641,600 | |||||
1,545,000 | Metropolitan Government | ||||||
Nashville & Davidson | |||||||
County Tennessee Water | |||||||
& Sewer Revenue, 6.50%, | |||||||
12/01/2014 (ETM) | 1,902,219 | ||||||
5,000,000 | Shelby County Tennessee | ||||||
Health Educational & | |||||||
Housing Facilities | |||||||
Revenue, 5.50%, | |||||||
08/15/2019 (ETM) | 5,687,500 | ||||||
8,354,751 | |||||||
Texas – 12.3% | |||||||
1,125,000 | Barbers Hill Texas | ||||||
Independent School | |||||||
District General Obligation, | |||||||
5.00%, 02/15/2017 | |||||||
(Callable 02/15/2015) | |||||||
(PSF Guaranteed) | 1,252,215 |
The accompanying notes are an integral part of these financial statements.
Page 57
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 92.0% (cont.) | |||||||
Texas – 12.3% (cont.) | |||||||
$ | 6,060,000 | Capital Area Housing | |||||
Finance Corporation | |||||||
Texas, 0.00%, | |||||||
01/01/2016 (ETM) ^ | $ | 5,139,910 | |||||
1,500,000 | Central Texas Housing | ||||||
Finance Corporation, | |||||||
0.00%, 09/01/2016 | |||||||
(ETM) ^ | 1,221,600 | ||||||
1,000,000 | Copperas Cove Texas | ||||||
Independent School | |||||||
District, 5.00%, | |||||||
08/15/2016 | |||||||
(Callable 08/15/2015) | |||||||
(PSF Guaranteed) | 1,133,960 | ||||||
1,500,000 | Cypress-Fairbanks Texas | ||||||
Independent School | |||||||
District, 5.00%, | |||||||
02/15/2017 | |||||||
(Callable 02/15/2016) | |||||||
(PSF Guaranteed) | 1,690,335 | ||||||
1,355,000 | El Paso Texas Waterworks | ||||||
& Sewer Revenue, | |||||||
5.00%, 08/15/2018 | 1,525,269 | ||||||
1,625,000 | Frisco Texas Independent | ||||||
School District, | |||||||
6.00%, 08/15/2018 | |||||||
(Callable 08/15/2016) | |||||||
(PSF Guaranteed) | 1,917,337 | ||||||
1,000,000 | Georgetown Texas | ||||||
Independent School | |||||||
District, 5.00%, | |||||||
02/15/2016 | |||||||
(Callable 02/15/2015) | |||||||
(PSF Guaranteed) | 1,124,780 | ||||||
2,000,000 | Harris County Texas, | ||||||
5.25%, 10/01/2017 | |||||||
(Pre-refunded to | |||||||
10/01/2013) | 2,294,240 | ||||||
Harris County Texas | |||||||
Health Facilities | |||||||
Development Corporation | |||||||
Hospital Revenue: (ETM) | |||||||
8,000,000 | 5.50%, 10/01/2013 | 8,800,960 | |||||
1,720,000 | 5.50%, 10/01/2019 | 2,022,118 | |||||
10,710,000 | Houston Texas Health | ||||||
Facilities Corporate | |||||||
Facilities Revenue, 7.125%, | |||||||
02/15/2034 (Pre-refunded | |||||||
to 02/15/2014) | 13,134,637 | ||||||
1,595,000 | Houston Texas Sewer | ||||||
System Revenue, 9.375%, | |||||||
10/01/2013 (Callable | |||||||
04/01/2010) (ETM) | 1,882,068 | ||||||
1,315,000 | La Porte Texas Independent | ||||||
School District, | |||||||
5.00%, 02/15/2018 | |||||||
(Callable 02/15/2015) | |||||||
(Insured by NPFGC) | 1,443,896 | ||||||
1,735,000 | Lufkin Texas Independent | ||||||
School District, | |||||||
5.00%, 08/15/2015 | |||||||
(Callable 08/15/2014) | |||||||
(PSF Guaranteed) | 1,954,061 | ||||||
1,050,000 | Magnolia Texas | ||||||
Independent School District, | |||||||
5.00%, 08/15/2016 | |||||||
(PSF Guaranteed) | 1,207,573 |
The accompanying notes are an integral part of these financial statements.
Page 58
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 92.0% (cont.) | |||||||
Texas – 12.3% (cont.) | |||||||
$ | 1,265,000 | Mission Consolidation | |||||
Independent School District, | |||||||
5.00%, 02/15/2019 | |||||||
(Callable 02/15/2015) | |||||||
(PSF Guaranteed) | $ | 1,370,868 | |||||
1,125,000 | North Central Texas | ||||||
Health Facilities | |||||||
Revenue, 5.75%, | |||||||
02/15/2015 (ETM) | 1,308,668 | ||||||
1,210,000 | Pearland Texas Waterworks | ||||||
& Sewage, 5.25%, | |||||||
03/01/2023 (Pre-refunded | |||||||
to 03/01/2014) | 1,403,116 | ||||||
2,035,000 | Retama Texas | ||||||
Development Corporation | |||||||
Special Facilities | |||||||
Revenue, 8.750%, | |||||||
12/15/2018 (ETM) | 2,742,061 | ||||||
1,295,000 | Rockwall Texas Independent | ||||||
School District, | |||||||
5.00%, 02/15/2015 | |||||||
(PSF Guaranteed) | 1,489,535 | ||||||
400,000 | Sam Rayburn Texas | ||||||
Municipal Power Agency, | |||||||
6.00%, 09/01/2010 | |||||||
(Callable 03/18/2010) | |||||||
(ETM) | 414,964 | ||||||
11,565,000 | San Antonio Texas Electric | ||||||
& Gas Revenue, 5.65%, | |||||||
02/01/2019 (ETM) | 13,647,394 | ||||||
2,100,000 | San Antonio Texas Hotel | ||||||
Occupancy Tax Revenue | |||||||
Bonds, 0.00%, | |||||||
08/15/2015 (ETM) ^ | 1,830,906 | ||||||
2,000,000 | San Antonio Texas | ||||||
Independent School District, | |||||||
5.00%, 08/15/2017 | |||||||
(Callable 08/15/2015) | |||||||
(PSF Guaranteed) | 2,240,080 | ||||||
575,000 | Socorro Texas | ||||||
Independent | |||||||
School District, | |||||||
5.25%, 08/15/2012 | |||||||
(PSF Guaranteed) | 638,860 | ||||||
1,000,000 | Spring Texas Independent | ||||||
School District, | |||||||
5.00%, 08/15/2019 | |||||||
(Callable 08/15/2018) | |||||||
(PSF Guaranteed) | 1,136,090 | ||||||
7,775,000 | Tarrant County Texas Health | ||||||
Facilities Revenue, 6.00%, | |||||||
09/01/2024 (ETM) | 9,440,949 | ||||||
835,000 | Tarrant County Texas | ||||||
Housing Finance | |||||||
Corporation Revenue | |||||||
Bonds, 0.00%, | |||||||
09/15/2016 (ETM) ^ | 685,953 | ||||||
180,000 | Texas Public Building | ||||||
Authority Revenue, 7.125%, | |||||||
08/01/2011 (ETM) | 190,676 | ||||||
1,900,000 | Trinity River Authority | ||||||
Texas Revenue, 5.50%, | |||||||
02/01/2021 (Pre-refunded | |||||||
to 02/01/2013) | 2,159,046 | ||||||
1,000,000 | University of | ||||||
Houston Texas, | |||||||
5.25%, 02/15/2012 | |||||||
(FSA Insured) | 1,089,540 | ||||||
89,533,665 |
The accompanying notes are an integral part of these financial statements.
Page 59
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 92.0% (cont.) | |||||||
Utah – 0.1% | |||||||
$ | 600,000 | Salt Lake City Utah | |||||
Hospital Revenue, 8.125%, | |||||||
05/15/2015 (Callable | |||||||
03/18/2010) (ETM) | $ | 702,246 | |||||
Virginia – 0.7% | |||||||
1,095,000 | Bristol Virginia Utility | ||||||
Systems General | |||||||
Obligations, 5.50%, | |||||||
11/01/2018 (ETM) | 1,279,092 | ||||||
3,195,000 | Tobacco Settlement | ||||||
Financing Corporation | |||||||
Revenue, 5.625%, | |||||||
06/01/2037 (Pre-refunded | |||||||
to 06/01/2015) | 3,747,703 | ||||||
5,026,795 | |||||||
Washington – 0.2% | |||||||
1,000,000 | Snohomish County | ||||||
Washington Public | |||||||
Utilities Revenue, 6.80%, | |||||||
01/01/2020 (Callable | |||||||
03/18/2010) (ETM) | 1,227,340 | ||||||
West Virginia – 0.9% | |||||||
7,365,000 | Berkeley Brooke Fayette | ||||||
Counties West Virginia | |||||||
Single Family Mortgage | |||||||
Revenue, 0.00%, | |||||||
12/01/2014 (ETM) ^ | 6,558,385 | ||||||
Wisconsin – 3.3% | |||||||
Badger Tobacco Asset | |||||||
Securitization Corporation | |||||||
Wisconsin, | |||||||
6,075,000 | 6.125%, 06/01/2027 | ||||||
(Callable 06/01/2012) | |||||||
(Pre-refunded to | |||||||
various dates) | 6,590,646 | ||||||
9,730,000 | 6.375%, 06/01/2032 | ||||||
(Pre-refunded to | |||||||
06/01/2012) | 10,946,153 | ||||||
3,000,000 | Ladysmith-Hawkins | ||||||
Wisconsin School District | |||||||
General Obligation, | |||||||
5.20%, 04/01/2018 | |||||||
(Callable 04/01/2016) | |||||||
(Insured by NPFGC) | 2,997,750 | ||||||
3,320,000 | Wisconsin State Health | ||||||
& Educational | |||||||
Facilities Revenue, | |||||||
5.00%, 12/01/2019 | |||||||
(Callable 12/01/2014) | |||||||
(Insured by NPFGC) | 3,367,376 | ||||||
23,901,925 | |||||||
Total Municipal Bonds | |||||||
(Cost $651,509,986) | 671,851,833 |
The accompanying notes are an integral part of these financial statements.
Page 60
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2009 |
Shares | Value | ||||||
SHORT-TERM INVESTMENTS – 6.2% | |||||||
Money Market Mutual Funds – 6.2% | |||||||
12,142,749 | Fidelity Institutional | ||||||
Tax-Exempt | |||||||
Portfolio, 0.13% « | $ | 12,142,749 | |||||
33,000,000 | Goldman Sachs Financial | ||||||
Square Funds, 0.19% « | 33,000,000 | ||||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $45,142,749) | 45,142,749 | ||||||
Total Investments | |||||||
(Cost $696,652,735) – | |||||||
98.2% | 716,994,582 | ||||||
Other Assets in Excess of | |||||||
Liabilities – 1.8% | 12,982,224 | ||||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 729,976,806 |
ETM – Escrowed to Maturity
^ | Non-Income Producing |
« | 7-Day Yield |
The accompanying notes are an integral part of these financial statements.
Page 61
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2009 |
Summary of Fair Value Exposure at December 31, 2009
The Fund has adopted authoritative fair valuation accounting standards which establish a definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion on changes in valuation techniques and related inputs during the period. These inputs are summarized into three broad levels and described below:
Level 1 – | Quoted prices in active markets for identical securities. |
Level 2 – | Other significant observable inputs (including quoted prices for similar securities, quoted prices for identical securities in inactive markets, dealer indications, interest rates, yield curves, benchmark yields, issuer spreads, prepayment speeds, cash flows, credit risk, default rates, information about issuers, sectors and markets, inputs corroborated by observable market data, etc.) |
Level 3 – | Significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in pricing the security) |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2009:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
Municipal Bonds | $ | — | $ | 671,851,833 | $ | — | $ | 671,851,833 | ||||||||
Total Fixed Income | — | 671,851,833 | — | 671,851,833 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 45,142,749 | — | — | 45,142,749 | ||||||||||||
Total Short-Term Investments | 45,142,749 | — | — | 45,142,749 | ||||||||||||
Total Investments | $ | 45,142,749 | $ | 671,851,833 | $ | — | $ | 716,994,582 |
Page 62
Baird Aggregate Bond Fund
The Baird Aggregate Bond Fund seeks an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Barclays Capital U.S. Aggregate Bond Index. The Barclays Capital U.S. Aggregate Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of at least one year.
The improved market conditions resulted in strong performance for the Fund in 2009. The Fund also outperformed its benchmark index in 2009. The primary factors for the outperformance were:
• | Price appreciation of the Fund’s non-Agency mortgage-backed securities; |
• | The Fund’s overweight to the corporate sector which performed well in 2009; |
• | Price recovery from certain corporate securities with sound fundamental value whose market prices had fallen in 2008 and subsequently appreciated in value in 2009; and |
• | The Fund’s underweight to U.S. Treasuries which underperformed all other market sectors for the year. |
The Fund maintained its duration-neutral strategy, holding a broadly diversified portfolio of over 460 securities at year end.
We are greatly encouraged by the Fund’s performance in 2009 and are very optimistic regarding the individual issues and the overall structure of the portfolio. The portfolio’s yield advantage over the benchmark remains historically high and we remain confident that the portfolio will realize this yield advantage over time and outperform its benchmark through the completion of this historic credit cycle.
Portfolio Characteristics
Quality Distribution* | Sector Weightings* |
![]() | ![]() |
Net Assets: | $1,397,281,179 | Annualized Expense Ratio: | ||||
SEC 30-Day Yield:** | Institutional Class: | 0.30 | % | |||
Institutional Class: | 4.83% | Investor Class: | 0.55 | %*** | ||
Investor Class: | 4.58% | Portfolio Turnover Rate: | 37.7 | % | ||
Average Effective Duration: | 4.57 years | Total Number of Holdings: | 464 | |||
Average Effective Maturity: | 6.79 years |
* | Percentages shown are based on the Fund’s total net assets. |
** | SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2009. |
*** | Includes 0.25% 12b-1 fee. |
Page 63
Baird Aggregate Bond Fund
Institutional Class |
Value of a $25,000 Investment |
![]() |
Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.
Investor Class |
Value of a $10,000 Investment |
![]() |
Growth of a hypothetical investment of $10,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.
Page 64
Baird Aggregate Bond Fund
Average Annual Total Returns
Since | |||
For the Periods Ended December 31, 2009 | One Year | Five Years | Inception(1) |
Institutional Class Shares | 10.88% | 4.28% | 6.09% |
Investor Class Shares | 10.55% | 4.02% | 5.85% |
Barclays Capital U.S. Aggregate Bond Index(2) | 5.93% | 4.97% | 6.07% |
(1) | For the period from September 29, 2000 (commencement of operations) through December 31, 2009. |
(2) | The Barclays Capital U.S. Aggregate Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. This index does not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. |
The returns shown in the table above and line graphs on the previous page reflect reinvestment of dividends and/or capital gains distributions in additional shares. The returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
For information about the performance of the Fund as of the most recent month-end, please call 1-866-44BAIRD or visit www.bairdfunds.com. Mutual fund performance changes over time and current performance may be lower or higher than that stated.
Page 65
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% | |||||||
Asset Backed Securities – 6.1% | |||||||
$ | 8,000,000 | American Express Credit | |||||
Account Master Trust, | |||||||
Series 2005-5, Class A, | |||||||
0.313%, 02/15/2013 | $ | 7,981,896 | |||||
Bayview Financial | |||||||
Acquisition Trust: | |||||||
2,000,000 | Series 2006-A, Class 1A2, | ||||||
5.483%, 02/28/2041 | 1,735,102 | ||||||
5,000,000 | Series 2007-B, Class 1A2, | ||||||
6.831%, 08/28/2047 | 1,742,647 | ||||||
9,700,000 | Capital One Multi-Asset | ||||||
Execution Trust, | |||||||
Series 2006-9A, Class A9, | |||||||
0.248%, 05/15/2013 | 9,669,062 | ||||||
Chase Issuance Trust: | |||||||
3,285,000 | Series 2009-A7, Class A7, | ||||||
0.683%, 09/17/2012 | 3,288,922 | ||||||
2,825,000 | Series 2005-A10, Class | ||||||
A10, 4.65%, 12/15/2012 | 2,911,530 | ||||||
2,000,000 | Citibank Credit Card | ||||||
Issuance Trust, | |||||||
Series 2009-A1, Class A1, | |||||||
1.983%, 03/17/2014 | 2,041,983 | ||||||
Contimortgage Home | |||||||
Equity Trust: | |||||||
799 | Series 1997-2, Class A9, | ||||||
7.09%, 04/15/2028 | 758 | ||||||
637 | Series 1999-3, Class A8, | ||||||
0.804%, 05/25/2029 | 633 | ||||||
Countrywide | |||||||
Asset-Backed Certificates: | |||||||
3,354,858 | Series 2006-S2, Class A2, | ||||||
5.627%, 07/25/2027 | 2,645,842 | ||||||
8,001,966 | Series 2004-15, | ||||||
Class AF6, 4.613%, | |||||||
04/25/2035 | 6,797,189 | ||||||
4,659,839 | Series 2005-1, | ||||||
Class AF6, 5.03%, | |||||||
07/25/2035 | 4,341,804 | ||||||
4,807,957 | Series 2005-10, | ||||||
Class AF6, 4.915%, | |||||||
02/25/2036 | 3,204,677 | ||||||
2,701,925 | Series 2005-11, | ||||||
Class AF3, 4.778%, | |||||||
02/25/2036 | 2,280,197 | ||||||
1,528,725 | Series 2005-17, | ||||||
Class 1AF2, 5.363%, | |||||||
05/25/2036 | 1,257,224 | ||||||
1,952,026 | Series 2005-17, | ||||||
Class 1AF5, 5.564%, | |||||||
05/25/2036 | 1,132,789 | ||||||
2,437,722 | Series 2007-S1, Class A6, | ||||||
5.693%, 11/25/2036 | 1,234,568 | ||||||
7,000,000 | Series 2006-13, | ||||||
Class 1AF2, 5.884%, | |||||||
01/25/2037 | 6,604,062 | ||||||
1,500,000 | Series 2006-10, | ||||||
Class 1AF3, 5.971%, | |||||||
09/25/2046 | 741,572 | ||||||
754,784 | Credit Based Asset | ||||||
Servicing and Securities, | |||||||
Series 2005-CB8, | |||||||
Class AF2, | |||||||
5.303%, 12/25/2035 | 700,364 | ||||||
2,000,000 | Discover Card | ||||||
Master Trust I, | |||||||
Series 2003-4, Class A2, | |||||||
1.32%, 05/15/2013 | 1,993,925 | ||||||
193,749 | Equivantage Home | ||||||
Equity Loan Trust, | |||||||
Series 1996-3, Class A3, | |||||||
7.70%, 09/25/2027 | 161,061 |
The accompanying notes are an integral part of these financial statements.
Page 66
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% (cont.) | |||||||
Asset Backed Securities – 6.1% (cont.) | |||||||
$ | 3,126,264 | FedEx Corporation | |||||
Pass-Thru Certificates, | |||||||
Series 1998-1, Class B, | |||||||
6.845%, 01/15/2019 | $ | 3,251,314 | |||||
2,300,000 | Ford Credit Auto | ||||||
Owner Trust, | |||||||
Series 2009-E, Class A2, | |||||||
0.80%, 03/15/2012 | 2,296,984 | ||||||
GE Capital Mortgage | |||||||
Services, Inc.: | |||||||
1,712 | Series 1997-HE4, Class A7, | ||||||
6.735%, 12/25/2028 | 1,697 | ||||||
27,840 | Series 1999-HE1, Class A7, | ||||||
6.265%, 04/25/2029 | 26,870 | ||||||
Green Tree Financial | |||||||
Corporation: | |||||||
892,770 | Series 1993-3, Class A7, | ||||||
6.40%, 10/15/2018 | 889,847 | ||||||
669,972 | Series 1993-4, Class A5, | ||||||
7.05%, 01/15/2019 | 669,708 | ||||||
1,803,255 | Series 1998-2, Class A5, | ||||||
6.24%, 12/01/2028 | 1,650,356 | ||||||
110,762 | Series 1997-6, Class A8, | ||||||
7.07%, 01/15/2029 | 111,413 | ||||||
1,483,637 | Series 1998-3, Class A5, | ||||||
6.22%, 03/01/2030 | 1,445,862 | ||||||
901,764 | Series 1998-4, Class A5, | ||||||
6.18%, 04/01/2030 | 823,808 | ||||||
68,486 | IMC Home Equity | ||||||
Loan Trust, | |||||||
Series 1997-5, Class A10, | |||||||
6.88%, 11/20/2028 | 66,260 | ||||||
3,200,000 | MBNA Master Credit | ||||||
Card Trust, | |||||||
Series 2005-4A, Class A4, | |||||||
0.273%, 11/15/2012 | 3,189,535 | ||||||
86,663 | Oakwood Mortgage | ||||||
Investors, Inc., | |||||||
Series 1999-B, | |||||||
Class A3, | |||||||
6.45%, 11/15/2017 | 70,812 | ||||||
984,327 | RAAC Series, | ||||||
Series 2004-SP1, | |||||||
Class AI4, 5.285%, | |||||||
08/25/2027 | 841,745 | ||||||
3,000,000 | Renaissance Home | ||||||
Equity Loan Trust, | |||||||
Series 2007-1, Class AF3, | |||||||
5.612%, 04/25/2037 | 1,328,772 | ||||||
Residential Asset | |||||||
Mortgage Products, Inc.: | |||||||
1,197,962 | Series 2003-RS7, Class | ||||||
AI6, 5.34%, 08/25/2033 | 1,114,089 | ||||||
863,177 | Series 2005-RS1, | ||||||
Class AI6, 4.713%, | |||||||
01/25/2035 | 643,891 | ||||||
Residential Asset | |||||||
Securities Corporation: | |||||||
2,343,258 | Series 2003-KS2, Class | ||||||
AI6, 3.99%, 04/25/2033 | 2,118,301 | ||||||
238,512 | Series 2003-KS5, Class | ||||||
AI6, 3.62%, 07/25/2033 | 169,512 | ||||||
245,253 | Series 2004-KS2, Class | ||||||
AI6, 4.30%, 03/25/2034 | 208,548 | ||||||
2,600,000 | Stingray Pass-Thru | ||||||
Certificates, Series 2005, | |||||||
5.902%, 01/12/2015 | |||||||
(Acquired 05/10/2007 | |||||||
and 09/19/2007; | |||||||
Cost $1,543,127 and | |||||||
$828,163, respectively) † ** | 1,300,000 |
The accompanying notes are an integral part of these financial statements.
Page 67
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% (cont.) | |||||||
Asset Backed Securities – 6.1% (cont.) | |||||||
$ | 1,362,114 | Structured Asset Securities | |||||
Corporation, Series | |||||||
2005-7XS, Class 1A4B, | |||||||
5.44%, 04/25/2035 | $ | 811,289 | |||||
85,498,420 | |||||||
Commercial Mortgage Backed Securities – 3.9% | |||||||
2,950,000 | First Union National | ||||||
Bank Commercial | |||||||
Mortgage Securities Inc., | |||||||
Series 2001-C4, Class A2, | |||||||
6.223%, 12/12/2033 | 3,088,884 | ||||||
GE Capital Commercial | |||||||
Mortgage Corporation: | |||||||
6,072,638 | Series 2000-1, Class A2, | ||||||
6.496%, 01/15/2033 | 6,239,092 | ||||||
2,865,000 | Series 2002-3A, Class AZ, | ||||||
4.996%, 12/10/2037 | 2,925,789 | ||||||
6,200,000 | Series 2004-C3, Class A4, | ||||||
5.189%, 07/10/2039 | 6,187,028 | ||||||
10,100,000 | GMAC Commercial | ||||||
Mortgage Securities, Inc., | |||||||
Series 2003-C1, Class A2, | |||||||
4.079%, 05/10/2036 | 10,070,914 | ||||||
Government National | |||||||
Mortgage Association | |||||||
(GNMA): | |||||||
800,000 | Series 2004-78, Class C, | ||||||
4.658%, 04/16/2029 | 835,479 | ||||||
1,285,000 | Series 2004-100, Class B, | ||||||
4.603%, 02/16/2043 | 1,339,007 | ||||||
13,455,000 | J.P. Morgan Chase | ||||||
Commercial Mortgage | |||||||
Trust, Series 2005-CB12, | |||||||
Class A4, 4.895%, | |||||||
09/12/2037 | 12,980,660 | ||||||
3,412,451 | Salomon Brothers Mortgage | ||||||
Securities VII, Series | |||||||
2001-C2, Class A3, | |||||||
6.50%, 11/13/2036 | 3,576,839 | ||||||
Wachovia Bank | |||||||
Commercial | |||||||
Mortgage Trust: | |||||||
2,050,000 | Series 2003-C3, Class A2, | ||||||
4.867%, 02/15/2035 | 2,109,673 | ||||||
4,560,000 | Series 2005-C22, | ||||||
Class A4, 5.265%, | |||||||
12/15/2044 | 4,451,394 | ||||||
53,804,759 | |||||||
Financial – 17.2% | |||||||
3,500,000 | Aegon NV, | ||||||
4.75%, 06/01/2013 f | 3,519,127 | ||||||
2,450,000 | American Express Credit | ||||||
Corporation, Series C, | |||||||
7.30%, 08/20/2013 | 2,753,508 | ||||||
American General Finance | |||||||
Corporation Senior Notes: | |||||||
1,510,000 | 4.875%, 05/15/2010 @ | 1,489,114 | |||||
1,000,000 | 5.85%, 06/01/2013 | 790,197 | |||||
500,000 | 6.90%, 12/15/2017 | 347,177 | |||||
1,000,000 | American International | ||||||
Group Inc., | |||||||
8.175%, 05/15/2058 | |||||||
(Callable 05/15/2038) | 660,000 | ||||||
2,000,000 | Ameriprise Financial, Inc., | ||||||
7.30%, 06/28/2019 | 2,224,120 | ||||||
250,000 | AmSouth Bancorporation | ||||||
Subordinated Debentures, | |||||||
6.75%, 11/01/2025 | 178,937 | ||||||
1,708,000 | Arden Realty LP, | ||||||
5.25%, 03/01/2015 | |||||||
(Callable 12/01/2014) | 1,758,642 |
The accompanying notes are an integral part of these financial statements.
Page 68
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% (cont.) | |||||||
Financial – 17.2% (cont.) | |||||||
$ | 2,330,000 | Axa Financial, Inc., | |||||
7.75%, 08/01/2010 | $ | 2,418,100 | |||||
300,000 | BAC Capital Trust VI, | ||||||
5.625%, 03/08/2035 | 240,884 | ||||||
1,265,000 | Bank of America | ||||||
Corporation | |||||||
Subordinated Notes, | |||||||
10.20%, 07/15/2015 | 1,474,037 | ||||||
2,435,000 | Bank of Tokyo- | ||||||
Mitsubishi/UFJ NY, | |||||||
7.40%, 06/15/2011 f | 2,625,731 | ||||||
929,000 | Bank One Corporation | ||||||
Subordinated Notes, | |||||||
10.00%, 08/15/2010 | 980,622 | ||||||
2,175,000 | Banponce Trust I, Series A, | ||||||
8.327%, 02/01/2027 | |||||||
(Callable 02/22/2010) | 1,422,533 | ||||||
2,500,000 | Barclays Bank PLC, | ||||||
6.75%, 05/22/2019 f @ | 2,788,580 | ||||||
2,400,000 | Bear Stearns Cos., Inc., | ||||||
Series B, 6.95%, | |||||||
08/10/2012 | 2,681,462 | ||||||
1,500,000 | BOI Capital Funding II, | ||||||
5.571%, 02/01/2049 | |||||||
(Callable 02/01/2016) | |||||||
(Acquired 09/03/2008; | |||||||
Cost $1,015,667)* f | 630,000 | ||||||
2,000,000 | BOI Capital Funding III, | ||||||
6.107%, 02/04/2016 f | 840,000 | ||||||
5,000,000 | CDP Financial Inc., | ||||||
4.40%, 11/25/2019 | |||||||
(Acquired 11/20/2009; | |||||||
Cost 4,987,600)* f | 4,789,450 | ||||||
CIT Group Funding: | |||||||
126,993 | 10.25%, 05/01/2013 | ||||||
(Callable 02/24/2010) | 129,533 | ||||||
190,489 | 10.25%, 05/01/2014 | ||||||
(Callable 02/08/2010) | 193,823 | ||||||
190,489 | 10.25%, 05/01/2015 | ||||||
(Callable 02/24/2010) @ | 192,394 | ||||||
317,482 | 10.25%, 05/01/2016 | ||||||
(Callable 02/24/2010) | 319,069 | ||||||
444,475 | 10.25%, 05/01/2017 | ||||||
(Callable 02/24/2010) | 446,697 | ||||||
CIT Group, Inc.: | |||||||
35,478 | 7.00%, 05/01/2013 | ||||||
(Callable 02/24/2010) | 33,083 | ||||||
53,217 | 7.00%, 05/01/2014 | ||||||
(Callable 02/24/2010) | 49,425 | ||||||
53,217 | 7.00%, 05/01/2015 | ||||||
(Callable 02/24/2010) | 47,629 | ||||||
88,694 | 7.00%, 05/01/2016 | ||||||
(Callable 02/24/2010) | 78,051 | ||||||
124,172 | 7.00%, 05/01/2017 | ||||||
(Callable 02/24/2010) | 107,719 | ||||||
2,000,000 | Citigroup Capital XXI, | ||||||
8.30%, 12/21/2057 | |||||||
(Callable 12/21/2037) | 1,925,000 | ||||||
Citigroup, Inc.: | |||||||
1,000,000 | 5.50%, 04/11/2013 | 1,036,765 | |||||
3,125,000 | 6.01%, 01/15/2015 | 3,190,931 | |||||
Corp Andina De | |||||||
Fomento Notes: f | |||||||
675,000 | 7.375%, 01/18/2011 | 710,865 | |||||
340,000 | 5.75%, 01/12/2017 | 346,016 | |||||
4,505,000 | Countrywide Financial | ||||||
Corporation Subordinated | |||||||
Notes, 6.25%, 05/15/2016 | 4,582,333 | ||||||
1,000,000 | Credit Agricole S.A., | ||||||
6.637%, 05/29/2049 | |||||||
(Callable 05/31/2017) | |||||||
(Acquired 05/23/2007; | |||||||
Cost $1,000,000)* f | 810,000 |
The accompanying notes are an integral part of these financial statements.
Page 69
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% (cont.) | |||||||
Financial – 17.2% (cont.) | |||||||
$ | 330,000 | Deutsche Bank Trust | |||||
Corporation | |||||||
Subordinated Notes, | |||||||
7.25%, 10/15/2011 | $ | 351,407 | |||||
3,000,000 | Developers Diversified | ||||||
Realty Corporation, | |||||||
5.00%, 05/03/2010 | 2,999,928 | ||||||
5,750,000 | Export-Import Bank | ||||||
Korea Notes, | |||||||
5.125%, 02/14/2011 f | 5,939,169 | ||||||
4,935,000 | Fifth Third Bank, | ||||||
4.20%, 02/23/2010 | 4,954,587 | ||||||
3,135,000 | First Empire Capital Trust | ||||||
I, 8.234%, 02/01/2027 | |||||||
(Callable 02/22/2010) | 2,804,718 | ||||||
1,575,000 | First Empire Capital Trust | ||||||
II, 8.277%, 06/01/2027 | |||||||
(Callable 02/22/2010) | 1,413,425 | ||||||
3,749,000 | First Hawaiian Capital | ||||||
Trust I, Series B, | |||||||
8.343%, 07/01/2027 | |||||||
(Callable 02/22/2010) | 3,561,550 | ||||||
686,508 | First National Bank of | ||||||
Chicago Pass-Thru | |||||||
Certificates, Series 1993-A, | |||||||
8.08%, 01/05/2018 | 753,264 | ||||||
4,475,000 | First National Bank of | ||||||
Omaha Subordinated | |||||||
Notes, 7.32%, 12/01/2010 | 4,516,380 | ||||||
5,700,000 | First Tennessee Bank, | ||||||
0.59%, 02/14/2011 | 5,476,093 | ||||||
1,748,000 | First Union Capital I, | ||||||
Series A, 7.935%, | |||||||
01/15/2027 (Callable | |||||||
02/22/2010) | 1,699,441 | ||||||
5,107,000 | First Union Institutional | ||||||
Capital I, | |||||||
8.04%, 12/01/2026 | |||||||
(Callable 02/22/2010) | 5,018,159 | ||||||
1,460,000 | First Union | ||||||
Institutional Capital II, | |||||||
7.85%, 01/01/2027 | |||||||
(Callable 02/22/2010) | 1,382,843 | ||||||
2,500,000 | Fleet Capital Trust II, | ||||||
7.92%, 12/11/2026 | |||||||
(Callable 02/22/2010) | 2,356,250 | ||||||
2,300,000 | FMR LLC Notes, | ||||||
4.75%, 03/01/2013 | |||||||
(Acquired 02/26/2003 | |||||||
through 12/21/2007; | |||||||
Aggregate Cost | |||||||
$2,244,483)* | 2,315,302 | ||||||
1,000,000 | GE Global Insurance | ||||||
Holding Corporation, | |||||||
7.50%, 06/15/2010 | 1,026,067 | ||||||
General Electric Capital | |||||||
Corporation: | |||||||
2,030,000 | 5.50%, 11/15/2011 | ||||||
(Callable 05/15/2010) | 2,054,153 | ||||||
1,389,000 | 1.146%, 08/02/2012 | 1,358,663 | |||||
1,100,000 | 5.90%, 05/13/2014 | 1,189,179 | |||||
2,475,000 | 4.375%, 09/21/2015 @ | 2,505,777 | |||||
5,360,000 | Glencore Funding LLC, | ||||||
6.00%, 04/15/2014 | |||||||
(Acquired 03/31/2004 | |||||||
through 10/29/2009; | |||||||
Aggregate Cost | |||||||
$5,312,341)* | 5,483,687 | ||||||
GMAC LLC: | |||||||
100,000 | 7.25%, 03/02/2011 | 99,808 |
The accompanying notes are an integral part of these financial statements.
Page 70
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% (cont.) | |||||||
Financial – 17.2% (cont.) | |||||||
$ | 336,000 | 7.50%, 12/31/2013 | |||||
(Acquired 06/21/2005 | |||||||
through 10/17/2007; | |||||||
Aggregate Cost | |||||||
$1,011,194)* | $ | 324,240 | |||||
150,000 | 6.75%, 12/01/2014 | 142,477 | |||||
403,000 | 8.00%, 12/31/2018 | ||||||
(Acquired 06/21/2005 | |||||||
through 10/17/2007; | |||||||
Aggregate Cost | |||||||
$1,389,041)* | 354,640 | ||||||
1,180,000 | Goldman Sachs Capital I, | ||||||
6.345%, 02/15/2034 | 1,104,786 | ||||||
1,000,000 | Goldman Sachs Group | ||||||
Inc., 6.25%, 09/01/2017 | 1,072,414 | ||||||
500,000 | Goldman Sachs Group LP, | ||||||
8.00%, 03/01/2013 | |||||||
(Acquired 01/05/2009; | |||||||
Cost $500,000)* | 557,316 | ||||||
2,800,000 | Great West Life & | ||||||
Annuity Insurance, | |||||||
7.153%, 05/16/2046 | |||||||
(Callable 05/16/2016) | |||||||
(Acquired 05/16/2006 | |||||||
and 11/08/2007; Cost | |||||||
$1,000,000 and | |||||||
$1,783,656, respectively)* | 2,464,000 | ||||||
2,200,000 | Hartford Financial | ||||||
Services Group Inc., | |||||||
8.125%, 06/15/2038 | |||||||
(Callable 06/15/2018) | 2,112,000 | ||||||
1,000,000 | Holcim US Finance, | ||||||
6.00%, 12/30/2019 | |||||||
(Acquired 09/24/2009; | |||||||
Cost $986,740)* f | 1,040,891 | ||||||
950,000 | HSBC Bank PLC | ||||||
Subordinated Notes, | |||||||
6.95%, 03/15/2011 f | 990,853 | ||||||
2,000,000 | HSBC Finance | ||||||
Corporation, | |||||||
1.16%, 03/10/2010 | 2,000,000 | ||||||
2,100,000 | HSBC Holdings PLC | ||||||
Subordinated Notes, | |||||||
6.50%, 09/15/2037 f | 2,194,063 | ||||||
400,000 | HSBC USA Capital Trust | ||||||
I, 7.808%, 12/15/2026 | |||||||
(Callable 02/22/2010) | |||||||
(Acquired 03/08/2007; | |||||||
Cost $410,848)* | 392,000 | ||||||
500,000 | HSBC USA Capital Trust | ||||||
II, 8.38%, 05/15/2027 | |||||||
(Callable 02/22/2010) | |||||||
(Acquired 11/06/2007; | |||||||
Cost $516,300)* | 477,519 | ||||||
3,150,000 | Huntington National | ||||||
Bank Notes, | |||||||
8.00%, 04/01/2010 | 3,159,608 | ||||||
2,400,000 | ING Security Life | ||||||
Institutional Funding | |||||||
Senior Unsecured Notes, | |||||||
0.699%, 01/15/2010 | 2,400,288 | ||||||
Invesco Ltd. Notes: f | |||||||
1,015,000 | 5.375%, 02/27/2013 | 1,032,973 | |||||
1,246,000 | 5.375%, 12/15/2014 | 1,221,749 | |||||
900,000 | J.P. Morgan Chase & | ||||||
Company Notes, | |||||||
5.875%, 03/15/2035 | 801,071 | ||||||
1,255,000 | Jefferies Group Inc., | ||||||
6.25%, 01/15/2036 | 1,000,101 |
The accompanying notes are an integral part of these financial statements.
Page 71
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% (cont.) | |||||||
Financial – 17.2% (cont.) | |||||||
$ | 1,250,000 | Kaupthing Bank, 5.75%, | |||||
10/04/2011 (Acquired | |||||||
06/06/2008 and | |||||||
07/22/2008; Cost | |||||||
$199,243 and $769,804, | |||||||
respectively)* f | $ | 309,375 | |||||
3,400,000 | Key Bank NA, | ||||||
7.413%, 05/06/2015 | 3,469,265 | ||||||
2,550,000 | Kookmin Bank, | ||||||
7.25%, 05/14/2014 | |||||||
(Acquired 08/24/2009; | |||||||
Cost $2,741,979)* f | 2,862,599 | ||||||
700,000 | Korea Development Bank | ||||||
Senior Unsecured Notes, | |||||||
4.625%, 09/16/2010 f | 712,117 | ||||||
2,500,000 | Liberty Mutual Group, | ||||||
10.75%, 06/15/2058 | |||||||
(Callable 06/15/2038) | |||||||
(Acquired 05/21/2008; | |||||||
Cost $2,445,125)* @ | 2,650,000 | ||||||
565,000 | Liberty Mutual | ||||||
Insurance Company, | |||||||
7.697%, 10/15/2097 | |||||||
(Acquired 03/26/2003; | |||||||
Cost $361,716)* | 483,656 | ||||||
1,125,000 | Lincoln National | ||||||
Corporation, | |||||||
6.05%, 04/20/2067 | |||||||
(Callable 04/20/2017) | 871,875 | ||||||
Marsh & McLennan | |||||||
Companies, Inc.: | |||||||
925,000 | 5.375%, 07/15/2014 | 946,012 | |||||
500,000 | 9.25%, 04/15/2019 | 606,661 | |||||
1,000,000 | Massachusetts Mutual | ||||||
Life Insurance Company, | |||||||
8.875%, 06/01/2039 | |||||||
(Acquired 05/27/2009; | |||||||
Cost $987,100)* | 1,226,449 | ||||||
800,000 | MBIA Insurance Corp., | ||||||
14.00%, 01/15/2033 | |||||||
(Callable 01/15/2013) | |||||||
(Acquired 01/11/2008; | |||||||
Cost $800,000)* | 344,000 | ||||||
Merrill Lynch | |||||||
& Company: | |||||||
1,000,000 | 6.40%, 08/28/2017 | 1,052,378 | |||||
1,750,000 | 6.875%, 04/25/2018 | 1,885,517 | |||||
1,275,000 | 7.75%, 05/14/2038 | 1,400,892 | |||||
422,000 | Metlife Inc., | ||||||
6.50%, 12/15/2032 | 449,798 | ||||||
1,650,000 | Metropolitan Life | ||||||
Global Funding I, | |||||||
0.313%, 05/17/2010 | |||||||
(Acquired 12/31/2008 | |||||||
and 04/23/2009; | |||||||
Cost $1,519,048 and | |||||||
$98,156, respectively)* | 1,648,170 | ||||||
3,444,000 | The Mony Group, Inc., | ||||||
8.35%, 03/15/2010 | 3,486,823 | ||||||
Morgan Stanley: | |||||||
1,000,000 | 6.75%, 04/15/2011 | 1,059,483 | |||||
2,000,000 | 5.625%, 01/09/2012 | 2,110,644 | |||||
1,075,000 | 4.75%, 04/01/2014 | 1,081,178 | |||||
3,644,000 | Morgan Stanley Dean | ||||||
Witter & Co., | |||||||
6.75%, 10/15/2013 | 3,982,156 | ||||||
510,000 | National Bank of Hungary | ||||||
Yankee Debentures, | |||||||
8.875%, 11/01/2013 f | 550,791 |
The accompanying notes are an integral part of these financial statements.
Page 72
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% (cont.) | |||||||
Financial – 17.2% (cont.) | |||||||
$ | 1,310,000 | National City Bank | |||||
of Cleveland | |||||||
Subordinated Notes, | |||||||
4.625%, 05/01/2013 | $ | 1,342,119 | |||||
2,850,000 | National City Bank | ||||||
of Kentucky | |||||||
Subordinated Notes, | |||||||
6.30%, 02/15/2011 | 2,945,022 | ||||||
2,000,000 | Nationwide | ||||||
Building Society, | |||||||
4.25%, 02/01/2010 | |||||||
(Acquired 12/02/2008; | |||||||
Cost $1,995,664)* f | 2,000,596 | ||||||
1,500,000 | Nationwide | ||||||
Financial Services, | |||||||
6.25%, 11/15/2011 | 1,553,540 | ||||||
4,921,000 | Navigators Group Inc. | ||||||
Senior Unsecured Notes, | |||||||
7.00%, 05/01/2016 | 4,804,712 | ||||||
4,334,000 | NB Capital Trust IV, | ||||||
8.25%, 04/15/2027 | |||||||
(Callable 02/22/2010) | 4,290,660 | ||||||
2,500,000 | North Fork Capital Trust | ||||||
II, 8.00%, 12/15/2027 | |||||||
(Callable 02/22/2010) | 2,263,750 | ||||||
3,000,000 | Pemex Finance Ltd., | ||||||
10.61%, 08/15/2017 f | 3,615,000 | ||||||
1,600,000 | Pricoa Global Funding I, | ||||||
1.055%, 06/04/2010 | |||||||
(Acquired 03/06/2009; | |||||||
Cost $1,545,856)* | 1,600,845 | ||||||
2,750,000 | Protective Life Corp., | ||||||
7.375%, 10/15/2019 | 2,755,943 | ||||||
1,800,000 | Prudential Financial | ||||||
Inc., Series D, | |||||||
3.625%, 09/17/2012 | 1,826,627 | ||||||
1,000,000 | Regions | ||||||
Financial Corp., | |||||||
7.75%, 11/10/2014 @ | 986,223 | ||||||
4,750,000 | Regions Financing | ||||||
Trust II, | |||||||
6.625%, 05/15/2047 | |||||||
(Callable 05/15/2027) | 3,098,539 | ||||||
1,000,000 | Republic New York | ||||||
Capital I, | |||||||
7.75%, 11/15/2026 | |||||||
(Callable 03/15/2010) | 917,362 | ||||||
700,000 | Republic New York | ||||||
Corporation Debentures, | |||||||
9.125%, 05/15/2021 | 814,256 | ||||||
3,430,000 | Santander | ||||||
Financial Issuances, | |||||||
6.375%, 02/15/2011 f | 3,575,350 | ||||||
1,500,000 | Santander Issuances, | ||||||
6.50%, 08/11/2019 | |||||||
(Callable 08/11/2014) | |||||||
(Acquired 10/18/2007; | |||||||
Cost $1,777,840)* f | 1,559,223 | ||||||
8,760,000 | Schwab Capital Trust I, | ||||||
7.50%, 11/15/2037 | |||||||
(Callable 11/15/2017) | 8,487,038 | ||||||
500,000 | SLM Corporation Notes, | ||||||
5.625%, 08/01/2033 | 376,979 | ||||||
Sovereign Bancorp, Inc.: | |||||||
1,500,000 | 0.479%, 03/23/2010 | 1,499,432 | |||||
800,000 | 4.80%, 09/01/2010 | 816,822 | |||||
745,000 | 4.90%, 09/23/2010 | 760,769 | |||||
1,500,000 | 8.75%, 05/30/2018 | 1,733,229 | |||||
3,000,000 | Sun Life Financial | ||||||
Global Funding, | |||||||
0.528%, 07/06/2010 | |||||||
(Acquired 03/25/2009; | |||||||
Cost $2,907,680)* | 2,987,397 |
The accompanying notes are an integral part of these financial statements.
Page 73
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% (cont.) | |||||||
Financial – 17.2% (cont.) | |||||||
$ | 1,000,000 | Symetra Financial | |||||
Corporation Senior Notes, | |||||||
6.125%, 04/01/2016 | |||||||
(Acquired 03/23/2006; | |||||||
Cost $995,570)* | $ | 895,932 | |||||
3,000,000 | TD Ameritrade | ||||||
Holding Corporation, | |||||||
5.60%, 12/01/2019 | 2,980,092 | ||||||
1,709,000 | TECO Finance Inc., | ||||||
7.00%, 05/01/2012 | 1,823,903 | ||||||
2,400,000 | Toll Road Inv. | ||||||
Partnership II, | |||||||
0.00%, 02/15/2011 | |||||||
(Acquired 06/19/2008; | |||||||
Cost $2,205,928)* ^ | 2,228,726 | ||||||
1,400,000 | Transamerica Finance | ||||||
Corporation Debentures, | |||||||
0.00%, 03/01/2010 ^ | 1,393,354 | ||||||
1,000,000 | Travelers Companies Inc., | ||||||
6.75%, 06/20/2036 | 1,103,812 | ||||||
560,000 | UFJ Finance | ||||||
Aruba A.E.C., | |||||||
6.75%, 07/15/2013 f | 623,480 | ||||||
1,015,000 | Unitedhealth Group, Inc., | ||||||
4.875%, 02/15/2013 | 1,061,958 | ||||||
301,000 | United Mexican | ||||||
States Notes, | |||||||
6.75%, 09/27/2034 f | 317,555 | ||||||
2,788,000 | Westdeutsche Landesbank | ||||||
Subordinated Notes, | |||||||
4.796%, 07/15/2015 f | 2,908,232 | ||||||
Willis North America Inc.: | |||||||
2,073,000 | 5.125%, 07/15/2010 | 2,084,762 | |||||
750,000 | 5.625%, 07/15/2015 | 734,513 | |||||
240,871,984 | |||||||
Industrial – 13.9% | |||||||
4,200,000 | Acuity Brands Lighting | ||||||
Inc., 6.00%, 12/15/2019 | |||||||
(Acquired 12/01/2009; | |||||||
Cost $4,191,474)* | 4,026,893 | ||||||
8,410,000 | Allied Waste North | ||||||
America, Inc., | |||||||
7.25%, 03/15/2015 | |||||||
(Callable 03/15/2010) | 8,788,450 | ||||||
Ameritech Capital | |||||||
Funding Debentures: | |||||||
2,236,691 | 9.10%, 06/01/2016 | 2,552,641 | |||||
1,500,000 | 6.45%, 01/15/2018 | 1,578,192 | |||||
2,000,000 | Anglo American Capital | ||||||
PLC, 9.375%, 04/08/2019 | |||||||
(Acquired 04/02/2009; | |||||||
Cost $2,000,000)* f @ | 2,540,420 | ||||||
British Telecommunications | |||||||
PLC Notes: f | |||||||
6,482,000 | 9.125%, 12/15/2010 | 6,944,296 | |||||
600,000 | 9.625%, 12/15/2030 | 764,530 | |||||
600,000 | Bunge Limited Finance | ||||||
Corporation Notes, | |||||||
5.35%, 04/15/2014 | 613,362 | ||||||
3,700,000 | Bunge NA Finance LP, | ||||||
5.90%, 04/01/2017 | 3,662,682 | ||||||
1,000,000 | Canadian | ||||||
National Resources, | |||||||
6.25%, 03/15/2038 f | 1,034,937 | ||||||
CBS Corporation: | |||||||
2,250,000 | 7.70%, 07/30/2010 | 2,318,463 | |||||
3,000,000 | 6.625%, 05/15/2011 | 3,143,868 | |||||
800,000 | Clear Channel | ||||||
Communications Senior | |||||||
Unsubordinated Notes, | |||||||
5.50%, 12/15/2016 | 444,000 |
The accompanying notes are an integral part of these financial statements.
Page 74
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% (cont.) | |||||||
Industrial – 13.9% (cont.) | |||||||
$ | 400,000 | Comcast Cable | |||||
Communication | |||||||
Holdings, | |||||||
8.375%, 03/15/2013 | $ | 461,079 | |||||
1,000,000 | Comcast Corporation, | ||||||
6.95%, 08/15/2037 | 1,089,893 | ||||||
825,000 | Comcast Holdings | ||||||
Corporation, | |||||||
10.625%, 07/15/2012 | 973,434 | ||||||
680,000 | Comcast-Cable Holdings, | ||||||
7.875%, 08/01/2013 | 771,824 | ||||||
5,000,000 | Computer Sciences | ||||||
Corporation, | |||||||
7.375%, 06/15/2011 | 5,380,875 | ||||||
ConAgra Foods, Inc.: | |||||||
837,000 | 5.819%, 06/15/2017 | 869,351 | |||||
120,000 | 9.75%, 03/01/2021 | 153,465 | |||||
Continental Airlines, Inc. | |||||||
Pass-Thru Certificates: | |||||||
83,253 | Series 2000-2, Class C, | ||||||
8.312%, 04/02/2011 | 77,842 | ||||||
367,978 | Series 1997-4, Class A, | ||||||
6.90%, 01/02/2018 | 356,019 | ||||||
COX Communications Inc.: | |||||||
1,000,000 | 7.75%, 11/01/2010 | 1,046,865 | |||||
1,775,000 | 7.125%, 10/01/2012 | 1,971,734 | |||||
2,000,000 | 5.45%, 12/15/2014 @ | 2,142,704 | |||||
1,000,000 | COX Enterprises, Inc., | ||||||
7.875%, 09/15/2010 | |||||||
(Acquired 08/12/2009; | |||||||
Cost $1,032,756)* | 1,039,347 | ||||||
2,000,000 | CVS Caremark Corp., | ||||||
5.75%, 06/01/2017 | 2,110,828 | ||||||
1,000,000 | D.R. Horton Inc. | ||||||
Unsubordinated Notes, | |||||||
6.50%, 04/15/2016 | 975,000 | ||||||
Deutsche Telekom | |||||||
International | |||||||
Finance BV: f | |||||||
1,800,000 | 8.50%, 06/15/2010 | 1,860,167 | |||||
300,000 | 8.75%, 06/15/2030 @ | 385,833 | |||||
Donnelley (R.R.) | |||||||
& Sons Co.: | |||||||
4,900,000 | 4.95%, 05/15/2010 | 4,934,986 | |||||
2,500,000 | 8.60%, 08/15/2016 | 2,721,522 | |||||
1,500,000 | 6.125%, 01/15/2017 | 1,482,913 | |||||
6,125,000 | Enterprise Products | ||||||
Operating LLC, | |||||||
7.625%, 02/15/2012 | 6,770,238 | ||||||
635,000 | FedEx Corporation, | ||||||
9.65%, 06/15/2012 | 734,710 | ||||||
6,850,000 | Fiserv, Inc., | ||||||
6.125%, 11/20/2012 | 7,458,766 | ||||||
1,500,000 | Fortune Brands Inc., | ||||||
5.125%, 01/15/2011 | 1,547,088 | ||||||
2,200,000 | GTE Corporation | ||||||
Debentures, | |||||||
6.84%, 04/15/2018 | 2,410,008 | ||||||
3,500,000 | Health Care Service | ||||||
Corporation Notes, | |||||||
7.75%, 06/15/2011 | |||||||
(Acquired 06/20/2001 | |||||||
through 06/15/2009; | |||||||
Aggregate Cost | |||||||
$3,667,926)* | 3,636,686 | ||||||
650,000 | Health Management | ||||||
Association, | |||||||
6.125%, 04/15/2016 @ | 609,375 |
The accompanying notes are an integral part of these financial statements.
Page 75
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% (cont.) | |||||||
Industrial – 13.9% (cont.) | |||||||
$ | 1,950,000 | Highmark Inc. Notes, | |||||
6.80%, 08/15/2013 | |||||||
(Acquired 08/14/2003 | |||||||
through 12/17/2007; | |||||||
Aggregate Cost | |||||||
$1,974,496)* | $ | 2,040,260 | |||||
2,000,000 | Humana Inc., | ||||||
7.20%, 06/15/2018 | 2,045,476 | ||||||
5,700,000 | Hutchison Whampoa | ||||||
International LTD, | |||||||
7.625%, 04/09/2019 | |||||||
(Acquired 10/22/2009 | |||||||
and 10/29/2009; Cost | |||||||
$3,051,630 and | |||||||
$3,372,390, | |||||||
respectively)* f | 6,549,699 | ||||||
850,000 | Johnson Controls Inc. | ||||||
Senior Notes, | |||||||
6.00%, 01/15/2036 | 727,269 | ||||||
400,000 | Laboratory Corporation | ||||||
of America, | |||||||
5.625%, 12/15/2015 | 418,216 | ||||||
900,000 | Lafarge S.A. Notes, | ||||||
7.125%, 07/15/2036 f | 942,410 | ||||||
1,000,000 | Martin Marietta | ||||||
Material Inc., | |||||||
6.25%, 05/01/2037 | 902,382 | ||||||
Masco Corporation: | |||||||
1,000,000 | 0.554%, 03/12/2010 | 995,923 | |||||
1,000,000 | 6.125%, 10/03/2016 | 952,941 | |||||
1,100,000 | Nabors Industries, Inc., | ||||||
6.15%, 02/15/2018 | 1,143,276 | ||||||
1,050,000 | New Cingular | ||||||
Wireless Services, Inc. | |||||||
Senior Notes, | |||||||
8.75%, 03/01/2031 @ | 1,356,924 | ||||||
1,500,000 | Nextel Communications, | ||||||
7.375%, 08/01/2015 | |||||||
(Callable | |||||||
02/23/2010) @ | 1,458,750 | ||||||
4,060,000 | Pacific Energy Partners | ||||||
LP, 6.25%, 09/15/2015 | |||||||
(Callable 09/15/2010) | 4,176,997 | ||||||
320,000 | Pactiv Corporation, | ||||||
7.95%, 12/15/2025 | 343,252 | ||||||
400,000 | PCCW-HWT | ||||||
Capital II Ltd., | |||||||
6.00%, 07/15/2013 | |||||||
(Acquired 07/10/2003; | |||||||
Cost $398,132)* f | 414,826 | ||||||
2,800,000 | Pemex Project Funding | ||||||
Master Trust, | |||||||
5.75%, 03/01/2018 f @ | 2,831,153 | ||||||
1,000,000 | Petrobras International | ||||||
Finance Company, | |||||||
5.75%, 01/20/2020 f @ | 1,017,287 | ||||||
4,095,000 | Plum Creek Timberlands, | ||||||
5.875%, 11/15/2015 | 4,193,210 | ||||||
4,975,000 | Premcor Refining Group, | ||||||
7.50%, 06/15/2015 | |||||||
(Callable 02/22/2010) | 4,938,439 | ||||||
1,000,000 | Questar Market | ||||||
Resources Inc., | |||||||
6.80%, 03/01/2020 | 1,042,305 | ||||||
200,000 | Qwest Capital Funding, | ||||||
Inc., 7.25%, 02/15/2011 | 203,000 | ||||||
500,000 | Rio Tinto Alcan Inc., | ||||||
5.75%, 06/01/2035 f | 484,406 | ||||||
3,700,000 | Rio Tinto Financial | ||||||
USA Ltd., | |||||||
6.50%, 07/15/2018 f | 4,064,376 | ||||||
4,761,000 | Simon Property Group LP, | ||||||
7.75%, 01/20/2011 | 4,970,075 |
The accompanying notes are an integral part of these financial statements.
Page 76
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% (cont.) | |||||||
Industrial – 13.9% (cont.) | |||||||
$ | 1,500,000 | SK Telecom, | |||||
6.625%, 07/20/2027 | |||||||
(Acquired 07/13/2007; | |||||||
Cost $1,482,015)* f | $ | 1,536,645 | |||||
Sprint Capital | |||||||
Corporation: | |||||||
2,800,000 | 6.90%, 05/01/2019 @ | 2,576,000 | |||||
358,000 | 8.75%, 03/15/2032 | 337,415 | |||||
1,000,000 | Target Corporation, | ||||||
6.50%, 10/15/2037 @ | 1,096,535 | ||||||
Telecom Italia Capital: f | |||||||
1,400,000 | 6.20%, 07/18/2011 | 1,481,850 | |||||
2,000,000 | 7.175%, 06/18/2019 | 2,229,726 | |||||
2,675,000 | 7.20%, 07/18/2036 | 2,909,849 | |||||
2,075,000 | Telefonica Emisones S.A., | ||||||
6.221%, 07/03/2017 f | 2,287,084 | ||||||
1,000,000 | Teva Pharmaceutical | ||||||
Finance LLC, | |||||||
5.55%, 02/01/2016 | 1,055,572 | ||||||
Time Warner, Inc.: | |||||||
2,000,000 | 6.875%, 05/01/2012 | 2,189,486 | |||||
1,100,000 | 7.625%, 04/15/2031 @ | 1,277,791 | |||||
500,000 | 7.70%, 05/01/2032 | 587,167 | |||||
1,000,000 | 6.55%, 05/01/2037 | 1,018,996 | |||||
2,800,000 | 6.75%, 06/15/2039 @ | 2,932,454 | |||||
3,000,000 | Tyco Electronics | ||||||
Group S.A., | |||||||
6.55%, 10/01/2017 f | 3,101,883 | ||||||
Tyco International | |||||||
Finance: f | |||||||
1,775,000 | 6.375%, 10/15/2011 | 1,903,333 | |||||
300,000 | 6.00%, 11/15/2013 | 328,615 | |||||
269,803 | United AirLines, Inc. | ||||||
Pass-Thru Certificates, | |||||||
Series 2000-2, Class C, | |||||||
7.762%, 04/29/2049§ | 291,387 | ||||||
452,921 | U.S. Airways | ||||||
Pass-Thru Certificate, | |||||||
Series 1998-1, | |||||||
6.85%, 01/30/2018 † | 394,626 | ||||||
Vale Overseas Limited: f | |||||||
3,550,000 | 8.25%, 01/17/2034 | 4,066,546 | |||||
1,450,000 | 6.875%, 11/21/2036 | 1,448,783 | |||||
1,000,000 | 6.875%, 11/10/2039 | 1,006,724 | |||||
2,000,000 | Verizon Wireless Cap LLC, | ||||||
8.50%, 11/15/2018 | 2,480,764 | ||||||
1,875,000 | Vodafone Group PLC, | ||||||
6.15%, 02/27/2037 f @ | 1,953,233 | ||||||
Vulcan Materials Co.: | |||||||
2,000,000 | 7.00%, 06/15/2018 | 2,181,370 | |||||
500,000 | 7.15%, 11/30/2037 | 509,713 | |||||
1,000,000 | Wal-Mart Stores, | ||||||
5.25%, 09/01/2035 | 983,319 | ||||||
100,000 | Westvaco Corporation, | ||||||
9.75%, 06/15/2020 | 106,188 | ||||||
2,000,000 | Weyerhaeuser Company, | ||||||
7.25%, 07/01/2013 | 2,070,054 | ||||||
3,600,000 | Woodside Finance Ltd., | ||||||
8.125%, 03/01/2014 | |||||||
(Acquired 02/24/2009; | |||||||
Cost $3,598,884)* f | 4,111,963 | ||||||
3,000,000 | Wyeth, | ||||||
5.50%, 02/01/2014 | 3,268,422 | ||||||
194,321,631 | |||||||
Residential Mortgage Backed Securities – 30.5% | |||||||
Bank of America | |||||||
Alternative Loan Trust: | |||||||
408,058 | Series 2003-4, Class 2A1, | ||||||
5.00%, 06/25/2018 | 377,454 | ||||||
757,843 | Series 2003-11, Class 4A1, | ||||||
4.75%, 01/25/2019 | 738,897 |
The accompanying notes are an integral part of these financial statements.
Page 77
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% (cont.) | |||||||
Residential Mortgage Backed Securities – 30.5% (cont.) | |||||||
$ | 482,251 | Series 2004-6, | |||||
Class 4A1, | |||||||
5.00%, 07/25/2019 | $ | 455,727 | |||||
509,552 | Series 2004-11, Class | ||||||
4A1, 5.50%, 12/25/2019 | 498,087 | ||||||
787,304 | Series 2005-2, Class 4A1, | ||||||
5.50%, 03/25/2020 | 738,098 | ||||||
3,679,780 | Series 2005-4, Class 3A1, | ||||||
5.50%, 05/25/2020 | 3,319,921 | ||||||
2,836,147 | Series 2005-10, | ||||||
Class 5A1, 5.25%, | |||||||
11/25/2020 | 2,389,294 | ||||||
3,601,284 | Series 2007-1, | ||||||
Class 1A1, 6.098%, | |||||||
04/25/2022 | 2,941,237 | ||||||
1,433,906 | Series 2003-11, | ||||||
Class 2A1, 6.00%, | |||||||
01/25/2034 | 1,375,205 | ||||||
766,961 | Series 2005-2, | ||||||
Class 1CB2, 5.50%, | |||||||
03/25/2035 | 552,317 | ||||||
1,072,503 | Series 2005-9, | ||||||
Class 1CB3, 5.50%, | |||||||
10/25/2035 | 858,483 | ||||||
609,531 | Series 2005-11, | ||||||
Class 1CB4, 5.50%, | |||||||
12/25/2035 | 484,236 | ||||||
2,077,784 | Series 2006-5, | ||||||
Class CB7, 6.00%, | |||||||
06/25/2046 | 1,712,384 | ||||||
Chase Mortgage | |||||||
Finance Corporation: | |||||||
1,127,500 | Series 2003-S13, Class | ||||||
A11, 5.50%, 11/25/2033 | 1,130,085 | ||||||
6,000,000 | Series 2006-A1, Class | ||||||
2A3, 6.00%, 09/25/2036 | 4,116,745 | ||||||
557,784 | Citicorp Mortgage | ||||||
Securities, Inc., | |||||||
Series 2004-3, Class A2, | |||||||
5.25%, 05/25/2034 | 543,095 | ||||||
1,197,257 | Citigroup Mortgage | ||||||
Loan Trust, Inc., | |||||||
Series 2005-9, Class 2A2, | |||||||
5.50%, 11/25/2035 | 1,026,648 | ||||||
Countrywide Alternative | |||||||
Loan Trust: | |||||||
1,170,264 | Series 2005-50CB, Class | ||||||
4A1, 5.00%, 11/25/2020 | 929,214 | ||||||
5,797,100 | Series 2006-7CB, | ||||||
Class 3A1, 5.25%, | |||||||
05/25/2021 | 4,101,448 | ||||||
1,128,111 | Series 2006-J5, | ||||||
Class 3A1, 6.132%, | |||||||
07/25/2021 | 898,787 | ||||||
1,398,204 | Series 2006-43CB, | ||||||
Class 2A1, 6.00%, | |||||||
02/25/2022 | 1,169,903 | ||||||
924,567 | Series 2002-11, Class A4, | ||||||
6.25%, 10/25/2032 | 910,206 | ||||||
3,000,000 | Series 2005-10CB, Class | ||||||
1A6, 5.50%, 05/25/2035 | 2,224,021 | ||||||
2,027,862 | Series 2005-34CB, Class | ||||||
1A6, 5.50%, 09/25/2035 | 1,885,064 | ||||||
2,676,750 | Series 2006-28CB, Class | ||||||
A17, 6.00%, 10/25/2036 | 1,822,130 | ||||||
475,661 | Countrywide Home | ||||||
Loans, Inc., | |||||||
Series 2003-39, Class A5, | |||||||
5.00%, 05/25/2012 | 472,013 | ||||||
1,149,753 | Credit Suisse First Boston | ||||||
Mortgage Securities Corp., | |||||||
Series 2004-4, Class 2A5, | |||||||
5.50%, 06/25/2015 | 1,142,977 |
The accompanying notes are an integral part of these financial statements.
Page 78
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% (cont.) | |||||||
Residential Mortgage Backed Securities – 30.5% (cont.) | |||||||
Deutsche Mortgage | |||||||
Securities Inc.: | |||||||
$ | 1,823,457 | Series 2006-AR5, | |||||
Class 21A, | |||||||
6.00%, 10/25/2021 | $ | 1,405,857 | |||||
346,799 | Series 2004-4, Class | ||||||
1A6, 5.65%, 04/25/2034 | 288,148 | ||||||
Federal Gold Loan | |||||||
Mortgage Corporation | |||||||
(FGLMC): | |||||||
111,213 | 6.50%, 07/01/2014 | 119,587 | |||||
991,556 | 6.00%, 06/01/2020 | 1,060,942 | |||||
493,971 | 5.50%, 11/01/2022 | 523,027 | |||||
602,892 | 5.00%, 06/01/2023 | 623,802 | |||||
463,759 | 5.50%, 07/01/2023 | 491,092 | |||||
1,196,084 | 6.50%, 06/01/2029 | 1,294,760 | |||||
4,865,939 | 5.50%, 01/01/2036 | 5,115,825 | |||||
3,114,059 | 6.00%, 12/01/2036 | 3,310,633 | |||||
4,671,037 | 5.50%, 04/01/2037 | 4,898,507 | |||||
14,019,648 | 5.50%, 05/01/2038 | 14,701,588 | |||||
6,944,599 | 5.50%, 08/01/2038 | 7,282,396 | |||||
Federal Home Loan | |||||||
Mortgage Corporation | |||||||
(FHLMC): | |||||||
804,416 | Series 3124, Class VP, | ||||||
6.00%, 06/15/2014 | 860,869 | ||||||
368,394 | Series 2695, Class UA, | ||||||
5.50%, 09/15/2014 | 380,893 | ||||||
1,514,881 | Series R007, Class AC, | ||||||
5.875%, 05/15/2016 | 1,555,715 | ||||||
3,199,475 | Series R003, Class VA, | ||||||
5.50%, 08/15/2016 | 3,404,314 | ||||||
2,008,952 | Series 3097, Class MC, | ||||||
6.00%, 11/15/2016 | 2,151,341 | ||||||
391,431 | Series 2391, Class QR, | ||||||
5.50%, 12/15/2016 | 415,820 | ||||||
3,466,496 | Series R009, Class AJ, | ||||||
5.75%, 12/15/2018 | 3,612,226 | ||||||
122,160 | Series 206, Class E, | ||||||
0.00%, 07/15/2019 ^ | 114,214 | ||||||
1,363,022 | Series R010, Class AB, | ||||||
5.50%, 12/15/2019 | 1,429,766 | ||||||
68,984 | Series 141, Class D, | ||||||
5.00%, 05/15/2021 | 69,868 | ||||||
72,114 | Series 1074, Class I, | ||||||
6.75%, 05/15/2021 | 77,860 | ||||||
409,641 | Series 1081, Class K, | ||||||
7.00%, 05/15/2021 | 451,905 | ||||||
61,060 | Series 163, Class F, | ||||||
6.00%, 07/15/2021 | 65,353 | ||||||
114,501 | Series 188, Class H, | ||||||
7.00%, 09/15/2021 | 124,770 | ||||||
57,777 | Series 1286, Class A, | ||||||
6.00%, 05/15/2022 | 60,684 | ||||||
2,112,477 | Series 1694, Class PK, | ||||||
6.50%, 03/15/2024 | 2,283,315 | ||||||
16,886,151 | Series 2009-15, Class | ||||||
MA, 4.00%, 03/25/2024 | 17,496,843 | ||||||
941,500 | Series 2664, Class LG, | ||||||
5.50%, 07/15/2028 | 950,363 | ||||||
2,330,253 | Series 2552, Class ND, | ||||||
5.50%, 10/15/2031 | 2,435,784 | ||||||
Federal National | |||||||
Mortgage Association | |||||||
(FNMA): | |||||||
1,845,862 | 5.00%, 12/01/2019 | 1,944,727 | |||||
1,214,927 | 5.50%, 01/01/2023 | 1,287,413 | |||||
1,807,044 | 5.50%, 07/01/2023 | 1,914,918 | |||||
4,680,912 | 5.00%, 11/01/2023 | 4,862,954 | |||||
2,025,494 | 6.00%, 03/01/2026 | 2,164,589 | |||||
4,797,051 | 6.00%, 05/01/2026 | 5,126,475 | |||||
6,036,638 | 5.00%, 05/01/2028 | 6,246,935 | |||||
445,797 | 6.00%, 03/01/2033 | 476,446 |
The accompanying notes are an integral part of these financial statements.
Page 79
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% (cont.) | |||||||
Residential Mortgage Backed Securities – 30.5% (cont.) | |||||||
$ | 401,640 | 5.00%, 11/01/2033 | $ | 413,836 | |||
29,343,431 | 5.50%, 04/01/2034 | 30,841,170 | |||||
13,874,356 | 5.50%, 04/01/2034 | 14,614,153 | |||||
2,335,375 | 5.50%, 09/01/2034 | 2,454,576 | |||||
614,920 | 6.00%, 11/01/2034 | 655,851 | |||||
3,944,794 | 5.50%, 02/01/2035 | 4,146,143 | |||||
19,407,096 | 5.50%, 02/01/2035 | 20,397,668 | |||||
9,635,335 | 5.00%, 06/01/2035 | 9,918,875 | |||||
6,207,507 | 5.00%, 07/01/2035 | 6,390,176 | |||||
38,372,269 | 5.00%, 10/01/2035 | 39,453,489 | |||||
5,471,165 | 5.00%, 11/01/2035 | 5,625,327 | |||||
11,069,845 | 5.00%, 02/01/2036 | 11,381,762 | |||||
18,476,799 | 5.00%, 03/01/2036 | 18,997,422 | |||||
37,326,122 | 5.50%, 04/01/2036 | 39,207,982 | |||||
6,190,275 | 5.50%, 11/01/2036 | 6,491,728 | |||||
1,585,221 | 6.00%, 08/01/2037 | 1,675,876 | |||||
17,662,014 | 5.50%, 06/01/2038 | 18,508,320 | |||||
3,080,536 | Series 2006-B2, Class AB, | ||||||
5.50%, 05/25/2014 | 3,188,930 | ||||||
167,198 | Series 2003-27, Class OJ, | ||||||
5.00%, 07/25/2015 | 167,949 | ||||||
189,518 | Series 2003-24, Class PC, | ||||||
5.00%, 11/25/2015 | 191,467 | ||||||
54,670 | Series 2002-56, Class MC, | ||||||
5.50%, 09/25/2017 | 57,267 | ||||||
329,401 | Series 1989-37, Class G, | ||||||
8.00%, 07/25/2019 | 365,223 | ||||||
59,016 | Series 1989-94, Class G, | ||||||
7.50%, 12/25/2019 | 65,672 | ||||||
16,142 | Series 1990-58, Class J, | ||||||
7.00%, 05/25/2020 | 17,748 | ||||||
155,767 | Series 1990-76, Class G, | ||||||
7.00%, 07/25/2020 | 170,687 | ||||||
67,083 | Series 1990-105, Class J, | ||||||
6.50%, 09/25/2020 | 73,959 | ||||||
25,170 | Series 1990-108, Class | ||||||
G, 7.00%, 09/25/2020 | 27,581 | ||||||
48,116 | Series 1991-1, Class G, | ||||||
7.00%, 01/25/2021 | 53,050 | ||||||
52,227 | Series 1991-86, Class Z, | ||||||
6.50%, 07/25/2021 | 57,078 | ||||||
161,885 | Series 2003-28, | ||||||
Class KA, 4.25%, | |||||||
03/25/2022 | 166,864 | ||||||
24,859 | Series G92-30, Class Z, | ||||||
7.00%, 06/25/2022 | 27,120 | ||||||
1,911,622 | Series 2003-33, Class LD, | ||||||
4.25%, 09/25/2022 | 1,978,796 | ||||||
655,160 | Series 1993-58, Class H, | ||||||
5.50%, 04/25/2023 | 697,847 | ||||||
424,419 | Series 1998-66, Class C, | ||||||
6.00%, 12/25/2028 | 457,983 | ||||||
1,378,436 | Series 2002-85, Class PD, | ||||||
5.50%, 05/25/2031 | 1,431,958 | ||||||
60,922 | Series 2003-44, Class AB, | ||||||
3.75%, 05/25/2033 | 62,044 | ||||||
2,216,889 | Series 2004-W6, | ||||||
Class 1A4, 5.50%, | |||||||
07/25/2034 | 2,298,290 | ||||||
4,120,175 | Series 2004-W6, | ||||||
Class 1A6, 5.50%, | |||||||
07/25/2034 | 4,209,660 | ||||||
5,134,374 | Series 2004-W10, Class | ||||||
A24, 5.00%, 08/25/2034 | 5,264,338 | ||||||
4,000,000 | Series 2004-W10, Class | ||||||
A4, 5.75%, 08/25/2034 | 4,146,875 | ||||||
First Horizon Alternative | |||||||
Mortgage Securities: | |||||||
886,860 | Series 2005-FA7, Class | ||||||
2A1, 5.00%, 09/25/2020 | 705,054 | ||||||
1,217,341 | Series 2006-FA6, Class | ||||||
3A1, 5.75%, 11/25/2021 | 1,055,093 |
The accompanying notes are an integral part of these financial statements.
Page 80
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% (cont.) | |||||||
Residential Mortgage Backed Securities – 30.5% (cont.) | |||||||
$ | 3,296,567 | �� | Series 2006-FA8, | ||||
Class 2A1, | |||||||
5.75%, 02/25/2037 | $ | 1,879,748 | |||||
743,127 | GSAA Home | ||||||
Equity Trust, | |||||||
Series 2005-1, Class AF2, | |||||||
4.316%, 11/25/2034 | 705,679 | ||||||
202,768 | Impac CMB Trust, Series | ||||||
2004-4, Class 2A2, | |||||||
5.441%, 09/25/2034 | 154,597 | ||||||
1,183,510 | J.P. Morgan Alternative | ||||||
Loan Trust, Series | |||||||
2006-A1, Class 2A1, | |||||||
5.799%, 03/25/2036 | 747,802 | ||||||
J.P. Morgan | |||||||
Mortgage Trust: | |||||||
3,100,000 | Series 2006-A7, | ||||||
Class 2A4R, 5.457%, | |||||||
01/25/2037 | 1,934,539 | ||||||
1,358,099 | Series 2006-A7, Class | ||||||
2A2, 5.83%, 01/25/2037 | 1,006,270 | ||||||
6,100,000 | Series 2007-A2, | ||||||
Class 2A3, 5.715%, | |||||||
04/25/2037 | 4,594,868 | ||||||
Master Alternative | |||||||
Loans Trust: | |||||||
2,449,225 | Series 2004-1, Class 1A1, | ||||||
5.00%, 01/25/2019 | 2,314,518 | ||||||
1,753,502 | Series 2004-4, Class 4A1, | ||||||
5.00%, 04/25/2019 | 1,657,059 | ||||||
749,500 | Series 2003-5, Class 6A1, | ||||||
6.00%, 08/25/2033 | 643,867 | ||||||
555,211 | Residential Accredit Loans, | ||||||
Inc., Series 2004-QS6, | |||||||
Class A1, 5.00%, | |||||||
05/25/2019 | 546,883 | ||||||
800,000 | Residential Funding | ||||||
Mortgage Security I, | |||||||
Series 2003-S11, | |||||||
Class A2, 4.00%, | |||||||
06/25/2018 | 786,594 | ||||||
985,945 | Salomon Brothers | ||||||
Mortgage Securities VII, | |||||||
Series 2003-UP2, | |||||||
Class A2, 4.00%, | |||||||
06/25/2033 | 971,989 | ||||||
Washington Mutual, | |||||||
Inc. Pass-Thru | |||||||
Certificates: | |||||||
1,952,467 | Series 2004-CB1, | ||||||
Class 5A, 5.00%, | |||||||
06/25/2019 | 1,942,704 | ||||||
3,468,856 | Series 2004-CB2, | ||||||
Class 7A, 5.50%, | |||||||
08/25/2019 | 3,425,495 | ||||||
1,151,015 | Series 2004-CB3, | ||||||
Class 4A, 6.00%, | |||||||
10/25/2019 | 1,146,087 | ||||||
758,687 | Series 2004-CB4, | ||||||
Class 21A, | |||||||
5.50%, 12/25/2019 | 744,128 | ||||||
425,211,914 | |||||||
Taxable Municipal Bonds – 0.6% | |||||||
1,000,000 | Cuyahoga County | ||||||
Ohio Industrial | |||||||
Development Revenue, | |||||||
9.125%, 10/01/2023 | 885,190 | ||||||
8,420,000 | Tobacco Settlement | ||||||
Authority Iowa, | |||||||
6.50%, 06/01/2023 | |||||||
(Callable 06/01/2015) | 7,090,903 |
The accompanying notes are an integral part of these financial statements.
Page 81
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% (cont.) | |||||||
Taxable Municipal Bonds – 0.6% (cont.) | |||||||
$ | 615,529 | Tobacco Settlement | |||||
Financing Corporation, | |||||||
Series 2001-A, Class A, | |||||||
6.36%, 05/15/2025 | $ | 594,663 | |||||
8,570,756 | |||||||
Utilities – 5.2% | |||||||
1,500,000 | Allegheny Energy Supply | ||||||
Co. Senior Unsecured | |||||||
Notes, 5.75%, 10/15/2019 | |||||||
(Acquired 09/22/2009; | |||||||
Cost $1,494,525)* | 1,456,994 | ||||||
900,000 | Ameren Corporation, | ||||||
8.875%, 05/15/2014 | 1,010,901 | ||||||
850,000 | Arizona Public Service | ||||||
Senior Unsecured Notes, | |||||||
8.75%, 03/01/2019 | 990,299 | ||||||
599,000 | Beaver Valley Funding | ||||||
Corporation Debentures, | |||||||
9.00%, 06/01/2017 | 654,683 | ||||||
1,000,000 | Constellation Energy | ||||||
Group Inc. Senior | |||||||
Unsecured Notes, | |||||||
4.55%, 06/15/2015 | 1,002,699 | ||||||
1,700,000 | DCP Midstream LLC, | ||||||
7.875%, 08/16/2010 | 1,767,361 | ||||||
Enel Finance | |||||||
International: f | |||||||
2,475,000 | 5.125%, 10/07/2019 | ||||||
(Acquired 09/30/2009; | |||||||
Cost $2,464,110)* | 2,490,286 | ||||||
1,900,000 | 6.80%, 09/15/2037 | ||||||
(Acquired 09/13/2007; | |||||||
Cost $1,894,965)* @ | 2,100,790 | ||||||
750,000 | Energy Transfer Partners, | ||||||
5.65%, 08/01/2012 | 797,138 | ||||||
1,000,000 | Entergy Louisiana LLC, | ||||||
5.09%, 11/01/2014 | |||||||
(Callable 02/08/2010) | 1,000,746 | ||||||
5,625,000 | Exelon Corporation | ||||||
Senior Notes, | |||||||
4.45%, 06/15/2010 | 5,717,925 | ||||||
2,500,000 | FPL Group Capital, Inc., | ||||||
Series D, | |||||||
7.30%, 09/01/2067 | |||||||
(Callable 09/01/2017) | 2,450,000 | ||||||
705,344 | GG1C Funding | ||||||
Corporation, | |||||||
5.129%, 01/15/2014 | |||||||
(Acquired 06/27/2006; | |||||||
Cost $685,461)* | 700,117 | ||||||
Kinder Morgan Energy | |||||||
Partners Senior Notes: | |||||||
1,000,000 | 9.00%, 02/01/2019 | 1,230,501 | |||||
2,250,000 | 6.95%, 01/15/2038 | 2,397,967 | |||||
1,000,000 | 6.50%, 09/01/2039 | 1,007,811 | |||||
900,000 | Kinder Morgan Finance, | ||||||
5.70%, 01/05/2016 f | 864,000 | ||||||
155,734 | Kiowa Power Partners LLC, | ||||||
4.811%, 12/30/2013 | |||||||
(Acquired 11/19/2004; | |||||||
Cost $155,734)* | 157,236 | ||||||
Korea Electric Power | |||||||
Corporation: f | |||||||
100,000 | 7.75%, 04/01/2013 | 112,422 | |||||
2,165,000 | 6.75%, 08/01/2027 | 2,029,536 | |||||
1,325,000 | National Grid PLC | ||||||
Senior Unsecured Notes, | |||||||
6.30%, 08/01/2016 f | 1,441,006 | ||||||
1,500,000 | National Rural | ||||||
Utilities Coop, | |||||||
10.375%, 11/01/2018 | 1,987,614 |
The accompanying notes are an integral part of these financial statements.
Page 82
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 95.9% (cont.) | |||||||
Utilities – 5.2% (cont.) | |||||||
NiSource Finance | |||||||
Corporation: | |||||||
$ | 4,375,000 | 7.875%, 11/15/2010 | $ | 4,586,575 | |||
3,084,000 | 6.15%, 03/01/2013 | 3,283,708 | |||||
625,000 | ONEOK, Inc. | ||||||
Senior Notes, | |||||||
7.125%, 04/15/2011 | 661,043 | ||||||
1,920,000 | Pepco Holdings Inc., | ||||||
6.45%, 08/15/2012 | 2,060,678 | ||||||
1,000,000 | Plains All American | ||||||
Pipeline Senior Notes, | |||||||
5.625%, 12/15/2013 | 1,055,641 | ||||||
300,000 | PPL Energy Supply, | ||||||
LLC Senior Notes, | |||||||
6.40%, 11/01/2011 | 322,357 | ||||||
PSE&G Power LLC: | |||||||
5,000,000 | 7.75%, 04/15/2011 | 5,350,240 | |||||
350,000 | 5.00%, 04/01/2014 | 361,522 | |||||
144,000 | 5.32%, 09/15/2016 | ||||||
(Acquired 06/27/2001; | |||||||
Cost $126,829)* @ | 148,157 | ||||||
1,564,128 | RGS (I&M) Funding | ||||||
Corporation Debentures, | |||||||
9.82%, 12/07/2022 | 1,835,114 | ||||||
1,400,000 | Southern Natural Gas, | ||||||
5.90%, 04/01/2017 | |||||||
(Acquired 03/14/2007; | |||||||
Cost $1,397,676)* | 1,437,710 | ||||||
3,500,000 | Spectra Energy Capital, | ||||||
5.668%, 08/15/2014 | 3,788,526 | ||||||
1,000,000 | Talisman Energy Inc., | ||||||
7.75%, 06/01/2019 f | 1,174,407 | ||||||
2,000,000 | Trans-Canada Pipelines, | ||||||
6.50%, 08/15/2018 f | 2,230,904 | ||||||
2,200,000 | Transcontinental | ||||||
Gas Pipe Line | |||||||
Corporation | |||||||
Senior Notes, | |||||||
8.875%, 07/15/2012 | 2,521,567 | ||||||
Vectren Utility | |||||||
Holdings: | |||||||
875,000 | 6.625%, 12/01/2011 | 918,327 | |||||
1,100,000 | 5.25%, 08/01/2013 | 1,128,967 | |||||
Williams Companies, | |||||||
Inc. Notes: | |||||||
5,675,000 | 6.375%, 10/01/2010 | ||||||
(Acquired 07/09/2008 | |||||||
through 10/28/2009; | |||||||
Aggregate Cost | |||||||
$5,743,312)* | 5,777,718 | ||||||
800,000 | 8.125%, 03/15/2012 | 874,771 | |||||
72,885,964 | |||||||
U.S. Government Agency Issues – 0.0% | |||||||
348,992 | Government National | ||||||
Mortgage Association | |||||||
(GNMA), | |||||||
6.00%, 11/20/2033 | 372,976 | ||||||
U.S. Treasury Obligations – 18.5% | |||||||
U.S. Treasury Bonds: | |||||||
59,025,000 | 2.375%, 03/31/2016 @ | 56,470,339 | |||||
147,025,000 | 6.25%, 08/15/2023 @ | 175,602,984 | |||||
24,400,000 | 5.25%, 11/15/2028 @ | 26,439,694 | |||||
258,513,017 | |||||||
Total Long-Term | |||||||
Investments | |||||||
(Cost $1,350,767,804) | 1,340,051,421 |
The accompanying notes are an integral part of these financial statements.
Page 83
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
SHORT-TERM INVESTMENTS – 3.7% | |||||||
Money Market Mutual Funds – 3.7% | |||||||
$ | 27,520,126 | Dreyfus Institutional | |||||
Cash Advantage Fund, | |||||||
0.13% « | $ | 27,520,126 | |||||
23,436,139 | Short-Term Investment | ||||||
Company Liquid Assets | |||||||
Portfolio – AIM Fund, | |||||||
0.18% « | 23,436,139 | ||||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $50,956,265) | 50,956,265 | ||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 19.7% | |||||||
Commercial Paper – 0.2% | |||||||
4,107,642 | Atlantic East Funding | ||||||
LLC, 3.059%, | |||||||
03/25/2010 † ** | 2,401,225 | ||||||
Total Commercial Paper | 2,401,225 | ||||||
Shares | |||||||
Investment Companies – 19.5% | |||||||
271,921,901 | Mount Vernon | ||||||
Securities Lending Trust | |||||||
Prime Portfolio, | |||||||
0.20% « | 271,921,901 | ||||||
1,345,749 | Reserve Primary | ||||||
Fund † ** | 1,135,139 | ||||||
Total Investment | |||||||
Companies | 273,057,040 | ||||||
Total Investments | |||||||
Purchased With Cash | |||||||
Proceeds From | |||||||
Securities Lending | |||||||
(Cost $277,375,292) | 275,458,265 | ||||||
Total Investments | |||||||
(Cost $1,679,099,361) | |||||||
– 119.3% | 1,666,465,951 |
The accompanying notes are an integral part of these financial statements.
Page 84
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Shares | Value | |||||
INVESTMENTS PURCHASED | ||||||
WITH CASH PROCEEDS FROM | ||||||
SECURITIES LENDING – 19.7% (cont.) | ||||||
Assets Relating to Securities | ||||||
Lending (Note 6) – 0.1% | ||||||
Support | ||||||
Agreement** ^ a | $ | 1,633,605 | ||||
Cash Contribution | ||||||
from Transfer | ||||||
Agent/Administrator € | 259,285 | |||||
Total (Cost $0) | 1,892,890 | |||||
Liabilities in Excess of | ||||||
Other Assets – (19.4%) | (271,077,662 | ) | ||||
TOTAL NET | ||||||
ASSETS – 100.0% | $ | 1,397,281,179 |
* | Restricted Security Deemed Liquid | |
** | Illiquid | |
@ | This security or portion of this security is out on loan at December 31, 2009. | |
f | Foreign Security | |
^ | Non-Income Producing | |
§ | Security in Default | |
« | 7-Day Yield | |
† | Priced at fair value by the Valuation Committee as delegated by the Baird Funds’ Board of Directors. | |
a | The Fund’s transfer agent and administrator and securities lending agent entered into a support agreement with the Fund to cover potential losses realized by the Fund on its investment in Atlantic East Funding, LLC (up to a certain amount), which investment was made by the Fund’s securities lending agent. | |
€ | Pursuant to a loss reimbursement agreement, the Fund’s transfer agent and administrator made a cash contribution to the Fund to cover anticipated losses realized from the Fund’s ownership of shares of the Reserve Primary Fund, which investment was made by the Fund’s securities lending agent. |
The accompanying notes are an integral part of these financial statements.
Page 85
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2009 |
Summary of Fair Value Exposure at December 31, 2009
The Fund has adopted authoritative fair valuation accounting standards which establish a definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion on changes in valuation techniques and related inputs during the period. These inputs are summarized into three broad levels and described below:
Level 1 – | Quoted prices in active markets for identical securities. |
Level 2 – | Other significant observable inputs (including quoted prices for similar securities, quoted prices for identical securities in inactive markets, dealer indications, interest rates, yield curves, benchmark yields, issuer spreads, prepayment speeds, cash flows, credit risk, default rates, information about issuers, sectors and markets, inputs corroborated by observable market data, etc.) |
Level 3 – | Significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in pricing the security) |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2009:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 84,198,420 | $ | 1,300,000 | $ | 85,498,420 | ||||||||
Commercial Mortgage Backed Securities | — | 53,804,759 | — | 53,804,759 | ||||||||||||
Corporate Debt Securities | — | 507,684,953 | 394,626 | 508,079,579 | ||||||||||||
Residential Mortgage Backed Securities | — | 425,211,914 | — | 425,211,914 | ||||||||||||
Taxable Municipal Bonds | — | 8,570,756 | — | 8,570,756 | ||||||||||||
U.S. Government Agency Issues | — | 372,976 | — | 372,976 | ||||||||||||
U.S. Treasury Obligations | — | 258,513,017 | — | 258,513,017 | ||||||||||||
Total Fixed Income | — | 1,338,356,795 | 1,694,626 | 1,340,051,421 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 50,956,265 | — | — | 50,956,265 | ||||||||||||
Total Short-Term Investments | 50,956,265 | — | — | 50,956,265 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 2,401,225 | — | 2,401,225 | ||||||||||||
Money Market Mutual Funds | 271,921,901 | — | 1,135,139 | 273,057,040 | ||||||||||||
Total Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | 271,921,901 | 2,401,225 | 1,135,139 | 275,458,265 | ||||||||||||
Total Investments | $ | 322,878,166 | $ | 1,340,758,020 | $ | 2,829,765 | $ | 1,666,465,951 | ||||||||
Other Assets Relating to | ||||||||||||||||
Securities Lending Investments | 259,285 | 1,633,605 | — | 1,892,890 |
Page 86
Schedule of Investments December 31, 2009 |
Level 3 Reconciliation Disclosure
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
Description | Investments in Securities | |||
Balance as of December 31, 2008 | $ | 4,580,447 | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | 1,209 | |||
Change in unrealized appreciation (depreciation) | 784,187 | |||
Net purchases (sales) | (2,079,641 | ) | ||
Transfers in and/or out of Level 3 * | (456,437 | ) | ||
Balance as of December 31, 2009 | $ | 2,829,765 |
* | The information used in the above reconciliation represents fiscal year to date activity for any investments identified as using Level 3 inputs at either the beginning or end of the current fiscal period. Transfers in or out of Level 3 represents either the beginning value (for transfers in) or ending value (for transfers out) of any security or instrument where a change in the pricing level occurred from the beginning to the end of the period. |
Page 87
Baird Core Plus Bond Fund
The Baird Core Plus Bond Fund seeks an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Barclays Capital U.S. Universal Bond Index. The Barclays Capital U.S. Universal Bond Index is an unmanaged, market value weighted index of fixed income securities issued in U.S. dollars, including U.S. government and investment grade debt, non-investment grade debt, asset-backed and mortgage-backed securities, Eurobonds, 144A securities and emerging market debt, with maturities of at least one year.
The improved market conditions resulted in very strong performance for the Fund in 2009. The Fund also outperformed its benchmark index in 2009. The primary factors for the outperformance were:
• | Price appreciation of the Fund’s non-Agency mortgage-backed securities; |
• | The Fund’s overweight to the corporate sector which performed well in 2009; |
• | The Fund’s exposure to below investment grade issues that rebounded sharply in value; |
• | Price recovery from certain securities with sound fundamental value whose market prices had fallen in 2008 and subsequently appreciated in value in 2009; and |
• | The Fund’s underweight to U.S. Treasuries which underperformed all other market sectors for the year. |
The Fund maintained its duration-neutral strategy, holding a broadly diversified portfolio of over 350 securities at year end.
We are greatly encouraged by the Fund’s performance in 2009 and are very optimistic regarding the individual issues and the overall structure of the portfolio. The portfolio’s yield advantage over the benchmark remains historically high and we remain confident that the portfolio will realize this yield advantage over time and outperform its benchmark through the completion of this historic credit cycle.
Portfolio Characteristics
Quality Distribution* | Sector Weightings* |
![]() | ![]() |
Net Assets: | $260,701,958 | Annualized Expense Ratio: | ||||
SEC 30-Day Yield:** | Institutional Class: | 0.30 | % | |||
Institutional Class: | 5.60% | Investor Class: | 0.55 | %*** | ||
Investor Class: | 5.35% | Portfolio Turnover Rate: | 33.2 | % | ||
Average Effective Duration: | 4.57 years | Total Number of Holdings: | 353 | |||
Average Effective Maturity: | 6.87 years |
* | Percentages shown are based on the Fund’s total net assets. |
** | SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2009. |
*** | Includes 0.25% 12b-1 fee. |
Page 88
Institutional Class |
Value of a $25,000 Investment |
![]() |
Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.
Investor Class |
Value of a $10,000 Investment |
![]() |
Growth of a hypothetical investment of $10,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.
Page 89
Baird Core Plus Bond Fund
Average Annual Total Returns
Since | |||
For the Periods Ended December 31, 2009 | One Year | Five Years | Inception(1) |
Institutional Class Shares | 15.36% | 5.52% | 6.77% |
Investor Class Shares | 15.06% | 5.26% | 6.50% |
Barclays Capital U.S. Universal Bond Index(2) | 8.60% | 5.01% | 6.21% |
(1) | For the period from September 29, 2000 (commencement of operations) through December 31, 2009. |
(2) | The Barclays Capital U.S. Universal Bond Index is an unmanaged, market value weighted index of fixed income securities issued in U.S. dollars, including U.S. government and investment grade debt, non-investment grade debt, asset-backed and mortgage-backed securities, Eurobonds, 144A securities and emerging market debt, with maturities of at least one year. This index does not reflect any deduction for fees, expenses or taxes. A direct investment in an index is not possible. |
The returns shown in the table above and line graphs on the previous page reflect reinvestment of dividends and/or capital gains distributions in additional shares. The returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
For information about the performance of the Fund as of the most recent month-end, please call 1-866-44BAIRD or visit www.bairdfunds.com. Mutual fund performance changes over time and current performance may be lower or higher than that stated.
Page 90
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% | |||||||
Asset Backed Securities – 6.0% | |||||||
$ | 1,825,000 | American Express Credit | |||||
Account Master Trust, | |||||||
Series 2005-5, Class A, | |||||||
0.313%, 02/15/2013 | $ | 1,820,870 | |||||
97,542 | Amresco Residential | ||||||
Securities Mortgage | |||||||
Loan Trust, | |||||||
Series 1998-2, Class A6, | |||||||
6.45%, 12/25/2027 | 94,965 | ||||||
600,000 | Bayview Financial | ||||||
Acquisition Trust, | |||||||
Series 2007-A, | |||||||
6.205%, 05/28/2037 | 433,304 | ||||||
275,000 | Capital One Multi-Asset | ||||||
Execution Trust, | |||||||
Series 2003-A5, Class A5, | |||||||
0.61%, 07/15/2013 | 274,367 | ||||||
350,000 | Chase Issuance Trust, | ||||||
Series 2007-A15, Class A, | |||||||
4.96%, 09/17/2012 | 360,569 | ||||||
15,838 | CitiFinancial Mortgage | ||||||
Securities, Inc., | |||||||
Series 2004-1, Class AF2, | |||||||
2.645%, 04/25/2034 | 15,738 | ||||||
Countrywide Asset-Backed | |||||||
Certificates: | |||||||
163,652 | Series 2006-S2, Class A2, | ||||||
5.627%, 07/25/2027 | 129,065 | ||||||
1,206,793 | Series 2004-15, Class AF6, | ||||||
4.613%, 04/25/2035 | 1,025,098 | ||||||
572,376 | Series 2005-10, Class AF6, | ||||||
4.915%, 02/25/2036 | 381,509 | ||||||
9,764 | Series 2005-13, Class AF2, | ||||||
5.294%, 04/25/2036 | 9,674 | ||||||
1,000,000 | Series 2005-13, Class AF3, | ||||||
5.43%, 04/25/2036 | 720,362 | ||||||
321,436 | Series 2006-S9, Class A3, | ||||||
5.728%, 08/25/2036 | 135,654 | ||||||
1,000,000 | Series 2006-13, | ||||||
Class 1AF2, 5.884%, | |||||||
01/25/2037 | 943,438 | ||||||
1,300,000 | Series 2006-10, | ||||||
Class 1AF3, 5.971%, | |||||||
09/25/2046 | 642,696 | ||||||
616,000 | Series 2006-9, Class 1AF3, | ||||||
5.859%, 10/25/2046 | 320,515 | ||||||
729,179 | Credit-Based Asset | ||||||
Servicing and Security, | |||||||
Series 2005-CB3, | |||||||
4.725%, 02/25/2033 | 680,508 | ||||||
7,495 | GE Capital Mortgage | ||||||
Services, Inc., | |||||||
Series 1999-HE1, Class A7, | |||||||
6.265%, 04/25/2029 | 7,234 | ||||||
393,187 | GMAC Mortgage | ||||||
Corporation Loan Trust, | |||||||
Series 2005-HE3, Class A2, | |||||||
0.416%, 02/25/2036 | 159,027 | ||||||
Green Tree Financial | |||||||
Corporation: | |||||||
67,479 | Series 1993-4, Class A5, | ||||||
7.05%, 01/15/2019 | 67,453 | ||||||
22,272 | Series 1997-1, Class A5, | ||||||
6.86%, 03/15/2028 | 22,241 | ||||||
69,502 | Series 1997-4, Class A5, | ||||||
6.88%, 02/15/2029 | 70,004 | ||||||
957,211 | Series 1997-5, Class A6, | ||||||
6.82%, 05/15/2029 | 955,342 | ||||||
822,480 | Series 1998-3, Class A5, | ||||||
6.22%, 03/01/2030 | 801,539 | ||||||
345,292 | Series 1998-4, Class A5, | ||||||
6.18%, 04/01/2030 | 315,443 |
The accompanying notes are an integral part of these financial statements.
Page 91
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Asset Backed Securities – 6.0% (cont.) | |||||||
$ | 250,000 | MBNA Master | |||||
Credit Card Trust, | |||||||
Series 2002-A3, Class A3, | |||||||
0.559%, 09/15/2014 | $ | 246,049 | |||||
49,521 | Oakwood Mortgage | ||||||
Investors, Inc., | |||||||
Series 1999-B, Class A3, | |||||||
6.45%, 11/15/2017 | 40,464 | ||||||
Renaissance Home | |||||||
Equity Loan Trust: | |||||||
265,299 | Series 2005-1, Class AF6, | ||||||
4.97%, 05/25/2035 | 224,840 | ||||||
819,000 | Series 2006-2, Class AF3, | ||||||
5.797%, 08/25/2036 | 526,201 | ||||||
679,921 | Series 2006-3, Class AF2, | ||||||
5.58%, 11/25/2036 | 594,526 | ||||||
500,000 | Series 2007-1, Class AF2, | ||||||
5.512%, 04/25/2037 | 254,137 | ||||||
1,500,000 | Series 2007-2, Class AF2, | ||||||
5.675%, 06/25/2037 | 798,495 | ||||||
228,921 | Residential Asset | ||||||
Mortgage Products, Inc., | |||||||
Series 2003-RS10, Class | |||||||
AI7, 4.85%, 11/25/2033 | 195,344 | ||||||
Residential Asset Securities | |||||||
Corporation: | |||||||
1,021,475 | 2006-EMX8, 0.351%, | ||||||
10/25/2036 | 858,317 | ||||||
306,658 | Series 2003-KS5, Class | ||||||
AI6, 3.62%, 07/25/2033 | 217,944 | ||||||
400,000 | Stingray Pass-Thru | ||||||
Certificates, Series 2005, | |||||||
5.902%, 01/12/2015 | |||||||
(Acquired 05/10/2007, | |||||||
Cost $385,782) † ** | 200,000 | ||||||
1,725,345 | Structured Asset Securities | ||||||
Corporation, Series | |||||||
2005-7XS, Class 1A4B, | |||||||
5.44%, 04/25/2035 | 1,027,633 | ||||||
15,570,565 | |||||||
Commercial Mortgage Backed Securities – 4.1% | |||||||
1,075,000 | First Union National Bank | ||||||
Commercial Mortgage | |||||||
Securities Inc., | |||||||
Series 2001-C4, Class A2, | |||||||
6.223%, 12/12/2033 | 1,125,610 | ||||||
GE Capital Commercial | |||||||
Mortgage Corporation: | |||||||
1,132,137 | Series 2000-1, Class A2, | ||||||
6.496%, 01/15/2033 | 1,163,170 | ||||||
1,610,000 | Series 2003-C2, Class A4, | ||||||
5.145%, 07/10/2037 | 1,659,556 | ||||||
950,000 | Series 2004-C3, Class A4, | ||||||
5.189%, 07/10/2039 | 948,012 | ||||||
GMAC Commercial | |||||||
Mortgage Securities, Inc: | |||||||
233,342 | Series 2001-C1, Class A2, | ||||||
6.465%, 04/15/2034 | 241,740 | ||||||
1,750,000 | Series 2003-C1, Class A2, | ||||||
4.079%, 05/10/2036 | 1,744,960 | ||||||
Salomon Brothers | |||||||
Mortgage Securities VII: | |||||||
1,803,144 | Series 2001-C2, Class A3, | ||||||
6.50%, 11/13/2036 | 1,890,008 | ||||||
612,816 | Series 2000-C2, Class A2, | ||||||
7.455%, 07/18/2033 | 614,223 | ||||||
1,250,000 | Wachovia Bank | ||||||
Commercial Mortgage Trust, | |||||||
Series 2003-C3, Class A2, | |||||||
4.867%, 02/15/2035 | 1,286,386 | ||||||
10,673,665 |
The accompanying notes are an integral part of these financial statements.
Page 92
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Financial – 19.6% | |||||||
$ | 825,000 | American Express Credit | |||||
Corporation, Series C, | |||||||
7.30%, 08/20/2013 | $ | 927,202 | |||||
1,000,000 | American General Finance, | ||||||
6.90%, 12/15/2017 | 694,354 | ||||||
150,000 | AmSouth Bancorporation | ||||||
Subordinated Debentures, | |||||||
6.75%, 11/01/2025 | 107,362 | ||||||
500,000 | Bancwest Corporation, | ||||||
8.30%, 01/15/2011 | 507,874 | ||||||
200,000 | BankAmerica Capital II, | ||||||
8.00%, 12/15/2026 | |||||||
(Callable 02/08/2010) | 196,000 | ||||||
300,000 | Bank of America | ||||||
Corporation Subordinated | |||||||
Notes, 10.20%, 07/15/2015 | 349,574 | ||||||
150,000 | Bank Tokyo – | ||||||
Mitsubishi UFJ Ltd., | |||||||
7.40%, 06/15/2011 f | 161,749 | ||||||
200,000 | Banponce Trust I, Series A, | ||||||
8.327%, 02/01/2027 | |||||||
(Callable 02/22/2010) | 130,808 | ||||||
400,000 | Bear Stearns Cos., | ||||||
Inc., Series B, | |||||||
6.95%, 08/10/2012 | 446,910 | ||||||
1,000,000 | BOI Capital Funding III, | ||||||
6.107%, 02/04/2016 f | 420,000 | ||||||
CIT Group Funding: | |||||||
25,058 | 10.25%, 05/01/2013 | ||||||
(Callable 02/23/2010) | 25,559 | ||||||
37,587 | 10.25%, 05/01/2014 | ||||||
(Callable 02/08/2010) @ | 38,245 | ||||||
37,587 | 10.25%, 05/01/2015 | ||||||
(Callable 02/23/2010) | 37,963 | ||||||
62,644 | 10.25%, 05/01/2016 | ||||||
(Callable 02/23/2010) | 62,957 | ||||||
87,702 | 10.25%, 05/01/2017 | ||||||
(Callable 02/23/2010) | 88,141 | ||||||
CIT Group, Inc.: | |||||||
23,404 | 7.00%, 05/01/2013 | ||||||
(Callable 02/23/2010) | 21,824 | ||||||
35,106 | 7.00%, 05/01/2014 | ||||||
(Callable 02/23/2010) | 32,605 | ||||||
35,106 | 7.00%, 05/01/2015 | ||||||
(Callable 03/09/2010) | 31,420 | ||||||
558,510 | 7.00%, 05/01/2016 | ||||||
(Callable 02/23/2010) | 491,489 | ||||||
81,914 | 7.00%, 05/01/2017 | ||||||
(Callable 02/23/2010) | 71,060 | ||||||
700,000 | Citigroup Capital XXI, | ||||||
8.30%, 12/21/2077 | |||||||
(Callable 12/21/2037) | 673,750 | ||||||
650,000 | Citigroup, Inc., | ||||||
6.01%, 01/15/2015 | 663,714 | ||||||
825,000 | Countrywide Financial | ||||||
Corporation Subordinated | |||||||
Notes, 6.25%, 05/15/2016 | 839,162 | ||||||
250,000 | Dresdner Bank-New York | ||||||
Subordinated Debentures, | |||||||
7.25%, 09/15/2015 | 250,010 | ||||||
500,000 | Export-Import | ||||||
Bank Korea Notes, | |||||||
4.625%, 03/16/2010 f | 502,710 | ||||||
500,000 | Fifth Third Bank, | ||||||
4.20%, 02/23/2010 | 501,984 | ||||||
500,000 | First Empire Capital Trust | ||||||
I, 8.234%, 02/01/2027 | |||||||
(Callable 02/22/2010) | 447,323 | ||||||
145,623 | First National Bank of | ||||||
Chicago Pass-Thru | |||||||
Certificates, Series 1993-A, | |||||||
8.08%, 01/05/2018 | 159,783 |
The accompanying notes are an integral part of these financial statements.
Page 93
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Financial – 19.6% (cont.) | |||||||
$ | 1,100,000 | First National | |||||
Bank of Omaha | |||||||
Subordinated Notes, | |||||||
7.32%, 12/01/2010 | $ | 1,110,172 | |||||
1,300,000 | First Tennessee Capital I, | ||||||
8.07%, 01/06/2027 | |||||||
(Callable 03/15/2010) | 1,052,748 | ||||||
450,000 | First Union Capital I, | ||||||
Series A, 7.935%, | |||||||
01/15/2027 | |||||||
(Callable 03/15/2010) | 437,499 | ||||||
2,100,000 | GE Global Insurance | ||||||
Holding Corporation, | |||||||
7.50%, 06/15/2010 | 2,154,741 | ||||||
General Electric Capital | |||||||
Corporation Notes: | |||||||
150,000 | 6.00%, 06/15/2012 @ | 161,686 | |||||
1,000,000 | 5.625%, 09/15/2017 | 1,030,230 | |||||
General Motors Acceptance | |||||||
Corporation Notes: | |||||||
75,000 | 7.75%, 01/19/2010 @ | 75,035 | |||||
450,000 | 6.875%, 09/15/2011 @ | 445,266 | |||||
1,627,000 | Genworth Global | ||||||
Funding Trust, | |||||||
5.125%, 03/15/2011 | 1,653,436 | ||||||
425,000 | Glencore Funding LLC, | ||||||
6.00%, 04/15/2014 | |||||||
(Acquired 03/31/2004 | |||||||
through 09/29/2008; | |||||||
Aggregate Cost $419,971)* | 434,807 | ||||||
GMAC LLC: | |||||||
97,000 | 7.75%, 01/19/2010 | ||||||
(Acquired 04/29/2009; | |||||||
Cost $96,057)* | 97,000 | ||||||
49,000 | 7.50%, 12/31/2013 | ||||||
(Acquired 12/21/2006 | |||||||
through 09/29/2008; | |||||||
Aggregate | |||||||
Cost $137,453)* | 47,285 | ||||||
250,000 | 6.75%, 12/01/2014 | 237,462 | |||||
59,000 | 8.00%, 12/31/2018 | ||||||
(Acquired 12/21/2006 | |||||||
through 09/29/2008; | |||||||
Aggregate Cost $189,644)* | 51,920 | ||||||
125,000 | Goldman Sachs Capital I, | ||||||
6.345%, 02/15/2034 | 117,032 | ||||||
Goldman Sachs Group, Inc.: | |||||||
100,000 | 5.15%, 01/15/2014 | 105,786 | |||||
1,000,000 | 5.95%, 01/18/2018 @ | 1,055,973 | |||||
530,000 | Goldman Sachs Group LP, | ||||||
8.00%, 03/01/2013 | |||||||
(Acquired 05/19/2006 | |||||||
and 12/23/2008; Cost | |||||||
$31,575 and $500,000, | |||||||
respectively)* | 590,755 | ||||||
800,000 | Hartford Financial | ||||||
Services Group, | |||||||
8.125%, 06/15/2038 | |||||||
(Callable 06/15/2018) | 768,000 | ||||||
175,000 | HSBC Bank PLC | ||||||
Subordinated Notes, | |||||||
6.95%, 03/15/2011 f | 182,526 | ||||||
250,000 | HSBC Finance | ||||||
Corporation, | |||||||
7.00%, 05/15/2012 | 271,840 | ||||||
550,000 | Huntington National | ||||||
Bank Notes, | |||||||
8.00%, 04/01/2010 | 551,677 | ||||||
Invesco Ltd.: f | |||||||
1,570,000 | 5.625%, 04/17/2012 | 1,626,175 | |||||
1,110,000 | 5.375%, 12/15/2014 | 1,088,396 |
The accompanying notes are an integral part of these financial statements.
Page 94
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Financial – 19.6% (cont.) | |||||||
$ | 400,000 | Istar Financial, Inc., | |||||
5.85%, 03/15/2017 | $ | 224,000 | |||||
100,000 | J.P. Morgan Chase | ||||||
Capital XV, | 89,008 | ||||||
5.875%, 03/15/2035 | |||||||
400,000 | Jefferies Group, Inc., | ||||||
6.45%, 06/08/2027 | 340,896 | ||||||
600,000 | Key Bank NA, | ||||||
7.413%, 05/06/2015 | 612,223 | ||||||
Liberty Mutual Group: | |||||||
50,000 | 6.50%, 03/15/2035 | ||||||
(Acquired 09/29/2008; | |||||||
Cost $37,047)* | 40,149 | ||||||
900,000 | 10.75%, 06/15/2058 | ||||||
(Callable 06/15/2038) | |||||||
(Acquired 05/21/2008 | |||||||
through 05/06/2009; | |||||||
Aggregate | |||||||
Cost $750,149)* @ | 954,000 | ||||||
375,000 | Liberty Mutual | ||||||
Insurance Company, | |||||||
7.697%, 10/15/2097 | |||||||
(Acquired 03/26/2003; | |||||||
Cost $240,077)* | 321,010 | ||||||
825,000 | Lincoln National | ||||||
Corporation, | |||||||
6.05%, 04/20/2067 | |||||||
(Callable 04/20/2017) | 639,375 | ||||||
Manufacturer And | |||||||
Traders Trust Co.: | |||||||
500,000 | 6.625%, 12/04/2017 | 512,765 | |||||
265,000 | 5.585%, 12/28/2020 | ||||||
(Callable 12/28/2015) | |||||||
(Acquired 08/20/2009; | |||||||
Cost $194,804)* | 231,134 | ||||||
1,450,000 | Marsh & McLennan | ||||||
Companies, Inc., | |||||||
5.375%, 07/15/2014 | 1,482,938 | ||||||
700,000 | MBIA Insurance Company, | ||||||
14.00%, 01/15/2033 | |||||||
(Callable 01/15/2013) | |||||||
(Acquired 01/11/2008; | |||||||
Cost $700,000)* | 301,000 | ||||||
150,000 | MBNA Capital, Series A, | ||||||
8.278%, 12/01/2026 | |||||||
(Callable 02/22/2010) | 144,750 | ||||||
Merrill Lynch & Co.: | |||||||
100,000 | 5.00%, 02/03/2014 | 101,202 | |||||
600,000 | 6.875%, 04/25/2018 | 646,463 | |||||
500,000 | 7.75%, 05/14/2038 | 549,369 | |||||
520,000 | M&I Marshall & Ilsley | ||||||
Bank Senior Unsecured | |||||||
Notes, 5.30%, 09/08/2011 | 512,128 | ||||||
828,000 | The Mony Group, Inc. | ||||||
Senior Unsecured Notes, | |||||||
8.35%, 03/15/2010 | 838,295 | ||||||
Morgan Stanley Senior | |||||||
Unsecured Notes: | |||||||
125,000 | 4.25%, 05/15/2010 @ | 126,536 | |||||
800,000 | 5.625%, 01/09/2012 | 844,258 | |||||
125,000 | 6.625%, 04/01/2018 | 135,146 | |||||
1,000,000 | M&T Capital Trust | ||||||
II, 8.277%, 06/01/2027 | |||||||
(Callable 02/22/2010) | 897,413 | ||||||
75,000 | National Bank of Hungary | ||||||
Yankee Debentures, | |||||||
8.875%, 11/01/2013 f | 80,999 | ||||||
871,000 | National City Bank, | ||||||
6.20%, 12/15/2011 | 927,496 | ||||||
500,000 | National City Bank of | ||||||
Kentucky Subordinated | |||||||
Notes, 6.30%, 02/15/2011 | 516,670 |
The accompanying notes are an integral part of these financial statements.
Page 95
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Financial – 19.6% (cont.) | |||||||
$ | 800,000 | Nationwide Financial | |||||
Services, Inc., | |||||||
5.90%, 07/01/2012 | $ | 835,054 | |||||
100,000 | Nationwide Mutual | ||||||
Insurance Company, | |||||||
7.875%, 04/01/2033 | |||||||
(Acquired 10/13/2009; | |||||||
Cost $89,960)* | 92,741 | ||||||
1,459,000 | Navigators Group Inc. | ||||||
Senior Unsecured Notes, | |||||||
7.00%, 05/01/2016 | 1,424,522 | ||||||
750,000 | Pricoa Global Funding I, | ||||||
1.055%, 06/04/2010 | |||||||
(Acquired 04/29/2009; | |||||||
Cost $722,405)* | 750,396 | ||||||
1,550,000 | Principal Life | ||||||
Income Funding, | |||||||
5.10%, 04/15/2014 | 1,576,979 | ||||||
950,000 | Protective Life | ||||||
Corporation Senior Notes, | |||||||
4.30%, 06/01/2013 | �� | 908,909 | |||||
1,400,000 | Regions Financing Trust II, | ||||||
6.625%, 05/15/2047 | |||||||
(Callable 05/15/2027) | 913,254 | ||||||
Royal Bank of Scotland | |||||||
Group PLC: f | |||||||
705,000 | 5.00%, 11/12/2013 | 633,150 | |||||
1,258,000 | 5.05%, 01/08/2015 | 1,091,267 | |||||
Santander Financial | |||||||
Issuances: f | |||||||
200,000 | 6.375%, 02/15/2011 | 208,475 | |||||
100,000 | 7.25%, 11/01/2015 | 104,447 | |||||
2,378,000 | Schwab Capital Trust I, | ||||||
7.50%, 11/15/2037 | |||||||
(Callable 11/15/2017) | 2,303,902 | ||||||
50,000 | SLM Corporation | ||||||
Senior Unsecured Notes, | |||||||
5.625%, 08/01/2033 | 37,698 | ||||||
Sovereign Bancorp, Inc.: | |||||||
1,100,000 | 0.479%, 03/23/2010 | 1,099,583 | |||||
643,000 | 8.75%, 05/30/2018 | 742,978 | |||||
1,000,000 | TD Ameritrade Holding | ||||||
Corporation, | |||||||
5.60%, 12/01/2019 | 993,364 | ||||||
775,000 | Travelers Companies, Inc., | ||||||
6.25%, 03/15/2037 | |||||||
(Callable 03/15/2017) | 706,017 | ||||||
100,000 | UFJ Finance Aruba AEC, | ||||||
6.75%, 07/15/2013 f @ | 111,336 | ||||||
100,000 | Unitrin, Inc. Senior | ||||||
Unsecured Notes, | |||||||
6.00%, 05/15/2017 | 88,603 | ||||||
105,000 | Westdeutsche Landesbank | ||||||
Subordinated Notes, | |||||||
4.796%, 07/15/2015 f | 109,528 | ||||||
51,030,405 | |||||||
Industrial – 15.8% | |||||||
600,000 | Acuity Brands Lighting, | ||||||
Inc., 6.00%, 12/15/2019 | |||||||
(Acquired 12/01/2009; | |||||||
Cost $598,782)* | 575,270 | ||||||
1,868,000 | Allied Waste North America, | ||||||
Inc., 7.25%, 03/15/2015 | |||||||
(Callable 03/15/2010) | 1,952,060 | ||||||
388,250 | Atlas Air, Inc. | ||||||
Pass-Thru Certificates, | |||||||
8.707%, 01/02/2019 | 337,777 | ||||||
1,000,000 | British | ||||||
Telecommunications PLC | |||||||
Senior Unsecured Notes, | |||||||
9.125%, 12/15/2010 f | 1,071,320 |
The accompanying notes are an integral part of these financial statements.
Page 96
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Industrial – 15.8% (cont.) | |||||||
Bunge Ltd. Finance | |||||||
Corporation Notes: | |||||||
$ | 150,000 | 5.35%, 04/15/2014 | $ | 153,340 | |||
200,000 | 5.10%, 07/15/2015 | 198,290 | |||||
955,000 | 8.50%, 06/15/2019 | 1,088,611 | |||||
500,000 | Bunge NA Finance LP, | ||||||
5.90%, 04/01/2017 | 494,957 | ||||||
150,000 | CBS Corporation, | ||||||
7.70%, 07/30/2010 | 154,564 | ||||||
Clear Channel | |||||||
Communications Notes: | |||||||
375,000 | 4.50%, 01/15/2010 | 372,656 | |||||
50,000 | 5.50%, 12/15/2016 | 27,750 | |||||
275,000 | Comcast-Cable Holdings, | ||||||
7.875%, 08/01/2013 | 312,135 | ||||||
175,000 | Comcast Corporation, | ||||||
6.50%, 01/15/2017 | 193,736 | ||||||
500,000 | Comcast Holdings | ||||||
Corporation, | |||||||
10.625%, 07/15/2012 | 589,960 | ||||||
Continental Airlines, Inc. | |||||||
Pass-Thru Certificates: | |||||||
190,293 | Series 2000-2, Class C, | ||||||
8.312%, 04/02/2011 | 177,924 | ||||||
56,384 | Series 1997-4, | ||||||
6.90%, 01/02/2018 | 54,551 | ||||||
COX Communications | |||||||
Inc. Notes: | |||||||
600,000 | 4.625%, 01/15/2010 | 600,499 | |||||
800,000 | 5.45%, 12/15/2014 @ | 857,082 | |||||
750,000 | CSX Corporation, | ||||||
6.25%, 04/01/2015 | 826,088 | ||||||
325,000 | Deutsche Telekom | ||||||
International Finance BV, | |||||||
8.75%, 06/15/2030 f @ | 417,986 | ||||||
Donnelley (R.R.) | |||||||
& Sons Co.: | |||||||
1,100,000 | 8.60%, 08/15/2016 | 1,197,470 | |||||
250,000 | 6.125%, 01/15/2017 | 247,152 | |||||
381,366 | Federal Express 1995 | ||||||
Corporation Pass-Thru | |||||||
Certificates, Series B2, | |||||||
7.11%, 01/02/2014 | |||||||
(Callable 03/15/2010) | 381,366 | ||||||
500,000 | First Data Corporation, | ||||||
9.875%, 09/24/2015 | |||||||
(Callable 09/30/2011) @ | 466,250 | ||||||
950,000 | Fiserv, Inc., | ||||||
6.125%, 11/20/2012 | 1,034,427 | ||||||
350,000 | Georgia Pacific LLC, | ||||||
9.50%, 12/01/2011 @ | 378,000 | ||||||
500,000 | GTE Corporation, | ||||||
8.75%, 11/01/2021 | 615,484 | ||||||
1,525,000 | Hanson Australia Funding, | ||||||
5.25%, 03/15/2013 f | 1,502,125 | ||||||
Hanson PLC Notes: f | |||||||
1,150,000 | 7.875%, 09/27/2010 | 1,191,665 | |||||
350,000 | 6.125%, 08/15/2016 | 334,250 | |||||
100,000 | Health Care Service | ||||||
Corporation Notes, | |||||||
7.75%, 06/15/2011 | |||||||
(Acquired 01/26/2005; | |||||||
Cost $103,853)* | 103,905 | ||||||
350,000 | Health Management | ||||||
Association, | |||||||
6.125%, 04/15/2016 @ | 328,125 | ||||||
800,000 | Humana Inc., | ||||||
7.20%, 06/15/2018 | 818,190 | ||||||
939,000 | International | ||||||
Paper Company, | |||||||
7.40%, 06/15/2014 @ | 1,045,894 |
The accompanying notes are an integral part of these financial statements.
Page 97
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Industrial – 15.8% (cont.) | |||||||
$ | 425,000 | Lafarge S.A. Senior | |||||
Unsecured Notes, | |||||||
7.125%, 07/15/2036 f | $ | 445,027 | |||||
300,000 | Martin Marietta | ||||||
Materials, Inc., | |||||||
6.25%, 05/01/2037 | 270,715 | ||||||
225,000 | Masco Corporation, | ||||||
6.125%, 10/03/2016 @ | 214,412 | ||||||
250,000 | Nabors Industries, Inc., | ||||||
6.15%, 02/15/2018 | 259,836 | ||||||
New Cingular Wireless | |||||||
Services, Inc. Senior Notes: | |||||||
700,000 | 7.875%, 03/01/2011 | 752,077 | |||||
350,000 | 8.75%, 03/01/2031 @ | 452,308 | |||||
150,000 | Nextel Communications | ||||||
Senior Notes, Series E, | |||||||
6.875%, 10/31/2013 | |||||||
(Callable 02/22/2010) | 145,500 | ||||||
50,000 | Pactiv Corporation | ||||||
Senior Unsecured Notes, | |||||||
7.95%, 12/15/2025 | 53,633 | ||||||
200,000 | PCCW-HWT Capital II | ||||||
Ltd., 6.00%, 07/15/2013 | |||||||
(Acquired 07/10/2003; | |||||||
Cost $199,066)* f | 207,413 | ||||||
100,000 | PCCW-HKT Capital III | ||||||
Ltd., 5.25%, 07/20/2015 | |||||||
(Acquired 09/29/2008; | |||||||
Cost $85,580)* f | 99,085 | ||||||
75,000 | Pearson Dollar Finance PLC, | ||||||
5.70%, 06/01/2014 | |||||||
(Acquired 09/29/2008; | |||||||
Cost $73,502)* f | 79,189 | ||||||
750,000 | PEMEX Project | ||||||
Funding Master Trust, | |||||||
9.125%, 10/13/2010 | 791,250 | ||||||
1,100,000 | Plum Creek Timberlands, | ||||||
5.875%, 11/15/2015 | 1,126,381 | ||||||
1,240,000 | Premcor Refining Group | ||||||
Senior Unsecured Notes, | |||||||
7.50%, 06/15/2015 | |||||||
(Callable 02/22/2010) | 1,230,887 | ||||||
925,000 | Rio Tinto Financial | ||||||
USA Ltd., | |||||||
6.50%, 07/15/2018 f | 1,016,094 | ||||||
610,000 | SK Telecom, | ||||||
6.625%, 07/20/2027 | |||||||
(Acquired 07/13/2007 | |||||||
through 04/08/2009; | |||||||
Aggregate | |||||||
Cost $541,143)* f | 624,902 | ||||||
Sprint Capital Corporation: | |||||||
100,000 | 7.625%, 01/30/2011 | 102,375 | |||||
675,000 | 6.90%, 05/01/2019 @ | 621,000 | |||||
300,000 | 8.75%, 03/15/2032 | 282,750 | |||||
100,000 | Sunoco, Inc. Senior | ||||||
Unsecured Notes, | |||||||
5.75%, 01/15/2017 | 101,103 | ||||||
Telecom Italia Capital: f | |||||||
340,000 | 4.95%, 09/30/2014 @ | 352,402 | |||||
1,425,000 | 7.20%, 07/18/2036 | 1,550,106 | |||||
300,000 | Telefonica | ||||||
Emisiones, S.A.U., | |||||||
6.421%, 06/20/2016 f | 332,980 | ||||||
Time Warner, Inc.: | |||||||
25,000 | 8.875%, 10/01/2012 | 28,697 | |||||
743,000 | 9.125%, 01/15/2013 | 862,127 | |||||
92,000 | 6.875%, 06/15/2018 | 101,473 | |||||
450,000 | 7.625%, 04/15/2031 @ | 522,733 | |||||
95,000 | 7.70%, 05/01/2032 | 111,562 | |||||
500,000 | Transocean, Ltd., | ||||||
6.80%, 03/15/2038 f | 559,099 |
The accompanying notes are an integral part of these financial statements.
Page 98
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Industrial – 15.8% (cont.) | |||||||
$ | 500,000 | Tyco Electronics | |||||
Group S.A., | |||||||
7.125%, 10/01/2037 f | $ | 515,571 | |||||
Tyco International | |||||||
Finance: f | |||||||
125,000 | 6.375%, 10/15/2011 | 134,038 | |||||
50,000 | 6.00%, 11/15/2013 | 54,769 | |||||
United AirLines, Inc. | |||||||
Pass-Thru Certificates: | |||||||
156,769 | Series 1991-A, Class A-2, | ||||||
10.02%, 03/22/2014 | 43,111 | ||||||
686,771 | Series 2000-2, Class C, | ||||||
7.762%, 04/29/2049 | 741,713 | ||||||
1,000,000 | Unitedhealth Group, Inc. | ||||||
Senior Unsecured Notes, | |||||||
6.00%, 02/15/2018 | 1,032,948 | ||||||
488,370 | US Airways | ||||||
Pass-Thru Trust, | |||||||
Series 1998-1, Class B, | |||||||
7.35%, 01/30/2018 † | 368,563 | ||||||
322,000 | USX Corporation, | ||||||
9.125%, 01/15/2013 | 366,915 | ||||||
Vale Overseas Limited: f | |||||||
100,000 | 8.25%, 01/17/2034 | 114,551 | |||||
250,000 | 6.875%, 11/21/2036 | 249,790 | |||||
350,000 | Verizon New York Inc. | ||||||
Senior Unsecured Notes, | |||||||
8.625%, 11/15/2010 | 371,362 | ||||||
150,000 | Viacom, Inc. | ||||||
Senior Notes, | |||||||
6.25%, 04/30/2016 | 163,482 | ||||||
Vodafone Group PLC: f | |||||||
400,000 | 5.50%, 06/15/2011 | 421,864 | |||||
500,000 | 6.15%, 02/27/2037 @ | 520,862 | |||||
500,000 | Vulcan Materials, | ||||||
7.15%, 11/30/2037 | 509,713 | ||||||
75,000 | Wellpoint Inc., | ||||||
5.95%, 12/15/2034 | 71,086 | ||||||
1,000,000 | Weyerhaeuser Company, | ||||||
7.25%, 07/01/2013 | 1,035,027 | ||||||
1,000,000 | Woodside Finance Ltd., | ||||||
8.125%, 03/01/2014 | |||||||
(Acquired 02/24/2009; | |||||||
Cost $999,690)* f | 1,142,212 | ||||||
41,255,552 | |||||||
Residential Mortgage Backed Securities – 29.3% | |||||||
Bank of America | |||||||
Alternative Loan Trust: | |||||||
129,950 | Series 2004-2, Class 5A1, | ||||||
5.50%, 03/25/2019 | 110,908 | ||||||
138,936 | Series 2005-2, Class 4A1, | ||||||
5.50%, 03/25/2020 | 130,253 | ||||||
290,794 | Series 2006-2, Class 6A1, | ||||||
5.50%, 03/25/2021 | 249,355 | ||||||
110,883 | Series 2006-3, Class 6A1, | ||||||
6.00%, 04/25/2036 | 96,104 | ||||||
277,038 | Series 2006-5, Class CB7, | ||||||
6.00%, 06/25/2046 | 228,318 | ||||||
Chase Mortgage | |||||||
Finance Corporation: | |||||||
76,875 | Series 2003-S13, Class A11, | ||||||
5.50%, 11/25/2033 | 77,051 | ||||||
700,000 | Series 2006-A1, Class 2A3, | ||||||
6.00%, 09/25/2036 | 480,287 | ||||||
99,271 | Citicorp Mortgage | ||||||
Securities, Inc., | |||||||
Series 2004-4, Class A5, | |||||||
5.50%, 06/25/2034 | 97,777 | ||||||
Citigroup Mortgage | |||||||
Loan Trust, Inc.: | |||||||
169,309 | Series 2005-9, Class 2A2, | ||||||
5.50%, 11/25/2035 | 145,183 |
The accompanying notes are an integral part of these financial statements.
Page 99
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Residential Mortgage Backed Securities – 29.3% (cont.) | |||||||
$ | 285,454 | Series 2005-9, Class 22A2, | |||||
6.00%, 11/25/2035 | $ | 215,455 | |||||
Countrywide Alternative | |||||||
Loan Trust: | |||||||
550,024 | Series 2005-50CB, Class | ||||||
4A1, 5.00%, 11/25/2020 | 436,731 | ||||||
862,588 | Series 2006-7CB, Class | ||||||
3A1, 5.25%, 05/25/2021 | 610,281 | ||||||
186,427 | Series 2006-43CB, Class | ||||||
2A1, 6.00%, 02/25/2022 | 155,987 | ||||||
1,300,000 | Series 2005-10CB, Class | ||||||
1A6, 5.50%, 05/25/2035 | 963,742 | ||||||
410,212 | Series 2006-J2, Class A3, | ||||||
6.00%, 04/25/2036 | 339,190 | ||||||
1,264,021 | Series 2006-28CB, Class | ||||||
A17, 6.00%, 10/25/2036 | 860,450 | ||||||
85,999 | CS First Boston Mortgage | ||||||
Securities Corporation, | |||||||
Series 2005-11, Class 5A1, | |||||||
5.25%, 12/25/2020 | 78,644 | ||||||
133,442 | Deutsche Alternative | ||||||
Securities Inc. Mortgage, | |||||||
Series 2005-4, Class A2, | |||||||
5.05%, 09/25/2035 | 130,025 | ||||||
341,599 | Deutsche Securities | ||||||
Inc. Mortgage, | |||||||
Series 2006-AR5, Class | |||||||
21A, 6.00%, 10/25/2021 | 263,368 | ||||||
Federal Gold Loan Mortgage | |||||||
Corporation (FGLMC): | |||||||
397,557 | 5.00%, 12/01/2020 | 417,981 | |||||
707,062 | 5.00%, 05/01/2021 | 743,386 | |||||
144,378 | 6.00%, 06/01/2021 | 154,436 | |||||
110,861 | 6.50%, 12/01/2028 | 120,007 | |||||
52,798 | 6.50%, 06/01/2029 | 57,154 | |||||
2,813,122 | 5.50%, 04/01/2037 | 2,950,115 | |||||
2,601,584 | 5.50%, 05/01/2038 | 2,728,130 | |||||
Federal Home | |||||||
Loan Mortgage | |||||||
Corporation (FHLMC): | |||||||
289,511 | Series 3122, Class VA, | ||||||
6.00%, 01/15/2017 | 309,554 | ||||||
2,550,600 | Series R010, Class VA, | ||||||
5.50%, 04/15/2017 | 2,711,075 | ||||||
1,377,074 | Series R010, Class AB, | ||||||
5.50%, 12/15/2019 | 1,444,505 | ||||||
12,722 | Series 1053, Class G, | ||||||
7.00%, 03/15/2021 | 13,800 | ||||||
28,453 | Series 136, Class E, | ||||||
6.00%, 04/15/2021 | 30,169 | ||||||
229,074 | Series 2804, Class VC, | ||||||
5.00%, 07/15/2021 | 239,115 | ||||||
21,416 | Series 1122, Class G, | ||||||
7.00%, 08/15/2021 | 23,069 | ||||||
53,565 | Series 1186, Class I, | ||||||
7.00%, 12/15/2021 | 53,540 | ||||||
114,451 | Series 3132, Class MA, | ||||||
5.50%, 12/15/2023 | 119,059 | ||||||
Federal National Mortgage | |||||||
Association (FNMA): | |||||||
1,414,558 | 5.50%, 03/01/2023 | 1,499,002 | |||||
586,002 | 5.50%, 07/01/2023 | 620,985 | |||||
822,371 | 5.50%, 12/01/2023 | 871,464 | |||||
202,549 | 6.00%, 03/01/2026 | 216,459 | |||||
1,131,870 | 5.00%, 05/01/2028 | 1,171,300 | |||||
88,656 | 6.50%, 09/01/2028 | 96,081 | |||||
180,156 | 6.50%, 02/01/2029 | 195,244 | |||||
132,776 | 5.50%, 01/01/2032 | 139,740 | |||||
6,248,425 | 5.50%, 04/01/2034 | 6,567,355 | |||||
3,777,539 | 5.50%, 04/01/2034 | 3,978,961 | |||||
153,954 | 5.50%, 02/01/2035 | 161,812 | |||||
4,394,521 | 5.50%, 02/01/2035 | 4,618,825 | |||||
9,104,784 | 5.00%, 02/01/2036 | 9,361,331 |
The accompanying notes are an integral part of these financial statements.
Page 100
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Residential Mortgage Backed Securities – 29.3% (cont.) | |||||||
$ | 12,642,492 | 5.50%, 04/01/2036 | $ | 13,279,885 | |||
1,585,221 | 6.00%, 08/01/2037 | 1,675,876 | |||||
11,349 | Series 1989-94, Class G, | ||||||
7.50%, 12/25/2019 | 12,629 | ||||||
44,783 | Series 1990-15, Class J, | ||||||
7.00%, 02/25/2020 | 49,072 | ||||||
9,228 | Series 1991-21, Class J, | ||||||
7.00%, 03/25/2021 | 10,117 | ||||||
177,567 | Series 1991-43, Class J, | ||||||
7.00%, 05/25/2021 | 195,185 | ||||||
234,531 | Series 1991-65, Class Z, | ||||||
6.50%, 06/25/2021 | 253,105 | ||||||
338,153 | Series 1992-129, Class L, | ||||||
6.00%, 07/25/2022 | 355,589 | ||||||
847,517 | Series 2003-33, Class LD, | ||||||
4.25%, 09/25/2022 | 877,299 | ||||||
70,155 | Series 1993-32, Class H, | ||||||
6.00%, 03/25/2023 | 74,657 | ||||||
370,104 | Series 1993-58, Class H, | ||||||
5.50%, 04/25/2023 | 394,218 | ||||||
6,766 | Series 2003-31, Class KG, | ||||||
4.50%, 12/25/2028 | 6,768 | ||||||
1,585,202 | Series 2002-85, Class PD, | ||||||
5.50%, 05/25/2031 | 1,646,752 | ||||||
29,232 | Series 2003-44, Class AB, | ||||||
3.75%, 05/25/2033 | 29,770 | ||||||
735,764 | Series 2004-W6, Class 1A4, | ||||||
5.50%, 07/25/2034 | 762,780 | ||||||
642,928 | Series 2004-W6, Class | ||||||
1A6, 5.50%, 07/25/2034 | 656,892 | ||||||
1,500,000 | Series 2004-W10, Class A4, | ||||||
5.75%, 08/25/2034 | 1,555,078 | ||||||
First Horizon Alternative | |||||||
Mortgage Securities: | |||||||
197,540 | Series 2006-FA6, Class | ||||||
3A1, 5.75%, 11/25/2021 | 171,212 | ||||||
1,572,209 | Series 2006-FA8, | ||||||
Class 2A1, | |||||||
5.75%, 02/25/2037 | 896,495 | ||||||
Government National | |||||||
Mortgage Association | |||||||
(GNMA): | |||||||
103,218 | 6.00%, 12/20/2028 | 110,430 | |||||
39,719 | 6.50%, 01/20/2029 | 43,064 | |||||
470,347 | Series 2003-2, Class PB, | ||||||
5.50%, 03/20/2032 | 492,843 | ||||||
93,064 | 6.00%, 11/20/2033 | 99,460 | |||||
J.P. Morgan Alternative | |||||||
Loan Trust: | |||||||
1,400,841 | Series 2005-S1, Class 3A1, | ||||||
5.50%, 10/25/2020 | 1,201,221 | ||||||
236,702 | Series 2006-A1, Class 2A1, | ||||||
5.799%, 03/25/2036 | 149,560 | ||||||
300,000 | Series 2006-S3, Class A3A, | ||||||
6.00%, 08/25/2036 | 177,554 | ||||||
J.P. Morgan Mortgage Trust: | |||||||
850,000 | Series 2006-A7, Class 2A4R, | ||||||
5.457%, 01/25/2037 | 530,438 | ||||||
950,000 | Series 2007-A2, Class 2A3, | ||||||
5.715%, 04/25/2037 | 715,594 | ||||||
Master Alternative | |||||||
Loans Trust: | |||||||
699,779 | Series 2004-1, Class 1A1, | ||||||
5.00%, 01/25/2019 | 661,291 | ||||||
450,504 | Series 2005-3, Class 4A1, | ||||||
5.50%, 03/25/2020 | 423,264 | ||||||
147,629 | Series 2003-5, Class 6A1, | ||||||
6.00%, 08/25/2033 | 126,822 | ||||||
120,187 | Merrill Lynch Mortgage | ||||||
Investors Trust, | |||||||
Series 2005-A8, Class | |||||||
A1C1, 5.25%, 08/25/2036 | 111,789 |
The accompanying notes are an integral part of these financial statements.
Page 101
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Residential Mortgage Backed Securities – 29.3% (cont.) | |||||||
$ | 191,178 | Residential Accredit Loans, | |||||
Inc., Series 2005-QS2, | |||||||
Class A1, 5.50%, | |||||||
02/25/2035 | $ | 154,005 | |||||
Washington Mutual, Inc. | |||||||
Pass-Thru Certificates: | |||||||
272,701 | Series 2004-CB1, | ||||||
Class 5A, 5.00%, | |||||||
06/25/2019 | 271,337 | ||||||
486,486 | Series 2004-CB2, | ||||||
Class 7A, 5.50%, | |||||||
08/25/2019 | 480,405 | ||||||
149,725 | Series 2004-CB3, Class 4A, | ||||||
6.00%, 10/25/2019 | 149,084 | ||||||
247,502 | Series 2004-CB4, Class | ||||||
22A, 6.00%, 12/25/2019 | 246,690 | ||||||
76,330,993 | |||||||
Taxable Municipal Bonds – 0.9% | |||||||
2,610,000 | Tobacco Settlement | ||||||
Authority Iowa, | |||||||
6.50%, 06/01/2023 | |||||||
(Callable 06/01/2015) | 2,198,012 | ||||||
45,046 | Tobacco Settlement | ||||||
Financing Corporation, | |||||||
Series 2001-A, Class A, | |||||||
6.36%, 05/15/2025 | 43,519 | ||||||
2,241,531 | |||||||
Utilities – 8.4% | |||||||
500,000 | Allegheny Energy Supply | ||||||
Co. Senior Unsecured | |||||||
Notes, 5.75%, 10/15/2019 | |||||||
(Acquired 09/22/2009; | |||||||
Cost $498,175)* | 485,664 | ||||||
1,200,000 | Ameren Corporation, | ||||||
8.875%, 05/15/2014 | 1,347,868 | ||||||
300,000 | Appalachian Power | ||||||
Company Senior | |||||||
Unsecured Notes, | |||||||
6.70%, 08/15/2037 | 317,993 | ||||||
1,000,000 | Arizona Pubic Service | ||||||
Senior Unsecured Notes, | |||||||
8.75%, 03/01/2019 | 1,165,058 | ||||||
600,000 | Constellation Energy Group | ||||||
Inc., 4.55%, 06/15/2015 | 601,619 | ||||||
500,000 | Encana Corporation, | ||||||
6.50%, 05/15/2019 f | 559,318 | ||||||
500,000 | Enel Finance International, | ||||||
6.80%, 09/15/2037 | |||||||
(Acquired 09/13/2007 | |||||||
and 09/29/2008; Cost | |||||||
$398,940 and $99,957, | |||||||
respectively)* f @ | 552,839 | ||||||
150,000 | Energy Transfer Partners, | ||||||
5.65%, 08/01/2012 | 159,428 | ||||||
225,000 | Exelon Corporation | ||||||
Senior Unsecured Notes, | |||||||
5.625%, 06/15/2035 | 203,464 | ||||||
1,000,000 | FPL Group Capital, Inc., | ||||||
Series D, 7.30%, | |||||||
09/01/2067 (Callable | |||||||
09/01/2017) | 980,000 | ||||||
542,572 | GG1C Funding Corporation, | ||||||
5.129%, 01/15/2014 | |||||||
(Callable 03/15/2010) | |||||||
(Acquired 11/21/2008; | |||||||
Cost $521,886)* | 538,552 | ||||||
Kinder Morgan Energy | |||||||
Partners Senior Notes: | |||||||
100,000 | 6.50%, 02/01/2037 | 100,758 | |||||
350,000 | 6.95%, 01/15/2038 | 373,017 | |||||
535,000 | Kinder Morgan Finance, | ||||||
5.70%, 01/05/2016 f | 513,600 |
The accompanying notes are an integral part of these financial statements.
Page 102
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Utilities – 8.4% (cont.) | |||||||
$ | 51,911 | Kiowa Power Partners LLC, | |||||
4.811%, 12/30/2013 | |||||||
(Acquired 11/19/2004; | |||||||
Cost $51,911)* | $ | 52,412 | |||||
115,000 | Korea Electric | ||||||
Power Corporation, | |||||||
6.75%, 08/01/2027 f | 107,804 | ||||||
1,000,000 | Marathon Oil Corporation | ||||||
Senior Unsecured Notes, | |||||||
7.50%, 02/15/2019 | 1,154,117 | ||||||
800,000 | MidAmerican | ||||||
Funding, LLC, | |||||||
6.75%, 03/01/2011 | 835,561 | ||||||
100,000 | National Grid PLC | ||||||
Senior Unsecured Notes, | |||||||
6.30%, 08/01/2016 f | 108,755 | ||||||
National Rural Utilities: | |||||||
200,000 | 7.25%, 03/01/2012 | 219,848 | |||||
600,000 | 10.375%, 11/01/2018 | 795,046 | |||||
125,000 | 8.00%, 03/01/2032 | 149,484 | |||||
Nisource Finance | |||||||
Corporation: | |||||||
536,000 | 6.15%, 03/01/2013 | 570,709 | |||||
1,583,000 | 5.40%, 07/15/2014 | 1,625,429 | |||||
800,000 | ONEOK, Inc. | ||||||
Senior Notes, | |||||||
7.125%, 04/15/2011 | 846,135 | ||||||
475,000 | Pepco Holdings, Inc., | ||||||
Senior Notes, | |||||||
6.125%, 06/01/2017 | 490,116 | ||||||
1,700,000 | PPL Energy Supply LLC | ||||||
Senior Unsecured Notes, | |||||||
6.20%, 05/15/2016 | 1,782,195 | ||||||
800,000 | PPL Energy Supply, | ||||||
LLC Bonds, Series A, | |||||||
5.70%, 10/15/2015 | 832,072 | ||||||
577,000 | PSE&G Power LLC, | ||||||
5.32%, 09/15/2016 | |||||||
(Acquired 06/27/2001 | |||||||
and 08/17/2009; Cost | |||||||
$144,884 and $389,765, | |||||||
respectively)* @ | 593,657 | ||||||
500,000 | Public Service Company | ||||||
Of New Mexico, | |||||||
7.95%, 05/15/2018 | 523,400 | ||||||
284,387 | RGS (I&M) Funding | ||||||
Corporation Debentures, | |||||||
9.82%, 12/07/2022 | 333,657 | ||||||
300,000 | Southern Natural Gas, | ||||||
5.90%, 04/01/2017 | |||||||
(Acquired 03/14/2007; | |||||||
Cost $299,502)* | 308,081 | ||||||
1,100,000 | Spectra Energy Capital, | ||||||
5.668%, 08/15/2014 | 1,190,680 | ||||||
Williams Companies | |||||||
Inc. Notes: | |||||||
175,000 | 7.125%, 09/01/2011 | 187,024 | |||||
500,000 | 8.125%, 03/15/2012 | 546,732 | |||||
690,000 | 7.875%, 09/01/2021 | 791,444 | |||||
80,000 | 7.50%, 01/15/2031 @ | 86,299 | |||||
22,029,835 | |||||||
U.S Treasury Obligations – 14.1% | |||||||
U.S. Treasury Bonds: | |||||||
8,000,000 | 2.375%, 03/31/2016 @ | 7,653,752 | |||||
20,450,000 | 6.25%, 08/15/2023 @ | 24,424,969 | |||||
4,375,000 | 5.25%, 11/15/2028 @ | 4,740,724 | |||||
36,819,445 | |||||||
Total Long-Term | |||||||
Investments | |||||||
(Cost $251,939,847) | 255,951,991 |
The accompanying notes are an integral part of these financial statements.
Page 103
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2009 |
Shares | Value | ||||||
SHORT-TERM INVESTMENT – 1.2% | |||||||
Money Market Mutual Fund – 1.2% | |||||||
3,064,570 | Short-Term Investment | ||||||
Company Liquid Assets | |||||||
Portfolio – AIM Fund, | |||||||
0.18% « | $ | 3,064,570 | |||||
Total Short-Term | |||||||
Investment | |||||||
(Cost $3,064,570) | 3,064,570 | ||||||
Principal | |||||||
Amount | |||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 18.0% | |||||||
Commercial Paper – 0.1% | |||||||
$ | 373,389 | Atlantic East Funding LLC, | |||||
3.059%, 03/25/2010 † ** | 218,274 | ||||||
Total Commercial Paper | 218,274 | ||||||
Investment Companies – 17.9% | |||||||
46,472,029 | Mount Vernon Securities | ||||||
Lending Trust | |||||||
Prime Portfolio, 0.20% « | 46,472,029 | ||||||
Shares | |||||||
Investment Companies – 17.9% (cont.) | |||||||
289,609 | Reserve Primary Fund † ** | 244,285 | |||||
Total Investment | |||||||
Companies | 46,716,314 | ||||||
Total Investments | |||||||
Purchased With Cash | |||||||
Proceeds From | |||||||
Securities Lending | |||||||
(Cost $47,135,027) | 46,934,588 | ||||||
Total Investments | |||||||
(Cost $302,139,444) | |||||||
– 117.4% | 305,951,149 | ||||||
Assets Relating to Securities | |||||||
Lending (Note 6) – 0.1% | |||||||
Support Agreement ** ^ a | 148,496 | ||||||
Cash Contribution | |||||||
from Transfer | |||||||
Agent/Administrator € | 55,799 | ||||||
Total (Cost $0) | 204,295 | ||||||
Liabilities in Excess of | |||||||
Other Assets – (17.5%) | (45,453,486 | ) | |||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 260,701,958 |
* | Restricted Security Deemed Liquid | |
** | Illiquid | |
@ | This security or a portion of this security is out on loan at December 31, 2009. | |
f | Foreign Security | |
^ | Non-Income Producing | |
† | Priced at fair value by the Valuation Committee as delegated by the Baird Funds’ Board of Directors. | |
« | 7-Day Yield | |
a | The Fund’s transfer agent and administrator and securities lending agent entered into a support agreement with the Fund to cover potential losses realized by the Fund on its investment in Atlantic East Funding, LLC (up to a certain amount), which investment was made by the Fund’s securities lending agent. | |
€ | Pursuant to a loss reimbursement agreement, the Fund’s transfer agent and administrator made a cash contribution to the Fund to cover anticipated losses realized from the Fund’s ownership of shares of the Reserve Primary Fund, which investment was made by the Fund’s securities lending agent. |
The accompanying notes are an integral part of these financial statements.
Page 104
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2009 |
Summary of Fair Value Exposure at December 31, 2009
The Fund has adopted authoritative fair valuation accounting standards which establish a definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion on changes in valuation techniques and related inputs during the period. These inputs are summarized into three broad levels and described below:
Level 1 – | Quoted prices in active markets for identical securities. |
Level 2 – | Other significant observable inputs (including quoted prices for similar securities, quoted prices for identical securities in inactive markets, dealer indications, interest rates, yield curves, benchmark yields, issuer spreads, prepayment speeds, cash flows, credit risk, default rates, information about issuers, sectors and markets, inputs corroborated by observable market data, etc.) |
Level 3 – | Significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in pricing the security) |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2009:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 15,370,565 | $ | 200,000 | $ | 15,570,565 | ||||||||
Commercial Mortgage Backed Securities | — | 10,673,665 | — | 10,673,665 | ||||||||||||
Corporate debt Securities | — | 113,947,229 | 368,563 | 114,315,792 | ||||||||||||
Residential Mortgage Backed Securities | — | 76,330,993 | — | 76,330,993 | ||||||||||||
Taxable Municipal Bonds | — | 2,241,531 | — | 2,241,531 | ||||||||||||
U.S. Treasury Obligations | — | 36,819,445 | — | 36,819,445 | ||||||||||||
Total Fixed Income | — | 255,383,428 | 568,563 | 255,951,991 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 3,064,570 | — | — | 3,064,570 | ||||||||||||
Total Short-Term Investments | 3,064,570 | — | — | 3,064,570 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 218,274 | — | 218,274 | ||||||||||||
Money Market Mutual Funds | 46,472,029 | — | 244,285 | 46,716,314 | ||||||||||||
Total Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | 46,472,029 | 218,274 | 244,285 | 46,934,588 | ||||||||||||
Total Investments | $ | 49,536,599 | $ | 255,601,702 | $ | 812,848 | $ | 305,951,149 | ||||||||
Other Assets Relating to | ||||||||||||||||
Securities Lending Investments | 55,799 | 148,496 | — | 204,295 |
Page 105
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2009 |
Level 3 Reconciliation Disclosure
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
Description | Investments in Securities | |||
Balance as of December 31, 2008 | $ | 1,211,045 | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | 14,671 | |||
Change in unrealized appreciation (depreciation) | 161,065 | |||
Net purchases (sales) | (507,250 | ) | ||
Transfers in and/or out of Level 3 * | (66,683 | ) | ||
Balance as of December 31, 2009 | $ | 812,848 |
* | The information used in the above reconciliation represents fiscal year to date activity for any investments identified as using Level 3 inputs at either the beginning or end of the current fiscal period. Transfers in or out of Level 3 represents either the beginning value (for transfers in) or ending value (for transfers out) of any security or instrument where a change in the pricing level occurred from the beginning to the end of the period. |
Page 106
Baird Funds, Inc.
Additional Information on Fund Expenses December 31, 2009 |
Example
As a shareholder of a mutual fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, such as management fees; distribution and/or service (12b-1) fees; and other fund expenses. Although the Funds do not charge any sales loads, redemption fees, or other transaction fees, you will be assessed fees for outgoing wire transfers, returned checks and stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Funds’ transfer agent. If you request that a redemption be made by wire transfer, currently the Funds’ transfer agent charges a $15.00 fee.
This Example is intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (7/1/09 – 12/31/09).
Actual Expenses
The third and fourth columns of the following table provide information about account values based on actual returns and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the fourth column entitled “Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fifth and sixth columns of the following table provide information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the sixth column of the table (entitled “Expenses Paid During Period”) is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different mutual funds. In addition, if these transactional costs were included, your costs could have been higher.
Page 107
Baird Funds, Inc.
Additional Information on Fund Expenses December 31, 2009 |
Actual vs. Hypothetical Returns
For the Six Months Ended December 31, 2009
Hypothetical (5% return | ||||||
Actual | before expenses) | |||||
Fund’s | Beginning | Ending | Expenses | Ending | Expenses | |
Annualized | Account | Account | Paid | Account | Paid | |
Expense | Value | Value | During | Value | During | |
Ratio(1) | 7/1/09 | 12/31/09 | Period(1) | 12/31/09 | Period(1) | |
Baird Short-Term Bond Fund | ||||||
Institutional Class | 0.30% | $1,000.00 | $1,041.20 | $1.54 | $1,023.69 | $1.53 |
Baird Intermediate Bond Fund | ||||||
Institutional Class | 0.30% | $1,000.00 | $1,061.30 | $1.56 | $1,023.69 | $1.53 |
Investor Class | 0.55% | $1,000.00 | $1,060.80 | $2.86 | $1,022.43 | $2.80 |
Baird Intermediate Municipal | ||||||
Bond Fund | ||||||
Institutional Class | 0.30% | $1,000.00 | $1,035.20 | $1.54 | $1,023.69 | $1.53 |
Investor Class | 0.55% | $1,000.00 | $1,034.10 | $2.82 | $1,022.43 | $2.80 |
Baird Aggregate Bond Fund | ||||||
Institutional Class | 0.30% | $1,000.00 | $1,067.50 | $1.56 | $1,023.69 | $1.53 |
Investor Class | 0.55% | $1,000.00 | $1,066.60 | $2.86 | $1,022.43 | $2.80 |
Baird Core Plus Bond Fund | ||||||
Institutional Class | 0.30% | $1,000.00 | $1,089.80 | $1.58 | $1,023.69 | $1.53 |
Investor Class | 0.55% | $1,000.00 | $1,087.80 | $2.89 | $1,022.43 | $2.80 |
(1) | Expenses are equal to the Fund’s annualized net expense ratio multiplied by the average account value over the period, multiplied by 184 days and divided by 365 to reflect the one-half year period. |
Page 108
Baird Funds, Inc.
Statements of Assets and Liabilities December 31, 2009 |
Baird | ||||||||||||||||||||
Baird | Baird | Intermediate | Baird | Baird | ||||||||||||||||
Short-Term | Intermediate | Municipal | Aggregate | Core Plus | ||||||||||||||||
Bond Fund | Bond Fund | Bond Fund | Bond Fund | Bond Fund | ||||||||||||||||
ASSETS: | ||||||||||||||||||||
Investments, at value | $ | 747,458,739 | $ | 730,862,145 | $ | 716,994,582 | $ | 1,666,465,951 | $ | 305,951,149 | ||||||||||
(cost $747,151,658; $731,228,612; $696,652,735; | ||||||||||||||||||||
$1,679,099,361; & $302,139,444, respectively) | ||||||||||||||||||||
Support Agreement (Note 6) | 470,875 | 1,189,830 | — | 1,633,605 | 148,496 | |||||||||||||||
Cash contribution from Transfer Agent/ | ||||||||||||||||||||
Administrator (Note 6) | 19,558 | 138,822 | — | 259,285 | 55,799 | |||||||||||||||
Interest receivable | 7,251,199 | 6,177,240 | 8,031,158 | 14,176,085 | 2,940,096 | |||||||||||||||
Receivable for investments sold or paid down | — | 38,984 | — | 4,852 | 175 | |||||||||||||||
Receivable for Fund shares sold | 2,034,532 | 1,202,632 | 5,436,874 | 6,392,039 | 308,156 | |||||||||||||||
Uninvested cash | 24,115 | 31,836 | — | 47,655 | 11,425 | |||||||||||||||
Total assets | 757,259,018 | 739,641,489 | 730,462,614 | 1,688,979,472 | 309,415,296 | |||||||||||||||
LIABILITIES: | ||||||||||||||||||||
Payable for collateral received | ||||||||||||||||||||
for securities loaned (Note 6) | 150,775,555 | 201,064,928 | — | 277,419,165 | 47,142,525 | |||||||||||||||
Payable for securities purchased | — | 1,376,592 | 61,782 | 13,177,581 | 1,227,157 | |||||||||||||||
Payable for Fund shares repurchased | 63,773 | 2,467,127 | 178,696 | 480,180 | 200,566 | |||||||||||||||
Payable to Advisor and Distributor | 126,296 | 136,166 | 245,330 | 362,082 | 87,291 | |||||||||||||||
Other liabilities | 44,818 | 138,828 | — | 259,285 | 55,799 | |||||||||||||||
Total liabilities | 151,010,442 | 205,183,641 | 485,808 | 291,698,293 | 48,713,338 | |||||||||||||||
NET ASSETS | $ | 606,248,576 | $ | 534,457,848 | $ | 729,976,806 | $ | 1,397,281,179 | $ | 260,701,958 | ||||||||||
NET ASSETS CONSIST OF: | ||||||||||||||||||||
Capital stock | $ | 605,801,505 | $ | 535,126,027 | $ | 710,472,768 | $ | 1,411,637,156 | $ | 257,221,518 | ||||||||||
Undistributed (distributed in | ||||||||||||||||||||
excess of) net investment income | 51,213 | (138,821 | ) | 693 | (259,285 | ) | (55,799 | ) | ||||||||||||
Accumulated net realized | ||||||||||||||||||||
losses on investments sold | (401,656 | ) | (1,491,543 | ) | (838,502 | ) | (3,356,172 | ) | (479,761 | ) | ||||||||||
Net unrealized appreciation (depreciation) on | ||||||||||||||||||||
investments, support agreement and cash | ||||||||||||||||||||
contribution from Transfer Agent/Administrator | 797,514 | 962,185 | 20,341,847 | (10,740,520 | ) | 4,016,000 | ||||||||||||||
NET ASSETS | $ | 606,248,576 | $ | 534,457,848 | $ | 729,976,806 | $ | 1,397,281,179 | $ | 260,701,958 | ||||||||||
INSTITUTIONAL CLASS SHARES | ||||||||||||||||||||
Net Assets | $ | 606,248,576 | $ | 527,750,216 | $ | 533,313,125 | $ | 1,362,164,059 | $ | 215,194,337 | ||||||||||
Shares outstanding ($0.01 par value, | ||||||||||||||||||||
unlimited shares authorized) | 63,376,540 | 49,751,815 | 46,982,643 | 133,145,938 | 21,135,556 | |||||||||||||||
Net asset value, offering and | ||||||||||||||||||||
redemption price per share | $ | 9.57 | $ | 10.61 | $ | 11.35 | $ | 10.23 | $ | 10.18 | ||||||||||
INVESTOR CLASS SHARES | ||||||||||||||||||||
Net Assets | $ | 6,707,632 | $ | 196,663,681 | $ | 35,117,120 | $ | 45,507,621 | ||||||||||||
Shares outstanding ($0.01 par value, | ||||||||||||||||||||
unlimited shares authorized) | 611,624 | 16,995,739 | 3,349,720 | 4,337,694 | ||||||||||||||||
Net asset value, offering and | ||||||||||||||||||||
redemption price per share | $ | 10.97 | $ | 11.57 | $ | 10.48 | $ | 10.49 |
The accompanying notes are an integral part of these financial statements.
Page 109
Baird Funds, Inc.
Statements of Operations Year Ended December 31, 2009 |
Baird | ||||||||||||||||||||
Baird | Baird | Intermediate | Baird | Baird | ||||||||||||||||
Short-Term | Intermediate | Municipal | Aggregate | Core Plus | ||||||||||||||||
Bond Fund | Bond Fund | Bond Fund | Bond Fund | Bond Fund | ||||||||||||||||
INVESTMENT INCOME: | ||||||||||||||||||||
Interest income, net of paydowns | $ | 18,094,171 | $ | 23,214,316 | $ | 15,936,585 | $ | 57,513,485 | $ | 15,153,854 | ||||||||||
Income from securities lending (Note 6) | 229,532 | 1,000,097 | — | 1,679,600 | 313,280 | |||||||||||||||
Other income | 13,558 | 11,812 | 2,439 | 16,750 | 5,436 | |||||||||||||||
Total investment income | 18,337,261 | 24,226,225 | 15,939,024 | 59,209,835 | 15,472,570 | |||||||||||||||
EXPENSES: | ||||||||||||||||||||
Investment advisory fee | 1,000,647 | 1,159,260 | 1,273,391 | 2,612,894 | 554,906 | |||||||||||||||
Administration fee | 200,130 | 231,852 | 254,678 | 522,579 | 110,981 | |||||||||||||||
Distribution expense – | ||||||||||||||||||||
Investor class shares (Note 8) | — | 13,382 | 315,082 | 80,422 | 96,283 | |||||||||||||||
Interest expense (Note 7) | — | — | — | — | 32 | |||||||||||||||
Total expenses | 1,200,777 | 1,404,494 | 1,843,151 | 3,215,895 | 762,202 | |||||||||||||||
NET INVESTMENT INCOME | 17,136,484 | 22,821,731 | 14,095,873 | 55,993,940 | 14,710,368 | |||||||||||||||
REALIZED AND UNREALIZED | ||||||||||||||||||||
GAIN (LOSS) ON INVESTMENTS: | ||||||||||||||||||||
Net realized loss on investments | (319,472 | ) | (1,483,476 | ) | (222,538 | ) | (2,091,077 | ) | (503,979 | ) | ||||||||||
Net change in unrealized | ||||||||||||||||||||
appreciation/depreciation on investments, | ||||||||||||||||||||
support agreement and cash contribution | ||||||||||||||||||||
from Transfer Agent/Administrator | 14,215,370 | 29,816,507 | 12,959,957 | 53,582,372 | 17,693,160 | |||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gain on investments | 13,895,898 | 28,333,031 | 12,737,419 | 51,491,295 | 17,189,181 | |||||||||||||||
NET INCREASE IN NET ASSETS | ||||||||||||||||||||
RESULTING FROM OPERATIONS | $ | 31,032,382 | $ | 51,154,762 | $ | 26,833,292 | $ | 107,485,235 | $ | 31,899,549 |
The accompanying notes are an integral part of these financial statements.
Page 110
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird Short-Term Bond Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2009 | December 31, 2008 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 17,136,484 | $ | 11,305,735 | ||||
Net realized gain (loss) on investments | (319,472 | ) | 217,036 | |||||
Net change in unrealized appreciation/depreciation on investments, support | ||||||||
agreement and cash contribution from Transfer Agent/Administrator | 14,215,370 | (14,687,311 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 31,032,382 | (3,164,540 | ) | |||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 489,964,818 | 178,053,687 | ||||||
Shares issued to holders in reinvestment of dividends | 15,743,300 | 10,505,667 | ||||||
Cost of shares redeemed | (128,314,054 | ) | (158,184,075 | ) | ||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 377,394,064 | 30,375,279 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (17,177,276 | ) | (11,301,816 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 391,249,170 | 15,908,923 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 214,999,406 | 199,090,483 | ||||||
End of year (including undistributed net investment | ||||||||
income of $51,213 and $32,582, respectively) | $ | 606,248,576 | $ | 214,999,406 |
The accompanying notes are an integral part of these financial statements.
Page 111
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird Intermediate Bond Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2009 | December 31, 2008 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 22,821,731 | $ | 22,412,911 | ||||
Net realized gain (loss) on investments | (1,483,476 | ) | 3,440,473 | |||||
Net change in unrealized appreciation/depreciation on investments, support | ||||||||
agreement and cash contribution from Transfer Agent/Administrator | 29,816,507 | (30,956,520 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 51,154,762 | (5,103,136 | ) | |||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 178,123,812 | 142,640,099 | ||||||
Shares issued to holders in reinvestment of dividends | 20,178,062 | 19,625,331 | ||||||
Cost of shares redeemed | (97,091,409 | ) | (130,271,025 | ) | ||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 101,210,465 | 31,994,405 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (22,664,664 | ) | (22,354,849 | ) | ||||
From net realized gains | (920,310 | ) | (26,596 | ) | ||||
Total Distributions | (23,584,974 | ) | (22,381,445 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (243,629 | ) | (174,810 | ) | ||||
From net realized gains | (11,476 | ) | (231 | ) | ||||
Total Distributions | (255,105 | ) | (175,041 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 128,525,148 | 4,334,783 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 405,932,700 | 401,597,917 | ||||||
End of year (including undistributed (distributed in excess of) net | ||||||||
investment income of $(138,821) and $87,193, respectively) | $ | 534,457,848 | $ | 405,932,700 |
The accompanying notes are an integral part of these financial statements.
Page 112
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird Intermediate Municipal Bond Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2009 | December 31, 2008 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 14,095,873 | $ | 5,141,918 | ||||
Net realized loss on investments | (222,538 | ) | (274,006 | ) | ||||
Net change in unrealized appreciation/depreciation on investments | 12,959,957 | 5,662,406 | ||||||
Net increase in net assets resulting from operations | 26,833,292 | 10,530,318 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 641,325,576 | 160,219,164 | ||||||
Shares issued to holders in reinvestment of dividends | 12,682,064 | 4,513,442 | ||||||
Cost of shares redeemed | (180,332,528 | ) | (33,490,109 | ) | ||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 473,675,112 | 131,242,497 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (10,821,254 | ) | (5,091,785 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (3,273,926 | ) | (97,675 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 486,413,224 | 136,583,355 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 243,563,582 | 106,980,227 | ||||||
End of year (including undistributed net investment | ||||||||
income of $693 and $0, respectively) | $ | 729,976,806 | $ | 243,563,582 |
The accompanying notes are an integral part of these financial statements.
Page 113
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird Aggregate Bond Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2009 | December 31, 2008 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 55,993,940 | $ | 44,829,005 | ||||
Net realized gain (loss) on investments | (2,091,077 | ) | 1,031,139 | |||||
Net change in unrealized appreciation/depreciation on investments, support | ||||||||
agreement and cash contribution from Transfer Agent/Administrator | 53,582,372 | (67,458,374 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 107,485,235 | (21,598,230 | ) | |||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 699,713,940 | 380,122,590 | ||||||
Shares issued to holders in reinvestment of dividends | 48,292,146 | 36,137,185 | ||||||
Cost of shares redeemed | (272,921,659 | ) | (217,594,354 | ) | ||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 475,084,427 | 198,665,421 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (55,302,673 | ) | (43,763,255 | ) | ||||
From net realized gains | (228,095 | ) | — | |||||
Total Distributions | (55,530,768 | ) | (43,763,255 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (1,622,760 | ) | (1,376,855 | ) | ||||
From net realized gains | (5,836 | ) | — | |||||
Total Distributions | (1,628,596 | ) | (1,376,855 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 525,410,298 | 131,927,081 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 871,870,881 | 739,943,800 | ||||||
End of year (including undistributed (distributed in excess of) net | ||||||||
investment income of $(259,285) and $0, respectively) | $ | 1,397,281,179 | $ | 871,870,881 |
The accompanying notes are an integral part of these financial statements.
Page 114
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird Core Plus Bond Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2009 | December 31, 2008 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 14,710,368 | $ | 9,185,656 | ||||
Net realized gain (loss) on investments | (503,979 | ) | 1,160,853 | |||||
Net change in unrealized appreciation/depreciation on investments, support | ||||||||
agreement and cash contribution from Transfer Agent/Administrator | 17,693,160 | (14,240,961 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 31,899,549 | (3,894,452 | ) | |||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 102,894,269 | 134,885,428 | ||||||
Shares issued to holders in reinvestment of dividends | 14,010,899 | 8,307,982 | ||||||
Cost of shares redeemed | (61,466,420 | ) | (57,613,955 | ) | ||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 55,438,748 | 85,579,455 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (12,301,553 | ) | (7,991,266 | ) | ||||
From net realized gains | (387,585 | ) | (689,704 | ) | ||||
Total Distributions | (12,689,138 | ) | (8,680,970 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (2,433,595 | ) | (1,208,915 | ) | ||||
From net realized gains | (80,519 | ) | (123,760 | ) | ||||
Total Distributions | (2,514,114 | ) | (1,332,675 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 72,135,045 | 71,671,358 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 188,566,913 | 116,895,555 | ||||||
End of year (including undistributed (distributed in excess of) net | ||||||||
investment income of $(55,799) and $0, respectively) | $ | 260,701,958 | $ | 188,566,913 |
The accompanying notes are an integral part of these financial statements.
Page 115
Baird Funds, Inc.
Financial Highlights |
Baird Short-Term Bond Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 9.25 | $ | 9.91 | $ | 9.81 | $ | 9.79 | $ | 9.93 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.41 | 0.52 | 0.48 | 0.43 | 0.33 | |||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.32 | (0.67 | ) | 0.10 | 0.02 | (0.15 | ) | |||||||||||||
Total from investment operations | 0.73 | (0.15 | ) | 0.58 | 0.45 | 0.18 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.41 | ) | (0.51 | ) | (0.48 | ) | (0.43 | ) | (0.32 | ) | ||||||||||
Net asset value, end of year | $ | 9.57 | $ | 9.25 | $ | 9.91 | $ | 9.81 | $ | 9.79 | ||||||||||
Total return | 8.14 | % | (1.79 | )% | 6.08 | % | 4.65 | % | 1.85 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 606,248,576 | $ | 214,999,406 | $ | 199,090,483 | $ | 148,604,711 | $ | 97,057,968 | ||||||||||
Ratio of expenses to average net assets | 0.30 | % | 0.30 | % | 0.30 | % | 0.30 | % | 0.30 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets | 4.28 | % | 5.01 | % | 5.00 | % | 4.48 | % | 3.52 | % | ||||||||||
Portfolio turnover rate | 55.5 | % | 98.5 | % | 36.6 | % | 41.1 | % | 31.8 | % |
The accompanying notes are an integral part of these financial statements.
Page 116
Baird Funds, Inc.
Financial Highlights |
Baird Intermediate Bond Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 10.00 | $ | 10.62 | $ | 10.52 | $ | 10.55 | $ | 10.83 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.51 | (1) | 0.55 | 0.54 | 0.51 | 0.46 | ||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.63 | (0.64 | ) | 0.10 | (0.03 | ) | (0.27 | ) | ||||||||||||
Total from investment operations | 1.14 | (0.09 | ) | 0.64 | 0.48 | 0.19 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.51 | ) | (0.53 | ) | (0.54 | ) | (0.51 | ) | (0.47 | ) | ||||||||||
Distributions from net realized gains | (0.02 | ) | — | — | — | — | ||||||||||||||
Total distributions | (0.53 | ) | (0.53 | ) | (0.54 | ) | (0.51 | ) | (0.47 | ) | ||||||||||
Net asset value, end of year | $ | 10.61 | $ | 10.00 | $ | 10.62 | $ | 10.52 | $ | 10.55 | ||||||||||
Total return | 11.76 | % | (0.91 | )% | 6.24 | % | 4.70 | % | 1.77 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 527,750,216 | $ | 401,914,872 | $ | 398,321,566 | $ | 326,835,399 | $ | 231,800,807 | ||||||||||
Ratio of expenses to average net assets | 0.30 | % | 0.30 | % | 0.30 | % | 0.30 | % | 0.30 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets | 4.92 | % | 5.14 | % | 5.13 | % | 4.90 | % | 4.34 | % | ||||||||||
Portfolio turnover rate(2) | 38.6 | % | 32.9 | % | 42.5 | % | 44.8 | % | 42.1 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 117
Baird Funds, Inc.
Financial Highlights |
Baird Intermediate Bond Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 10.32 | $ | 10.96 | $ | 10.85 | $ | 10.86 | $ | 11.13 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.50 | (1) | 0.52 | 0.52 | 0.50 | (1) | 0.45 | |||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.65 | (0.65 | ) | 0.10 | (0.03 | ) | (0.28 | ) | ||||||||||||
Total from investment operations | 1.15 | (0.13 | ) | 0.62 | 0.47 | 0.17 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.48 | ) | (0.51 | ) | �� | (0.51 | ) | (0.48 | ) | (0.44 | ) | |||||||||
Distributions from net realized gains | (0.02 | ) | — | — | — | — | ||||||||||||||
Total distributions | (0.50 | ) | (0.51 | ) | (0.51 | ) | (0.48 | ) | (0.44 | ) | ||||||||||
Net asset value, end of year | $ | 10.97 | $ | 10.32 | $ | 10.96 | $ | 10.85 | $ | 10.86 | ||||||||||
Total return | 11.51 | % | (1.31 | )% | 5.89 | % | 4.47 | % | 1.56 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 6,707,632 | $ | 4,017,828 | $ | 3,276,351 | $ | 1,207,214 | $ | 2,829,659 | ||||||||||
Ratio of expenses to average net assets | 0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets | 4.67 | % | 4.89 | % | 4.88 | % | 4.65 | % | 4.09 | % | ||||||||||
Portfolio turnover rate(2) | 38.6 | % | 32.9 | % | 42.5 | % | 44.8 | % | 42.1 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 118
Baird Funds, Inc.
Financial Highlights |
Baird Intermediate Municipal Bond Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 10.98 | $ | 10.69 | $ | 10.55 | $ | 10.56 | $ | 10.81 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income(1) | 0.32 | 0.39 | 0.37 | 0.39 | 0.39 | |||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.36 | 0.28 | 0.14 | (0.01 | ) | (0.25 | ) | |||||||||||||
Total from investment operations | 0.68 | 0.67 | 0.51 | 0.38 | 0.14 | |||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.31 | ) | (0.38 | ) | (0.37 | ) | (0.39 | ) | (0.39 | ) | ||||||||||
Net asset value, end of year | $ | 11.35 | $ | 10.98 | $ | 10.69 | $ | 10.55 | $ | 10.56 | ||||||||||
Total return | 6.22 | % | 6.37 | % | 4.93 | % | 3.69 | % | 1.33 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 533,313,125 | $ | 226,148,164 | $ | 106,583,763 | $ | 64,932,629 | $ | 53,831,848 | ||||||||||
Ratio of expenses to average net assets | 0.30 | % | 0.30 | % | 0.30 | % | 0.30 | % | 0.30 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets | 2.83 | % | 3.58 | % | 3.44 | % | 3.72 | % | 3.64 | % | ||||||||||
Portfolio turnover rate(2) | 0.7 | % | 0.9 | % | 5.6 | % | 25.1 | % | 13.7 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 119
Baird Funds, Inc.
Financial Highlights |
Baird Intermediate Municipal Bond Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.19 | $ | 10.90 | $ | 10.75 | $ | 10.75 | $ | 10.99 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income(1) | 0.29 | 0.36 | 0.35 | 0.37 | 0.37 | |||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.37 | 0.28 | 0.14 | (0.01 | ) | (0.25 | ) | |||||||||||||
Total from investment operations | 0.66 | 0.64 | 0.49 | 0.36 | 0.12 | |||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.28 | ) | (0.35 | ) | (0.34 | ) | (0.36 | ) | (0.36 | ) | ||||||||||
Net asset value, end of year | $ | 11.57 | $ | 11.19 | $ | 10.90 | $ | 10.75 | $ | 10.75 | ||||||||||
Total return | 5.95 | % | 6.02 | % | 4.68 | % | 3.44 | % | 1.13 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 196,663,681 | $ | 17,415,418 | $ | 396,464 | $ | 544,878 | $ | 1,491,666 | ||||||||||
Ratio of expenses to average net assets | 0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets | 2.58 | % | 3.33 | % | 3.19 | % | 3.47 | % | 3.39 | % | ||||||||||
Portfolio turnover rate(2) | 0.7 | % | 0.9 | % | 5.6 | % | 25.1 | % | 13.7 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 120
Baird Funds, Inc.
Financial Highlights |
Baird Aggregate Bond Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 9.74 | $ | 10.54 | $ | 10.51 | $ | 10.54 | $ | 10.74 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.54 | 0.56 | 0.54 | 0.52 | 0.49 | (1) | ||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.49 | (0.81 | ) | 0.03 | (0.03 | ) | (0.19 | ) | ||||||||||||
Total from investment operations | 1.03 | (0.25 | ) | 0.57 | 0.49 | 0.30 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.54 | ) | (0.55 | ) | (0.54 | ) | (0.52 | ) | (0.49 | ) | ||||||||||
Distributions from net realized gains | (0.00 | )(2) | — | — | (0.00 | )(2) | (0.01 | ) | ||||||||||||
Total distributions | (0.54 | ) | (0.55 | ) | (0.54 | ) | (0.52 | ) | (0.50 | ) | ||||||||||
Net asset value, end of year | $ | 10.23 | $ | 9.74 | $ | 10.54 | $ | 10.51 | $ | 10.54 | ||||||||||
Total return | 10.88 | % | (2.36 | )% | 5.61 | % | 4.88 | % | 2.85 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 1,362,164,059 | $ | 842,724,670 | $ | 725,580,384 | $ | 334,907,855 | $ | 227,132,399 | ||||||||||
Ratio of expenses to average net assets | 0.30 | % | 0.30 | % | 0.30 | % | 0.30 | % | 0.30 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets | 5.37 | % | 5.46 | % | 5.37 | % | 5.11 | % | 4.56 | % | ||||||||||
Portfolio turnover rate(3) | 37.7 | % | 21.9 | % | 33.6 | % | 52.4 | % | 46.0 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Amount is less than ($0.01). |
(3) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 121
Baird Funds, Inc.
Financial Highlights |
Baird Aggregate Bond Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 9.97 | $ | 10.78 | $ | 10.73 | $ | 10.75 | $ | 10.95 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.52 | 0.52 | 0.53 | 0.50 | 0.47 | (1) | ||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.50 | (0.81 | ) | 0.04 | (0.02 | ) | (0.19 | ) | ||||||||||||
Total from investment operations | 1.02 | (0.29 | ) | 0.57 | 0.48 | 0.28 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.51 | ) | (0.52 | ) | (0.52 | ) | (0.50 | ) | (0.47 | ) | ||||||||||
Distributions from net realized gains | (0.00 | )(2) | — | — | (0.00 | )(2) | (0.01 | ) | ||||||||||||
Total distributions | (0.51 | ) | (0.52 | ) | (0.52 | ) | (0.50 | ) | (0.48 | ) | ||||||||||
Net asset value, end of year | $ | 10.48 | $ | 9.97 | $ | 10.78 | $ | 10.73 | $ | 10.75 | ||||||||||
Total return | 10.55 | % | (2.63 | )% | 5.45 | % | 4.61 | % | 2.54 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 35,117,120 | $ | 29,146,211 | $ | 14,363,416 | $ | 1,848,622 | $ | 1,289,926 | ||||||||||
Ratio of expenses to average net assets | 0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets | 5.12 | % | 5.21 | % | 5.12 | % | 4.86 | % | 4.31 | % | ||||||||||
Portfolio turnover rate(3) | 37.7 | % | 21.9 | % | 33.6 | % | 52.4 | % | 46.0 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Amount is less than ($0.01). |
(3) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 122
Baird Funds, Inc.
Financial Highlights |
Baird Core Plus Bond Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 9.46 | $ | 10.22 | $ | 10.16 | $ | 10.06 | $ | 10.38 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income(1) | 0.65 | 0.56 | 0.54 | 0.55 | 0.51 | |||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.74 | (0.73 | ) | 0.05 | 0.09 | (0.28 | ) | |||||||||||||
Total from investment operations | 1.39 | (0.17 | ) | 0.59 | 0.64 | 0.23 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.65 | ) | (0.55 | ) | (0.53 | ) | (0.54 | ) | (0.54 | ) | ||||||||||
Distributions from net realized gains | (0.02 | ) | (0.04 | ) | — | — | (0.01 | ) | ||||||||||||
Total distributions | (0.67 | ) | (0.59 | ) | (0.53 | ) | (0.54 | ) | (0.55 | ) | ||||||||||
Net asset value, end of year | $ | 10.18 | $ | 9.46 | $ | 10.22 | $ | 10.16 | $ | 10.06 | ||||||||||
Total return | 15.36 | % | (1.79 | )% | 5.99 | % | 6.58 | % | 2.23 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 215,194,337 | $ | 158,983,325 | $ | 114,421,895 | $ | 51,551,017 | $ | 32,173,459 | ||||||||||
Ratio of expenses to average net assets | 0.30 | % | 0.30 | % | 0.30 | % | 0.30 | % | 0.30 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets | 6.67 | % | 5.61 | % | 5.41 | % | 5.49 | % | 4.92 | % | ||||||||||
Portfolio turnover rate(2) | 33.2 | % | 27.7 | % | 47.4 | % | 62.0 | % | 37.6 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 123
Baird Funds, Inc.
Financial Highlights |
Baird Core Plus Bond Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 9.72 | $ | 10.50 | $ | 10.42 | $ | 10.30 | $ | 10.62 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income(1) | 0.64 | 0.53 | 0.53 | 0.54 | 0.49 | |||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.78 | (0.74 | ) | 0.06 | 0.09 | (0.29 | ) | |||||||||||||
Total from investment operations | 1.42 | (0.21 | ) | 0.59 | 0.63 | 0.20 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.63 | ) | (0.53 | ) | (0.51 | ) | (0.51 | ) | (0.51 | ) | ||||||||||
Distributions from net realized gains | (0.02 | ) | (0.04 | ) | — | — | (0.01 | ) | ||||||||||||
Total distributions | (0.65 | ) | (0.57 | ) | (0.51 | ) | (0.51 | ) | (0.52 | ) | ||||||||||
Net asset value, end of year | $ | 10.49 | $ | 9.72 | $ | 10.50 | $ | 10.42 | $ | 10.30 | ||||||||||
Total return | 15.06 | % | (2.07 | )% | 5.80 | % | 6.34 | % | 1.93 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 45,507,621 | $ | 29,583,588 | $ | 2,473,660 | $ | 288,928 | $ | 449,709 | ||||||||||
Ratio of expenses to average net assets | 0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets | 6.42 | % | 5.36 | % | 5.16 | % | 5.24 | % | 4.67 | % | ||||||||||
Portfolio turnover rate(2) | 33.2 | % | 27.7 | % | 47.4 | % | 62.0 | % | 37.6 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 124
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
1.ORGANIZATION
Baird Funds, Inc. (the “Corporation”) was incorporated on June 9, 2000 as a Wisconsin corporation and is registered as an open-end investment management company under the Investment Company Act of 1940, as amended (the “1940 Act”). The accompanying financial statements include the Baird Short-Term Bond Fund, Baird Intermediate Bond Fund, Baird Intermediate Municipal Bond Fund, Baird Aggregate Bond Fund and Baird Core Plus Bond Fund (each, a “Fund” and collectively, the “Funds”), five of the eight portfolios comprising the Corporation, each of which is diversified within the meaning of the 1940 Act. Robert W. Baird & Co. Incorporated (“Baird” or the “Advisor”) serves as investment advisor to the Funds.
The Baird Short-Term Bond Fund commenced operations with the sale of Institutional Class shares on August 31, 2004. The Baird Intermediate Municipal Bond Fund commenced operations with the sale of both Institutional and Investor class shares on March 30, 2001. The Baird Intermediate Bond Fund, Baird Aggregate Bond Fund and Baird Core Plus Bond Fund commenced operations with the sale of both Institutional and Investor class shares on September 29, 2000. The Institutional Class Shares are not subject to a distribution and service (12b-1) fee, while the Investor Class Shares are subject to a distribution and service (12b-1) fee up to 0.25%.
The investment objective of the Baird Short-Term Bond Fund is to provide an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Barclays Capital 1-3 Year U.S. Government/Credit Bond Index. The Barclays Capital 1-3 Year U.S. Government/Credit Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt including government and corporate securities with maturities between one and three years.
The investment objective of the Baird Intermediate Bond Fund is to provide an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Barclays Capital Intermediate U.S. Government/Credit Bond Index. The Barclays Capital Intermediate U.S. Government/Credit Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt, including government and corporate securities, with maturities between one and ten years.
The primary investment objective of the Baird Intermediate Municipal Bond Fund is to provide current income that is substantially exempt from federal income tax. A secondary objective is to provide total return with relatively low volatility of principal.
The investment objective of the Baird Aggregate Bond Fund is to provide an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Barclays Capital U.S. Aggregate Bond Index. The Barclays Capital U.S. Aggregate Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year.
The investment objective of the Baird Core Plus Bond Fund is to provide an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Barclays Capital U.S. Universal Bond Index. The Barclays Capital U.S. Universal Bond Index is an unmanaged, market value weighted index of fixed income securities issued in U.S. dollars, including U.S. government and investment grade debt, non-investment grade debt, asset-backed and mortgage-backed securities, Eurobonds, 144A securities and emerging market debt, with maturities of at least one year.
Page 125
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
2.SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America.
a) | Investment Valuation – Section 2(a)(41) of the 1940 Act, together with the rules and interpretations of the SEC, require the Funds, in computing NAV, to value their portfolio securities using market quotations when they are “readily available.” When market quotations are not readily available (e.g., because there is no regular market quotation for such securities, the market for such security is limited, the validity of quotations is questionable or, for debt securities, IDC, the Funds’ independent pricing service, does not provide a price), the Board of Directors of the Corporation must value the securities at “fair value determined in good faith.” The Board has delegated such responsibility to the Advisor pursuant to pricing policies and procedures that the Board has adopted and regularly reviews. In general, the “fair value” of a security means the price that would be received to sell a security in an orderly transaction between market participants at the measurement date. |
Consistent with Section 2(a)(41) of the 1940 Act, the Funds price their securities as follows: Debt securities are valued by an independent pricing service using valuation methods that are designed to represent fair value, such as matrix pricing and other analytical pricing models, market transactions and dealer quotations. Debt securities purchased with a remaining maturity of 60 days or less are valued at acquisition cost, plus or minus any amortized discount or premium which approximates fair value. Investments in mutual funds are valued at their stated net asset value. Common stocks that are listed on a securities exchange (other than NASDAQ) are valued at the last quoted sales price. Securities traded on Nasdaq are valued at the Nasdaq Official Closing Price. Price information on listed stocks is taken from the exchange where the security is primarily traded. Securities that were not traded on the valuation date, as well as stocks that are not listed on an exchange, including NASDAQ, are valued at the average of the current bid and asked price. Other assets and securities for which market quotations are not readily available are valued at fair value as determined in good faith by the Advisor in accordance with procedures approved by the Corporation’s Board of Directors. In accordance with such procedures, the Advisor may use broker quotes or prices obtained from alternative independent pricing services or, if the broker quotes or prices from alternative pricing services are unavailable or deemed to be unreliable, fair value will be determined by a valuation committee of the Advisor. In determining fair value, the valuation committee takes into account all relevant factors and available information. Consequently, the price of the security used by a Fund to calculate its NAV may differ from quoted or published prices for the same security. Fair value pricing involves subjective judgments and there is no single standard for determining a security’s fair value. As a result, different mutual funds could reasonably arrive at a different fair value for the same security. It is possible that the fair value determined for a security is materially different from the value that could be realized upon the sale of that security or from the values that other mutual funds may determine. In addition, given the volatility and periodic illiquidity experienced in recent years, the prices determined for any individual security on any given day may vary significantly from the amount that can be obtained in an actual sale of that security, and the Funds’ NAVs may fluctuate significantly from day to day or from period to period. |
Page 126
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
2.SIGNIFICANT ACCOUNTING POLICIES (cont.)
In January, 2010, FASB issued Accounting Standards Update No. 2010-06, Improving Disclosures about Fair Value Measurements (ASU 2010-06). ASU 2010-06 will require new disclosures regarding transfers in and out of Levels 1 and 2 (effective for interim and annual periods beginning after December 15, 2009), as well as additional details regarding Level 3 transaction activity (effective for interim and annual periods beginning after December 15, 2010). Management is currently evaluating the effect that the adoption of ASU 2010-06 will have on the Funds’ financial statements. |
b) | Unregistered Securities – Four of the Funds own certain investment securities which are unregistered and thus restricted with respect to resale. These securities are valued by the Advisor after giving due consideration to pertinent factors including recent private sales, market conditions and the issuer’s financial performance. The value of such securities for the Baird Short-Term Bond, Baird Intermediate Bond, Baird Aggregate Bond and Baird Core Plus Bond Funds were $63,938,438 (10.55% of net assets), $35,279,981 (6.60% of net assets), $81,901,761 (5.86% of net assets) and $9,475,381 (3.63% of net assets), respectively, at December 31, 2009. Restricted securities may be deemed to be liquid as determined by the Advisor based on several factors. All of the restricted securities held by the Funds as of December 31, 2009 consist of securities issued pursuant to Rule 144A under the Securities Act of 1933 and a majority have been deemed to be liquid. A restricted security that is held in each of the Baird Aggregate Bond and Baird Core Plus Bond Funds has been deemed illiquid. The value of the illiquid security is $1,300,000 (0.1% of net assets) in the Baird Aggregate Bond Fund and $200,000 (0.1% of net assets) in the Baird Core Plus Bond Fund. |
c) | Foreign Securities – Foreign securities are defined as securities of issuers that are organized outside the United States. The Funds may invest in U.S. dollar-denominated debt obligations of foreign companies and foreign governments. Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in U.S. companies and the U.S. government. These risks include foreign currency fluctuations, political and economic instability and differences in financial reporting standards and less strict regulation of securities markets. Moreover, securities of many foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies and the U.S. government. Occasionally, events that affect these values and exchange rates may occur after the close of the exchange on which such securities are traded. If such events materially affect the value of a Fund’s securities, these securities may be valued at their fair value pursuant to procedures adopted by the Board of Directors. |
d) | Federal Income Taxes – The Funds intend to continue to qualify as regulated investment companies as provided in subchapter M of the Internal Revenue Code and to distribute substantially all of their taxable income to their shareholders in a manner which results in no tax cost to the Funds. Therefore, no federal income or excise tax provision is recorded. |
There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2009, or for any other tax years which are open for exam. As of December 31, 2009, open tax years include the tax years ended December 31, 2006 through 2009. The Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next 12 months. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the year, the Funds did not incur any interest or penalties. |
Page 127
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
2.SIGNIFICANT ACCOUNTING POLICIES (cont.)
e) | Allocation of Income and Expenses – Each Fund is charged for those expenses directly attributable to it. Expenses directly attributable to a class of shares, such as Rule 12b-1 distribution fees, are charged to that class of shares. Income, expenses and realized and unrealized gains and losses are allocated to the classes based on their respective net assets. Expenses that are not directly attributable to a Fund are allocated among the Funds in the series in proportion to their assets. |
f) | Distributions to Shareholders – Dividends from net investment income are declared and paid monthly. Distributions of net realized capital gains, if any, are declared and paid at least annually. |
g) | Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. |
h) | Other – Investment and shareholder transactions are recorded on trade date. The Funds determine the gain or loss realized from investment transactions by comparing the original cost of the security lot sold with the net sales proceeds. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Premiums and discounts on the purchase of securities are amortized/accreted using the effective interest method. Accounting principles generally accepted in the United States of America require that permanent financial reporting and tax differences be reclassified in the capital accounts. |
i) | Guarantees and Indemnifications – In the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown and would involve future claims against the Funds that have not yet occurred. Based on experience, the Funds would expect the risk of loss to be remote. |
Page 128
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
3.CAPITAL SHARE TRANSACTIONS
The following table summarizes the capital share transactions of each Fund for the past two fiscal periods:
BAIRD SHORT-TERM BOND FUND
Year Ended | Year Ended | |||||||||||||||||
December 31, 2009 | December 31, 2008 | |||||||||||||||||
Institutional Class Shares | Shares | Amount | Institutional Class Shares | Shares | Amount | |||||||||||||
Shares sold | 51,660,852 | $ | 489,964,818 | Shares sold | 18,494,988 | $ | 178,053,687 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment of dividends | 2,122,851 | 15,743,300 | reinvestment of dividends | 1,090,024 | 10,505,667 | |||||||||||||
Shares redeemed | (13,654,484 | ) | (128,314,054 | ) | Shares redeemed | (16,418,698 | ) | (158,184,075 | ) | |||||||||
Net increase | 40,129,219 | $ | 377,394,064 | Net increase | 3,166,314 | $ | 30,375,279 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 23,247,321 | Beginning of year | 20,081,007 | |||||||||||||||
End of year | 63,376,540 | End of year | 23,247,321 |
BAIRD INTERMEDIATE BOND FUND
Year Ended | Year Ended | ||||||||||||||||
December 31, 2009 | December 31, 2009 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 16,872,604 | $ | 174,429,260 | Shares sold | 347,459 | $ | 3,694,552 | ||||||||||
Shares issued to | Shares issued to | ||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||
reinvestment of dividends | 1,929,787 | 19,930,214 | reinvestment of dividends | 23,175 | 247,848 | ||||||||||||
Shares redeemed | (9,254,232 | ) | (95,499,335 | ) | Shares redeemed | (148,358 | ) | (1,592,074 | ) | ||||||||
Net increase | 9,548,159 | $ | 98,860,139 | Net increase | 222,276 | $ | 2,350,326 | ||||||||||
Shares Outstanding: | Shares Outstanding: | ||||||||||||||||
Beginning of year | 40,203,656 | Beginning of year | 389,348 | ||||||||||||||
End of year | 49,751,815 | End of year | 611,624 |
Page 129
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
3.CAPITAL SHARE TRANSACTIONS (cont.)
BAIRD INTERMEDIATE BOND FUND (cont.)
Year Ended | Year Ended | ||||||||||||||||
December 31, 2008 | December 31, 2008 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 13,284,667 | $ | 139,033,374 | Shares sold | 344,090 | $ | 3,606,725 | ||||||||||
Shares issued to | Shares issued to | ||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||
reinvestment of dividends | 1,893,754 | 19,500,448 | reinvestment of dividends | 11,882 | 124,883 | ||||||||||||
Shares redeemed | (12,483,629 | ) | (127,498,417 | ) | Shares redeemed | (265,688 | ) | (2,772,608 | ) | ||||||||
Net increase | 2,694,792 | $ | 31,035,405 | Net increase | 90,284 | $ | 959,000 | ||||||||||
Shares Outstanding: | Shares Outstanding: | ||||||||||||||||
Beginning of year | 37,508,864 | Beginning of year | 299,064 | ||||||||||||||
End of year | 40,203,656 | End of year | 389,348 |
BAIRD INTERMEDIATE MUNICIPAL BOND FUND
Year Ended | Year Ended | ||||||||||||||||
December 31, 2009 | December 31, 2009 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 36,828,950 | $ | 414,425,545 | Shares sold | 19,786,729 | $ | 226,900,031 | ||||||||||
Shares issued to | Shares issued to | ||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||
reinvestment of dividends | 843,085 | 9,510,007 | reinvestment of dividends | 275,652 | 3,172,057 | ||||||||||||
Shares redeemed | (11,284,390 | ) | (127,288,012 | ) | Shares redeemed | (4,622,830 | ) | (53,044,516 | ) | ||||||||
Net increase | 26,387,645 | $ | 296,647,540 | Net increase | 15,439,551 | $ | 177,027,572 | ||||||||||
Shares Outstanding: | Shares Outstanding: | ||||||||||||||||
Beginning of year | 20,594,998 | Beginning of year | 1,556,188 | ||||||||||||||
End of year | 46,982,643 | End of year | 16,995,739 |
Page 130
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
3.CAPITAL SHARE TRANSACTIONS (cont.)
BAIRD INTERMEDIATE MUNICIPAL BOND FUND (cont.)
Year Ended | Year Ended | ||||||||||||||||
December 31, 2008 | December 31, 2008 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 13,276,639 | $ | 142,984,847 | Shares sold | 1,565,048 | $ | 17,234,317 | ||||||||||
Shares issued to | Shares issued to | ||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||
reinvestment of dividends | 411,841 | 4,420,800 | reinvestment of dividends | 8,443 | 92,642 | ||||||||||||
Shares redeemed | (3,060,912 | ) | (32,903,382 | ) | Shares redeemed | (53,682 | ) | (586,727 | ) | ||||||||
Net increase | 10,627,568 | $ | 114,502,265 | Net increase | 1,519,809 | $ | 16,740,232 | ||||||||||
Shares Outstanding: | Shares Outstanding: | ||||||||||||||||
Beginning of year | 9,967,430 | Beginning of year | 36,379 | ||||||||||||||
End of year | 20,594,998 | End of year | 1,556,188 |
BAIRD AGGREGATE BOND FUND
Year Ended | Year Ended | ||||||||||||||||
December 31, 2009 | December 31, 2009 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 68,500,208 | $ | 686,029,625 | Shares sold | 1,350,250 | $ | 13,684,315 | ||||||||||
Shares issued to | Shares issued to | ||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||
reinvestment of dividends | 4,709,712 | 46,694,029 | reinvestment of dividends | 157,672 | 1,598,117 | ||||||||||||
Shares redeemed | (26,546,959 | ) | (262,021,867 | ) | Shares redeemed | (1,080,732 | ) | (10,899,792 | ) | ||||||||
Net increase | 46,662,961 | $ | 470,701,787 | Net increase | 427,190 | $ | 4,382,640 | ||||||||||
Shares Outstanding: | Shares Outstanding: | ||||||||||||||||
Beginning of year | 86,482,977 | Beginning of year | 2,922,530 | ||||||||||||||
End of year | 133,145,938 | End of year | 3,349,720 |
Page 131
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
3.CAPITAL SHARE TRANSACTIONS (cont.)
BAIRD AGGREGATE BOND FUND (cont.)
Year Ended | Year Ended | ||||||||||||||||
December 31, 2008 | December 31, 2008 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 35,060,168 | $ | 355,079,855 | Shares sold | 2,373,145 | $ | 25,042,735 | ||||||||||
Shares issued to | Shares issued to | ||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||
reinvestment of dividends | 3,467,389 | 34,858,275 | reinvestment of dividends | 124,786 | 1,278,910 | ||||||||||||
Shares redeemed | (20,869,352 | ) | (208,295,492 | ) | Shares redeemed | (908,136 | ) | (9,298,862 | ) | ||||||||
Net increase | 17,658,205 | $ | 181,642,638 | Net increase | 1,589,795 | $ | 17,022,783 | ||||||||||
Shares Outstanding: | Shares Outstanding: | ||||||||||||||||
Beginning of year | 68,824,772 | Beginning of year | 1,332,735 | ||||||||||||||
End of year | 86,482,977 | End of year | 2,922,530 |
BAIRD CORE PLUS BOND FUND
Year Ended | Year Ended | ||||||||||||||||
December 31, 2009 | December 31, 2009 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 8,147,236 | $ | 79,141,942 | Shares sold | 2,376,910 | $ | 23,752,327 | ||||||||||
Shares issued to | Shares issued to | ||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||
reinvestment of dividends | 1,196,156 | 11,727,096 | reinvestment of dividends | 226,153 | 2,283,803 | ||||||||||||
Shares redeemed | (5,021,984 | ) | (48,391,591 | ) | Shares redeemed | (1,307,694 | ) | (13,074,829 | ) | ||||||||
Net increase | 4,321,408 | $ | 42,477,447 | Net increase | 1,295,369 | $ | 12,961,301 | ||||||||||
Shares Outstanding: | Shares Outstanding: | ||||||||||||||||
Beginning of year | 16,814,148 | Beginning of year | 3,042,325 | ||||||||||||||
End of year | 21,135,556 | End of year | 4,337,694 |
Page 132
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
3.CAPITAL SHARE TRANSACTIONS (cont.)
BAIRD CORE PLUS BOND FUND (cont.)
Year Ended | Year Ended | ||||||||||||||||
December 31, 2008 | December 31, 2008 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 9,503,375 | $ | 94,092,004 | Shares sold | 3,970,650 | $ | 40,793,424 | ||||||||||
Shares issued to | Shares issued to | ||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||
reinvestment of dividends | 808,307 | 7,891,717 | reinvestment of dividends | 41,410 | 416,265 | ||||||||||||
Shares redeemed | (4,691,588 | ) | (45,526,757 | ) | Shares redeemed | (1,205,342 | ) | (12,087,198 | ) | ||||||||
Net increase | 5,620,094 | $ | 56,456,964 | Net increase | 2,806,718 | $ | 29,122,491 | ||||||||||
Shares Outstanding: | Shares Outstanding: | ||||||||||||||||
Beginning of year | 11,194,054 | Beginning of year | 235,607 | ||||||||||||||
End of year | 16,814,148 | End of year | 3,042,325 |
4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION
During the year ended December 31, 2009, purchases and sales of investment securities (excluding short-term investments) were as follows:
Baird | ||||||||||||||||||||
Baird | Baird | Intermediate | Baird | Baird | ||||||||||||||||
Short-Term | Intermediate | Municipal | Aggregate | Core Plus | ||||||||||||||||
Bond Fund | Bond Fund | Bond Fund | Bond Fund | Bond Fund | ||||||||||||||||
Purchases: | ||||||||||||||||||||
U.S. Government | $ | 137,097,531 | $ | 67,940,758 | $ | — | $ | 501,053,832 | $ | 73,823,259 | ||||||||||
Other | $ | 440,360,906 | $ | 200,010,808 | $ | 460,221,441 | $ | 345,837,376 | $ | 52,989,832 | ||||||||||
Sales: | ||||||||||||||||||||
U.S. Government | $ | 37,666,907 | $ | 54,912,441 | $ | — | $ | 238,905,746 | $ | 37,984,347 | ||||||||||
Other | $ | 182,081,641 | $ | 122,377,625 | $ | 3,282,000 | $ | 151,235,600 | $ | 34,591,540 |
Page 133
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION (cont.)
At December 31, 2009, gross unrealized appreciation and depreciation of investments and distributable ordinary income and long-term capital gains for federal tax purposes were as follows:
Baird | ||||||||||||||||||||
Baird | Baird | Intermediate | Baird | Baird | ||||||||||||||||
Short-Term | Intermediate | Municipal | Aggregate | Core Plus | ||||||||||||||||
Bond Fund | Bond Fund | Bond Fund | Bond Fund | Bond Fund | ||||||||||||||||
Cost of Investments | $ | 747,195,034 | $ | 731,367,433 | $ | 696,658,134 | $ | 1,679,982,119 | $ | 302,195,243 | ||||||||||
Gross unrealized appreciation | $ | 9,016,085 | $ | 13,821,023 | $ | 20,978,848 | $ | 36,436,769 | $ | 13,742,755 | ||||||||||
Gross unrealized depreciation | (8,261,947 | ) | (12,997,659 | ) | (642,400 | ) | (48,060,047 | ) | (9,782,554 | ) | ||||||||||
Net unrealized | ||||||||||||||||||||
appreciation/(depreciation) | $ | 754,138 | $ | 823,364 | $ | 20,336,448 | $ | (11,623,278 | ) | $ | 3,960,201 | |||||||||
Undistributed ordinary income | $ | 70,771 | $ | — | $ | — | $ | — | $ | — | ||||||||||
Undistributed long-term capital gain | — | — | 693 | — | — | |||||||||||||||
Total distributable earnings | $ | 70,771 | $ | — | $ | 693 | $ | — | $ | — | ||||||||||
Other accumulated losses | $ | (377,838 | ) | $ | (1,491,543 | ) | $ | (833,103 | ) | $ | (2,732,699 | ) | $ | (479,761 | ) | |||||
Total accumulated earnings (losses) | $ | 447,071 | $ | (668,179 | ) | $ | 19,504,038 | $ | (14,355,977 | ) | $ | 3,480,440 |
Undistributed income or net realized gains for financial statement purposes may differ from amounts recognized for federal income tax purposes due to differences in the recognition and characterization of income, expense and capital gain items. The difference between book-basis and tax-basis unrealized appreciation is attributed primarily to the tax deferral of losses on wash sales.
Additionally, U.S. generally accepted accounting principles require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended December 31, 2009, the following table shows the reclassifications made:
Undistributed Net | Accumulated Net | Paid In | ||||||||||
Investment Income (Loss) | Realized Gain (Loss) | Capital | ||||||||||
Baird Short-Term Bond Fund | $ | 59,423 | $ | (59,423 | ) | $ | — | |||||
Baird Intermediate Bond Fund | $ | (139,452 | ) | $ | (12,576 | ) | $ | 152,028 | ||||
Baird Intermediate Municipal Bond Fund | $ | — | $ | — | $ | — | ||||||
Baird Aggregate Bond Fund | $ | 672,208 | $ | (640,850 | ) | $ | (31,358 | ) | ||||
Baird Core Plus Bond Fund | $ | (31,019 | ) | $ | 45,394 | $ | (14,375 | ) |
The permanent differences primarily relate to reclasses from paydown gains and losses from asset backed securities.
Page 134
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION (cont.)
The tax components of dividends paid during the periods shown below were as follows:
Year Ended | Year Ended | |||||||||||||||||||
December 31, 2009 | December 31, 2008 | |||||||||||||||||||
Distribution in | ||||||||||||||||||||
Ordinary | Excess of | Long-Term | Ordinary | Long-Term | ||||||||||||||||
Income | Ordinary | Capital Gains | Income | Capital Gains | ||||||||||||||||
Distributions | Income | Distributions | Distributions | Distributions | ||||||||||||||||
Baird Short-Term Bond Fund | $ | 17,177,276 | $ | — | $ | — | $ | 11,301,816 | $ | — | ||||||||||
Baird Intermediate Bond Fund | $ | 22,785,368 | $ | 123,303 | $ | 931,408 | $ | 22,529,659 | $ | 26,827 | ||||||||||
Baird Intermediate Municipal | ||||||||||||||||||||
Bond Fund | $ | 290,339 | $ | — | $ | — | $ | — | $ | — | ||||||||||
Baird Aggregate Bond Fund | $ | 57,128,006 | $ | 31,358 | $ | — | $ | 45,140,110 | $ | — | ||||||||||
Baird Core Plus Bond Fund | $ | 14,914,638 | $ | 14,375 | $ | 274,239 | $ | 9,954,603 | $ | 59,042 |
For the years ended December 31, 2009 and December 31, 2008, distributions of $13,804,841 and $5,189,460 ($15,555 of which was return of capital), respectively, from the Baird Intermediate Municipal Bond Fund were tax-exempt.
Under the current tax law, capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the year ended December 31, 2009, capital losses occurring between November 1, 2009 and December 31, 2009 that were deferred for the Baird Short-Term Bond Fund, Baird Intermediate Bond Fund, Baird Intermediate Municipal Bond Fund, Baird Aggregate Bond Fund and Baird Core Plus Bond Fund were $25,777, $1,302,764, $20,839, $394,498 and $400,265, respectively.
At December 31, 2009, accumulated net realized capital loss carryovers, if any, and the year(s) in which the capital loss carryovers expire were:
Capital Loss Carryover | Year of Expiration | ||||||||
Baird Short-Term Bond Fund | $ | 16,864 | 2014 | ||||||
335,197 | 2017 | ||||||||
Baird Intermediate Bond Fund | 188,779 | 2017 | |||||||
Baird Intermediate Municipal Bond Fund | 6,626 | 2012 | |||||||
184,660 | 2013 | ||||||||
51,283 | 2014 | ||||||||
76,723 | 2015 | ||||||||
290,404 | 2016 | ||||||||
202,568 | 2017 | ||||||||
Baird Aggregate Bond Fund | 2,338,201 | 2017 | |||||||
Baird Core Plus Bond Fund | 79,496 | 2017 |
Page 135
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION (cont.)
To the extent these Funds realize future net capital gains, those gains will be offset by any unused capital loss carryovers. During the year ended December 31, 2009, none of the Funds utilized capital loss carryovers.
5.INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Funds have entered into an Investment Advisory Agreement with Baird for the provision of investment advisory services. Pursuant to the Investment Advisory Agreement, the Advisor is entitled to receive a fee, calculated daily and payable monthly, at the annual rate of 0.25% for the Funds as applied to the respective Fund’s average daily net assets. Certain officers of the Advisor are also officers of the Funds.
The Funds have entered into an Administration Agreement with Baird. Under the Administration Agreement, the Advisor assumes and pays all expenses of the applicable Fund other than the investment advisory fees, fees under the 12b-1 plan, costs related to portfolio securities transactions and extraordinary or non-recurring expenses. Pursuant to the Administration Agreement, the Advisor is entitled to receive a fee, calculated daily and payable monthly, at the annual rate of 0.05% for the Funds as applied to the respective Fund’s average daily net assets.
U.S. Bancorp Fund Services, LLC serves as transfer agent, administrator, and accounting services agent for the Funds. U.S. Bank, N.A. serves as custodian for the Funds.
Baird (the “Distributor”) is the distributor of the Funds pursuant to a distribution agreement.
6.SECURITIES LENDING
Each Fund (other than the Intermediate Municipal Bond Fund) may lend up to one-third of its total assets (including such loans) to borrowers under terms of participation in a securities lending program administered by FAF Advisors, Inc., an affiliate of the Funds’ custodian, transfer agent and administrator. The securities lending agreement requires that loans are collateralized at all times in an amount equal to at least 102% of the market value of any loaned securities at the time of the loan, plus accrued interest.
The Funds receive compensation in the form of fees and earn interest on the cash collateral. The amount of fees depends on a number of factors including the type of security and length of the loan. Each Fund continues to receive interest payments or dividends on the securities loaned during the borrowing period. Each Fund has the right under the terms of the securities lending agreement to recall the securities from the borrower on demand.
As of December 31, 2009, the Baird Short-Term Bond Fund, Baird Intermediate Bond Fund, Baird Aggregate Bond Fund and Baird Core Plus Bond Fund had loaned securities that were collateralized by cash equivalents. The cash collateral is invested by the custodian in accordance with approved investment guidelines. Those guidelines require the cash collateral to be invested in readily marketable, high quality, short-term obligations; however, such investments are subject to risk of payment delays or default on the part of the issuer or counterparty or otherwise may not generate sufficient interest to support the costs associated with securities lending. A Fund could also experience delays in recovering its securities and possible loss of income or value if the borrower fails to return the borrowed securities, although the Funds are indemnified from this risk by contract with the securities lending agent.
Page 136
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
6.SECURITIES LENDING (cont.)
As of December 31, 2009, the market value of the securities on loan and payable on collateral due to broker were as follows:
Market Value of | Payable on Collateral | |||||||
Securities on Loan | due to Broker | |||||||
Baird Short-Term Bond Fund | $ | 146,901,069 | $ | 150,775,555 | ||||
Baird Intermediate Bond Fund | 196,134,461 | 201,064,928 | ||||||
Baird Aggregate Bond Fund | 270,775,757 | 277,419,165 | ||||||
Baird Core Plus Bond Fund | 45,998,846 | 47,142,525 |
The Funds receive cash as collateral in return for securities lent as part of a securities lending program. The collateral is invested in short-term securities including the Mount Vernon Securities Lending Prime Portfolio (a securities lending trust subject to Rule 2a-7 under the 1940 Act), other money market funds, certificates of deposit, commercial paper, corporate notes, government agency securities and repurchase agreements. The schedules of investments for the Funds include the particular cash collateral holdings as of December 31, 2009. The Funds intend to invest all of the cash collateral from securities lending in the Mount Vernon Securities Lending Prime Portfolio once their existing cash collateral holdings mature or are liquidated or otherwise paid down. At December 31, 2009, all of the cash collateral from securities lending was invested in the Mount Vernon Securities Lending Prime Portfolio, plus an interest in Atlantic East Funding LLC and shares of the Reserve Primary Fund. The Funds’ interest in Atlantic East Funding LLC and the Reserve Primary Fund are priced at fair value by the Valuation Committee of the Advisor. The fair value of the Funds’ interest in Atlantic East Funding LLC is based on the underlying market values of the securities owned by Atlantic East Funding LLC, which are determined by independent pricing sources. In addition, the Funds’ transfer agent and administrator and securities lending agent entered into a support agreement with the Funds to cover potential losses realized by the Funds’ on their investment in Atlantic East Funding LLC (up to a certain amount). The amounts agreed to be provided to the Funds under the support agreement are shown in the Funds’ schedules of investments and statements of assets and liabilities. At December 31, 2009, the fair value of the Funds’ interest in Atlantic East Funding LLC, plus the amounts payable under the support agreement, amounted to 98.33% of the outstanding par value of the Funds’ interest in Atlantic East Funding LLC.
The fair value of the Reserve Primary Fund shares owned by the Funds is based on publicly available information, including information posted on the Reserve Primary Fund’s website and the terms of a plan of distribution approved by a federal district court. In addition, pursuant to a loss reimbursement agreement, the Funds’ transfer agent and administrator made a cash contribution to the Funds to cover anticipated losses realized from the Funds’ ownership of shares of the Reserve Primary Fund. The amounts of the cash contribution made to the Funds are shown in the Funds’ schedules of investments and statements of assets and liabilities. At December 31, 2009, the cash contribution made by the Funds’ transfer agent and administrator was sufficient to cover the difference between the fair value of the Reserve Primary Fund shares owned by the Funds and the amount paid by the Fund for such shares ($1.00 per share).
The interest income earned by the Funds on investments of cash collateral received from borrowers for the securities loaned to them (“securities lending income”) is reflected in the Funds’ statements of operations. From July 2008 through January 2009, the Funds retained and did not recognize for financial reporting purposes their securities lending income. Amounts
Page 137
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
6.SECURITIES LENDING (cont.)
so retained were placed in reserve to cover potential losses on the Funds’ interest in Atlantic East Funding LLC that could exceed the amount provided by the Funds’ transfer agent and administrator and securities lending agent under the support agreement. All of such retained securities lending income was recognized and distributed in the second half of 2009 after it was determined that it was unlikely that realized losses on the Funds’ interest in Atlantic East Funding LLC would exceed amounts provided under the support agreement. The securities lending income recognized by the Funds in 2009, including amounts that were retained from July 2008 through January 2009 and securities lending income earned after January 2009, was $229,532 for the Short-Term Bond Fund, $1,000,097 for the Intermediate Bond Fund, $1,679,600 for the Aggregate Bond Fund, and $313,280 for the Core Plus Bond Fund.
7.LINE OF CREDIT
The Corporation maintains an uncommitted, senior secured line of credit (“LOC”) with U.S. Bank, N.A. (the “Bank”) to provide the Funds a temporary liquidity source to meet unanticipated redemptions. Under the terms of the LOC, borrowings for each Fund are limited to one-third of the total assets (including the amount borrowed) of the respective Fund, or as otherwise indicated within the Funds’ agreement with the Bank. The Bank charges interest at the Bank’s Prime Rate less 1% (weighted average rate of 2.25% during 2009). For the year ended December 31, 2009, the Baird Core Plus Bond Fund incurred $32 in interest charges on an average daily loan balance of $8,142. The Baird Short-Term Bond Fund, Baird Intermediate Bond Fund, Baird Intermediate Municipal Bond Fund and Baird Aggregate Bond Fund did not incur interest charges on the LOC during the period.
8.DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
The Funds have adopted a distribution and shareholder service plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan allows the Funds to compensate the Distributor for the costs incurred in distributing the Funds’ Investor Class Shares, including amounts paid to brokers or dealers, at an annual rate not to exceed 0.25% of the average daily net assets of the Funds’ Investor Class Shares. The Baird Intermediate Bond, Baird Intermediate Municipal Bond, Baird Aggregate Bond and Baird Core Plus Bond Funds incurred $13,382, $315,082, $80,422 and $96,283, respectively, in fees pursuant to the Plan during the year ending December 31, 2009.
9.SUBSEQUENT EVENT
In preparing these financial statements, the Corporation has evaluated events and transactions for potential recognition or disclosure through February 26, 2010, the date the financial statements were issued and available. There were no additional subsequent events to report that would have a material impact on the Funds’ financial statements.
Page 138
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Baird Funds, Inc.
We have audited the accompanying statements of assets and liabilities of Baird Intermediate Bond Fund, Baird Aggregate Bond Fund, Baird Intermediate Municipal Bond Fund, Baird Core Plus Bond Fund and Baird Short-Term Bond Fund (five of the eight funds constituting Baird Funds, Inc.) (collectively, the “Funds”), including the schedules of investments, as of December 31, 2009, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the aforementioned Funds of Baird Funds, Inc. as of December 31, 2009, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
![]() |
Chicago, Illinois
February 26, 2010
Page 139
Baird Funds, Inc.
Directors & Officers |
Number of | |||||||
Portfolios | Other | ||||||
Positions | Term of Office | Principal | in Complex | Directorships | |||
Held with | and Length of | Occupation(s) | Overseen | Held | |||
Name, Address and Age | the Funds | Time Served | During Past 5 Years | by Director | by Director | ||
G. Frederick Kasten, Jr. | Independent | Indefinite; | Retired; Chairman, the Advisor (January 2000-December | 8 | Director of Regal-Beloit | ||
777 East Wisconsin Avenue | Director and | Since September | 2005); Chairman and CEO, the Advisor (January 1998- | Corporation, a | |||
Milwaukee, WI 53202 | Chairman | 2000 | January 2000); President, Chairman and CEO, the | manufacturing | |||
Age: 70 | Advisor (June 1983-January 1998); President, the Advisor | company | |||||
(January 1979-January 1983) | |||||||
John W. Feldt | Independent | Indefinite; | Retired; Senior Vice President-Finance, University of | 8 | Director of Thompson | ||
c/o University of | Director | Since September | Wisconsin Foundation (1985-2006); Vice President- | Plumb Funds, Inc., a | |||
Wisconsin Foundation | 2000 | Finance, University of Wisconsin Foundation (1980-1985); | mutual fund complex | ||||
1848 University Avenue | Associate Director, University of Wisconsin Foundation | (3 portfolios); Trustee | |||||
Madison, WI 53705 | (1967-1980) | of Nakoma Mutual | |||||
Age: 67 | Funds, a mutual fund | ||||||
complex (1 portfolio) | |||||||
Frederick P. Stratton, Jr. | Independent | Indefinite; | Retired; Chairman Emeritus, Briggs & Stratton | 8 | Director of Weyco | ||
10134 N. Port Washington | Director | Since May | Corporation, a manufacturing company, since 2003; | Group, Inc., a men’s | |||
Road, #2B | 2004 | Chairman of the Board, Briggs & Stratton Corporation | footwear distributor; | ||||
Mequon, WI 53092 | (2001-2002); Chairman and CEO, Briggs & Stratton | Director of Wisconsin | |||||
Age: 70 | Corporation (1986-2001) | Energy Corporation | |||||
and its subsidiaries, | |||||||
Wisconsin Electric | |||||||
Power Company and | |||||||
Wisconsin Gas LLC | |||||||
Marlyn J. Spear, CFA | Independent | Indefinite; | Chief Investment Officer, Building Trades United | 8 | Management Trustee of | ||
P. O. Box 530 | Director | Since January | Pension Trust Fund, since July 1989; Investment Officer, | AFL-CIO Housing | |||
500 Elm Grove Road | 2008 | Northwestern Mutual Financial Network (1988-1989); | Investment Trust, a | ||||
Elm Grove, WI 53122 | Assistant Vice-President, Firstar Trust Company | mutual fund complex | |||||
Age: 56 | (1978-1987); Financial Analyst, Harco Holdings, Inc. | (1 portfolio) | |||||
(1976-1978) | |||||||
Cory L. Nettles* | Interested | Indefinite; | Managing Director, Generation Growth Capital, Inc., | 8 | Director of Weyco | ||
Generation Growth Capital, Inc. | Director | Since January | since March 2007; Of Counsel, Quarles & Brady LLP, | Group, Inc., a men’s | |||
411 East Wisconsin Avenue, | 2008 | since January 2005; Secretary, Wisconsin Department | footwear distributor; | ||||
Suite 1710, | of Commerce (January 2003 – January 2005) | Director of The | |||||
Milwaukee, WI 53202 | PrivateBank, a | ||||||
Age: 39 | financial institution | ||||||
* | Mr. Nettles is an “interested person” of the Corporation (as defined in the 1940 Act) because of his association with the law firm, Quarles & Brady LLP, which provides legal services to the Advisor. The legal services that Quarles & Brady LLP has provided to the Advisor include litigation, real estate, trademark and miscellaneous securities related matters that did not relate to the Corporation or the Funds. |
Additional information about the Funds’ directors is available in the Statement of Additional Information which may be obtained without charge, upon request, by calling 1-866-44BAIRD, or at www.bairdfunds.com.
Page 140
Baird Funds, Inc.
Directors & Officers |
Position(s) | Term of Office | Principal | |||
Held with | and Length of | Occupation(s) | |||
Name, Address, and Age | the Funds | Time Served | During Past 5 Years | ||
Mary Ellen Stanek | President | Re-elected by | Managing Director, the Advisor, and Chief Investment Officer, Baird Advisors, a department of | ||
777 East Wisconsin Avenue | Board annually; | the Advisor, since March 2000 | |||
Milwaukee, WI 53202 | Since | ||||
Age: 53 | September 2000 | ||||
Charles B. Groeschell | Vice President | Re-elected by | Managing Director, the Advisor, and Senior Portfolio Manager, Baird Advisors, a department of | ||
777 East Wisconsin Avenue | Board annually; | the Advisor, since February 2000 | |||
Milwaukee, WI 53202 | Since | ||||
Age: 56 | January 2010 | ||||
Todd S. Nichol | Vice President | Re-elected by | Chief Compliance Officer, the Advisor since October 2004; Assistant Compliance Director, the | ||
777 East Wisconsin Avenue | and Chief | Board annually; | the Advisor since August 2002; Senior Vice President, the Advisor since January 2005; First Vice | ||
Milwaukee, WI 53202 | Compliance | Since | President, the Advisor (January 2004-January 2005) | ||
Age: 47 | Officer | August 2004 | |||
Russell P. Schwei | Vice President | Re-elected by | Director of Operations, the Advisor since July 1992; Managing Director, the Advisor since January | ||
777 East Wisconsin Avenue | Board annually; | 1997 | |||
Milwaukee, WI 53202 | Since | ||||
Age: 50 | September 2000 | ||||
Leonard M. Rush | Treasurer | Re-elected by | Chief Financial Officer, the Advisor since January 2000 | ||
777 East Wisconsin Avenue | Board annually; | ||||
Milwaukee, WI 53202 | Since | ||||
Age: 63 | September 2000 | ||||
Charles M. Weber | Secretary | Re-elected by | Managing Director, the Advisor since January 2009; Senior Vice President, the Advisor | ||
777 East Wisconsin Avenue | Board annually; | (July 2005-December 2008); Associate General Counsel, the Advisor since July 2005; Partner, | |||
Milwaukee, WI 53202 | Since | Quarles & Brady LLP, a law firm (October 1998-June 2005) | |||
Age: 46 | September 2005 | ||||
Laura E. Piotrowski | Assistant | Re-elected by | Managing Director, the Advisor since January 2008; Senior Vice President, the Advisor (January | ||
777 East Wisconsin Avenue | Treasurer | Board annually; | 2003-December 2007); Controller, the Advisor since January 2003 | ||
Milwaukee, WI 53202 | Since | ||||
Age: 40 | August 2007 | ||||
John R. Sokolowski | AML | Re-elected by | AML Compliance Officer, the Advisor since March 2009; Internal Auditor, the Advisor (December | ||
777 East Wisconsin Avenue | Compliance | Board annually; | 2006-March 2009); Accounting Analyst, UMB Fund Services (December 2005-December 2006); | ||
Milwaukee, WI 53202 | Officer | Since | United States Air Force (July 2001-December 2005) | ||
Age: 34 | March 2009 | ||||
Bret T. Reese | Assistant | Re-elected by | First Vice President, the Advisor since January 2009; Vice President, the Advisor (June | ||
777 East Wisconsin Avenue | Secretary | Board annually; | 2005-December 2008); Associate General Counsel, the Advisor since June 2005; Senior Financial | ||
Milwaukee, WI 53202 | Since | Analyst, the Advisor (August 2004-June 2005) | |||
Age: 40 | August 2006 | ||||
Page 141
Baird Funds, Inc.
DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD BOND FUNDS
The Board of Directors (the “Board”) of Baird Funds, Inc. (the “Corporation”) met on August 20, 2009 to consider the annual renewal of the investment advisory agreement with Robert W. Baird & Co. Incorporated (“Baird” or the “Advisor”) for management of the Baird Intermediate Bond, Baird Core Plus Bond, Baird Aggregate Bond, Baird Short-Term Bond, and Baird Intermediate Municipal Bond Funds, which are mutual fund series or portfolios of the Corporation (the “Funds”). The Board reviewed and discussed various information that had been provided prior to the meeting, including the investment advisory agreement, memoranda provided by outside legal counsel and the Secretary of the Funds discussing the Board’s fiduciary obligations and factors the Board should assess in considering the renewal of the investment advisory agreement, information in response to a request from the Board, including the directors who are not “interested persons” of the Corporation or the Advisor within the meaning of the Investment Company Act of 1940 (the “1940 Act”) (“Independent Directors”), from the Advisor (including the Advisor’s Form ADV, Annual Report and statement of financial condition), a profitability analysis, comparative information about the Funds’ performance for periods ended June 30, 2009, management fees and expense ratios, and other pertinent information. The Board also discussed relevant case law, including the Supreme Court’s forthcoming consideration of the Seventh Circuit decision in Jones v. Harris Associates, L.P. The Independent Directors met separately in executive session with Fund legal counsel to consider the investment advisory agreement. The Board discussed the Advisor’s 15(c) response with the President of the Funds, including how the Advisor has responded to the current economic downturn. The Board also received information periodically throughout the year that was relevant to its consideration of the investment advisory agreement, including performance, management fee and other expense information. Based on its evaluation of this information, the Board, including a majority of the Independent Directors, approved the continuation of the investment advisory agreement for an additional one-year period.
In considering the investment advisory agreement and reaching its conclusions, the Board reviewed and analyzed various factors that it determined were relevant, including the factors below.
Nature, Extent and Quality of Services Provided to the Funds
The Board analyzed the nature, extent and quality of the services provided by the Advisor to the Funds. The Board reviewed and considered the Advisor’s significant role in establishing the Funds and the construction of their investment objectives, principal strategies, investment limitations and fee structures. The Board noted the Advisor’s overall reputation and positive name recognition, the depth of the Advisor’s personnel, resources and commitment to the Funds, and the experience, credentials and continuity of the portfolio management teams employed to manage the Funds’ investments. The Board further noted that the Advisor has approximately $15.2 billion of assets under discretionary management and has strong relationships with numerous institutional accounts. The Funds provide an opportunity for smaller institutional and retail accounts to receive the same professional advice from the Advisor that it offers to its larger institutional clients. However, the Board noted that the provision of investment advisory services to the Funds requires more effort than it does for separately managed accounts due to daily sales and redemption activity and additional regulatory and compliance requirements. The Board considered the Advisor’s disciplined investment decision-making process used for the Funds. The Board also considered other services that the Advisor provided for the Funds in its capacity as their investment advisor, such as making some of its key personnel available to serve as officers of the Funds, selecting broker-dealers for execution of portfolio transactions, ensuring adherence to the Fund’s investment policies and restrictions, compliance, risk management
Page 142
Baird Funds, Inc.
DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD BOND FUNDS (cont.)
services, valuation, providing support services to the Board and the Audit Committee of the Board and overseeing the Funds’ other service providers. In addition, the Board considered that the Advisor provides administrative services to each of the Funds at an annual rate of 0.05% of the Fund’s average daily net assets, and is responsible for paying each Fund’s custody, transfer agency, accounting, printing, auditing, legal and director fees and other ordinary expenses (except for advisory and 12b-1 fees), which has the effect of capping the Funds’ expense ratios at 0.55% and 0.30% for Investor and Institutional Class shares, respectively. The Board further noted that the Advisor, in its capacity as a registered broker-dealer, also serves as distributor and principal underwriter of shares of the Funds and spends time and effort marketing the Funds. The Board also considered the strength of the Advisor’s compliance department, including the Funds’ chief compliance officer, the status of the recent SEC examination of the Advisor and the Funds and the fact that the Advisor has not experienced any significant legal, compliance or regulatory difficulties since the Funds were launched. The Board concluded that the nature, extent and quality of the services provided by the Advisor to the Funds were appropriate and that each Fund was likely to continue to benefit from services provided under the investment advisory agreement.
Investment Performance of the Advisor and the Funds
In considering the investment performance of each of the Funds, the Board reviewed information as of June 30, 2009 regarding the Fund’s performance in comparison to its benchmark index and its peer groups as determined by Lipper. The Board concluded that the Funds had performed extremely well over most time periods and had achieved consistent performance results. While certain Funds had underperformed their benchmark indices in recent time periods, the Board noted the challenging environment for bond funds in recent periods due to the credit market and other factors and referred to the Advisor’s commentary in this regard. The Board also noted that each of the Funds (both Institutional and Investor Class shares) had outperformed its Lipper peer group average over the past five-year and since inception periods, as applicable, and most had also outperformed the Lipper peer group average for the past one-year and three-year periods.
The Board also considered the Advisor’s quarterly portfolio commentaries and reviews explaining the Funds’ performance, the Advisor’s consistent and disciplined investment decision process and the investment strategies it employs for the Funds. After considering all of the information, the Board concluded that, although past performance is not a guarantee of future results, each Fund and its shareholders were likely to benefit from the Advisor’s continued management.
Costs of Services Provided and Profits Realized by the Advisor
The Board examined the fee and expense information for each of the Baird Intermediate Bond, Aggregate Bond, Intermediate Municipal Bond, Core Plus Bond and Short-Term Bond Funds, including a comparison of such information to other similarly situated mutual funds as determined by Lipper. The Board noted that each Fund’s advisory fee and total expense ratio (for both its Investor Class and Institutional Class shares) were significantly lower than the average and median advisory fees and expense ratios for all mutual funds in its Lipper category.
The Board also reviewed and considered investment management fees charged by the Advisor to other investment advisory clients and found that the fee paid by the Funds (0.25%) was less than the fee that the Advisor charges on the first $25 million (0.30%) of a separately managed account and the same as the fee that the Advisor charges on the next $25 million.
Page 143
Baird Funds, Inc.
DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD BOND FUNDS (cont.)
The Board noted and discussed the extent of the significant additional services provided to the Funds that the Advisor did not provide in the other advisory relationships. Those services included certain administrative services, oversight of the Funds’ other service providers, director support, risk management, regulatory compliance and various other services.
The Board considered the fees realized, and the costs incurred, by the Advisor in providing investment management services to the Funds and a profitability analysis with respect to each Fund. The Board noted the unique expense structure of the Funds whereby the Institutional Class shareholders were charged only a management fee and an administration fee and the Advisor incurred all of the other expenses on behalf of each Fund and that Investor Class shareholders incurred the same expenses as the Institutional Class shareholders plus a 0.25% 12b-1 fee. This structure means that the annual expense ratio for each Fund (as a percentage of average daily net assets) is 0.55% for Investor Class shares and 0.30% for Institutional Class shares.
The Board concluded that the profits realized by the Advisor from its relationship with the Funds were appropriate. The Board noted that the profitability information does not reflect certain internal resources provided by the Advisor to the Funds, such as legal and compliance support. The Board reviewed and considered the general financial condition of the Advisor and determined it to be sound. The Board also reviewed a report regarding revenue sharing payments, noting that any payments by the Advisor to third party platforms were made from the Advisor’s profits. In light of all of the information that it received and considered, the Board concluded that the management fee and total expense ratio of each Fund were reasonable.
Economies of Scale and Fee Levels Reflecting Those Economies
The Board noted that the Funds’ advisory fee structure does not contain any breakpoint reductions as the Funds grow in size. However, the Board recognized that the Advisor essentially bears all of the Funds’ expenses other than management, 12b-1 and administration fees. The Board also recognized that the advisory fee rates paid by the Funds were designed to be lower than the fees otherwise charged by the Advisor to its separately managed account clients and to be comparable to the second or third breakpoint advisory fee levels paid by other comparable mutual funds.
The Directors concluded that the current fee structure of each Fund was reasonable and that breakpoint reductions may be considered in the future depending on Fund asset levels.
Benefits Derived from the Relationship with the Funds
The Board noted that the Advisor does not have any soft dollar arrangements and does not realize any other tangible benefits in connection with its management of the Funds. The Board believed that the Funds generally benefit from their association with the Advisor and the use of the “Baird” name. The Board concluded that the other benefits realized by the Advisor from its relationship with the Funds were appropriate.
Based on its evaluation of the above factors, as well as other factors relevant to their consideration of the investment advisory agreement, the directors, including all of the Independent Directors, concluded that the continuation of the investment advisory agreement was in the best interest of each Fund and its shareholders.
Page 144
Additional Information
Proxy Voting
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Funds’ website at www.bairdfunds.com; and by accessing the SEC’s website at www.sec.gov.
Each Fund’s proxy voting record for the most recent 12-month period ended June 30, if applicable, is available without charge, upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Funds’ website at www.bairdfunds.com; and by accessing the SEC’s website at www.sec.gov. The Funds generally do not vote proxies because the securities held in their portfolios, consisting of bonds and other fixed-income securities, are not entitled to vote.
Portfolio Holdings Disclosure
The Funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-732-0330. The Funds’ Forms N-Q may also be obtained by calling toll-free 1-866-44BAIRD.
Tax Information
The percentage of taxable ordinary income distributions that are designated as short-term capital gain distributions under Internal Revenue Section 871(k)(2)(c) for the Baird Aggregate Bond Fund and Baird Core Plus Bond Fund were 0.41% and 1.30%, respectively.
Other Information Applicable to Foreign Shareholders Only
The Baird Short-Term Bond Fund hereby designates 99.97% of its ordinary income distributions for the fiscal year as interest-related dividends under Internal Revenue Code Section 871(k)(1)(C).
Page 145
(This Page Intentionally Left Blank.)
BAIRD FUNDS, INC.
PRIVACY POLICY
This disclosure is being made pursuant to Regulation S-P concerning the Fund’s privacy policy. It is our policy to protect the privacy and security of your personal and financial information. We treat your information as confidential and recognize the importance of protecting access to it.
We protect your privacy and treat as confidential any personal or financial information about you that we receive.
We collect and maintain information about you so that we can open and maintain your account in the Funds and provide various services to you. We may collect and maintain the following personal information about you:
• | Information we receive from you or your financial advisor on account applications or other forms, correspondence, or conversations, such as your name, address, e-mail address, phone number, social security number, assets, income and date of birth; and |
• | Information about your transactions with us, our affiliates, or others, such as your account number and balance, positions, activity, history, cost basis information, and other financial information. |
We do not sell any of your information to third parties. We do not disclose any nonpublic personal information about our current or former shareholders to nonaffiliated third parties, except as requested or authorized by the current or former shareholder, as necessary to process a transaction or service an account, as requested by regulatory authorities or as otherwise permitted or required by law. For example, we are permitted by law to disclose all of the information we collect, as described above, to our transfer agent to process your transactions. We may also provide your name and address to third party service providers who send account statements and other Fund-related material to you. We restrict access to your nonpublic personal information to those persons who require such information to provide products or services to you. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
In the event that you hold shares of the fund(s) through a financial intermediary, including, but not limited to, a broker-dealer, bank, or trust company, the privacy policy of your financial intermediary would govern how your nonpublic personal information would be shared with nonaffiliated third parties.
Page A-1
Baird Funds, Inc.
c/o U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
1-866-44BAIRD
Board of Directors
G. Frederick Kasten, Jr. (Chairman)
John W. Feldt
Frederick P. Stratton, Jr.
Cory L. Nettles
Marlyn J. Spear
Investment Advisor and Distributor
Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, WI 53202
Administrator and Transfer Agent
U.S. Bancorp Fund Services, LLC
P.O. Box 701
615 East Michigan Street
Milwaukee, WI 53202
Custodian
U.S. Bank, N.A.
1555 N. RiverCenter Drive, Suite 302
Milwaukee, WI 53212
Legal Counsel
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, WI 53202
Independent Registered Public Accounting Firm
Grant Thornton LLP
175 West Jackson Boulevard, 13th Floor
Chicago, IL 60604
![](https://capedge.com/proxy/N-CSR/0000898531-10-000257/baird-logo.jpg)
Annual Report - Baird Funds
Baird LargeCap Fund
Baird MidCap Fund
TABLE OF CONTENTS
Page | |
Letter to Shareholders | 1 |
2009 Economic and Stock Market Commentary | 2 |
Baird LargeCap Fund | 4 |
Baird MidCap Fund | 15 |
Additional Information on Fund Expenses | 26 |
Statements of Assets and Liabilities | 28 |
Statements of Operations | 29 |
Statements of Changes in Net Assets | 30 |
Financial Highlights | 32 |
Notes to the Financial Statements | 36 |
Report of Independent Registered Public Accounting Firm | 46 |
Directors and Officers | 47 |
Disclosure Regarding the Board of Directors’ Approval | |
of the Investment Advisory Agreement for Baird Equity Funds | 49 |
Additional Information | 52 |
Privacy Notice | A-1 |
This report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus.
Cautionary Note on Analyses, Opinions and Outlooks: In this report we offer analyses and opinions on the performance of individual securities, companies, industries, sectors, markets, interest rates and governmental policies, including predictions, forecasts and outlooks regarding possible future events. These can generally be identified as such because the context of the statements may include such words as “believe,” “should,” “will,” “expects,” “anticipates,” “hopes” and words of similar effect. These statements reflect the portfolio managers’ good faith beliefs and judgments and involve risks and uncertainties, including the risk that the portfolio managers’ analyses, opinions and outlooks are or will prove to be inaccurate. It is inherently difficult to correctly assess and explain the performance of particular securities, sectors, markets, interest rate movements, governmental actions or general economic trends and conditions, and many unforeseen factors contribute to the performance of Baird Funds. Investors are, therefore, cautioned not to place undue reliance on subjective judgments contained in this report.
![](https://capedge.com/proxy/N-CSR/0000898531-10-000257/baird-logo.jpg)
Baird Funds, Inc.
1-866-442-2473
www.bairdfunds.com
February 26, 2010
Dear Shareholder,
We appreciate the confidence and trust that you have placed in our experienced investment team to help you achieve your financial goals. We are pleased to report that net assets of the eight mutual funds in our family have grown to more than $3.6 billion as of the end of 2009, an increase of more than 83% compared to the prior year.
In this Annual Report we review the markets in 2009 and the performance and composition of the Baird LargeCap and MidCap Funds. We are pleased with the performance of the Funds in 2009 and feel that patience was rewarded as unprecedented market volatility and pricing dislocation subsided. Thank you again for choosing Baird Funds.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000898531-10-000257/mestanek-signature.jpg)
Mary Ellen Stanek, CFA
President
Baird Funds
2009 Economic and Stock Market Commentary
U.S. equities posted strong gains in 2009 with the Dow Jones Industrial Average rising 22.7% and the S&P 500® advancing 26.5%. Growth stocks generally outpaced the broader indices with the Russell 1000® Growth Index rising 37.2% and the Russell Midcap® Growth Index leading the way, up 46.3%. The road to such a strong year was anything but smooth. Simply put, the equity markets followed the prevailing theme behind economic discussions, which evolved from worry about a 1930s-like depression in the first quarter, to a drawn-out recession, to recovery – all within a year.
Ultimately the coordinated policy moves by central banks, which created massive stimulus, allowed healing to begin in most economies. Signs emerged in the latter half of 2009 and suggested that economic healing was underway. They included: a positively sloping yield curve, emerging market economic growth, a sharp rebound in corporate profits, and recovery in the leading economic indicators such as the Purchasing Managers Index. Furthermore, home prices turned positive and continuing unemployment claims began declining. These data points were reflected in the pattern of quarterly GDP growth, which bottomed at a striking -6.4% in the first quarter and then proceeded to improve each quarter. The initial report for the fourth quarter was positive growth of 5.7%. The transition from stimulus mode to sustainable economic growth is critical as we move into 2010.
Gains in 2009 equity prices were broad-based with all S&P 500 sectors showing positive returns. In fact, with the exception of the more defensive utilities and telecommunications sectors, double-digit gains were the norm. Technology stocks led the way as the sector’s higher-risk cyclical businesses and the large, established companies yielded very strong returns. The average technology stock, setting aside the influence of market capitalization, rose 71% in 2009.
The anticipatory nature of the market was evident when considering the return profile difference between consumer discretionary and consumer staples stocks. Both sectors provided positive returns, but the larger and more defensive nature of the staples companies resulted in the sector lagging the broader market as it rebounded along with improving economic data. Consumer discretionary stocks, including retail, media, and auto-related companies, exhibited typical early-cycle behavior and advanced sharply, even before GDP growth turned positive.
The health care sector was more volatile than normal due to the continued uncertainty surrounding health care reform. As the debate evolved during the year and a more modest reform profile started to take hold, sector performance improved. Energy and materials stocks, which, unlike health care, tend to move in a more volatile fashion, proved to be good areas for investment. As commodities prices rebounded during 2009, the stocks in these two sectors followed suit.
Financials rebounded from devastating returns in 2008, but the damage to investor confidence lingered as there was still ample weakness in the sector. The concern about credit losses and questions about capital adequacy continued to hurt the performance of regional bank stocks. Larger, more diversified financial companies, including those with market related fee businesses, performed much better.
From an equity market standpoint, we wouldn’t be surprised if most investors are happy to leave the past decade behind. The challenge of absorbing two recessions, which followed the bursting of bubbles in technology stocks and then house prices, proved too much to overcome. The broad S&P 500 index closed the decade 24% lower than it began.
Page 2
2009 Economic and Stock Market Commentary
Economic Outlook
We remain encouraged by the continuing rise in the GDP consensus forecast. The fourth quarter’s initial report far exceeded the consensus estimate of 3.0%, which was up from 2.2% just a few months earlier. The current GDP forecasts for both the first quarter of 2010 and full year stand at approximately 2.7%. Importantly, we expect many of the trends mentioned above to continue well into 2010, driving upside to corporate profits, estimates of GDP growth, and stock prices.
While the positive trends are favorable for the economy and markets, we remain concerned about overall employment, real estate (especially commercial), and the need/timing of Federal Reserve actions to drain liquidity from the system. Note that based on history, we should be seeing even greater GDP growth – on the order of 8% – after such as sharp downturn. The 2.7% consensus estimate for 2010 is indicative of natural conservatism coming out of such a destructive period, but also due to real structural headwinds that we face. These include high unemployment, still lofty consumer leverage, and the prospect for growing fiscal deficits.
Overall, we think the current economic backdrop and reasonable market valuation are supportive of higher stock prices. That said, we expect the pace of advancement will moderate relative to 2009 and periods of heightened volatility will occur. As the bull market has matured it has gathered more believers, but a fair amount of skepticism remains. There continues to be political and economic uncertainty ahead. However, cyclical forces will likely overwhelm structural challenges and markets often rise even in the face of long-term uncertainty. We remain optimistic about the outlook for economic and profit growth in the coming year and we believe we have our Funds positioned accordingly.
Page 3
Baird LargeCap Fund
Portfolio Managers’ Commentary
For the year ended December 31, 2009, the LargeCap Fund’s Institutional Class shares posted a total return of 36.27% (35.79% for the Investor Class shares), as compared to a return of 37.21% for the Russell 1000® Growth Index, the LargeCap Fund’s primary benchmark.
During the course of 2009 we adjusted the Fund’s exposure to benefit from an economic recovery, and we added to energy, industrial, and financials, using the proceeds from gains generated in our retail and technology holdings. The Fund responded well during the first three quarters of the year, ahead of the target index by about 300 basis points. The sharp fourth quarter rise in the target index proved a more difficult environment. While the Fund advanced 4.9% in the final quarter, it trailed the index by approximately 390 basis points, resulting in a shortfall for the year. Overall, we were pleased with the positive absolute return in 2009 and the way the Fund responded during the volatility experienced in the first quarter and strong rebound over the balance of the year.
The Fund’s overall exposure to the consumer discretionary (overweight) and staples (underweight) sectors was helpful throughout the year as the combined exposure added just over 100 basis points to the Fund’s relative performance. The consumer discretionary sector outperformed the Russell 1000® Growth Index, while the consumer staples sector underperformed the index. In the consumer discretionary sector, the Fund’s performance benefitted from the strong advance made by Amazon, Johnson Controls, and Kohl’s. As the year progressed the Fund lowered its exposure to the discretionary sector given its price strength. In particular, we trimmed several retail and related companies and worked toward a more diverse mix of companies. Many of the stocks in this sector display early cycle characteristics and move in anticipation of economic improvement. The Fund benefitted by carrying a low relative weight in the staples sector as many companies in this group are very large, provide relatively slow growth and tend to underperform in an economic recovery.
Regarding health care, we highlighted our concern throughout the year that the push for industry reform out of Washington, D.C. presented a risk to health care stocks. As a result, the Fund held fewer health care companies than what might be typical and this sector underweight assisted relative performance. However, as we moved through the fourth quarter we adjusted our thinking and began to add to our health care holdings. Our view was that even though a reform bill became more likely, key provisions in the plan took shape, and we were better able to analyze the fundamental impact of change on individual companies.
The Fund’s technology stocks produced the largest drag on relative performance for the year, approximately 300 basis points. In general, many of the Fund’s holdings performed well but did not keep pace with the sector’s sharp rise. Technology stocks led the market advance for the year. As we look at factors that impeded performance, two things stand out. First, many of the largest technology companies performed very well during the year; and second, many of the smaller and highly cyclical business models provided substantial returns. This combination presented a challenge for the Fund given its focus on finding high-quality companies with consistent performance, yet with market capitalizations not so large as to impede the potential for strong long-term growth. We were pleased to see several of the Fund’s larger holdings, Google, Corning and EMC, perform well fundamentally and be rewarded in the market. We trimmed back our holdings in the semiconductor industry as many of the stocks in this area experienced robust price moves during the year.
Page 4
Baird LargeCap Fund
The financial services sector was a modest drag on relative performance during 2009. State Street and Northern Trust, which carry relatively low credit risk, produced reasonable earnings for the October reporting cycle; however, they were not good enough for the market and the share prices declined while the average financial stock advanced in the fourth quarter. We still like these businesses for the long haul and expect their earnings will improve through 2010.
The Fund’s combined exposure to the energy and materials sectors provided a solid contribution to its relative performance. Attribution analysis points to strong stock selection in each of these sectors as the broad oil and gas services companies performed well during the year. In addition, investments targeted to take advantage of emerging global growth, particularly Posco and Freeport McMoran, proved to be timely.
The Fund’s higher relative weight in the industrial sector proved to be a headwind for performance and lagged the benchmark by approximately 100 basis points. The improvement in GDP during the year, which followed signs of increased industrial activity, did not translate to better stock price performance out of this group. We added to the Fund’s existing holdings on price weakness as we believe the economy is recovering ahead of most estimates. We’ve either been wrong or just early on our industrial sector positioning. We will actively monitor signs of industrial activity and the earnings progress of each company and adjust the portfolio holdings accordingly.
The LargeCap Fund remained consistently positioned below the average market cap of the target index. We continue to believe that developing large capitalization companies provide the most attractive growth profile for long-term investors. We will continue to operate with a fundamental focus and dedication to our investment process.
Portfolio Managers:
Douglas E. Guffy
Ken Hemauer, CFA
J. Bary Morgan, CFA
Page 5
Baird LargeCap Fund
A December 31, 2009 summary of the Fund’s top 10 holdings and equity sector analysis compared to the Russell 1000® Growth Index is shown below.
Top 10 Holdings* | Equity Sector Analysis** | ||
Baxter International, Inc. | 3.6% | ![]() | |
Google, Inc. - Class A | 3.1% | ||
Danaher Corporation | 3.0% | ||
Hewlett-Packard Company | 3.0% | ||
Praxair, Inc. | 2.8% | ||
Southwestern Energy Company | 2.7% | ||
Corning Incorporated | 2.7% | ||
Express Scripts, Inc. | 2.7% | ||
Allergan, Inc. | 2.7% | ||
Ecolab, Inc. | 2.7% | ||
Net Assets: | $21,088,687 | ||
Portfolio Turnover Rate: | 58.7% | ||
Number of Equity Holdings: | 54 | ||
Annualized Portfolio Expense Ratio:*** | |||
INSTITUTIONAL CLASS: | 0.75% | ||
INVESTOR CLASS: | 1.00% | **** | |
* | The Fund’s portfolio composition is subject to change and there is no assurance that the Fund will continue to hold any particular security. Percentages shown relate to the Fund’s total net assets as of December 31, 2009. |
** | Percentages shown in parentheses relate to the Fund’s total equity investments as of December 31, 2009, and may not add up to 100% due to rounding. |
*** | The Advisor has contractually agreed to limit the Fund’s total annual fund operating expenses to 0.75% of average daily net assets for the Institutional Class shares and 1.00% of average daily net assets for the Investor Class shares, at least through April 30, 2011. |
**** | Includes 0.25% 12b-1 fee. |
Page 6
Baird LargeCap Fund
Institutional Class |
Value of a $25,000 Investment |
![]() |
Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.
Investor Class |
Value of a $10,000 Investment |
![]() |
Growth of a hypothetical investment of $10,000 made on the Fund’s inception date (9/29/00), assuming reinvestment of all distributions.
Page 7
Baird LargeCap Fund
Average Annual Total Returns
For the Periods Ended December 31, 2009 | One Year | Five Years | Since Inception(1) |
Institutional Class Shares | 36.27% | -0.91% | -2.55% |
Investor Class Shares | 35.79% | -1.15% | -2.80% |
Russell 1000® Growth Index(2) | 37.21% | 1.63% | -4.16% |
(1) | For the period from September 29, 2000 (commencement of operations) through December 31, 2009. |
(2) | The Russell 1000® Growth Index measures the performance of those Russell 1000® companies with higher price-to-book ratios and higher forecasted growth values. This index does not reflect any deduction for fees, expenses or taxes. A direct investment in the index is not possible. |
The returns shown in the table above and line graphs on the previous page reflect reinvestment of dividends and/or capital gains distributions in additional shares. The returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
For information about the performance of the Fund as of the most recent month-end, please call 1-866-44BAIRD or visit www.bairdfunds.com. Mutual fund performance changes over time and current performance may be lower or higher than that stated.
Page 8
Baird LargeCap Fund
Schedule of Investments December 31, 2009 |
Shares | Value | ||||||
COMMON STOCKS – 98.7% | |||||||
Aerospace & Defense – 2.0% | |||||||
8,569 | ITT Industries, Inc.@ | $ | 426,222 | ||||
Air Freight & Logistics – 2.6% | |||||||
9,307 | C.H. Robinson | ||||||
Worldwide, Inc. | 546,600 | ||||||
Auto Components – 0.7% | |||||||
5,415 | Johnson Controls, Inc. | 147,505 | |||||
Biotechnology – 1.2% | |||||||
5,912 | Gilead Sciences, Inc.* | 255,871 | |||||
Capital Markets – 4.7% | |||||||
1,445 | The Goldman | ||||||
Sachs Group, Inc. | 243,974 | ||||||
3,044 | Northern Trust Corporation | 159,506 | |||||
6,866 | State Street Corporation | 298,946 | |||||
5,414 | T. Rowe Price Group, Inc. | 288,295 | |||||
990,721 | |||||||
Chemicals – 5.4% | |||||||
12,605 | Ecolab, Inc. | 561,931 | |||||
7,238 | Praxair, Inc. | 581,284 | |||||
1,143,215 | |||||||
Commercial Banks – 1.0% | |||||||
7,775 | Wells Fargo & Company | 209,847 | |||||
Communications Equipment – 9.2% | |||||||
29,323 | Corning Incorporated | 566,227 | |||||
20,000 | Juniper Networks, Inc.*@ | 533,400 | |||||
6,875 | QUALCOMM | ||||||
Incorporated | 318,038 | ||||||
7,850 | Research In | ||||||
Motion Limited* f @ | 530,189 | ||||||
1,947,854 | |||||||
Computers & Peripherals – 5.5% | |||||||
30,481 | EMC Corporation* | 532,503 | |||||
12,150 | Hewlett-Packard Company | 625,847 | |||||
1,158,350 | |||||||
Diversified Financial Services – 2.2% | |||||||
11,209 | J.P. Morgan Chase & Co. | 467,079 | |||||
Diversified Supply Services – 1.3% | |||||||
11,610 | Iron Mountain | ||||||
Incorporated*@ | 264,244 | ||||||
Electrical Equipment – 4.2% | |||||||
21,275 | ABB Limited – ADR f * | 406,353 | |||||
10,982 | Emerson Electric | ||||||
Company | 467,833 | ||||||
874,186 | |||||||
Electronic Equipment & Instruments – 1.6% | |||||||
11,025 | Agilent Technologies, Inc.* | 342,547 | |||||
Energy Equipment & Services – 1.7% | |||||||
5,587 | Schlumberger Limited f | 363,658 | |||||
Food & Staples Retailing – 2.9% | |||||||
4,365 | Costco Wholesale | ||||||
Corporation | 258,277 | ||||||
12,946 | Sysco Corporation | 361,711 | |||||
619,988 | |||||||
Health Care Equipment & Supplies – 6.0% | |||||||
12,816 | Baxter International, Inc. | 752,043 | |||||
34,825 | Boston Scientific | ||||||
Corporation* | 313,425 | ||||||
4,125 | Stryker Corporation | 207,776 | |||||
1,273,244 | |||||||
Health Care Providers & Services – 3.6% | |||||||
6,525 | Express Scripts, Inc.* | 564,086 | |||||
6,375 | UnitedHealth | ||||||
Group Incorporated | 194,310 | ||||||
758,396 | |||||||
Hotels, Restaurants & Leisure – 0.7% | |||||||
7,850 | International | ||||||
Game Technology | 147,345 | ||||||
Internet & Catalog Retail – 1.0% | |||||||
1,583 | Amazon.com, Inc.*@ | 212,945 |
The accompanying notes are an integral part of these financial statements.
Page 9
Baird LargeCap Fund
Schedule of Investments December 31, 2009 |
Shares | Value | ||||||
COMMON STOCKS – 98.7% (cont.) | |||||||
Internet Software & Services – 3.1% | |||||||
1,049 | Google, Inc. – Class A*@ | $ | 650,359 | ||||
IT Services – 4.3% | |||||||
7,900 | Infosys Technologies | ||||||
Limited – ADR f | 436,633 | ||||||
24,583 | Western Union Company | 463,390 | |||||
900,023 | |||||||
Life Sciences Tools & Services – 2.0% | |||||||
8,821 | Thermo Fisher | ||||||
Scientific, Inc.* | 420,673 | ||||||
Machinery – 4.7% | |||||||
8,417 | Danaher Corporation | 632,958 | |||||
7,259 | Illinois Tool Works, Inc. | 348,360 | |||||
981,318 | |||||||
Media – 1.5% | |||||||
9,730 | The Walt Disney Co.@ | 313,793 | |||||
Metals & Mining – 1.6% | |||||||
2,550 | POSCO – ADR f | 334,305 | |||||
Multiline Retail – 4.1% | |||||||
7,210 | Kohl’s Corporation* | 388,835 | |||||
9,695 | Target Corporation | 468,947 | |||||
857,782 | |||||||
Oil, Gas & Consumable Fuels – 4.1% | |||||||
4,810 | Anadarko Petroleum | ||||||
Corporation | 300,240 | ||||||
11,825 | Southwestern | ||||||
Energy Company* | 569,965 | ||||||
870,205 | |||||||
Personal Products – 0.7% | |||||||
3,240 | The Estee Lauder | ||||||
Companies Inc. – Class A | 156,686 | ||||||
Pharmaceutical – 2.7% | |||||||
8,925 | Allergan, Inc. | 562,364 | |||||
Semiconductor & Semiconductor Equipment – 4.9% | |||||||
18,365 | Altera Corporation@ | 415,600 | |||||
11,000 | Applied Materials, Inc. | 153,340 | |||||
7,732 | Broadcom Corporation – | ||||||
Class A*@ | 243,171 | ||||||
8,237 | Texas Instruments | ||||||
Incorporated@ | 214,656 | ||||||
1,026,767 | |||||||
Software – 2.3% | |||||||
13,380 | Adobe Systems, | ||||||
Incorporated*@ | 492,116 | ||||||
Specialty Retail – 3.6% | |||||||
10,150 | O ’Reilly Automotive, Inc.* | 386,918 | |||||
15,404 | Staples, Inc. | 378,784 | |||||
765,702 | |||||||
Trading Companies & Distributors – 1.6% | |||||||
7,972 | Fastenal Company@ | 331,954 | |||||
Total Common Stocks | |||||||
(Cost $17,453,864) | 20,813,864 | ||||||
SHORT-TERM INVESTMENTS – 2.8% | |||||||
Money Market Mutual Funds – 2.8% | |||||||
208,591 | Dreyfus Institutional | ||||||
Cash Advantage | |||||||
Fund, 0.13%« | 208,591 | ||||||
379,966 | Short-Term Investment | ||||||
Company Liquid Assets | |||||||
Portfolio – AIM | |||||||
Fund, 0.18%« | 379,966 | ||||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $588,557) | 588,557 |
The accompanying notes are an integral part of these financial statements.
Page 10
Baird LargeCap Fund
Schedule of Investments December 31, 2009 |
Principal | |||||||
Amount | Value | ||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 21.7% | |||||||
Commercial Paper – 0.6% | |||||||
$ | 216,381 | Atlantic East | |||||
Funding LLC, | |||||||
3.059%, 03/25/10 † ** | $ | 126,491 | |||||
Total Commercial Paper | 126,491 | ||||||
Shares | |||||||
Investment Companies – 21.1% | |||||||
4,418,575 | Mount Vernon | ||||||
Securities Lending Trust | |||||||
Prime Portfolio, 0.20%« | 4,418,575 | ||||||
44,854 | Reserve Primary Fund † ** | 37,834 | |||||
Total Investment | |||||||
Companies | 4,456,409 | ||||||
Total Investments Purchased | |||||||
with Cash Proceeds from | |||||||
Securities Lending | |||||||
(Cost $4,679,810) | 4,582,900 | ||||||
Total Investments | |||||||
(Cost $22,722,231) | |||||||
– 123.2% | 25,985,321 | ||||||
Assets Relating to Securities | |||||||
Lending (Note 6) – 0.5% | |||||||
Support Agreement * # ** | 86,055 | ||||||
Cash Contribution | |||||||
from Transfer Agent/ | |||||||
Administrator ‡ | 8,642 | ||||||
Total (Cost $0) | 94,697 | ||||||
Liabilities in Excess of | |||||||
Other Assets – (23.7)% | (4,991,331 | ) | |||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 21,088,687 |
* | Non-Income Producing | |
** | Illiquid | |
@ | This security or a portion of this security is out on loan at December 31, 2009. | |
f | Foreign Security | |
« | 7-Day Yield | |
† | Priced at fair value by the Valuation Committee as delegated by the Baird Funds’ Board of Directors. | |
# | The Fund’s transfer agent and administrator and securities lending agent entered into a support agreement with the Fund to cover potential losses realized by the Fund on its investment in Atlantic East Funding, LLC (up to a certain amount), which investment was made by the Fund’s securities lending agent. | |
‡ | Pursuant to a loss reimbursement agreement, the Fund’s transfer agent and administrator made a cash contribution to the Fund to cover anticipated losses realized from the Fund’s ownership of shares of the Reserve Primary Fund, which investment was made by the Fund’s securities lending agent. |
The accompanying notes are an integral part of these financial statements.
Page 11
Baird LargeCap Fund
Summary of Fair Value Exposure at December 31, 2009 |
The Fund has adopted authoritative fair valuation accounting standards which establish a definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion on changes in valuation techniques and related inputs during the period. These inputs are summarized into three broad levels and described below:
Level 1 – | Quoted prices in active markets for identical securities. |
Level 2 – | Other significant observable inputs (including quoted prices for similar securities, quoted prices in inactive markets, dealer indications, interest rates, yield curves, prepayment speeds, credit risk, default rates, inputs corroborated by observable market data, etc.). |
Level 3 – | Significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in pricing the security). |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Page 12
Baird LargeCap Fund
Summary of Fair Value Exposure at December 31, 2009 |
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2009:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity | ||||||||||||||||
Aerospace & Defense | $ | 426,222 | $ | — | $ | — | $ | 426,222 | ||||||||
Air Freight & Logistics | 546,600 | — | — | 546,600 | ||||||||||||
Auto Components | 147,505 | — | — | 147,505 | ||||||||||||
Biotechnology | 255,871 | — | — | 255,871 | ||||||||||||
Capital Markets | 990,721 | — | — | 990,721 | ||||||||||||
Chemicals | 1,143,215 | — | — | 1,143,215 | ||||||||||||
Commercial Banks | 209,847 | — | — | 209,847 | ||||||||||||
Communications Equipment | 1,947,854 | — | — | 1,947,854 | ||||||||||||
Computers & Peripherals | 1,158,350 | — | — | 1,158,350 | ||||||||||||
Diversified Financial Services | 467,079 | — | — | 467,079 | ||||||||||||
Diversified Supply Services | 264,244 | — | — | 264,244 | ||||||||||||
Electrical Equipment | 874,186 | — | — | 874,186 | ||||||||||||
Electronic Equipment & Instruments | 342,547 | — | — | 342,547 | ||||||||||||
Energy Equipment & Services | 363,658 | — | — | 363,658 | ||||||||||||
Food & Staples Retailing | 619,988 | — | — | 619,988 | ||||||||||||
Health Care Equipment & Supplies | 1,273,244 | — | — | 1,273,244 | ||||||||||||
Health Care Providers & Services | 758,396 | — | — | 758,396 | ||||||||||||
Hotels, Restaurants & Leisure | 147,345 | — | — | 147,345 | ||||||||||||
Internet & Catalog Retail | 212,945 | — | — | 212,945 | ||||||||||||
Internet Software & Services | 650,359 | — | — | 650,359 | ||||||||||||
IT Services | 900,023 | — | — | 900,023 | ||||||||||||
Life Science Tools & Services | 420,673 | — | — | 420,673 | ||||||||||||
Machinery | 981,318 | — | — | 981,318 | ||||||||||||
Media | 313,793 | — | — | 313,793 | ||||||||||||
Metals & Mining | 334,305 | — | — | 334,305 | ||||||||||||
Multiline Retail | 857,782 | — | — | 857,782 | ||||||||||||
Oil, Gas & Consumable Fuels | 870,205 | — | — | 870,205 | ||||||||||||
Personal Products | 156,686 | — | — | 156,686 | ||||||||||||
Pharmaceutical | 562,364 | — | — | 562,364 | ||||||||||||
Semiconductor & Semiconductor Equipment | 1,026,767 | — | — | 1,026,767 | ||||||||||||
Software | 492,116 | — | — | 492,116 | ||||||||||||
Specialty Retail | 765,702 | — | — | 765,702 | ||||||||||||
Trading Companies & Distributors | 331,954 | — | — | 331,954 | ||||||||||||
Total Equity | 20,813,864 | — | — | 20,813,864 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 588,557 | — | — | 588,557 | ||||||||||||
Total Short-Term Investments | 588,557 | — | — | 588,557 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 126,491 | — | 126,491 | ||||||||||||
Money Market Mutual Funds | 4,418,575 | — | 37,834 | 4,456,409 | ||||||||||||
Total Investments Purchased with | ||||||||||||||||
Cash Proceeds from Securities Lending | 4,418,575 | 126,491 | 37,834 | 4,582,900 | ||||||||||||
Total Investments | $ | 25,820,996 | $ | 126,491 | $ | 37,834 | $ | 25,985,321 | ||||||||
Other Assets Relating to Securities Lending Investments | 8,642 | 86,055 | — | 94,697 |
Page 13
Baird LargeCap Fund
Summary of Fair Value Exposure at December 31, 2009 |
Level 3 Reconciliation Disclosure
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
Description | Investments in Securities | |||
Balance as of December 31, 2008 | $ | 109,173 | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | — | |||
Change in unrealized appreciation (depreciation) | 1,622 | |||
Net purchases (sales) | (72,961 | ) | ||
Transfers in and/or out of Level 3 * | — | |||
Balance as of December 31, 2009 | $ | 37,834 |
* | The information used in the above reconciliation represents fiscal year to date activity for any investments identified as using Level 3 inputs at either the beginning or end of the current fiscal period. Transfers in or out of Level 3 represents either the beginning value (for transfers in) or ending value (for transfers out) of any security or instrument where a change in the pricing level occurred from the beginning to the end of the period. |
Page 14
Baird MidCap Fund
Portfolio Managers’ Commentary
The year 2009 saw strong returns for investors following the tumultuous events of 2008 and early 2009. We saw a return to normalcy, with liquidity re-established in bond markets, stabilization of the financial system, and economic stimulus providing a positive backdrop for stock market gains.
During the course of the year, the MidCap Fund reduced its exposure to more defensive areas that we had favored during the period of economic decline and added to more economically cyclical holdings, as the combination of earnings visibility, low inflation and investor sentiment steadily improved. In the strong market comeback of 2009, the MidCap Fund’s Institutional Class shares rose 40.90% (40.52% for the Investor Class shares). However, the Fund’s Institutional Class shares lagged its primary benchmark, the Russell MidCap® Growth Index, by 5.39%, largely due to the strong performance (not atypical in a sharp market rebound) of debt-laden and lower return-on-equity businesses that fall outside of the Fund’s focus on quality companies.
The lower-quality rebound was prevalent in the materials & processing sector. While the Fund’s holdings in materials rose 19.4%, the sector’s index components rose 55.3%, largely due to a large increase in chemical stocks and reflecting commodities price increases. The Fund generally focuses on businesses with unique competitive advantages, which tends to limit its holdings in commodity-oriented companies. True to form, the Fund’s holdings in such market-share leaders and stable businesses as Airgas (a leading industrial gas distributor), Aptar Group (specialized packaging components), Ecolab (restaurant sanitation supplies) and Watsco (building products) lagged the raw commodity producers.
On the other hand, a focus on quality names aided the Fund in the consumer discretionary sector, where the Fund’s holdings rose 62.6% against the benchmark’s 49.2%. Within the consumer discretionary sector, retail/apparel companies J. Crew, Urban Outfitters, Phillips Van Heusen and Dick’s Sporting Goods delivered strong performance as investors began anticipating a rebound in retail. Another beneficiary of the turn in the economy were advertising companies, which rose as cyclical winds shifted in the first half of 2009, with outdoor advertiser Lamar delivering strong stock performance for the Fund. Slot machine maker WMS delivered strong returns within the casinos and gambling sub-sector. Several other sub-sectors within consumer discretionary delivered mixed performance. We did successfully sidestep several weak areas, including education (we owned Strayer but sold mid-year). Two diverse companies with automotive exposure (Johnson Controls and LKQ) helped the Fund as this sub-sector began to recover.
The Fund’s financial sector names (up 19.7%) also lagged the benchmark, which rose 36.4%. After a universally dismal 2008, the financial sector began to move beyond 2008’s woes, but performance was widely differentiated by type of institution. The asset managers rocketed higher, and our holdings in T. Rowe, Eaton Vance and Invesco contributed positively to performance. The financial data processing sub-sector also performed well, and the Fund benefitted from holdings in Alliance Data and Global Payments. The regional banks, however, continued to struggle (lagging the performance of money center banks).
Technology stocks delivered strong gains in 2009, benefiting from better-than-expected corporate spending on IT and reflecting technology’s role as a driver of employee productivity. The Fund’s technology holdings rose 74.6%, slightly ahead of the index’s increase of 72.3%. Consumer electronics also remains a favorite item of consumers, driving stock performance of certain stocks (e.g., sound quality developer Dolby). Strong performance from software & services businesses
Page 15
Baird MidCap Fund
(up 107.5% vs. index up 59.5%), including holdings in Salesforce.com, Citrix, F5 and Akamai, offset weaker results from semiconductors and electrical components stocks. The computer technology sub-sector rose over 179% during 2009, and while we owned NetApp (up 146%) we missed a strong move in the disk drive makers. The same is true for communications technology and equipment, which delivered strong gains but where the Fund had no exposure.
With our move towards economically cyclical sectors that would benefit in a recovery, we established underweight positions in two defensive sectors, health care and consumer staples. This proved a good move, with the low allocation to these relatively weaker sectors aiding fund performance. Returns from individual stocks within health care were mixed: medical equipment makers Thoratec and Nuvasive performed poorly despite solid business fundamentals, while veterinary hospital operator VCA Antech was a strong performer. In consumer staples, Hain Celestial executed poorly, and was sold, while a late-year buyout offer for personal care products maker Chattem, from Sanofi-Aventis, boosted performance.
The improvement in industrial activity and GDP growth during the year did not translate to strong stock price action for the producer durables sector, which chalked up weak relative performance during 2009. The Fund saw weaker performance from scientific instruments names, offset by stronger performance from trucker JBHunt and a more than doubling of the shares of mining equipment company Bucyrus. We expect to see stronger performance from industrials in 2010 as prudent restructuring and cost cutting over the last couple of years should translate into better operating leverage and stock performance.
The Fund’s average cash position was 3.4% during 2009, costing about 2.21% in relative performance given strong market performance.
The MidCap Fund remained consistently positioned in favor of high-quality names that can deliver attractive returns with lower volatility than the stocks comprising the target index. We have positioned the Fund for the modest growth we expect in 2010, with attention to particular businesses that should demonstrate better rebound in profitability and stronger growth than peers. We will continue to operate with a fundamental focus and dedication to our investment process.
Portfolio Managers:
Carla N. Cooper, CFA
J. Bary Morgan, CFA
Charles F. Severson, CFA
Page 16
Baird MidCap Fund
A December 31, 2009 summary of the Fund’s top 10 holdings and equity sector analysis compared to the Russell Midcap® Growth Index is shown below.
Top 10 Holdings* | Equity Sector Analysis** | ||
NetApp, Inc. | 3.0% | ![]() | |
Alliance Data Systems Corporation | 2.7% | ||
Lamar Advertising Co. - Class A | 2.5% | ||
Church & Dwight Co., Inc. | 2.5% | ||
O ’Reilly Automotive, Inc. | 2.5% | ||
ANSYS, Inc. | 2.4% | ||
Life Technologies Corporation | 2.3% | ||
Varian Semiconductor | |||
Equipment Associates, Inc. | 2.3% | ||
Global Payments Inc. | 2.3% | ||
Tractor Supply Company | 2.2% | ||
Net Assets: | $27,090,434 | ||
Portfolio Turnover Rate: | 61.3% | ||
Number of Equity Holdings: | 55 | ||
Annualized Portfolio Expense Ratio:*** | |||
INSTITUTIONAL CLASS: | 0.85% | ||
INVESTOR CLASS: | 1.10% | **** | |
* | The Fund’s portfolio composition is subject to change and there is no assurance that the Fund will continue to hold any particular security. Percentages shown relate to the Fund’s total net assets as of December 31, 2009. |
** | Percentages shown in parentheses relate to the Fund’s total equity investments as of December 31, 2009, and may not add up to 100% due to rounding. |
*** | The Advisor has contractually agreed to limit the Fund’s total annual fund operating expenses to 0.85% of average daily net assets for the Institutional Class shares and 1.10% of average daily net assets for the Investor Class shares, at least through April 30, 2011. |
**** | Includes 0.25% 12b-1 fee. |
Page 17
Baird MidCap Fund
Institutional Class |
Value of a $25,000 Investment |
![]() |
Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (12/29/00), assuming reinvestment of all distributions.
Investor Class |
Value of a $10,000 Investment |
![]() |
Growth of a hypothetical investment of $10,000 made on the Fund’s inception date (12/29/00), assuming reinvestment of all distributions.
Page 18
Baird MidCap Fund
Average Annual Total Returns
For the Periods Ended December 31, 2009 | One Year | Five Years | Since Inception(1) |
Institutional Class Shares | 40.90% | 1.79% | 1.99% |
Investor Class Shares | 40.52% | 1.52% | 1.75% |
Russell Midcap® Growth Index(2) | 46.29% | 2.40% | 0.52% |
(1) | For the period from December 29, 2000 (commencement of operations) through December 31, 2009. |
(2) | The Russell Midcap® Growth Index measures the performance of those Russell Midcap® Index companies with higher price-to-book ratios and higher forecasted growth values. This index does not reflect any deduction for fees, expenses or taxes. A direct investment in the index is not possible. |
The returns shown in the table above and line graphs on the previous page reflect reinvestment of dividends and/or capital gains distributions in additional shares. The returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
For information about the performance of the Fund as of the most recent month-end, please call 1-866-44BAIRD or visit www.bairdfunds.com. Mutual fund performance changes over time and current performance may be lower or higher than that stated.
Page 19
Baird MidCap Fund
Schedule of Investments December 31, 2009 |
Shares | Value | ||||||
COMMON STOCKS – 97.2% | |||||||
Air Freight & Logistics – 0.9% | |||||||
7,104 | Expeditors International | ||||||
of Washington, Inc.@ | $ | 246,722 | |||||
Capital Markets – 4.0% | |||||||
12,521 | Eaton Vance Corporation@ | 380,764 | |||||
3,588 | Greenhill & Co., Inc. | 287,901 | |||||
18,125 | Invesco Limited f | 425,756 | |||||
1,094,421 | |||||||
Chemicals – 3.7% | |||||||
11,851 | Airgas, Inc. | 564,107 | |||||
10,029 | Ecolab, Inc. | 447,093 | |||||
1,011,200 | |||||||
Commercial Services & Supplies – 2.5% | |||||||
6,700 | Manpower Inc. | 365,686 | |||||
5,815 | Stericycle, Inc.* | 320,814 | |||||
686,500 | |||||||
Communications Equipment – 3.6% | |||||||
10,107 | F5 Networks, Inc.*@ | 535,469 | |||||
16,525 | Plantronics, Inc. | 429,319 | |||||
964,788 | |||||||
Computers & Peripherals – 3.0% | |||||||
23,424 | NetApp, Inc.*@ | 805,551 | |||||
Construction & Engineering – 1.4% | |||||||
12,698 | Foster Wheeler Ltd* f | 373,829 | |||||
Containers & Packaging – 1.8% | |||||||
13,397 | AptarGroup, Inc. | 478,809 | |||||
Distributors – 1.9% | |||||||
25,769 | LKQ Corporation* | 504,815 | |||||
Diversified Supply Services – 1.0% | |||||||
11,408 | Iron Mountain | ||||||
Incorporated*@ | 259,646 | ||||||
Electrical Equipment – 2.0% | |||||||
10,152 | Roper Industries, Inc. | 531,660 | |||||
Electronic Component – 1.9% | |||||||
10,685 | Dolby Laboratories, Inc.* | 509,995 | |||||
Electronic Equipment & | |||||||
Instruments – 2.0% | |||||||
18,950 | Plexus Corp.* | 540,075 | |||||
Energy Equipment & Services – 5.2% | |||||||
13,632 | Cameron International | ||||||
Corporation* | 569,818 | ||||||
9,303 | Oceaneering | ||||||
International, Inc.* | 544,412 | ||||||
10,855 | Smith International, Inc. | 294,930 | |||||
1,409,160 | |||||||
Food Products – 1.4% | |||||||
10,467 | McCormick & | ||||||
Co., Incorporated | 378,173 | ||||||
Health Care Equipment & Supplies – 4.6% | |||||||
4,925 | IDEXX Laboratories, Inc.* | 263,192 | |||||
18,075 | NuVasive, Inc.*@ | 578,039 | |||||
14,925 | Thoratec Corporation*@ | 401,781 | |||||
1,243,012 | |||||||
Health Care Technology – 1.4% | |||||||
18,001 | MedAssets Inc.* | 381,801 | |||||
Hotels, Restaurants & Leisure – 3.5% | |||||||
12,643 | Buffalo Wild Wings Inc.*@ | 509,134 | |||||
11,000 | WMS Industries Inc.*@ | 440,000 | |||||
949,134 | |||||||
Household Products – 2.5% | |||||||
11,343 | Church & | ||||||
Dwight Co., Inc. | 685,684 | ||||||
Internet Software & Services – 2.2% | |||||||
23,625 | Akamai | ||||||
Technologies, Inc.*@ | 598,421 | ||||||
IT Services – 6.8% | |||||||
11,244 | Alliance Data | ||||||
Systems Corporation*@ | 726,250 | ||||||
11,481 | Global Payments Inc. | 618,367 | |||||
16,022 | Paychex, Inc. | 490,914 | |||||
1,835,531 |
The accompanying notes are an integral part of these financial statements.
Page 20
Baird MidCap Fund
Schedule of Investments December 31, 2009 |
Shares | Value | ||||||
COMMON STOCKS – 97.2% (cont.) | |||||||
Life Sciences Tools & Services – 6.7% | |||||||
19,976 | ICON PLC – ADR* f | $ | 434,078 | ||||
9,675 | Illumina, Inc.*@ | 296,539 | |||||
12,144 | Life Technologies | ||||||
Corporation* | 634,281 | ||||||
4,350 | Mettler-Toledo | ||||||
International Inc.* | 456,707 | ||||||
1,821,605 | |||||||
Machinery – 7.3% | |||||||
8,820 | Bucyrus International, | ||||||
Inc. – Class A@ | 497,184 | ||||||
15,188 | Harsco Corporation | 489,509 | |||||
17,775 | IDEX Corporation@ | 553,691 | |||||
10,838 | Wabtec Corporation@ | 442,624 | |||||
1,983,008 | |||||||
Media – 2.5% | |||||||
22,150 | Lamar Advertising | ||||||
Co. – Class A* | 688,644 | ||||||
Oil, Gas & Consumable Fuels – 1.5% | |||||||
16,858 | Goodrich Petroleum | ||||||
Corporation*@ | 410,492 | ||||||
Personal Products – 1.0% | |||||||
5,575 | The Estee Lauder | ||||||
Companies Inc. – Class A | 269,607 | ||||||
Road & Rail – 1.5% | |||||||
12,795 | J.B. Hunt Transport | ||||||
Services, Inc.@ | 412,895 | ||||||
Semiconductors & Semiconductor Equipment – 4.4% | |||||||
19,188 | Microchip Technology | ||||||
Incorporated@ | 557,603 | ||||||
17,582 | Varian Semiconductor | ||||||
Equipment | |||||||
Associates, Inc.*@ | 630,842 | ||||||
1,188,445 | |||||||
Software – 4.6% | |||||||
15,000 | ANSYS, Inc.* | 651,900 | |||||
8,108 | Salesforce.com, Inc.*@ | 598,127 | |||||
1,250,027 | |||||||
Specialty Retail – 7.6% | |||||||
14,081 | Dick’s Sporting Goods, Inc.* | 350,194 | |||||
17,475 | O ’Reilly Automotive, Inc.* | 666,147 | |||||
11,458 | Tractor Supply Company*@ | 606,816 | |||||
12,399 | Urban Outfitters, Inc.* | 433,841 | |||||
2,056,998 | |||||||
Trading Companies & Distributors – 2.8% | |||||||
12,151 | Fastenal Company@ | 505,968 | |||||
5,275 | Watsco, Inc.@ | 258,369 | |||||
764,337 | |||||||
Total Common Stocks | |||||||
(Cost $21,433,180) | 26,334,985 | ||||||
SHORT-TERM INVESTMENTS – 3.9% | |||||||
Money Market Mutual Funds – 3.9% | |||||||
570,256 | Dreyfus Institutional Cash | ||||||
Advantage Fund, 0.13%« | 570,256 | ||||||
485,550 | Short-Term Investment | ||||||
Company Liquid Assets | |||||||
Portfolio – AIM | |||||||
Fund, 0.18%« | 485,550 | ||||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $1,055,806) | 1,055,806 | ||||||
Principal | |||||||
Amount | |||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 37.4% | |||||||
Commercial Paper – 0.6% | |||||||
$ | 304,601 | Atlantic East Funding LLC, | |||||
3.059%, 03/25/10 † ** | 178,062 | ||||||
Total Commercial Paper | 178,062 |
The accompanying notes are an integral part of these financial statements.
Page 21
Baird MidCap Fund
Schedule of Investments �� December 31, 2009 |
Shares | Value | ||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 37.4% (cont.) | |||||||
Investment Companies – 36.8% | |||||||
9,916,303 | Mount Vernon | ||||||
Securities Lending Trust | |||||||
Prime Portfolio, 0.20%« | $ | 9,916,303 | |||||
54,198 | Reserve Primary Fund † ** | 45,716 | |||||
Total Investment | |||||||
Companies | 9,962,019 | ||||||
Total Investments Purchased | |||||||
with Cash Proceeds from | |||||||
Securities Lending | |||||||
(Cost $10,275,102) | 10,140,081 | ||||||
Total Investments | |||||||
(Cost $32,764,088) | |||||||
– 138.5% | 37,530,872 | ||||||
Assets Relating to Securities | |||||||
Lending (Note 6) – 0.5% | |||||||
Support Agreement * # ** | 121,139 | ||||||
Cash Contribution | |||||||
from Transfer Agent/ | |||||||
Administrator ‡ | 10,442 | ||||||
Total (Cost $0) | 131,581 | ||||||
Liabilities in Excess of | |||||||
Other Assets – (39.0)% | (10,572,019 | ) | |||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 27,090,434 |
* | Non-Income Producing | |
** | Illiquid | |
@ | This security or a portion of this security is out on loan at December 31, 2009. | |
f | Foreign Security | |
« | 7-Day Yield | |
† | Priced at fair value by the Valuation Committee as delegated by the Baird Funds’ Board of Directors. | |
# | The Fund’s transfer agent and administrator and securities lending agent entered into a support agreement with the Fund to cover potential losses realized by the Fund on its investment in Atlantic East Funding, LLC (up to a certain amount), which investment was made by the Fund’s securities lending agent. | |
‡ | Pursuant to a loss reimbursement agreement, the Fund’s transfer agent and administrator made a cash contribution to the Fund to cover anticipated losses realized from the Fund’s ownership of shares of the Reserve Primary Fund, which investment was made by the Fund’s securities lending agent. |
The accompanying notes are an integral part of these financial statements.
Page 22
Baird MidCap Fund
Summary of Fair Value Exposure at December 31, 2009 |
The Fund has adopted authoritative fair valuation accounting standards which establish a definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion on changes in valuation techniques and related inputs during the period. These inputs are summarized into three broad levels and described below:
Level 1 – | Quoted prices in active markets for identical securities. |
Level 2 – | Other significant observable inputs (including quoted prices for similar securities, quoted prices in inactive markets, dealer indications, interest rates, yield curves, prepayment speeds, credit risk, default rates, inputs corroborated by observable market data, etc.). |
Level 3 – | Significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in pricing the security). |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Page 23
Baird MidCap Fund
Summary of Fair Value Exposure at December 31, 2009 |
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2009:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity | ||||||||||||||||
Air Freight & Logistics | $ | 246,722 | $ | — | $ | — | $ | 246,722 | ||||||||
Capital Markets | 1,094,421 | — | — | 1,094,421 | ||||||||||||
Chemicals | 1,011,200 | — | — | 1,011,200 | ||||||||||||
Commercial Services & Supplies | 686,500 | — | — | 686,500 | ||||||||||||
Communications Equipment | 964,788 | — | — | 964,788 | ||||||||||||
Computers & Peripherals | 805,551 | — | — | 805,551 | ||||||||||||
Construction & Engineering | 373,829 | — | — | 373,829 | ||||||||||||
Containers & Packaging | 478,809 | — | — | 478,809 | ||||||||||||
Distributors | 504,815 | — | — | 504,815 | ||||||||||||
Diversified Supply Services | 259,646 | — | — | 259,646 | ||||||||||||
Electrical Equipment | 531,660 | — | — | 531,660 | ||||||||||||
Electronic Component | 509,995 | — | — | 509,995 | ||||||||||||
Electronic Equipment & Instruments | 540,075 | — | — | 540,075 | ||||||||||||
Energy Equipment & Services | 1,409,160 | — | — | 1,409,160 | ||||||||||||
Food Products | 378,173 | — | — | 378,173 | ||||||||||||
Health Care Equipment & Supplies | 1,243,012 | — | — | 1,243,012 | ||||||||||||
Health Care Technology | 381,801 | — | — | 381,801 | ||||||||||||
Hotels Restaurants & Leisure | 949,134 | — | — | 949,134 | ||||||||||||
Household Products | 685,684 | — | — | 685,684 | ||||||||||||
Internet Software & Services | 598,421 | — | — | 598,421 | ||||||||||||
IT Services | 1,835,531 | — | — | 1,835,531 | ||||||||||||
Life Sciences Tools & Services | 1,821,605 | — | — | 1,821,605 | ||||||||||||
Machinery | 1,983,008 | — | — | 1,983,008 | ||||||||||||
Media | 688,644 | — | — | 688,644 | ||||||||||||
Oil, Gas & Consumable Fuels | 410,492 | — | — | 410,492 | ||||||||||||
Personal Products | 269,607 | — | — | 269,607 | ||||||||||||
Road & Rail | 412,895 | — | — | 412,895 | ||||||||||||
Semiconductor & Semiconductor Equipment | 1,188,445 | — | — | 1,188,445 | ||||||||||||
Software | 1,250,027 | — | — | 1,250,027 | ||||||||||||
Specialty Retail | 2,056,998 | — | — | 2,056,998 | ||||||||||||
Trading Companies & Distributors | 764,337 | — | — | 764,337 | ||||||||||||
Total Equity | 26,334,985 | — | — | 26,334,985 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 1,055,806 | — | — | 1,055,806 | ||||||||||||
Total Short-Term Investments | 1,055,806 | — | — | 1,055,806 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 178,062 | — | 178,062 | ||||||||||||
Money Market Mutual Funds | 9,916,303 | — | 45,716 | 9,962,019 | ||||||||||||
Total Investments Purchased with | ||||||||||||||||
Cash Proceeds from Securities Lending | 9,916,303 | 178,062 | 45,716 | 10,140,081 | ||||||||||||
Total Investments | $ | 37,307,094 | $ | 178,062 | $ | 45,716 | $ | 37,530,872 | ||||||||
Other Assets Relating to Securities Lending Investments | 10,442 | 121,139 | — | 131,581 |
Page 24
Baird MidCap Fund
Summary of Fair Value Exposure at December 31, 2009 |
Level 3 Reconciliation Disclosure
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
Description | Investments in Securities | |||
Balance as of December 31, 2008 | $ | 106,487 | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | — | |||
Change in unrealized appreciation (depreciation) | 1,960 | |||
Net purchases (sales) | (62,731 | ) | ||
Transfers in and/or out of Level 3 * | — | |||
Balance as of December 31, 2009 | $ | 45,716 |
* | The information used in the above reconciliation represents fiscal year to date activity for any investments identified as using Level 3 inputs at either the beginning or end of the current fiscal period. Transfers in or out of Level 3 represents either the beginning value (for transfers in) or ending value (for transfers out) of any security or instrument where a change in the pricing level occurred from the beginning to the end of the period. |
Page 25
Baird Funds, Inc.
Additional Information on Fund Expenses December 31, 2009 |
Example
As a shareholder of a mutual fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, such as management fees; distribution and/or service (12b-1) fees; and other fund expenses. Although the Funds do not charge any sales loads, redemption fees, or other transaction fees, you will be assessed fees for outgoing wire transfers, returned checks and stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Fund’s transfer agent. If you request that a redemption be made by wire transfer, currently the Fund’s transfer agent charges a $15.00 fee.
This Example is intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (7/1/09 – 12/31/09).
Actual Expenses
The third and fourth columns of the following table provide information about account values based on actual returns and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the fourth column entitled “Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fifth and sixth columns of the following table provide information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the sixth column of the table (entitled “Expenses Paid During Period”) is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different mutual funds. In addition, if these transactional costs were included, your costs could have been higher.
Page 26
Baird Funds, Inc.
Additional Information on Fund Expenses December 31, 2009 |
Actual vs. Hypothetical Returns
For the Six Months Ended December 31, 2009
Hypothetical (5% return | ||||||
Actual | before expenses) | |||||
Fund’s | Beginning | Ending | Expenses | Ending | Expenses | |
Annualized | Account | Account | Paid | Account | Paid | |
Expense | Value | Value | During | Value | During | |
Ratio(1) | 7/1/09 | 12/31/09 | Period(1) | 12/31/09 | Period(1) | |
Baird LargeCap Fund | ||||||
Institutional Class | 0.75% | $1,000.00 | $1,201.20 | $4.16 | $1,021.42 | $3.82 |
Investor Class | 1.00% | $1,000.00 | $1,198.90 | $5.54 | $1,020.16 | $5.09 |
Baird MidCap Fund | ||||||
Institutional Class | 0.85% | $1,000.00 | $1,245.10 | $4.81 | $1,020.92 | $4.33 |
Investor Class | 1.10% | $1,000.00 | $1,242.00 | $6.22 | $1,019.66 | $5.60 |
(1) | Expenses are equal to the Fund’s annualized net expense ratio multiplied by the average account value over the period, multiplied by 184 days and divided by 365 to reflect the one-half year period. |
Page 27
Baird Funds, Inc.
Statements of Assets and Liabilities December 31, 2009 |
Baird LargeCap | Baird MidCap | |||||||
Fund | Fund | |||||||
ASSETS: | ||||||||
Investments, at value (cost $22,722,231 and $32,764,088; respectively) | $ | 25,985,321 | $ | 37,530,872 | ||||
Support Agreement (Note 6) | 86,055 | 121,139 | ||||||
Cash Contribution from Transfer Agent/Administrator (Note 6) | 8,642 | 10,442 | ||||||
Dividends receivable | 25,178 | 5,579 | ||||||
Interest receivable | 118 | 149 | ||||||
Receivable for fund shares sold | — | 200 | ||||||
Uninvested cash | 713 | 1,600 | ||||||
Receivable from Advisor and Distributor | 16,015 | 9,955 | ||||||
Prepaid expenses | 7,041 | 7,054 | ||||||
Total assets | 26,129,083 | 37,686,990 | ||||||
LIABILITIES: | ||||||||
Payable for collateral received for securities loaned | 4,680,523 | 10,276,702 | ||||||
Payable for securities purchased | 322,891 | 276,043 | ||||||
Payable for fund shares repurchased | — | 3,082 | ||||||
Accrued expenses and other liabilities | 36,982 | 40,729 | ||||||
Total liabilities | 5,040,396 | 10,596,556 | ||||||
NET ASSETS | $ | 21,088,687 | $ | 27,090,434 | ||||
NET ASSETS CONSIST OF: | ||||||||
Capital stock | $ | 23,296,547 | $ | 26,381,151 | ||||
Distributions in excess of net investment income | (8,619 | ) | (10,443 | ) | ||||
Accumulated net realized loss on investments sold | (5,557,028 | ) | (4,178,639 | ) | ||||
Net unrealized appreciation on investments, support agreement | ||||||||
and cash contribution from Transfer Agent/Administrator | 3,357,787 | 4,898,365 | ||||||
NET ASSETS | $ | 21,088,687 | $ | 27,090,434 | ||||
INSTITUTIONAL CLASS SHARES | ||||||||
Net Assets | $ | 20,741,302 | $ | 25,513,554 | ||||
Shares outstanding | ||||||||
($0.01 par value, unlimited shares authorized) | 2,739,992 | 3,230,828 | ||||||
Net asset value, offering and redemption price per share | $ | 7.57 | $ | 7.90 | ||||
INVESTOR CLASS SHARES | ||||||||
Net Assets | $ | 347,385 | $ | 1,576,880 | ||||
Shares outstanding | ||||||||
($0.01 par value, unlimited shares authorized) | 45,938 | 204,989 | ||||||
Net asset value, offering and redemption price per share | $ | 7.56 | $ | 7.69 |
The accompanying notes are an integral part of these financial statements.
Page 28
Baird Funds, Inc.
Statements of Operations Year Ended December 31, 2009 |
Baird | Baird | |||||||
LargeCap Fund | MidCap Fund | |||||||
INVESTMENT INCOME: | ||||||||
Dividends (net of foreign taxes withheld of $391 and $0, respectively) | $ | 190,423 | $ | 176,078 | ||||
Income from securities lending (Note 6) | 28,599 | 70,026 | ||||||
Interest | 3,858 | 3,885 | ||||||
Total investment income | 222,880 | 249,989 | ||||||
EXPENSES: | ||||||||
Investment advisory fees | 119,299 | 170,406 | ||||||
Administration fees | 4,106 | 4,866 | ||||||
Shareholder servicing fees | 15,495 | 15,299 | ||||||
Fund accounting fees | 22,339 | 22,916 | ||||||
Professional fees | 28,123 | 27,423 | ||||||
Federal and state registration | 28,419 | 25,228 | ||||||
Directors fees | 26,048 | 25,648 | ||||||
Custody fees | 5,431 | 4,223 | ||||||
Reports to shareholders | 5,177 | 6,083 | ||||||
Distribution fees – Investor Class Shares (Note 8) | 754 | 3,899 | ||||||
Miscellaneous expenses | 1,256 | 1,417 | ||||||
Total expenses | 256,447 | 307,408 | ||||||
Expense reimbursement by Advisor (Note 5) | (118,040 | ) | (110,382 | ) | ||||
Total expenses | 138,407 | 197,026 | ||||||
NET INVESTMENT INCOME | 84,473 | 52,963 | ||||||
REALIZED AND UNREALIZED | ||||||||
GAIN / (LOSS) ON INVESTMENTS: | ||||||||
Net realized loss on investments | (1,409,994 | ) | (909,792 | ) | ||||
Change in unrealized appreciation/depreciation | ||||||||
on investments, support agreement and cash | ||||||||
contribution from Transfer Agent/Administrator | 7,065,081 | 8,807,651 | ||||||
Net realized and unrealized gain on investments | 5,655,087 | 7,897,859 | ||||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 5,739,560 | $ | 7,950,822 |
The accompanying notes are an integral part of these financial statements.
Page 29
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird LargeCap Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2009 | December 31, 2008 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 84,473 | $ | 75,378 | ||||
Net realized loss on investments | (1,409,994 | ) | (2,680,501 | ) | ||||
Change in unrealized appreciation/depreciation | ||||||||
on investments, support agreement and cash | ||||||||
contribution from Transfer Agent/Administrator | 7,065,081 | (8,322,225 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 5,739,560 | (10,927,348 | ) | |||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 1,781,312 | 2,906,588 | ||||||
Shares issued to holders in reinvestment of dividends | 92,400 | 80,523 | ||||||
Cost of shares redeemed | (3,040,863 | ) | (3,752,903 | ) | ||||
Net decrease in net assets resulting | ||||||||
from capital share transactions | (1,167,151 | ) | (765,792 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (93,147 | ) | (81,425 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (798 | ) | — | |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 4,478,464 | (11,774,565 | ) | |||||
NET ASSETS: | ||||||||
Beginning of year | 16,610,223 | 28,384,788 | ||||||
End of year (including distributions in excess of | ||||||||
net investment income and undistributed net | ||||||||
investment income of $(8,619) and $198, respectively) | $ | 21,088,687 | $ | 16,610,223 |
The accompanying notes are an integral part of these financial statements.
Page 30
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird MidCap Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2009 | December 31, 2008 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 52,963 | $ | 10,353 | ||||
Net realized loss on investments | (909,792 | ) | (2,859,632 | ) | ||||
Change in unrealized appreciation/depreciation | ||||||||
on investments, support agreement and cash | ||||||||
contribution from Transfer Agent/Administrator | 8,807,651 | (12,378,757 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 7,950,822 | (15,228,036 | ) | |||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 2,089,157 | 3,082,022 | ||||||
Shares issued to holders in reinvestment of dividends | 62,353 | 14,311 | ||||||
Cost of shares redeemed | (2,675,075 | ) | (9,527,280 | ) | ||||
Net decrease in net assets resulting | ||||||||
from capital share transactions | (523,565 | ) | (6,430,947 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (61,225 | ) | (14,588 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (2,418 | ) | — | |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | 7,363,614 | (21,673,571 | ) | |||||
NET ASSETS: | ||||||||
Beginning of year | 19,726,820 | 41,400,391 | ||||||
End of year (including distributions in excess of | ||||||||
net investment income of $(10,443) and $0, respectively) | $ | 27,090,434 | $ | 19,726,820 |
The accompanying notes are an integral part of these financial statements.
Page 31
Baird Funds, Inc.
Financial Highlights |
Baird LargeCap Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 5.59 | $ | 9.33 | $ | 8.53 | $ | 8.33 | $ | 8.13 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.03 | 0.03 | 0.02 | 0.04 | 0.04 | (1) | ||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 1.98 | (3.74 | ) | 0.80 | 0.20 | 0.24 | ||||||||||||||
Total from investment operations | 2.01 | (3.71 | ) | 0.82 | 0.24 | 0.28 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.03 | ) | (0.03 | ) | (0.02 | ) | (0.04 | ) | (0.08 | ) | ||||||||||
Net asset value, end of year | $ | 7.57 | $ | 5.59 | $ | 9.33 | $ | 8.53 | $ | 8.33 | ||||||||||
Total return | 36.27 | % | (39.88 | %) | 9.63 | % | 2.89 | % | 3.39 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 20,741,302 | $ | 16,349,025 | $ | 27,644,009 | $ | 27,442,329 | $ | 27,375,626 | ||||||||||
Ratio of expenses to average net assets | 0.75 | % | 0.75 | % | 0.75 | % | 0.75 | % | 0.75 | % | ||||||||||
Ratio of expenses to average | ||||||||||||||||||||
net assets (before waivers) | 1.39 | % | 1.17 | % | 1.10 | % | 1.12 | % | 0.93 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets | 0.46 | % | 0.32 | % | 0.25 | % | 0.44 | % | 0.46 | % | ||||||||||
Ratio of net investment income (loss) | ||||||||||||||||||||
to average net assets (before waivers) | (0.18 | %) | (0.10 | %) | (0.10 | %) | 0.07 | % | 0.28 | % | ||||||||||
Portfolio turnover rate(2) | 58.7 | % | 43.0 | % | 72.2 | % | 63.9 | % | 28.6 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 32
Baird Funds, Inc.
Financial Highlights |
Baird LargeCap Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 5.59 | $ | 9.29 | $ | 8.50 | $ | 8.29 | $ | 8.09 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.02 | 0.00 | (1) | 0.00 | (1) | 0.01 | 0.02 | (2) | ||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 1.97 | (3.70 | ) | 0.79 | 0.21 | 0.23 | ||||||||||||||
Total from investment operations | 1.99 | (3.70 | ) | 0.79 | 0.22 | 0.25 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.02 | ) | — | — | (0.01 | ) | (0.05 | ) | ||||||||||||
Net asset value, end of year | $ | 7.56 | $ | 5.59 | $ | 9.29 | $ | 8.50 | $ | 8.29 | ||||||||||
Total return | 35.79 | % | (39.94 | %) | 9.29 | % | 2.64 | % | 3.15 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 347,385 | $ | 261,198 | $ | 740,779 | $ | 1,087,948 | $ | 2,400,525 | ||||||||||
Ratio of expenses to average net assets | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | ||||||||||
Ratio of expenses to average | ||||||||||||||||||||
net assets (before waivers) | 1.64 | % | 1.42 | % | 1.35 | % | 1.37 | % | 1.18 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets | 0.21 | % | 0.07 | % | 0.00 | % | 0.19 | % | 0.21 | % | ||||||||||
Ratio of net investment income (loss) | ||||||||||||||||||||
to average net assets (before waivers) | (0.43 | %) | (0.35 | %) | (0.35 | %) | (0.18 | %) | 0.03 | % | ||||||||||
Portfolio turnover rate(3) | 58.7 | % | 43.0 | % | 72.2 | % | 63.9 | % | 28.6 | % |
(1) | Amount is less than $0.005. |
(2) | Calculated using average shares outstanding during the year. |
(3) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 33
Baird Funds, Inc.
Financial Highlights |
Baird MidCap Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 5.63 | $ | 9.62 | $ | 9.33 | $ | 11.12 | $ | 10.91 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss)(1) | 0.02 | 0.01 | (0.01 | ) | (0.02 | ) | (0.02 | ) | ||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 2.27 | (3.99 | ) | 1.99 | 0.46 | 0.63 | ||||||||||||||
Total from investment operations | 2.29 | (3.98 | ) | 1.98 | 0.44 | 0.61 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.02 | ) | (0.01 | ) | — | — | — | |||||||||||||
Distributions from net realized gains | — | — | (1.69 | ) | (2.23 | ) | (0.40 | ) | ||||||||||||
Total distributions | (0.02 | ) | (0.01 | ) | (1.69 | ) | (2.23 | ) | (0.40 | ) | ||||||||||
Net asset value, end of year | $ | 7.90 | $ | 5.63 | $ | 9.62 | $ | 9.33 | $ | 11.12 | ||||||||||
Total return | 40.90 | % | (41.53 | %) | 20.89 | % | 3.93 | % | 5.56 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 25,513,554 | $ | 18,163,034 | $ | 36,616,547 | $ | 32,057,214 | $ | 85,670,669 | ||||||||||
Ratio of expenses to average net assets | 0.85 | % | 0.85 | % | 0.85 | % | 0.85 | % | 0.85 | % | ||||||||||
Ratio of expenses to average | ||||||||||||||||||||
net assets (before waivers) | 1.34 | % | 1.19 | % | 1.11 | % | 1.01 | % | 0.98 | % | ||||||||||
Ratio of net investment income (loss) | ||||||||||||||||||||
to average net assets | 0.25 | % | 0.06 | % | (0.06 | %) | (0.17 | %) | (0.21 | %) | ||||||||||
Ratio of net investment loss | ||||||||||||||||||||
to average net assets (before waivers) | (0.24 | %) | (0.28 | %) | (0.32 | %) | (0.33 | %) | (0.34 | %) | ||||||||||
Portfolio turnover rate(2) | 61.3 | % | 74.0 | % | 72.3 | % | 78.6 | % | 77.4 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 34
Baird Funds, Inc.
Financial Highlights |
Baird MidCap Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 5.49 | $ | 9.40 | $ | 9.17 | $ | 10.99 | $ | 10.82 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss)(1) | 0.00 | (2) | (0.02 | ) | (0.04 | ) | (0.04 | ) | (0.05 | ) | ||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 2.21 | (3.89 | ) | 1.96 | 0.45 | 0.62 | ||||||||||||||
Total from investment operations | 2.21 | (3.91 | ) | 1.92 | 0.41 | 0.57 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.01 | ) | — | — | — | — | ||||||||||||||
Distributions from net realized gains | — | — | (1.69 | ) | (2.23 | ) | (0.40 | ) | ||||||||||||
Total distributions | (0.01 | ) | — | (1.69 | ) | (2.23 | ) | (0.40 | ) | |||||||||||
Net asset value, end of year | $ | 7.69 | $ | 5.49 | $ | 9.40 | $ | 9.17 | $ | 10.99 | ||||||||||
Total return | 40.52 | % | (41.70 | %) | 20.61 | % | 3.73 | % | 5.24 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 1,576,880 | $ | 1,563,786 | $ | 4,783,844 | $ | 5,023,621 | $ | 4,506,947 | ||||||||||
Ratio of expenses to average net assets | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | ||||||||||
Ratio of expenses to average | ||||||||||||||||||||
net assets (before waivers) | 1.59 | % | 1.44 | % | 1.36 | % | 1.26 | % | 1.23 | % | ||||||||||
Ratio of net investment income (loss) | ||||||||||||||||||||
to average net assets | 0.00 | % | (0.19 | %) | (0.31 | %) | (0.42 | %) | (0.46 | %) | ||||||||||
Ratio of net investment loss | ||||||||||||||||||||
to average net assets (before waivers) | (0.49 | %) | (0.53 | %) | (0.57 | %) | (0.58 | %) | (0.59 | %) | ||||||||||
Portfolio turnover rate(3) | 61.3 | % | 74.0 | % | 72.3 | % | 78.6 | % | 77.4 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Amount is less than $0.005. |
(3) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 35
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
1.ORGANIZATION
Baird Funds, Inc. (the “Corporation”) was incorporated on June 9, 2000 as a Wisconsin corporation and is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The accompanying financial statements include the Baird LargeCap Fund and the Baird MidCap Fund (each a “Fund” and collectively the “Funds”), two of the eight portfolios comprising the Corporation. Pursuant to the 1940 Act, the Funds are “diversified” series of the Corporation. The investment advisor to the Funds is Robert W. Baird & Co. Incorporated (“Baird” or the “Advisor”).
The Baird LargeCap Fund commenced operations with the sale of both Institutional and Investor Class Shares on September 29, 2000. The Baird MidCap Fund commenced operations with the sale of both Institutional and Investor Class Shares on December 29, 2000. The Institutional Class Shares are not subject to a distribution and service (12b-1) fee, while the Investor Class Shares are subject to a distribution and service (12b-1) fee up to 0.25%.
The Baird LargeCap Fund seeks long-term growth of capital through investments in equity securities of large-capitalization companies. Dividend income is a secondary consideration.
The Baird MidCap Fund seeks long-term growth of capital through investments in equity securities of mid-capitalization companies.
On December 31, 2009, shareholders affiliated with the Advisor held 82.1% of the Institutional Class shares of the Baird LargeCap Fund and 35.8% of the Institutional Class shares of the Baird MidCap Fund. These shareholders included the Advisor’s participant-directed retirement and deferred compensation plans and the Baird Foundation.
2.SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America.
a) | Investment Valuation – Section 2(a)(41) of the 1940 Act, together with the rules and interpretations of the SEC, require the Funds, in computing NAV, to value their portfolio securities using market quotations when they are “readily available.” When market quotations are not readily available (e.g., because there is no regular market quotation for such securities, the market for such security is limited, the validity of quotations is questionable or, for debt securities, IDC, the Funds’ independent pricing service, does not provide a price), the Board of Directors of the Corporation must value the securities at “fair value determined in good faith.” The Board has delegated such responsibility to the Advisor pursuant to pricing policies and procedures that the Board has adopted and regularly reviews. In general, the “fair value” of a security means the price that would be received to sell a security in an orderly transaction between market participants at the measurement date. |
Consistent with Section 2(a)(41) of the 1940 Act, the Funds price their securities as follows: common stocks that are listed on a securities exchange (other than NASDAQ) are valued at the last quoted sale price. Securities traded on |
Page 36
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
2.SIGNIFICANT ACCOUNTING POLICIES (cont.)
NASDAQ are valued at the NASDAQ Official Closing Price. Price information on listed stocks is taken from the exchange where the security is primarily traded. Securities that were not traded on the valuation date, as well as stocks that are not listed on an exchange, including NASDAQ, are valued at the average of the current bid and asked price. Debt securities are valued by an independent pricing service using valuation methods that are designed to represent fair value, such as matrix pricing and other analytical pricing models, market transactions and dealer quotations. Debt securities purchased with a remaining maturity of 60 days or less are valued at acquisition cost plus or minus any amortized discount or premium. Investments in mutual funds are valued at their stated net asset value. Other assets and securities for which market quotations are not readily available are valued at fair value as determined in good faith by the Advisor in accordance with procedures approved by the Corporation’s Board of Directors. In accordance with such procedures, the Advisor may use broker quotes or prices obtained from alternative pricing services or, if the broker quotes or prices from alternative pricing services are unavailable or deemed to be unreliable, fair value will be determined by a valuation committee of the Advisor. In determining fair value, the valuation committee takes into account all relevant factors and available information. Consequently, the price of the security used by a Fund to calculate its NAV may differ from quoted or published prices for the same security. Fair value pricing involves subjective judgments and there is no single standard for determining a security’s fair value. As a result, different mutual funds could reasonably arrive at a different fair value for the same security. It is possible that the fair value determined for a security is materially different from the value that could be realized upon the sale of that security or from the values that other mutual funds may determine. In addition, given the volatility and periodic illiquidity experienced in recent years, the prices determined for any individual security on any given day may vary significantly from the amount that can be obtained in an actual sale of that security, and the Funds’ NAV may fluctuate significantly from day to day or from period to period. |
In January, 2010, FASB issued Accounting Standards Update No. 2010-06, Improving Disclosures about Fair Value Measurements (ASU 2010-06). ASU 2010-06 will require new disclosures regarding transfers in and out of Levels 1 and 2 (effective for interim and annual periods beginning after December 15, 2009), as well as additional details regarding Level 3 transaction activity (effective for interim and annual periods beginning after December 15, 2010). Management is currently evaluating the effect that the adoption of ASU 2010-06 will have on the Funds’ financial statements. |
b) | Foreign Securities – Foreign securities are defined as securities issued by companies that are organized outside the United States. Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in U.S. companies and the U.S. government. These risks include foreign currency fluctuations and adverse political and economic developments. Moreover, securities of many foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies and the U.S. government. Occasionally, events that affect those values and exchange rates may occur after the close of the exchange on which such securities are traded. If such events materially affect the value of a Fund’s securities, these securities may be valued at their fair value pursuant to procedures adopted by the Board of Directors. All of the foreign securities owned by the Funds as of December 31, 2009 are traded on the New York Stock Exchange or NASDAQ. |
Page 37
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
2.SIGNIFICANT ACCOUNTING POLICIES (cont.)
c) | Federal Income Taxes – The Funds intend to continue to qualify as regulated investment companies as provided in subchapter M of the Internal Revenue Code and to distribute substantially all of their taxable income to their shareholders in a manner which results in no tax cost to the Funds. Therefore, no federal income or excise tax provision is recorded. |
There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2009, or for any other tax years which are open for exam. As of December 31, 2009, open tax years include the tax years ended December 31, 2006 through 2009. The Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next 12 months. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the year, the Funds did not incur any interest or penalties. |
d) | Distributions to Shareholders – Dividends from net investment income, if any, are declared and paid annually. Distributions of net realized gains, if any, are declared and paid at least annually. |
e) | Allocation of Income and Expenses – Each Fund is charged for those expenses directly attributable to it. Expenses directly attributable to a class of shares, such as Rule 12b-1 distribution fees, are charged to that class of shares. Income, expenses, and realized and unrealized gains and losses are allocated to the classes based on their respective net assets. Expenses that are not directly attributable to a Fund are allocated among the series of the Corporation in proportion to their assets. |
f) | Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. |
g) | Other – Investment and shareholder transactions are recorded on trade date. The Funds determine the gain or loss realized from investment transactions by comparing the original cost of the security lot sold with the net sales proceeds. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Accounting principles generally accepted in the United States require that permanent financial reporting and tax differences be reclassified in the capital accounts. |
h) | Guarantees and Indemnifications – In the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown and this would involve future claims against the Funds that have not yet occurred. Based on experience, the Funds would expect the risk of loss to be remote. |
Page 38
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
3.CAPITAL SHARE TRANSACTIONS
The following table summarizes the capital share transactions of each Fund for the past two fiscal periods:
BAIRD LARGECAP FUND
Year Ended | Year Ended | ||||||||||||||||
December 31, 2009 | December 31, 2009 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 300,413 | $ | 1,776,312 | Shares sold | 962 | $ | 5,000 | ||||||||||
Shares issued to | Shares issued to | ||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||
reinvestment of dividends | 11,991 | 91,610 | reinvestment of dividends | 103 | 790 | ||||||||||||
Shares redeemed | (496,682 | ) | (3,027,939 | ) | Shares redeemed | (1,882 | ) | (12,924 | ) | ||||||||
Net decrease | (184,278 | ) | $ | (1,160,017 | ) | Net decrease | (817 | ) | $ | (7,134 | ) | ||||||
Shares Outstanding: | Shares Outstanding: | ||||||||||||||||
Beginning of year | 2,924,270 | Beginning of year | 46,755 | ||||||||||||||
End of year | 2,739,992 | End of year | 45,938 |
Year Ended | Year Ended | ||||||||||||||||
December 31, 2008 | December 31, 2008 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 395,392 | $ | 2,875,596 | Shares sold | 3,893 | $ | 30,992 | ||||||||||
Shares issued to | Shares redeemed | (36,862 | ) | (306,565 | ) | ||||||||||||
reinvestment of | Net decrease | (32,969 | ) | $ | (275,573 | ) | |||||||||||
dividends | 14,995 | 80,523 | Shares Outstanding: | ||||||||||||||
Shares redeemed | (449,499 | ) | (3,446,338 | ) | Beginning of year | 79,724 | |||||||||||
Net decrease | (39,112 | ) | $ | (490,219 | ) | End of year | 46,755 | ||||||||||
Shares Outstanding: | |||||||||||||||||
Beginning of year | 2,963,382 | ||||||||||||||||
End of year | 2,924,270 |
Page 39
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
3.CAPITAL SHARE TRANSACTIONS (cont.)
BAIRD MIDCAP FUND
Year Ended | Year Ended | ||||||||||||||||
December 31, 2009 | December 31, 2009 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 303,859 | $ | 1,923,629 | Shares sold | 27,902 | $ | 165,528 | ||||||||||
Shares issued to | Shares issued to | ||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||
reinvestment of dividends | 7,535 | 60,274 | reinvestment of dividends | 266 | 2,079 | ||||||||||||
Shares redeemed | (308,585 | ) | (1,980,871 | ) | Shares redeemed | (108,085 | ) | (694,204 | ) | ||||||||
Net increase | 2,809 | $ | 3,032 | Net decrease | (79,917 | ) | $ | (526,597 | ) | ||||||||
Shares Outstanding: | Shares Outstanding: | ||||||||||||||||
Beginning of year | 3,228,019 | Beginning of year | 284,906 | ||||||||||||||
End of year | 3,230,828 | End of year | 204,989 |
Year Ended | Year Ended | ||||||||||||||||
December 31, 2008 | December 31, 2008 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 376,048 | $ | 2,765,434 | Shares sold | 41,456 | $ | 316,588 | ||||||||||
Shares issued to | Shares redeemed | (265,423 | ) | (1,884,193 | ) | ||||||||||||
shareholders in | Net decrease | (223,967 | ) | $ | (1,567,605 | ) | |||||||||||
reinvestment of | Shares Outstanding: | ||||||||||||||||
distributions | 2,660 | 14,311 | Beginning of year | 508,873 | |||||||||||||
Shares redeemed | (955,817 | ) | (7,643,087 | ) | End of year | 284,906 | |||||||||||
Net decrease | (577,109 | ) | $ | (4,863,342 | ) | ||||||||||||
Shares Outstanding: | |||||||||||||||||
Beginning of year | 3,805,128 | ||||||||||||||||
End of year | 3,228,019 |
Page 40
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION
During the year ended December 31, 2009, purchases and sales of investment securities (excluding short-term investments) were as follows:
Baird | Baird | |
LargeCap Fund | MidCap Fund | |
Purchases: | $10,257,802 | $13,423,114 |
Sales: | $11,062,378 | $14,078,773 |
At December 31, 2009, accumulated earnings/losses on a tax basis were as follows:
Baird | Baird | |||||||
LargeCap | MidCap | |||||||
Fund | Fund | |||||||
Cost of Investments | $ | 22,958,571 | $ | 32,830,068 | ||||
Gross unrealized appreciation | $ | 3,809,672 | $ | 5,985,013 | ||||
Gross unrealized depreciation | (688,225 | ) | (1,152,628 | ) | ||||
Net unrealized appreciation | $ | 3,121,447 | $ | 4,832,385 | ||||
Undistributed ordinary income | $ | 23 | $ | — | ||||
Undistributed long-term capital gain | — | — | ||||||
Total distributable earnings | $ | 23 | $ | — | ||||
Other accumulated losses | $ | (5,329,330 | ) | $ | (4,123,102 | ) | ||
Total accumulated earnings (losses) | $ | (2,207,860 | ) | $ | 709,283 |
Undistributed income or net realized gains for financial statement purposes may differ from amounts recognized for federal income tax purposes due to differences in the recognition and characterization of income, expense and capital gain items. The difference between book-basis and tax-basis unrealized appreciation is attributable primarily to the tax deferral of losses on wash sales.
Additionally, U.S. generally accepted accounting principles require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended December 31, 2009, the following table shows the reclassifications made:
Undistributed | Accumulated | ||
Net Investment | Net Realized | ||
Income/(Loss) | Gain/(Loss) | Paid In Capital | |
Baird LargeCap Fund | 655 | — | (655) |
Baird MidCap Fund | 237 | — | (237) |
Under the current tax law, capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the year ended December 31, 2009, the Baird MidCap Fund elected to defer capital losses occurring between November 1, 2009 and December 31, 2009 in the amount of $160,090.
Page 41
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION (cont.)
At December 31, 2009, accumulated net realized capital loss carryovers, if any, and the year(s) in which the capital loss carryovers expire were:
Capital Loss Carryover | Year of Expiration | |||||||
Baird LargeCap Fund | $ | 215,870 | 2011 | |||||
$ | 1,167,011 | 2012 | ||||||
$ | 929,167 | 2016 | ||||||
$ | 3,017,282 | 2017 | ||||||
Baird MidCap Fund | $ | 1,092,134 | 2016 | |||||
$ | 2,870,878 | 2017 |
To the extent the Funds realize future net capital gains, those gains will be offset by any unused capital loss carryovers. During the year ended December 31, 2009, the Funds did not utilize any capital loss carryovers from previous years.
During the year ended December 31, 2009, the Funds paid the following dividends:
Ordinary Income Dividends | In Excess of Ordinary Income | ||||||||
Baird LargeCap Fund | $ | 93,945 | — | ||||||
Baird MidCap Fund | $ | 59,171 | $ | 4,472 |
During the year ended December 31, 2008, the Funds paid the following dividends:
Ordinary Income Dividends | |||||
Baird LargeCap Fund | $ | 81,425 | |||
Baird MidCap Fund | $ | 14,588 |
5.INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Funds have entered into an Investment Advisory Agreement with Baird for the provision of investment advisory services. Pursuant to the Investment Advisory Agreement, the Advisor is entitled to receive a fee, calculated daily and payable monthly, at the annual rate of 0.65% for the Baird LargeCap Fund and 0.75% for the Baird MidCap Fund as applied to the respective Fund’s average daily net assets. Certain officers of the Advisor are also officers of the Funds.
For the year ended December 31, 2009 and through April 30, 2010, the Advisor has contractually agreed to waive its investment advisory fee and/or reimburse the Funds’ operating expenses (exclusive of brokerage, taxes, and extraordinary expenses) to the extent necessary to ensure that each Fund’s annual operating expenses do not exceed the following percentages of average daily net assets:
Institutional Class Shares | Investor Class Shares | |
Baird LargeCap Fund | 0.75% | 1.00% |
Baird MidCap Fund | 0.85% | 1.10% |
Page 42
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
5.INVESTMENT ADVISORY AND OTHER AGREEMENTS (cont.)
To the extent that the Advisor reimburses or absorbs fees and expenses, it may seek payment of such amounts for three years after the year in which expenses were reimbursed or absorbed. A Fund will make no such payment, however, if its total annual operating expenses exceed the expense limits in effect at the time the expenses were reimbursed or at the time these payments are proposed.
Fiscal Year Ended December 31, | |||
2009 | 2008 | 2007 | |
Reimbursed / Absorbed Expenses Subject | |||
to Recovery by Advisor Until: | 2012 | 2011 | 2010 |
Baird LargeCap Fund | $118,040 | $ 99,829 | $100,379 |
Baird MidCap Fund | $110,382 | $101,968 | $103,600 |
U.S. Bancorp Fund Services, LLC serves as transfer agent, administrator, and accounting services agent for the Funds. U.S. Bank, N.A. serves as custodian for the Funds.
Robert W. Baird & Co. Incorporated (the “Distributor”) is the sole distributor of the Funds pursuant to a distribution agreement.
No commissions were earned by the Distributor for services rendered as a registered broker-dealer in securities transactions for the Baird LargeCap Fund and Baird MidCap Fund for the year ended December 31, 2009.
6.SECURITIES LENDING
Each Fund may lend up to one-third of its total assets (including such loans) to borrowers under terms of participation in a securities lending program administered by FAF Advisors, Inc., an affiliate of the Funds’ custodian, transfer agent and administrator. The securities lending agreement requires that loans are collateralized at all times in an amount equal to at least 102% of the market value of any loaned securities at the time of the loan, plus accrued interest.
The Funds receive compensation in the form of fees and earn interest on the cash collateral. The amount of fees depends on a number of factors including the type of security and length of the loan. Each Fund continues to receive interest payments or dividends on the securities loaned during the borrowing period. Each Fund has the right under the terms of the securities lending agreement to recall the securities from the borrower on demand.
As of December 31, 2009, the Baird LargeCap and Baird MidCap Funds had loaned securities that were collateralized by cash equivalents. The cash collateral is invested by the custodian in accordance with approved investment guidelines. Those guidelines require the cash collateral to be invested in readily marketable, high quality, short-term obligations; however, such investments are subject to risk of payment delays or default on the part of the issuer or counterparty or otherwise may not generate sufficient interest to support the costs associated with securities lending. A Fund could also experience delays in recovering its securities and possible loss of income or value if the borrower fails to return the borrowed securities, although the Funds are indemnified from this risk by contract with the securities lending agent.
Page 43
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
6.SECURITIES LENDING (cont.)
As of December 31, 2009, the market value of the securities on loan and payable on collateral due to broker were as follows:
Market Value of | Payable on Collateral | |
Securities on Loan | due to Broker | |
Baird LargeCap Fund | $4,524,733 | $ 4,680,523 |
Baird MidCap Fund | $9,822,833 | $10,276,702 |
The Funds receive cash as collateral in return for securities lent as part of a securities lending program. The collateral is invested in short-term securities including the Mount Vernon Securities Lending Prime Portfolio (a securities lending trust subject to Rule 2a-7 under the 1940 Act), other money market funds, certificates of deposit, commercial paper, corporate notes, government agency securities and repurchase agreements. The schedules of investments for the Funds include the particular cash collateral holdings as of December 31, 2009. The Funds intend to invest all of the cash collateral from securities lending in the Mount Vernon Securities Lending Prime Portfolio once their existing cash collateral holdings mature or are liquidated or otherwise paid down. At December 31, 2009, all of the cash collateral from securities lending was invested in the Mount Vernon Securities Lending Prime Portfolio, plus an interest in Atlantic East Funding LLC and shares of the Reserve Primary Fund. The Funds’ interest in Atlantic East Funding LLC and the Reserve Primary Fund are priced at fair value by the Valuation Committee of the Advisor. The fair value of the Funds’ interest in Atlantic East Funding LLC is based on the underlying market values of the securities owned by Atlantic East Funding LLC, which are determined by independent pricing sources. In addition, the Funds’ transfer agent and administrator and securities lending agent entered into a support agreement with the Funds to cover potential losses realized by the Funds on their investment in Atlantic East Funding LLC (up to a certain amount). The amounts agreed to be provided to the Funds under the support agreement are shown in the Funds’ schedules of investments and statements of assets and liabilities. At December 31, 2009, the fair value of the Funds’ interest in Atlantic East Funding LLC, plus the amounts payable under the support agreement, amounted to 98.33% of the outstanding par value of the Funds’ interest in Atlantic East Funding LLC.
The fair value of the Reserve Primary Fund shares owned by the Funds is based on publicly available information, including information posted on the Reserve Primary Fund’s website and the terms of a plan of distribution approved by a federal district court. In addition, pursuant to a loss reimbursement agreement, the Funds’ transfer agent and administrator made a cash contribution to the Funds to cover anticipated losses realized from the Funds’ ownership of shares of the Reserve Primary Fund. The amounts of the cash contribution made to the Funds are shown in the Funds’ schedules of investments and statements of assets and liabilities. At December 31, 2009, the cash contribution made by the Funds’ transfer agent and administrator was sufficient to cover the difference between the fair value of the Reserve Primary Fund shares owned by the Funds and the amount paid by the Fund for such shares ($1.00 per share).
The interest income earned by the Funds on investments of cash collateral received from borrowers for the securities loaned to them (“securities lending income”) is reflected in the Funds’ statements of operations. From July 2008 through January 2009, the Funds retained and did not recognize for financial reporting purposes their securities lending income. Amounts so retained were placed in reserve to cover potential losses on the Funds’ interest in Atlantic East Funding LLC that could exceed the amount provided by the Funds’ transfer agent and administrator and securities lending agent under the support
Page 44
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2009 |
6.SECURITIES LENDING (cont.)
agreement. All of such retained securities lending income was recognized and distributed in the second half of 2009 after it was determined that it was unlikely that realized losses on the Funds’ interest in Atlantic East Funding LLC would exceed amounts provided under the support agreement. The securities lending income recognized by the Funds in 2009, including amounts that were retained from July 2008 through January 2009 and securities lending income earned after January 2009, was $28,599 for the LargeCap Fund and $70,026 for the MidCap Fund.
7.LINE OF CREDIT
The Corporation maintains an uncommitted, senior secured line of credit (“LOC”) with U.S. Bank, N.A. (the “Bank”) to provide the Funds a temporary liquidity source to meet unanticipated redemptions. Under the terms of the LOC, borrowings for each Fund are limited to one-third of the total assets (including the amount borrowed) of the respective Fund, or as otherwise indicated within the Funds’ agreement with the Bank. The Bank charges interest at the Bank’s Prime Rate less 1% (weighted average rate of 2.25% during 2009). For the year ended December 31, 2009, the Baird LargeCap Fund and Baird MidCap Fund did not borrow on the LOC.
8.DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
The Funds have adopted a distribution and shareholder service plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan allows the Funds to compensate the Distributor for the costs incurred in distributing the Funds’ Investor Class Shares, including amounts paid to brokers or dealers, at an annual rate not to exceed 0.25% of the average daily net assets of the Funds’ Investor Class Shares. The Baird LargeCap Fund and Baird MidCap Fund incurred $754 and $3,899, respectively, in fees pursuant to the Plan during the year ended December 31, 2009.
9.SUBSEQUENT EVENT
In preparing these financial statements, the Corporation has evaluated events and transactions for potential recognition or disclosure through February 26, 2010, the date the financial statements were available to be issued. There were no additional subsequent events to report that would have a material impact on the Funds’ financial statements.
Page 45
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Baird Funds, Inc.
We have audited the accompanying statements of assets and liabilities of Baird LargeCap Fund and Baird MidCap Fund (two of the eight funds constituting Baird Funds, Inc.) (collectively, the “Funds”), including the schedules of investments, as of December 31, 2009, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the aforementioned Funds of Baird Funds, Inc. as of December 31, 2009, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
![]() |
Chicago, Illinois
February 26, 2010
Page 46
Baird Funds, Inc.
Directors & Officers |
Number of | |||||||
Portfolios | Other | ||||||
Positions | Term of Office | Principal | in Complex | Directorships | |||
Held with | and Length of | Occupation(s) | Overseen | Held | |||
Name, Address and Age | the Funds | Time Served | During Past 5 Years | by Director | by Director | ||
G. Frederick Kasten, Jr. | Independent | Indefinite; | Retired; Chairman, the Advisor (January 2000-December | 8 | Director of Regal-Beloit | ||
777 East Wisconsin Avenue | Director and | Since September | 2005); Chairman and CEO, the Advisor (January 1998- | Corporation, a | |||
Milwaukee, WI 53202 | Chairman | 2000 | January 2000); President, Chairman and CEO, the | manufacturing | |||
Age: 70 | Advisor (June 1983-January 1998); President, the Advisor | company | |||||
(January 1979-January 1983) | |||||||
John W. Feldt | Independent | Indefinite; | Retired; Senior Vice President-Finance, University of | 8 | Director of Thompson | ||
c/o University of | Director | Since September | Wisconsin Foundation (1985-2006); Vice President- | Plumb Funds, Inc., a | |||
Wisconsin Foundation | 2000 | Finance, University of Wisconsin Foundation (1980-1985); | mutual fund complex | ||||
1848 University Avenue | Associate Director, University of Wisconsin Foundation | (3 portfolios); Trustee | |||||
Madison, WI 53705 | (1967-1980) | of Nakoma Mutual | |||||
Age: 67 | Funds, a mutual fund | ||||||
complex (1 portfolio) | |||||||
Frederick P. Stratton, Jr. | Independent | Indefinite; | Retired; Chairman Emeritus, Briggs & Stratton | 8 | Director of Weyco | ||
10134 N. Port Washington | Director | Since May | Corporation, a manufacturing company, since 2003; | Group, Inc., a men’s | |||
Road, #2B | 2004 | Chairman of the Board, Briggs & Stratton Corporation | footwear distributor; | ||||
Mequon, WI 53092 | (2001-2002); Chairman and CEO, Briggs & Stratton | Director of Wisconsin | |||||
Age: 70 | Corporation (1986-2001) | Energy Corporation | |||||
and its subsidiaries, | |||||||
Wisconsin Electric | |||||||
Power Company and | |||||||
Wisconsin Gas LLC | |||||||
Marlyn J. Spear, CFA | Independent | Indefinite; | Chief Investment Officer, Building Trades United | 8 | Management Trustee of | ||
P. O. Box 530 | Director | Since January | Pension Trust Fund, since July 1989; Investment Officer, | AFL-CIO Housing | |||
500 Elm Grove Road | 2008 | Northwestern Mutual Financial Network (1988-1989); | Investment Trust, a | ||||
Elm Grove, WI 53122 | Assistant Vice-President, Firstar Trust Company | mutual fund complex | |||||
Age: 56 | (1978-1987); Financial Analyst, Harco Holdings, Inc. | (1 portfolio) | |||||
(1976-1978) | |||||||
Cory L. Nettles* | Interested | Indefinite; | Managing Director, Generation Growth Capital, Inc., | 8 | Director of Weyco | ||
Generation Growth Capital, Inc. | Director | Since January | since March 2007; Of Counsel, Quarles & Brady LLP, | Group, Inc., a men’s | |||
411 East Wisconsin Avenue, | 2008 | since January 2005; Secretary, Wisconsin Department | footwear distributor; | ||||
Suite 1710, | of Commerce (January 2003 – January 2005) | Director of The | |||||
Milwaukee, WI 53202 | PrivateBank, a | ||||||
Age: 39 | financial institution | ||||||
* | Mr. Nettles is an “interested person” of the Corporation (as defined in the 1940 Act) because of his association with the law firm, Quarles & Brady LLP, which provides legal services to the Advisor. The legal services that Quarles & Brady LLP has provided to the Advisor include litigation, real estate, trademark and miscellaneous securities related matters that did not relate to the Corporation or the Funds. |
Additional information about the Funds’ directors is available in the Statement of Additional Information which may be obtained without charge, upon request, by calling 1-866-44BAIRD, or at www.bairdfunds.com.
Page 47
Baird Funds, Inc.
Directors & Officers |
Position(s) | Term of Office | Principal | |||
Held with | and Length of | Occupation(s) | |||
Name, Address, and Age | the Funds | Time Served | During Past 5 Years | ||
Mary Ellen Stanek | President | Re-elected by | Managing Director, the Advisor, and Chief Investment Officer, Baird Advisors, a department of | ||
777 East Wisconsin Avenue | Board annually; | the Advisor, since March 2000 | |||
Milwaukee, WI 53202 | Since | ||||
Age: 53 | September 2000 | ||||
Charles B. Groeschell | Vice President | Re-elected by | Managing Director, the Advisor, and Senior Portfolio Manager, Baird Advisors, a department of | ||
777 East Wisconsin Avenue | Board annually; | the Advisor, since February 2000 | |||
Milwaukee, WI 53202 | Since | ||||
Age: 56 | January 2010 | ||||
Todd S. Nichol | Vice President | Re-elected by | Chief Compliance Officer, the Advisor since October 2004; Assistant Compliance Director, the | ||
777 East Wisconsin Avenue | and Chief | Board annually; | the Advisor since August 2002; Senior Vice President, the Advisor since January 2005; First Vice | ||
Milwaukee, WI 53202 | Compliance | Since | President, the Advisor (January 2004-January 2005) | ||
Age: 47 | Officer | August 2004 | |||
Russell P. Schwei | Vice President | Re-elected by | Director of Operations, the Advisor since July 1992; Managing Director, the Advisor since | ||
777 East Wisconsin Avenue | Board annually; | January 1997 | |||
Milwaukee, WI 53202 | Since | ||||
Age: 50 | September 2000 | ||||
Leonard M. Rush | Treasurer | Re-elected by | Chief Financial Officer, the Advisor since January 2000 | ||
777 East Wisconsin Avenue | Board annually; | ||||
Milwaukee, WI 53202 | Since | ||||
Age: 63 | September 2000 | ||||
Charles M. Weber | Secretary | Re-elected by | Managing Director, the Advisor since January 2009; Senior Vice President, the Advisor | ||
777 East Wisconsin Avenue | Board annually; | (July 2005-December 2008); Associate General Counsel, the Advisor since July 2005; Partner, | |||
Milwaukee, WI 53202 | Since | Quarles & Brady LLP, a law firm (October 1998-June 2005) | |||
Age: 46 | September 2005 | ||||
Laura E. Piotrowski | Assistant | Re-elected by | Managing Director, the Advisor since January 2008; Senior Vice President, the Advisor (January | ||
777 East Wisconsin Avenue | Treasurer | Board annually; | 2003-December 2007); Controller, the Advisor since January 2003 | ||
Milwaukee, WI 53202 | Since | ||||
Age: 40 | August 2007 | ||||
John R. Sokolowski | AML | Re-elected by | AML Compliance Officer, the Advisor since March 2009; Internal Auditor, the Advisor | ||
777 East Wisconsin Avenue | Compliance | Board annually; | (December2006-March 2009); Accounting Analyst, UMB Fund Services (December 2005- | ||
Milwaukee, WI 53202 | Officer | Since | December 2006); United States Air Force (July 2001-December 2005) | ||
Age: 34 | March 2009 | ||||
Bret T. Reese | Assistant | Re-elected by | First Vice President, the Advisor since January 2009; Vice President, the Advisor (June | ||
777 East Wisconsin Avenue | Secretary | Board annually; | 2005-December 2008); Associate General Counsel, the Advisor since June 2005; Senior Financial | ||
Milwaukee, WI 53202 | Since | Analyst, the Advisor (August 2004-June 2005) | |||
Age: 40 | August 2006 | ||||
Page 48
Baird Funds, Inc.
DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD LARGECAP AND MIDCAP FUNDS
The Board of Directors (the “Board”) of Baird Funds, Inc. (the “Corporation”) met on August 20, 2009 to consider the annual renewal of the investment advisory agreement with Robert W. Baird & Co. Incorporated (“Baird” or the “Advisor”) for management of the Baird LargeCap and Baird MidCap Funds, which are mutual fund series or portfolios of the Corporation (the “Funds”). The Board reviewed and discussed various information that had been provided prior to the meeting, including the investment advisory agreement, memoranda provided by outside legal counsel and the Secretary of the Funds discussing the Board’s fiduciary obligations and factors the Board should assess in considering the renewal of the investment advisory agreement, information in response to a request from the Board, including the directors who are not “interested persons” of the Corporation or the Advisor within the meaning of the Investment Company Act of 1940 (the “1940 Act”) (“Independent Directors”), from the Advisor (including the Advisor’s Form ADV, Annual Report and statement of financial condition), a profitability analysis, comparative information about the Funds’ performance for periods ended June 30, 2009, management fees and expense ratios, and other pertinent information. The Board also discussed relevant case law, including the Supreme Court’s forthcoming consideration of the Seventh Circuit decision in Jones v. Harris Associates, L.P. The Independent Directors met separately in executive session with Fund legal counsel to consider the investment advisory agreement. The Board discussed the Advisor’s 15(c) response with the President of the Funds, including how the Advisor has responded to the current economic downturn. The Board also received information periodically throughout the year that was relevant to its consideration of the investment advisory agreement, including performance, management fee and other expense information. Based on its evaluation of this information, the Board, including a majority of the Independent Directors, approved the continuation of the investment advisory agreement for an additional one-year period.
In considering the investment advisory agreement and reaching its conclusions, the Board reviewed and analyzed various factors that it determined were relevant, including the factors below.
Nature, Extent and Quality of Services Provided to the Funds
The Board analyzed the nature, extent and quality of the services provided by the Advisor to the Funds. The Board reviewed and considered the Advisor’s significant role in establishing the Funds and the construction of their investment objectives, principal strategies, investment limitations and fee structures. The Board noted the Advisor’s overall reputation and positive name recognition, the depth of the Advisor’s personnel, resources and commitment to the Funds, and the experience, credentials and continuity of the portfolio management teams employed to manage the Funds’ investments. The Board further noted that the Advisor has approximately $15.2 billion of assets under discretionary management and has strong relationships with numerous institutional accounts. The Funds provide an opportunity for smaller institutional and retail accounts to receive the same professional advice from the Advisor that it offers to its larger institutional clients. However, the Board noted that the provision of investment advisory services to the Funds requires more effort than it does for separately managed accounts due to daily sales and redemption activity and additional regulatory and compliance requirements. The Board considered the Advisor’s disciplined investment decision-making process used for the Funds. The Board also considered other services that the Advisor provided for the Funds in its capacity as their investment advisor, such as making some of its key personnel available to serve as officers of the Funds, selecting broker-dealers for execution of portfolio transactions, ensuring adherence to the Fund’s investment policies and restrictions, compliance, risk management,
Page 49
Baird Funds, Inc.
DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD LARGECAP AND MIDCAP FUNDS (cont.)
services, valuation, providing support services to the Board and the Audit Committee of the Board and overseeing the Funds’ other service providers. The Board further noted that the Advisor, in its capacity as a registered broker-dealer, also serves as distributor and principal underwriter of shares of the Funds and spends time and effort marketing the Funds. The Board also considered the strength of the Advisor’s compliance department, including the Funds’ chief compliance officer, the status of the recent SEC examination of the Advisor and the Funds and the fact that the Advisor has not experienced any significant legal, compliance or regulatory difficulties since the Funds were launched. The Board concluded that the nature, extent and quality of the services provided by the Advisor to the Funds were appropriate and that each Fund was likely to continue to benefit from services provided under the investment advisory agreement.
Investment Performance of the Advisor and the Funds
In considering the investment performance of each of the Funds, the Board reviewed information as of June 30, 2009 regarding the Funds’ performance in comparison to various benchmark indices and their peer groups as determined by Lipper.
The Board noted that the Baird LargeCap Fund (both Institutional and Investor Class shares) had outperformed the Lipper peer group average for the one-year and since inception periods, but lagged the index for the one-year, three-year and five-year periods. The Board noted that the performance of the Baird Midcap Fund had exceeded its benchmark and Lipper peer group average for the one-year, three-year and since inception periods, but had underperformed both the benchmark index and peer group average for the five-year period. The Board also considered the effect of the challenging market environment and Advisor’s quarterly commentary and discussion of the reasons for the Funds’ underperformance during such periods.
The Board also considered the Advisor’s quarterly portfolio commentaries and reviews explaining the Funds’ performance, the Advisor’s consistent and disciplined investment decision process and the investment strategies it employs for the Funds. After considering all of the information, the Board concluded that, although past performance is not a guarantee of future results, each Fund and its shareholders were likely to benefit from the Advisor’s continued management.
Costs of Services Provided and Profits Realized by the Advisor
The Board examined the fee and expense information for the LargeCap and MidCap Funds, including a comparison of such information to other similarly situated mutual funds as determined by Lipper. The Board noted that each Fund’s advisory fee was less than or equal to the average and median for the universe of all mutual funds in its Lipper category. The Board also reviewed and considered management fees charged by the Advisor to other investment advisory clients and found that the investment management fee paid by the Funds was 10 basis points (or 0.10%) less than what the Advisor charges on the first $5 million of a separately managed account. The Board recognized the extent of the significant additional services provided to each Fund that the Advisor did not provide to its other clients, such as certain administrative services, oversight of the Fund’s other service providers, director support, risk management, regulatory compliance and various other services.
Page 50
Baird Funds, Inc.
DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD LARGECAP AND MIDCAP FUNDS (cont.)
The Board also examined the total expense ratio of each Fund relative to all other mutual funds in its Lipper category. The Board noted that each Fund’s total expense ratio (both for its Institutional and Investor Class shares), after fee waivers and expense reimbursements by the Advisor, was not only lower than the average and median expense ratios for all funds in its Lipper category, but in the lowest or second lowest quartile.
The Board considered the fees realized, and the costs incurred, by the Advisor in providing investment management services to the Funds and the profitability to the Advisor of having a relationship with the Funds. The Board noted that the Adviser had waived significant fees and/or reimbursed expenses for the Funds since their respective inception dates.
The Board concluded that the profits realized by the Advisor from its relationship with the Funds were appropriate. The Board noted that the profitability information does not reflect certain internal resources provided by the Advisor to the Funds, such as legal and compliance support. The Board reviewed and considered the general financial condition of the Advisor and determined it to be sound. The Board also reviewed a report regarding revenue sharing payments, noting that any payments by the Advisor to third party platforms were made from the Advisor’s profits. In light of all of the information that it received and considered, the Board concluded that the management fee and total expense ratio of each Fund were reasonable.
Economies of Scale and Fee Levels Reflecting Those Economies
The Board noted that the Funds’ advisory fee structure does not contain any breakpoint reductions as the Funds grow in size. However, the Board recognized that the Advisor has been waiving fees and/or reimbursing expenses for the Funds since their inception. The Board also recognized that the advisory fee rates paid by the Funds were designed to be lower than the fees otherwise charged by the Advisor to its separately managed account clients and to be comparable to the second or third breakpoint advisory fee levels paid by other comparable mutual funds.
The directors concluded that the current fee structure of each Fund was reasonable and that breakpoint reductions may be considered in the future depending on Fund asset levels.
Benefits Derived from the Relationship with the Funds
The Board noted that the Advisor derives ancillary benefits from its association with the Funds in the form of research products and services received from unaffiliated broker-dealers who execute portfolio trades for the Funds. However, the Board determined such products and services have been used for legitimate purposes relating to the Funds by providing assistance in the Advisor’s investment decision-making process. The Board believed that the Funds generally benefit from their association with the Advisor and the use of the “Baird” name. The Board concluded that the other benefits realized by the Advisor from its relationship with the Funds were appropriate.
Based on its evaluation of the above factors, as well as other factors relevant to their consideration of the investment advisory agreement, the directors, including all of the Independent Directors, concluded that the continuation of the investment advisory agreement was in the best interest of each Fund and its shareholders.
Page 51
Additional Information
Proxy Voting
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Funds’ website at www.bairdfunds.com; and by accessing the SEC’s website at www.sec.gov.
Each Fund’s proxy voting record for the most recent 12-month period ended June 30 is available without charge, upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Funds’ website at www.bairdfunds.com; and by accessing the SEC’s website at www.sec.gov.
Portfolio Holdings Disclosure
The Funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-732-0330. The Funds’ Forms N-Q may also be obtained by calling toll-free 1-866-44BAIRD.
Qualified Dividend Income/Dividends Received Deduction
For the fiscal year ended December 31, 2009, certain dividends paid by the Funds may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The percentage of dividends declared from ordinary income designated as qualified dividend income was as follows:
Baird LargeCap Fund | 100% |
Baird MidCap Fund | 100% |
For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends received deduction for the fiscal year ended December 31, 2009 was as follows:
Baird LargeCap Fund | 100% |
Baird MidCap Fund | 100% |
Other Tax Information
The Funds had no taxable ordinary income distributions that were designated as short-term capital gain distributions under Internal Revenue Section 871(k)(2)(C) during the year ended December 31, 2009.
Page 52
BAIRD FUNDS, INC.
PRIVACY POLICY
This disclosure is being made pursuant to Regulation S-P concerning the Fund’s privacy policy. It is our policy to protect the privacy and security of your personal and financial information. We treat your information as confidential and recognize the importance of protecting access to it.
We protect your privacy and treat as confidential any personal or financial information about you that we receive.
We collect and maintain information about you so that we can open and maintain your account in the Funds and provide various services to you. We may collect and maintain the following personal information about you:
• | Information we receive from you or your financial advisor on account applications or other forms, correspondence, or conversations, such as your name, address, e-mail address, phone number, social security number, assets, income and date of birth; and |
• | Information about your transactions with us, our affiliates, or others, such as your account number and balance, positions, activity, history, cost basis information, and other financial information. |
We do not sell any of your information to third parties. We do not disclose any nonpublic personal information about our current or former shareholders to nonaffiliated third parties, except as requested or authorized by the current or former shareholder, as necessary to process a transaction or service an account, as requested by regulatory authorities or as otherwise permitted or required by law. For example, we are permitted by law to disclose all of the information we collect, as described above, to our transfer agent to process your transactions. We may also provide your name and address to third party service providers who send account statements and other Fund-related material to you. We restrict access to your nonpublic personal information to those persons who require such information to provide products or services to you. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
In the event that you hold shares of the Fund(s) through a financial intermediary, including, but not limited to, a broker-dealer, bank, or trust company, the privacy policy of your financial intermediary would govern how your nonpublic personal information would be shared with nonaffiliated third parties.
Page A-1
Baird Funds, Inc.
c/o U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
1-866-44BAIRD
Board of Directors
G. Frederick Kasten, Jr. (Chairman)
John W. Feldt
Frederick P. Stratton, Jr.
Cory L. Nettles
Marlyn J. Spear
Investment Advisor and Distributor
Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, WI 53202
Administrator and Transfer Agent
U.S. Bancorp Fund Services, LLC
P.O. Box 701
615 East Michigan Street
Milwaukee, WI 53202
Custodian
U.S. Bank, N.A.
1555 N. RiverCenter Drive, Suite 302
Milwaukee, WI 53212
Legal Counsel
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, WI 53202
Independent Registered Public Accounting Firm
Grant Thornton LLP
175 West Jackson Boulevard, 13th Floor
Chicago, IL 60604
![]() | ![]() |
Annual Report
RiverFront Long-Term Growth Fund
TABLE OF CONTENTS
Page | |
Letter to Shareholders | 1 |
Portfolio Managers’ Commentary | 2 |
Additional Information on Fund Expenses | 13 |
Statement of Assets and Liabilities | 15 |
Statement of Operations | 16 |
Statement of Changes in Net Assets | 17 |
Financial Highlights | 18 |
Notes to the Financial Statements | 20 |
Report of Independent Registered Public Accounting Firm | 27 |
Directors and Officers | 28 |
Additional Information | 30 |
Privacy Notice | A-1 |
This report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus.
Cautionary Note on Analyses, Opinions and Outlooks: In this report we offer analyses and opinions on the performance of individual securities, companies, industries, sectors, markets, interest rates and governmental policies, including predictions, forecasts and outlooks regarding possible future events. These can generally be identified as such because the context of the statements may include such words as “believe,” “should,” “will,” “expects,” “anticipates,” “hopes” and words of similar effect. These statements reflect the portfolio managers’ good faith beliefs and judgments and involve risks and uncertainties, including the risk that the portfolio managers’ analyses, opinions and outlooks are or will prove to be inaccurate. It is inherently difficult to correctly assess and explain the performance of particular securities, sectors, markets, interest rate movements, governmental actions or general economic trends and conditions, and many unforeseen factors contribute to the performance of Baird Funds. Investors are, therefore, cautioned not to place undue reliance on subjective judgments contained in this report.
![]() | ![]() |
Baird Funds, Inc.
1-866-442-2473
www.bairdfunds.com
February 26, 2010
Dear Shareholder,
We appreciate the confidence and trust that you have placed in our experienced investment team to help you achieve your financial goals. We are pleased to report that net assets of the eight mutual funds in our family have grown to more than $3.6 billion as of the end of 2009, an increase of more than 83% compared to the prior year.
In this Annual Report we review the performance and composition of the RiverFront Long-Term Growth Fund. We are pleased with the performance of the Fund in 2009 and feel that patience was rewarded as unprecedented market volatility and pricing dislocation subsided. Thank you again for choosing Baird Funds.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000898531-10-000257/mestanek-signature.jpg)
Mary Ellen Stanek, CFA
President
Baird Funds, Inc.
RiverFront Long-Term Growth Fund
Portfolio Managers’ Commentary
For the year ended December 31, 2009, the RiverFront Long-Term Growth Fund’s Institutional Class shares posted a return of 26.86% (26.58% for the Investor Class shares), slightly ahead of the S&P 500 Index (the Fund’s benchmark index), which posted a return of 26.46%.
A key driver of performance for the Fund in 2009 was a significant shift in our strategic asset allocation model, which we made in March. At that time, major financial markets appeared to be priced as if the global economy would experience another Great Depression. With the markets priced for this worst-case scenario, we thought downside was limited and risk assets could experience substantial price increases should these fears recede. We altered our portfolio strategy accordingly, adding emerging market equities and commodities. The subsequent rally in these asset classes helped drive positive relative performance for the remainder of the year. Additionally, we emphasized quality, seeing little reason to speculate on weak companies when their stronger competitors were so attractively priced. Without this bias, we could potentially have posted stronger performance, but we chose to remain true to our basic investment philosophies.
Part of the RiverFront process involves a tactical overlay. Tactical shifts proved to be important contributors throughout the year as we not only “got on and rode” the bull market effectively, but we did so in an overweight fashion. We think we earned our first tactical merit badge due to our ability to quickly put our 15% defensive cash position to work after the March 9 market bottom. Due to our respect for our technical indicators, understanding of long-term valuation and the inherent flexibility of our process, we were able to put the majority of our cash to work within 30 days of the bottom. Once the cash was deployed, we remained tactically overweight in many of the stronger asset classes throughout the rest of 2009, including emerging market equities and international stocks.
Our inherent quality bias in the equity portion of the Fund hurt us in 2009 after helping us significantly in 2008. This was a “resurrection” year, during which the companies that suffered the most and in many instances were “left for dead” were resuscitated by the monetary and fiscal lifeline that had been thrown to them. Since we owned very few of these companies on the way down, we were not positioned to benefit when they bounced on the way up. In hindsight, we anticipate this to be a mistake we would likely repeat. In our view, it’s not worth taking excessive risk with our clients’ money to get 30% returns when 20-25% returns can potentially be achieved while assuming lower relative risk. From a sector perspective, our overweights of technology and industrial companies helped us, as did our underweights of defensive groups like utilities and telecommunications. However, we were hurt by not owning enough financial stocks, particularly banks, and underweighting the consumer sectors.
While our domestic equity selection was negatively affected by our quality bias, that was not the case in our foreign holdings. Developed international and emerging market equities were strong performers for the Fund in 2009. Led by our positions in Pacific ex-Japan (mostly Australia, but also including Hong Kong and Singapore) and Canada, developed international equities returned 30% for the year. A satellite position in international small caps also contributed to strong returns. Our worst performer in this area was Japan, but because of its small position size and the fact that it was only held until April (when it was switched for Pacific ex-Japan) it detracted little from performance. Emerging market equities were the asset class stars for the year — up 75% — led by Latin America. We were substantially overweight the group and Latin America for most of the year.
Page 2
RiverFront Long-Term Growth Fund
Risk management, in our view, was also a positive contributor to performance in 2009, but not for the usual reasons. While our stop-loss discipline kept us out of many of the disasters of 2008, it was our buy-stop discipline that was a positive contributor in 2009. We have always believed that opportunity cost risk (the risk that what you don’t own goes up) is as important as absolute cost (the value of what you own goes down), if not more so. Consistent with that philosophy, we are constantly monitoring potential areas of opportunity cost vulnerability and developing risk management plans around them. In 2009, this risk management process “pulled” the portfolio back into segments of the market (such as financials and REITs) in which fundamentals were still developing, but the technical picture was more clear.
Looking at the large cap component of the Fund, our quality bias caused a slight underperformance as the market corrected, with the most significant detractor being our underweight in the volatile financial sector. While we increased exposure to the capital markets/broker-dealer segment, it wasn’t enough to bridge the gap. In the consumer discretionary space, our positions in more conservative names, such as Wal-Mart and Costco, lagged their retail peers. The Fund showed positive relative performance in the health care and industrial sectors; stock selection in high conviction names such as Express Scripts and Illinois Tool Works each enjoyed double-digit gains.
The small and mid cap components of the Fund were also negatively affected by our bias against the consumer. Despite high levels of consumer debt and unemployment, the specialty retail group outperformed on a relative basis, and we had no exposure there. Additional relative pressure in the small and mid cap segments occurred due to our quality bias and our lack of exposure to the metals and mining group within the materials sector. We enjoyed positive relative performance in the energy, utilities and industrial sectors, with positions such as Cimarex Energy, ONEOK, Inc. and Manpower, Inc.
As we enter 2010, financial markets have largely unwound the steep declines experienced in the aftermath of the Lehman Brothers bankruptcy. At “pre-Lehman” levels, we believe markets reflect the prospect of a challenging economic environment but are no longer pricing in the possibility of economic depression. Continuing cost controls and enhanced worker productivity should generate sufficient corporate earnings to support current equity market levels and prompt modest additional upside, in our view. However, significant equity market gains will likely depend upon the level of sustainable growth in the global economy. With government stimulus programs set to fade by mid-year, we believe consumers in the emerging markets, especially China, are the most promising source for fueling economic growth in the second half. We think the most likely catalyst for a surge in emerging market consumption would be an increase in the value of Chinese currency. If China revalues its currency, the outlook for global economic growth improves substantially, in our view, with comparable increases in the potential returns from equity investments.
RiverFront Investment Group, LLC
Portfolio Managers:
Michael Jones, CFA
Rod Smyth
Doug Sandler, CFA
Tim Anderson, CFA
Page 3
RiverFront Long-Term Growth Fund
A December 31, 2009 summary of the Fund’s top 10 holdings and asset allocation is shown below.
Top 10 Holdings* | Asset Allocation** | ||
Vanguard Europe Pacific ETF | 10.93% | ![]() | |
Vanguard Emerging Markets ETF | 9.23% | ||
PowerShares DB Commodity | |||
Index Tracking Fund | 4.72% | ||
iShares MSCI EAFE Index Fund | 3.31% | ||
Vanguard Dividend | |||
Appreciation Index Fund | 2.43% | ||
Vanguard FTSE All World | |||
ex-US Small-Cap ETF | 2.19% | ||
PowerShares DB Precious Metals Fund | 2.19% | ||
iShares MSCI Canada Index Fund | 1.86% | ||
iShares MSCI Pacific ex-Japan Index Fund | 1.72% | ||
PowerShares DB Base Metals Fund | 1.69% | ||
Net Assets: | $41,644,476 | ||
Portfolio Turnover Rate: | 67.1% | ||
Number of Equity Holdings: | 92 | ||
Annualized Portfolio Expense Ratio:*** | |||
INSTITUTIONAL CLASS: | 0.90% | ||
INVESTOR CLASS: | 1.15% | **** | |
* | The Fund’s portfolio composition is subject to change and there is no assurance that the Fund will continue to hold any particular security. Percentages shown relate to the Fund’s total net assets as of December 31, 2009. |
** | Percentages shown may not add up to 100% due to rounding. |
*** | The Advisor has contractually agreed to limit the Fund’s total annual fund operating expenses to 0.90% of average daily net assets for the Institutional Class shares and 1.15% of average daily net assets for the Investor Class shares, at least through December 31, 2011. |
**** | Includes 0.25% 12b-1 fee. |
Page 4
RiverFront Long-Term Growth Fund
Institutional Class |
Value of a $25,000 Investment |
![]() |
Growth of a hypothetical investment of $25,000 made on the Fund’s inception date (10/28/08), assuming reinvestment of all distributions.
Investor Class |
Value of a $10,000 Investment |
![]() |
Growth of a hypothetical investment of $10,000 made on the Fund’s inception date (10/28/08), assuming reinvestment of all distributions.
Page 5
RiverFront Long-Term Growth Fund
Average Annual Total Returns
For the Periods Ended December 31, 2009 | One Year | Since Inception(1) |
Institutional Class Shares | 26.86% | 28.46% |
Investor Class Shares | 26.58% | 28.09% |
S&P 500® Index(2) | 26.46% | 18.63% |
(1) | For the period from October 28, 2008 (commencement of operations) through December 31, 2009. |
(2) | The S&P 500® is an index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500® is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe. Companies included in the index are selected by the S&P Index Committee, a team of analysts and economists at Standard & Poor’s. The S&P 500® is a market value weighted index – each stock’s weight in the index is proportionate to its market value. A direct investment in an index is not possible. |
The returns shown in the table above and line graphs on the previous page reflect reinvestment of dividends and/or capital gains distributions in additional shares. The returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
For information about the performance of the Fund as of the most recent month-end, please call 1-866-44BAIRD or visit www.bairdfunds.com. Mutual fund performance changes over time and current performance may be lower or higher than that stated.
Page 6
RiverFront Long-Term Growth Fund
Schedule of Investments December 31, 2009 |
Shares | Value | ||||||
COMMON STOCKS – 41.4% | |||||||
Aerospace & Defense – 2.4% | |||||||
8,308 | Esterline Technologies | ||||||
Corporation* | $ | 338,717 | |||||
3,137 | L-3 Communications | ||||||
Holdings, Inc. | 272,762 | ||||||
5,820 | United Technologies | ||||||
Corporation | 403,967 | ||||||
1,015,446 | |||||||
Beverages – 0.9% | |||||||
6,325 | The Coca-Cola Company | 360,525 | |||||
Capital Markets – 0.8% | |||||||
2,241 | Affiliated Managers | ||||||
Group, Inc.* | 150,931 | ||||||
1,128 | The Goldman Sachs | ||||||
Group, Inc. | 190,452 | ||||||
341,383 | |||||||
Chemicals – 0.8% | |||||||
2,021 | Praxair, Inc. | 162,307 | |||||
7,204 | Sensient Technologies | ||||||
Corporation | 189,465 | ||||||
351,772 | |||||||
Commercial Banks – 1.1% | |||||||
3,810 | Cullen/Frost Bankers, Inc. | 190,500 | |||||
19,583 | Valley National Bancorp | 276,708 | |||||
467,208 | |||||||
Commercial Services & Supplies – 0.5% | |||||||
3,603 | Manpower Inc. | 196,652 | |||||
Communications Equipment – 2.2% | |||||||
19,067 | Cisco Systems, Inc.* | 456,464 | |||||
6,487 | Harris Corporation | 308,457 | |||||
5,854 | Polycom, Inc.* | 146,174 | |||||
911,095 | |||||||
Computers & Peripherals – 2.3% | |||||||
1,766 | Apple Inc.* | 372,379 | |||||
3,820 | Hewlett-Packard Company | 196,768 | |||||
2,928 | International | ||||||
Business Machines | |||||||
Corporation (IBM) | 383,275 | ||||||
952,422 | |||||||
Containers & Packaging – 0.8% | |||||||
6,711 | Ball Corporation | 346,959 | |||||
Distributors – 0.5% | |||||||
6,987 | WESCO | ||||||
International, Inc.* | 188,719 | ||||||
Diversified Financial Services – 1.4% | |||||||
9,207 | J.P. Morgan Chase & Co. | 383,656 | |||||
10,119 | NASDAQ OMX | ||||||
Group, Inc.* | 200,558 | ||||||
584,214 | |||||||
Electrical Equipment – 1.0% | |||||||
9,672 | Cooper Industries | ||||||
PLC – Class A f | 412,414 | ||||||
Energy Equipment & Services – 1.4% | |||||||
7,880 | Hornbeck Offshore | ||||||
Services, Inc.* | 183,446 | ||||||
9,455 | Superior Energy | ||||||
Services, Inc.* | 229,662 | ||||||
1,792 | Transocean Ltd.* f | 148,378 | |||||
561,486 | |||||||
Food & Staples Retailing – 1.0% | |||||||
12,820 | CVS Caremark | ||||||
Corporation | 412,932 | ||||||
Food Products – 0.9% | |||||||
8,534 | H.J. Heinz Company | 364,914 | |||||
Health Care Providers & Services – 3.7% | |||||||
5,179 | DaVita, Inc.* | 304,214 | |||||
4,076 | Express Scripts, Inc.* | 352,370 | |||||
4,934 | Henry Schein, Inc.* | 259,528 | |||||
2,028 | Johnson & Johnson | 130,624 |
The accompanying notes are an integral part of these financial statements.
Page 7
RiverFront Long-Term Growth Fund
Schedule of Investments December 31, 2009 |
Shares | Value | ||||||
COMMON STOCKS – 41.4% (cont.) | |||||||
Health Care Providers & Services – 3.7% (cont.) | |||||||
3,153 | Laboratory Corporation | ||||||
of America Holdings* | $ | 235,971 | |||||
11,749 | PSS World Medical, Inc.* | 265,175 | |||||
1,547,882 | |||||||
Hotels, Restaurants & Leisure – 1.3% | |||||||
4,528 | Darden Restaurants, Inc. | 158,797 | |||||
8,616 | Jack in the Box Inc.* | 169,477 | |||||
7,870 | Penn National | ||||||
Gaming, Inc.* | 213,906 | ||||||
542,180 | |||||||
Insurance – 1.5% | |||||||
12,787 | HCC Insurance | ||||||
Holdings, Inc. | 357,652 | ||||||
15,647 | The Progressive | ||||||
Corporation* | 281,490 | ||||||
639,142 | |||||||
IT Services – 0.7% | |||||||
6,300 | Fiserv, Inc.* | 305,424 | |||||
Leisure Equipment & Products – 0.7% | |||||||
9,703 | Hasbro, Inc. | 311,078 | |||||
Machinery – 1.5% | |||||||
6,467 | Dover Corporation | 269,092 | |||||
7,184 | Illinois Tool Works, Inc. | 344,760 | |||||
613,852 | |||||||
Media – 1.3% | |||||||
8,073 | DIRECTV – Class A* | 269,234 | |||||
6,965 | Dreamworks Animation | ||||||
SKG, Inc.* | 278,252 | ||||||
547,486 | |||||||
Multiline Retail – 0.6% | |||||||
5,174 | Dollar Tree, Inc.* | 249,904 | |||||
Multimedia – 0.4% | |||||||
2,254 | Factset Research | ||||||
Systems Inc. | 148,471 | ||||||
Office Electronics – 0.6% | |||||||
8,253 | Zebra Technologies | ||||||
Corporation – Class A* | 234,055 | ||||||
Oil & Gas – 4.0% | |||||||
2,694 | Chevron Corporation | 207,411 | |||||
4,257 | Cimarex Energy Co. | 225,493 | |||||
7,041 | Exxon Mobil Corporation | 480,126 | |||||
8,954 | Forest Oil Corporation* | 199,227 | |||||
7,821 | ONEOK, Inc. | 348,582 | |||||
4,493 | XTO Energy, Inc. | 209,059 | |||||
1,669,898 | |||||||
Pharmaceuticals – 2.8% | |||||||
6,983 | Abbott Laboratories | 377,012 | |||||
10,592 | Bristol-Myers Squibb | ||||||
Company | 267,448 | ||||||
9,530 | Merck & Co., Inc. | 348,226 | |||||
10,549 | Pfizer, Inc. | 191,887 | |||||
1,184,573 | |||||||
Real Estate Investment Trusts – 1.0% | |||||||
8,068 | Highwoods Properties, Inc. | 269,068 | |||||
8,215 | Weingarten Realty | ||||||
Investors | 162,575 | ||||||
431,643 | |||||||
Semiconductors & | |||||||
Semiconductor Equipment – 0.5% | |||||||
10,534 | Intel Corporation | 214,894 | |||||
Software – 0.7% | |||||||
9,648 | Amdocs Limited* f | 275,257 | |||||
Specialty Retail – 1.3% | |||||||
7,409 | Best Buy Co., Inc. | 292,359 | |||||
10,783 | Gamestop | ||||||
Corporation – Class A* | 236,579 | ||||||
528,938 | |||||||
Tobacco – 0.5% | |||||||
4,481 | Philip Morris | ||||||
International Inc. | 215,939 |
The accompanying notes are an integral part of these financial statements.
Page 8
RiverFront Long-Term Growth Fund
Schedule of Investments December 31, 2009 |
Shares | Value | ||||||
COMMON STOCKS – 41.4% (cont.) | |||||||
Wireless Telecommunication Services – 0.3% | |||||||
36,471 | Sprint Nextel | ||||||
Corporation* | $ | 133,484 | |||||
Total Common Stocks | |||||||
(Cost $15,260,713) | 17,262,241 | ||||||
EXCHANGE-TRADED FUNDS – 55.0% | |||||||
Commodity – 10.0% | |||||||
21,635 | PowerShares DB | ||||||
Agriculture Fund* | 572,029 | ||||||
31,223 | PowerShares DB Base | ||||||
Metals Fund* | 702,518 | ||||||
79,804 | PowerShares DB | ||||||
Commodity Index | |||||||
Tracking Fund* | 1,964,774 | ||||||
24,206 | PowerShares DB Precious | ||||||
Metals Fund* | 911,840 | ||||||
4,151,161 | |||||||
Emerging Markets – 12.7% | |||||||
7,613 | iShares MSCI All Country | ||||||
Asia ex-Japan Index Fund | 424,120 | ||||||
13,637 | iShares MSCI Emerging | ||||||
Markets Index | 565,935 | ||||||
10,062 | iShares S&P Latin | ||||||
American 40 Index Fund | 481,064 | ||||||
93,751 | Vanguard Emerging | ||||||
Markets ETF | 3,843,791 | ||||||
5,314,910 | |||||||
International Equity – 22.9% | |||||||
29,447 | iShares MSCI Canada | ||||||
Index Fund | 775,340 | ||||||
24,915 | iShares MSCI EAFE | ||||||
Index Fund | 1,377,800 | ||||||
17,339 | iShares MSCI Pacific | ||||||
ex-Japan Index Fund | 717,314 | ||||||
35,443 | iShares MSCI Singapore | ||||||
Index Fund | 406,886 | ||||||
29,679 | PowerShares | ||||||
International Dividend | |||||||
Achievers Portfolio | 414,616 | ||||||
133,080 | Vanguard Europe | ||||||
Pacific ETF | 4,551,336 | ||||||
8,167 | Vanguard European ETF | 395,936 | |||||
11,165 | Vanguard FTSE All World | ||||||
ex-US Small-Cap ETF | 912,404 | ||||||
9,551,632 | |||||||
Large Cap – 8.2% | |||||||
7,810 | iShares Dow Jones U.S. | ||||||
Real Estate Index Fund | 358,635 | ||||||
13,036 | iShares S&P North | ||||||
American Technology- | |||||||
Software Index Fund* | 610,997 | ||||||
3,150 | iShares U.S. Dow Jones | ||||||
Medical Equipment Index | 166,883 | ||||||
4,720 | Market Vectors | ||||||
Agribusiness ETF | 206,689 | ||||||
9,645 | PowerShares QQQ | 442,898 | |||||
6,293 | SPDR S&P Retail ETF | 224,031 | |||||
21,581 | Vanguard Dividend | ||||||
Appreciation Index Fund | 1,011,286 | ||||||
7,400 | Vanguard Information | ||||||
Technology Index ETF | 405,668 | ||||||
3,427,087 | |||||||
Mid Cap - 0.4% | |||||||
2,021 | iShares Morningstar Mid | ||||||
Growth Index Fund | 152,788 |
The accompanying notes are an integral part of these financial statements.
Page 9
RiverFront Long-Term Growth Fund
Schedule of Investments December 31, 2009 |
Shares | Value | ||||||
EXCHANGE-TRADED FUNDS – 55.0% (cont.) | |||||||
Small Cap - 0.8% | |||||||
5,871 | iShares S&P SmallCap 600 | ||||||
Index Fund | $ | 321,261 | |||||
Total Exchange- | |||||||
Traded Funds | |||||||
(Cost $19,749,539) | 22,918,839 | ||||||
SHORT-TERM INVESTMENTS – 3.1% | |||||||
Money Market Mutual Fund – 3.1% | |||||||
1,271,395 | Fidelity Institutional | ||||||
Government Portfolio, | |||||||
0.03% « | 1,271,395 | ||||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $1,271,395) | 1,271,395 | ||||||
Total Investments | |||||||
(Cost $36,281,647) – | |||||||
99.5% | 41,452,475 | ||||||
Other Assets in Excess | |||||||
of Liabilities – 0.5% | 192,001 | ||||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 41,644,476 |
* | Non–Income Producing |
f | Foreign Security |
« | 7-Day Yield |
The accompanying notes are an integral part of these financial statements.
Page 10
RiverFront Long-Term Growth Fund
Schedule of Investments December 31, 2009 |
Summary of Fair Value Exposure at December 31, 2009
The Fund has adopted authoritative fair valuation accounting standards which establish a definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion on changes in valuation techniques and related inputs during the period. These inputs are summarized into three broad levels and described below:
Level 1 – | Quoted prices in active markets for identical securities. |
Level 2 – | Other significant observable inputs (including quoted prices for similar securities, quoted prices in inactive markets, interest rates, yield curves, prepayment speeds, credit risk, default rates, inputs corroborated by observable market data, etc.) |
Level 3 – | Significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in pricing the security.) |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2009:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity | ||||||||||||||||
Common Stocks | ||||||||||||||||
Aerospace & Defense | $ | 1,015,446 | $ | — | $ | — | $ | 1,015,446 | ||||||||
Beverages | 360,525 | — | — | 360,525 | ||||||||||||
Capital Markets | 341,383 | — | — | 341,383 | ||||||||||||
Chemicals | 351,772 | — | — | 351,772 | ||||||||||||
Commercial Banks | 467,208 | — | — | 467,208 | ||||||||||||
Commercial Services & Supplies | 196,652 | — | — | 196,652 | ||||||||||||
Communications Equipment | 911,095 | — | — | 911,095 | ||||||||||||
Computers & Peripherals | 952,422 | — | — | 952,422 | ||||||||||||
Containers & Packaging | 346,959 | — | — | 346,959 | ||||||||||||
Distributors | 188,719 | — | — | 188,719 | ||||||||||||
Diversified Financial Services | 584,214 | — | — | 584,214 | ||||||||||||
Electrical Equipment | 412,414 | — | — | 412,414 | ||||||||||||
Energy Equipment & Services | 561,486 | — | — | 561,486 | ||||||||||||
Food & Staples Retailing | 412,932 | — | — | 412,932 | ||||||||||||
Food Products | 364,914 | — | — | 364,914 | ||||||||||||
Health Care Providers & Services | 1,547,882 | — | — | 1,547,882 | ||||||||||||
Hotels, Restaurants & Leisure | 542,180 | — | — | 542,180 | ||||||||||||
Insurance | 639,142 | — | — | 639,142 |
Page 11
RiverFront Long-Term Growth Fund
Schedule of Investments December 31, 2009 |
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
IT Services | 305,424 | — | — | 305,424 | ||||||||||||
Leisure Equipment & Products | 311,078 | — | — | 311,078 | ||||||||||||
Machinery | 613,852 | — | — | 613,852 | ||||||||||||
Media | 547,486 | — | — | 547,486 | ||||||||||||
Multiline Retail | 249,904 | — | — | 249,904 | ||||||||||||
Multimedia | 148,471 | — | — | 148,471 | ||||||||||||
Office Electronics | 234,055 | — | — | 234,055 | ||||||||||||
Oil & Gas | 1,669,898 | — | — | 1,669,898 | ||||||||||||
Pharmaceuticals | 1,184,573 | — | — | 1,184,573 | ||||||||||||
Real Estate Investment Trusts | 431,643 | — | — | 431,643 | ||||||||||||
Semiconductors & Semiconductor Equipment | 214,894 | — | — | 214,894 | ||||||||||||
Software | 275,257 | — | — | 275,257 | ||||||||||||
Specialty Retail | 528,938 | — | — | 528,938 | ||||||||||||
Tobacco | 215,939 | — | — | 215,939 | ||||||||||||
Wireless Telecommunication Services | 133,484 | — | — | 133,484 | ||||||||||||
Total Common Stocks | 17,262,241 | — | — | 17,262,241 | ||||||||||||
Exchange-Traded Funds | ||||||||||||||||
Commodity | 4,151,161 | — | — | 4,151,161 | ||||||||||||
Emerging Markets | 5,314,910 | — | — | 5,314,910 | ||||||||||||
International Equity | 9,551,632 | — | — | 9,551,632 | ||||||||||||
Large Cap | 3,427,087 | — | — | 3,427,087 | ||||||||||||
Mid Cap | 152,788 | — | — | 152,788 | ||||||||||||
Small Cap | 321,261 | — | — | 321,261 | ||||||||||||
Total Exchange-Traded Funds | 22,918,839 | — | — | 22,918,839 | ||||||||||||
Total Equity | 40,181,080 | — | — | 40,181,080 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Fund | 1,271,395 | — | — | 1,271,395 | ||||||||||||
Total Short-Term Investments | 1,271,395 | — | — | 1,271,395 | ||||||||||||
Total Investments | $ | 41,452,475 | $ | — | $ | — | $ | 41,452,475 |
Page 12
RiverFront Long-Term Growth Fund
Additional Information on Fund Expenses December 31, 2009 |
Example
As a shareholder of a mutual fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, such as management fees; distribution and/or service (12b-1) fees; and other fund expenses. Although the Fund does not charge any sales loads, redemption fees, or other transaction fees, you will be assessed fees for outgoing wire transfers, returned checks and stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Fund’s transfer agent. If you request that a redemption be made by wire transfer, currently the Fund’s transfer agent charges a $15.00 fee.
This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (7/1/09 – 12/31/09).
Actual Expenses
The third and fourth columns of the following table provide information about account values based on actual returns and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the fourth column entitled “Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fifth and sixth columns of the following table provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the sixth column of the table (entitled “Expenses Paid During Period”) is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different mutual funds. In addition, if these transactional costs were included, your costs could have been higher.
Page 13
RiverFront Long-Term Growth Fund
Additional Information on Fund Expenses December 31, 2009 |
Actual vs. Hypothetical Returns
For the Six Months Ended December 31, 2009
Hypothetical (5% return | ||||||
Actual | before expenses) | |||||
Fund’s | Beginning | Ending | Expenses | Ending | Expenses | |
Annualized | Account | Account | Paid | Account | Paid | |
Expense | Value | Value | During | Value | During | |
Ratio(1) | 7/1/09 | 12/31/09 | Period(1) | 12/31/09 | Period(1) | |
RiverFront Fund | ||||||
Institutional Class | 0.90% | $1,000.00 | $1,202.10 | $5.00 | $1,020.67 | $4.58 |
Investor Class | 1.15% | $1,000.00 | $1,200.50 | $6.38 | $1,019.41 | $5.85 |
(1) | Expenses are equal to the Fund’s annualized net expense ratio multiplied by the average account value over the period, multiplied by 184 days and divided by 365 to reflect the one-half year period. |
Page 14
RiverFront Long-Term Growth Fund
Statement of Assets and Liabilities December 31, 2009 |
ASSETS: | ||||
Investments, at value | $ | 41,452,475 | ||
(cost $36,281,647) | ||||
Uninvested cash | 6,912 | |||
Receivable from Advisor and Distributor | 16,577 | |||
Dividends receivable | 24,562 | |||
Interest receivable | 116 | |||
Receivable for fund shares sold | 172,494 | |||
Other assets | 8,743 | |||
Total assets | 41,681,879 | |||
LIABILITIES: | ||||
Accrued expenses and other liabilities | 37,403 | |||
Total liabilities | 37,403 | |||
NET ASSETS | $ | 41,644,476 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 36,488,662 | ||
Accumulated undistributed net investment income | — | |||
Accumulated net realized loss on investments sold | (15,014 | ) | ||
Net unrealized appreciation on investments | 5,170,828 | |||
NET ASSETS | $ | 41,644,476 | ||
INSTITUTIONAL CLASS SHARES | ||||
Net Assets | 27,762,867 | |||
Shares outstanding ($0.01 par value, unlimited shares authorized) | 2,099,798 | |||
Net asset value, offering and redemption price per share | $ | 13.22 | ||
INVESTOR CLASS SHARES | ||||
Net Assets | 13,881,609 | |||
Shares outstanding ($0.01 par value, unlimited shares authorized) | 1,052,457 | |||
Net asset value, offering and redemption price per share | $ | 13.19 |
The accompanying notes are an integral part of these financial statements.
Page 15
RiverFront Long-Term Growth Fund
Statement of Operations Year Ended December 31, 2009 |
INVESTMENT INCOME: | ||||
Dividends | $ | 437,356 | ||
Interest | 3,328 | |||
Other income | 8,114 | |||
Total investment income | 448,798 | |||
EXPENSES: | ||||
Investment advisory fees | 130,246 | |||
Administration fees | 3,931 | |||
Shareholder servicing fees | 16,730 | |||
Fund accounting fees | 22,320 | |||
Professional fees | 29,841 | |||
Federal and state registration | 33,166 | |||
Directors fees | 26,032 | |||
Custody fees | 29,570 | |||
Reports to shareholders | 14,629 | |||
Distribution fees - Investor Class Shares (Note 7) | 12,248 | |||
Miscellaneous expenses | 224 | |||
Total expenses | 318,937 | |||
Expense reimbursement by Advisor (Note 5) | (126,348 | ) | ||
Total expenses | 192,589 | |||
NET INVESTMENT INCOME | 256,209 | |||
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS: | ||||
Net realized gain on investments | 83,824 | |||
Change in unrealized appreciation/depreciation on investments | 5,035,621 | |||
Net realized and unrealized gain on investments | 5,119,445 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 5,375,654 |
The accompanying notes are an integral part of these financial statements.
Page 16
RiverFront Long-Term Growth Fund
Statement of Changes in Net Assets |
October 28, 2008(1) | ||||||||
Year Ended | through | |||||||
December 31, 2009 | December 31, 2008 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 256,209 | $ | 65,058 | ||||
Net realized gain (loss) on investments | 83,824 | (94,878 | ) | |||||
Change in unrealized appreciation/depreciation on investments | 5,035,621 | 135,207 | ||||||
Net increase in net assets resulting from operations | 5,375,654 | 105,387 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 32,645,189 | 7,978,984 | ||||||
Shares issued to holders in reinvestments of dividends | 252,329 | 56,642 | ||||||
Cost of shares redeemed | (4,230,495 | ) | (213,933 | ) | ||||
Net increase in net assets resulting from capital share transactions | 28,667,023 | 7,821,693 | ||||||
DISTRIBUTIONS TO INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (183,786 | ) | (59,302 | ) | ||||
DISTRIBUTIONS TO INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (79,120 | ) | (3,073 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 33,779,771 | 7,864,705 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 7,864,705 | — | ||||||
End of period (including undistributed net investment | ||||||||
income of $0 and $2,682, respectively) | $ | 41,644,476 | $ | 7,864,705 |
(1) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
Page 17
RiverFront Long-Term Growth Fund
Financial Highlights |
Institutional Class | ||||||||
October 28, 2008(1) | ||||||||
Year Ended | through | |||||||
December 31, 2009 | December 31, 2008 | |||||||
Per Share Data: | ||||||||
Net asset value, beginning of period | $ | 10.49 | $ | 10.00 | ||||
Income from investment operations: | ||||||||
Net investment income(2) | 0.16 | 0.12 | ||||||
Net realized and unrealized gains on investments | 2.66 | 0.46 | ||||||
Total from investment operations | 2.82 | 0.58 | ||||||
Less distributions: | ||||||||
Distributions from net investment income | (0.09 | ) | (0.09 | ) | ||||
Net asset value, end of period | $ | 13.22 | $ | 10.49 | ||||
Total return | 26.86 | % | 5.81 | %(3) | ||||
Supplemental data and ratios: | ||||||||
Net assets, end of period | $ | 27,762,867 | $ | 7,438,725 | ||||
Ratio of expenses to average net assets | 0.90 | % | 0.90 | %(4) | ||||
Ratio of expenses to average net assets (before waivers) | 1.53 | % | 4.97 | %(4) | ||||
Ratio of net investment income to average net assets | 1.34 | % | 7.55 | %(4) | ||||
Ratio of net investment income to average net assets (before waivers) | 0.71 | % | 3.48 | %(4) | ||||
Portfolio turnover rate(5) | 67.1 | % | 13.3 | %(3) |
(1) | Commencement of operations. |
(2) | Calculated using average shares outstanding during the period. |
(3) | Not annualized. |
(4) | Annualized. |
(5) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 18
RiverFront Long-Term Growth Fund
Financial Highlights |
Investor Class | ||||||||
October 28, 2008(1) | ||||||||
Year Ended | through | |||||||
December 31, 2009 | December 31, 2008 | |||||||
Per Share Data: | ||||||||
Net asset value, beginning of period | $ | 10.49 | $ | 10.00 | ||||
Income from investment operations: | ||||||||
Net investment income(2) | 0.13 | 0.12 | ||||||
Net realized and unrealized gains on investments | 2.65 | 0.46 | ||||||
Total from investment operations | 2.78 | 0.58 | ||||||
Less distributions: | ||||||||
Distributions from net investment income | (0.08 | ) | (0.09 | ) | ||||
Net asset value, end of period | $ | 13.19 | $ | 10.49 | ||||
Total return | 26.58 | % | 5.68 | %(3) | ||||
Supplemental data and ratios: | ||||||||
Net assets, end of period | $ | 13,881,609 | $ | 425,980 | ||||
Ratio of expenses to average net assets | 1.15 | % | 1.15 | %(4) | ||||
Ratio of expenses to average net assets (before waivers) | 1.78 | % | 5.22 | %(4) | ||||
Ratio of net investment income to average net assets | 1.09 | % | 7.30 | %(4) | ||||
Ratio of net investment income to average net assets (before waivers) | 0.46 | % | 3.23 | %(4) | ||||
Portfolio turnover rate(5) | 67.1 | % | 13.3 | %(3) |
(1) | Commencement of operations. |
(2) | Calculated using average shares outstanding during the period. |
(3) | Not annualized. |
(4) | Annualized. |
(5) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 19
RiverFront Long-Term Growth Fund
Notes to the Financial Statements December 31, 2009 |
1.ORGANIZATION
Baird Funds, Inc. (the “Corporation”) was incorporated on June 9, 2000 as a Wisconsin corporation and is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The accompanying financial statements include the RiverFront Long-Term Growth Fund (“Fund”), one of the eight portfolios comprising the Corporation. Pursuant to the 1940 Act, the Fund is a “diversified” series of the Corporation. The investment advisor to the Fund is Robert W. Baird & Co. Incorporated (“Baird” or the “Advisor”). The sub-advisor to the Fund is RiverFront Investment Group, LLC (“RiverFront”).
The Fund commenced operations with the sale of both Institutional and Investor Class Shares on October 28, 2008. The Institutional Class Shares are not subject to a distribution and service (12b-1) fee, while the Investor Class Shares are subject to a distribution and service (12b-1) fee up to 0.25%.
The Fund seeks long-term capital appreciation through investments primarily in equity securities of domestic and foreign companies across varying market capitalization ranges, styles and economic sectors.
On December 31, 2009, the Advisor held 51.3% of the Institutional Class Shares of the Fund through the Advisor’s participant-directed retirement and deferred compensation plans.
2.SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America.
a) | Investment Valuation – Section 2(a)(41) of the 1940 Act, together with the rules and interpretations of the SEC, requires the Fund, in computing NAV, to value its portfolio securities using market quotations when they are “readily available.” When market quotations are not readily available (e.g., because there is no regular market quotation for such securities, the market for such security is limited, the validity of quotations is questionable or, for debt securities, IDC does not provide a price), the Board of Directors of the Corporation must value the securities at “fair value determined in good faith.” The Board has delegated such responsibility to the Advisor pursuant to pricing policies and procedures that the Board has adopted and regularly reviews. In general, the “fair value” of a security means the price that would be received to sell a security in an orderly transaction between market participants at the measurement date. |
Consistent with Section 2(a)(41) of the 1940 Act, the Fund prices its securities as follows: common stocks and ETFs that are listed on a securities exchange (other than NASDAQ) are valued at the last quoted sales price. Securities traded on NASDAQ are valued at the NASDAQ Official Closing Price. Price information on listed stocks is taken from the exchange where the security is primarily traded. Securities that were not traded on the valuation date, as well as stocks that are not listed on an exchange, including NASDAQ, are valued at the average of the current bid and asked price. Debt securities are valued by an independent pricing service using valuation methods that are designed to represent |
Page 20
RiverFront Long-Term Growth Fund
Notes to the Financial Statements December 31, 2009 |
2.SIGNIFICANT ACCOUNTING POLICIES (cont.)
fair value, such as matrix pricing and other analytical pricing models, market transactions and dealer quotations. Debt securities purchased with a remaining maturity of 60 days or less are valued at acquisition cost plus or minus any amortized discount or premium which approximates fair value. Investments in mutual funds are valued at their stated net asset value. Other assets and securities for which market quotations are not readily available are valued at fair value as determined in good faith by the Advisor in accordance with procedures approved by the Corporation’s Board of Directors. In accordance with such procedures, the Advisor may use broker quotes or prices obtained from alternative independent pricing services, or, if the broker quotes or prices from alternative pricing services are unavailable or deemed to be unreliable, fair value will be determined by a valuation committee of the Advisor (which includes a representative of RiverFront). In determining fair value, the valuation committee takes into account all relevant factors and available information. Consequently, the price of the security used by the Fund to calculate its NAV may differ from quoted or published prices for the same security. Fair value pricing involves subjective judgments and there is no single standard for determining a security’s fair value. As a result, different mutual funds could reasonably arrive at a different fair value for the same security. It is possible that the fair value determined for a security is materially different from the value that could be realized upon the sale of that security or from the values that other mutual funds may determine. In addition, given the volatility and periodic illiquidity experienced in recent years, the prices determined for any individual security on any given day may vary significantly from the amount that can be obtained in an actual sale of that security. |
In January, 2010, FASB issued Accounting Standards Update No. 2010-06, Improving Disclosures about Fair Value Measurements (ASU 2010-06). ASU 2010-06 will require new disclosures regarding transfers in and out of Levels 1 and 2 (effective for interim and annual periods beginning after December 15, 2009), as well as additional details regarding Level 3 transaction activity (effective for interim and annual periods beginning after December 15, 2010). Management is currently evaluating the effect that the adoption of ASU 2010-06 will have on the Fund’s financial statements. |
b) | Foreign Securities – Foreign securities are defined as securities issued by companies that are organized outside the United States. Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in U.S. companies and the U.S. government. These risks include foreign currency fluctuations and adverse political and economic developments. Moreover, securities of many foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies and the U.S. government. Occasionally, events that affect those values and exchange rates may occur after the close of the exchange on which such securities are traded. If such events materially affect the value of the Fund’s securities, these securities may be valued at their fair value pursuant to procedures adopted by the Board of Directors. All of the foreign securities directly owned by the Fund as of December 31, 2009 are traded on the New York Stock Exchange or NASDAQ. |
Page 21
RiverFront Long-Term Growth Fund
Notes to the Financial Statements December 31, 2009 |
2.SIGNIFICANT ACCOUNTING POLICIES (cont.)
c) | Federal Income Taxes – The Fund intends to continue to qualify as a regulated investment company as provided in subchapter M of the Internal Revenue Code and to distribute substantially all of its taxable income to its shareholders in a manner which results in no tax cost to the Fund. Therefore, no federal income or excise tax provision is recorded. |
There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on the tax return for the fiscal year ended December 31, 2009, or for any other tax years which are open for exam. As of December 31, 2009, open tax years include the tax years ended December 31, 2008 and 2009. The Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next 12 months. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the year, the Fund did not incur any interest or penalties. |
d) | Distributions to Shareholders – Dividends from net investment income, if any, are declared and paid annually. Distributions of net realized gains, if any, are declared and paid at least annually. |
e) | Allocation of Income and Expenses – The Fund is charged for those expenses directly attributable to it. Expenses directly attributable to a class of shares, such as Rule 12b-1 distribution fees, are charged to that class of shares. Income, expenses, and realized and unrealized gains and losses are allocated to the classes based on their respective net assets. Expenses that are not directly attributable to the Fund are allocated among the series of the Corporation in proportion to their assets. |
f) | Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. |
g) | Other – Investment and shareholder transactions are recorded on trade date. The Fund determines the gain or loss realized from investment transactions by comparing the original cost of the security lot sold with the net sales proceeds. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Accounting principles generally accepted in the United States require that permanent financial reporting and tax differences be reclassified in the capital accounts. |
h) | Guarantees and Indemnifications – In the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown and this would involve future claims against the Fund that have not yet occurred. Based on experience, the Fund would expect the risk of loss to be remote. |
Page 22
RiverFront Long-Term Growth Fund
Notes to the Financial Statements December 31, 2009 |
3.CAPITAL SHARE TRANSACTIONS
The following table summarizes the capital share transactions of the Fund for the fiscal year ended December 31, 2009 and for the period from October 28, 2008 (commencement of operations) through December 31, 2008:
Year Ended | Year Ended | |||||||||||||||||
December 31, 2009 | December 31, 2009 | |||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | |||||||||||||
Shares sold | 1,709,014 | $ | 19,773,680 | Shares sold | 1,060,950 | $ | 12,871,509 | |||||||||||
Shares issued | Shares issued | |||||||||||||||||
to shareholders | to shareholders | |||||||||||||||||
in reinvestment of | in reinvestment of | |||||||||||||||||
distributions | 13,072 | 176,343 | distributions | 5,717 | 75,986 | |||||||||||||
Shares redeemed | (331,302 | ) | (3,570,027 | ) | Shares redeemed | (54,832 | ) | (660,468 | ) | |||||||||
Net increase | 1,390,784 | $ | 16,379,996 | Net increase | 1,011,835 | $ | 12,287,027 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 709,014 | Beginning of year | 40,622 | |||||||||||||||
End of year | 2,099,798 | End of year | 1,052,457 |
October 28, 2008(1) | October 28, 2008(1) | |||||||||||||||||
through | through | |||||||||||||||||
December 31, 2008 | December 31, 2008 | |||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | |||||||||||||
Shares sold | 727,917 | $ | 7,567,640 | Shares sold | 40,368 | $ | 411,344 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment of | reinvestment of | |||||||||||||||||
distributions | 5,326 | 54,064 | distributions | 254 | 2,578 | |||||||||||||
Shares redeemed | (24,229 | ) | (213,933 | ) | Shares redeemed | — | — | |||||||||||
Net increase | 709,014 | $ | 7,407,771 | Net increase | 40,622 | $ | 413,922 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of period | — | Beginning of period | — | |||||||||||||||
End of period | 709,014 | End of period | 40,622 |
(1) | Commencement of operations. |
Page 23
RiverFront Long-Term Growth Fund
Notes to the Financial Statements December 31, 2009 |
4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION
During the year ended December 31, 2009, the Fund’s purchases and sales of investment securities (excluding short-term investments) were $41,051,525 and $12,926,900, respectively.
At December 31, 2009, the Fund’s accumulated earnings/losses on a tax basis were as follows:
Cost of Investments | $ | 36,315,341 | ||
Gross unrealized appreciation | $ | 5,464,116 | ||
Gross unrealized depreciation | (326,982 | ) | ||
Net unrealized appreciation | $ | 5,137,134 | ||
Undistributed ordinary income | $ | 2,449 | ||
Undistributed long-term capital gain | 16,231 | |||
Total distributable earnings | $ | 18,680 | ||
Other accumulated losses | $ | — | ||
Total accumulated earnings | $ | 5,155,814 |
Undistributed income or net realized gains for financial statement purposes may differ from amounts recognized for federal income tax purposes due to differences in the recognition and characterization of income, expense and capital gain items.
The difference between book-basis and tax-basis unrealized appreciation is attributable primarily to the tax deferral of losses on wash sales.
Additionally, U.S. generally accepted accounting principles require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended December 31, 2009, the following table shows the reclassifications made:
Undistributed | Accumulated | |
Net Investment | Net Realized | |
Income/(Loss) | Gain/(Loss) | Paid In Capital |
4,014 | (3,959) | (55) |
At December 31, 2009, the Fund had no accumulated net realized capital loss carryovers. To the extent the Fund realizes future net capital gains, taxable distributions to shareholders will be offset by any unused capital loss carryovers.
Page 24
RiverFront Long-Term Growth Fund
Notes to the Financial Statements December 31, 2009 |
The tax components of dividends paid by the Fund during the periods ended December 31, 2009 and December 31, 2008 were as follows:
Period Ended | ||||||||
October 28, 2008 | ||||||||
Year Ended | through | |||||||
December 31, 2009 | December 31, 2008 | |||||||
Ordinary Income | $ | 262,906 | $ | 62,375 | ||||
Long-Term Capital Gains | — | — |
5.INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Fund has entered into an Investment Advisory Agreement with Baird for the provision of investment advisory services. Pursuant to the Investment Advisory Agreement, the Advisor is entitled to receive a fee, calculated daily and payable monthly, at the annual rate of 0.65% for the Fund as applied to the Fund’s average daily net assets. Certain officers of the Advisor are also officers of the Fund. The Fund has also entered into a Sub-Advisory Agreement with Baird and RiverFront under which RiverFront in its capacity as investment sub-advisor is responsible for the management of the Fund’s assets subject to the Advisor’s oversight. Pursuant to the Sub-Advisory Agreement, the Advisor (not the Fund) is responsible for paying RiverFront a sub-advisory fee at an annual rate of 0.45% of the Fund’s average daily net assets.
For the period from October 28, 2008 through December 31, 2008 (commencement of operations), and years ending 2009, 2010 and 2011, the Advisor has contractually agreed to waive its investment advisory fee and/or reimburse the Fund’s operating expenses (exclusive of brokerage commissions, taxes, and extraordinary expenses, but including the fees and expenses incurred by the Fund in connection with its investments in ETFs and other investment companies) to the extent necessary to ensure that the Fund’s annual operating expenses do not exceed 0.90% of the average daily net assets of the Fund’s Institutional Class Shares and 1.15% of the average daily net assets of the Fund’s Investor Class Shares.
To the extent that the Advisor reimburses or absorbs fees and expenses, it may seek payment of such amounts for three years after the year in which expenses were reimbursed or absorbed. The Fund will make no such payment, however, if its total annual operating expenses exceed the expense limits in effect at the time the expenses were reimbursed or at the time these payments are proposed.
Period Ended | ||
Fiscal | October 28, 2008 | |
Year Ended | through | |
December 31, 2009 | December 31, 2008 | |
Reimbursed/Absorbed Expenses Subject to Recovery by Advisor Until: | 2012 | 2011 |
RiverFront Long-Term Growth Fund | $126,348 | $35,032 |
Page 25
RiverFront Long-Term Growth Fund
Notes to the Financial Statements December 31, 2009 |
U.S. Bancorp Fund Services, LLC serves as transfer agent, administrator, and accounting services agent for the Fund. U.S. Bank, N.A. serves as custodian for the Fund.
Robert W. Baird & Co. Incorporated (the “Distributor”) is the sole distributor of the Fund pursuant to a distribution agreement.
No commissions were earned by the Distributor for services rendered as a registered broker-dealer in securities transactions for the Fund for the year ended December 31, 2009.
6.LINE OF CREDIT
The Corporation maintains an uncommitted, senior secured line of credit (“LOC”) with U.S. Bank, N.A. (the “Bank”) to provide the Fund a temporary liquidity source to meet unanticipated redemptions. Under the terms of the LOC, borrowings for the Fund are limited to one-third of the total assets (including the amount borrowed), or as otherwise indicated within the Fund’s agreement with the Bank. The Bank charges interest at the Bank’s Prime Rate less 1%. For the year ended December 31, 2009 the Fund did not borrow from the LOC.
7.DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
The Fund has adopted a distribution and shareholder service plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. The Plan allows the Fund to compensate the Distributor for the cost incurred in distributing the Fund’s Investor Class Shares, including amounts paid to brokers or dealers, at an annual rate not to exceed 0.25% of the average daily net assets of the Fund’s Investor Class Shares. The Fund incurred $12,248 in fees pursuant to the Plan during the year ended December 31, 2009.
8.SUBSEQUENT EVENT
In preparing these financial statements, the Corporation has evaluated events and transactions for potential recognition or disclosure through February 26, 2010, the date the financial statements were available to be issued. There were no additional subsequent events to report that would have a material impact on the Fund’s financial statements.
Page 26
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Baird Funds, Inc.
We have audited the accompanying statement of assets and liabilities of Riverfront Long-Term Growth Fund (one of the eight funds constituting Baird Funds, Inc.) (the “Fund”), including the schedule of investments, as of December 31, 2009, and the related statement of operations for the year then ended, statement of changes in net assets and the financial highlights for the year then ended and for the period from October 28, 2008 (initial date of inception) through December 31, 2008. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Riverfront Long-Term Growth Fund as of December 31, 2009, and the results of its operations for the year then ended, the changes in its net assets and financial highlights for the year then ended and for the period from October 28, 2008 (initial date of inception) through December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.
![]() |
Chicago, Illinois
February 26, 2010
Page 27
RiverFront Long-Term Growth Fund
Directors & Officers |
Number of | |||||||
Portfolios | Other | ||||||
Positions | Term of Office | Principal | in Complex | Directorships | |||
Held with | and Length of | Occupation(s) | Overseen | Held | |||
Name, Address and Age | the Funds | Time Served | During Past 5 Years | by Director | by Director | ||
G. Frederick Kasten, Jr. | Independent | Indefinite; | Retired; Chairman, the Advisor (January 2000-December | 8 | Director of Regal-Beloit | ||
777 East Wisconsin Avenue | Director and | Since September | 2005); Chairman and CEO, the Advisor (January 1998- | Corporation, a | |||
Milwaukee, WI 53202 | Chairman | 2000 | January 2000); President, Chairman and CEO, the | manufacturing | |||
Age: 70 | Advisor (June 1983-January 1998); President, the Advisor | company | |||||
(January 1979-January 1983) | |||||||
John W. Feldt | Independent | Indefinite; | Retired; Senior Vice President-Finance, University of | 8 | Director of Thompson | ||
c/o University of | Director | Since September | Wisconsin Foundation (1985-2006); Vice President- | Plumb Funds, Inc., a | |||
Wisconsin Foundation | 2000 | Finance, University of Wisconsin Foundation (1980-1985); | mutual fund complex | ||||
1848 University Avenue | Associate Director, University of Wisconsin Foundation | (3 portfolios); Trustee | |||||
Madison, WI 53705 | (1967-1980) | of Nakoma Mutual | |||||
Age: 67 | Funds, a mutual fund | ||||||
complex (1 portfolio) | |||||||
Frederick P. Stratton, Jr. | Independent | Indefinite; | Retired; Chairman Emeritus, Briggs & Stratton | 8 | Director of Weyco | ||
10134 N. Port Washington | Director | Since May | Corporation, a manufacturing company, since 2003; | Group, Inc., a men’s | |||
Road, #2B | 2004 | Chairman of the Board, Briggs & Stratton Corporation | footwear distributor; | ||||
Mequon, WI 53092 | (2001-2002); Chairman and CEO, Briggs & Stratton | Director of Wisconsin | |||||
Age: 70 | Corporation (1986-2001) | Energy Corporation | |||||
and its subsidiaries, | |||||||
Wisconsin Electric | |||||||
Power Company and | |||||||
Wisconsin Gas LLC | |||||||
Marlyn J. Spear, CFA | Independent | Indefinite; | Chief Investment Officer, Building Trades United | 8 | Management Trustee of | ||
P. O. Box 530 | Director | Since January | Pension Trust Fund, since July 1989; Investment Officer, | AFL-CIO Housing | |||
500 Elm Grove Road | 2008 | Northwestern Mutual Financial Network (1988-1989); | Investment Trust, a | ||||
Elm Grove, WI 53122 | Assistant Vice-President, Firstar Trust Company | mutual fund complex | |||||
Age: 56 | (1978-1987); Financial Analyst, Harco Holdings, Inc. | (1 portfolio) | |||||
(1976-1978) | |||||||
Cory L. Nettles* | Interested | Indefinite; | Managing Director, Generation Growth Capital, Inc., | 8 | Director of Weyco | ||
Generation Growth Capital, Inc. | Director | Since January | since March 2007; Of Counsel, Quarles & Brady LLP, | Group, Inc., a men’s | |||
411 East Wisconsin Avenue, | 2008 | since January 2005; Secretary, Wisconsin Department | footwear distributor; | ||||
Suite 1710, | of Commerce (January 2003 – January 2005) | Director of The | |||||
Milwaukee, WI 53202 | PrivateBank, a | ||||||
Age: 39 | financial institution | ||||||
* | Mr. Nettles is an “interested person” of the Corporation (as defined in the 1940 Act) because of his association with the law firm, Quarles & Brady LLP, which provides legal services to the Advisor. The legal services that Quarles & Brady LLP has provided to the Advisor include litigation, real estate, trademark and miscellaneous securities related matters that did not relate to the Corporation or the Fund. |
Additional information about the Fund’s directors is available in the Statement of Additional Information which may be obtained without charge, upon request, by calling 1-866-44BAIRD, or at www.bairdfunds.com.
Page 28
RiverFront Long-Term Growth Fund
Directors & Officers |
Position(s) | Term of Office | Principal | |||
Held with | and Length of | Occupation(s) | |||
Name, Address, and Age | the Funds | Time Served | During Past 5 Years | ||
Mary Ellen Stanek | President | Re-elected by | Managing Director, the Advisor, and Chief Investment Officer, Baird Advisors, a department of | ||
777 East Wisconsin Avenue | Board annually; | the Advisor, since March 2000 | |||
Milwaukee, WI 53202 | Since | ||||
Age: 53 | September 2000 | ||||
Charles B. Groeschell | Vice President | Re-elected by | Managing Director, the Advisor, and Senior Portfolio Manager, Baird Advisors, a department of | ||
777 East Wisconsin Avenue | Board annually; | the Advisor, since February 2000 | |||
Milwaukee, WI 53202 | Since | ||||
Age: 56 | January 2010 | ||||
Todd S. Nichol | Vice President | Re-elected by | Chief Compliance Officer, the Advisor since October 2004; Assistant Compliance Director, the | ||
777 East Wisconsin Avenue | and Chief | Board annually; | Advisor since August 2002; Senior Vice President, the Advisor since January 2005; First Vice | ||
Milwaukee, WI 53202 | Compliance | Since | President, the Advisor (January 2004-January 2005) | ||
Age: 47 | Officer | August 2004 | |||
Russell P. Schwei | Vice President | Re-elected by | Director of Operations, the Advisor since July 1992; Managing Director, the Advisor since | ||
777 East Wisconsin Avenue | Board annually; | January 1997 | |||
Milwaukee, WI 53202 | Since | ||||
Age: 50 | September 2000 | ||||
Leonard M. Rush | Treasurer | Re-elected by | Chief Financial Officer, the Advisor since January 2000 | ||
777 East Wisconsin Avenue | Board annually; | ||||
Milwaukee, WI 53202 | Since | ||||
Age: 63 | September 2000 | ||||
Charles M. Weber | Secretary | Re-elected by | Managing Director, the Advisor since January 2009; Senior Vice President, the Advisor | ||
777 East Wisconsin Avenue | Board annually; | (July 2005-December 2008); Associate General Counsel, the Advisor since July 2005; Partner, | |||
Milwaukee, WI 53202 | Since | Quarles & Brady LLP, a law firm (October 1998-June 2005) | |||
Age: 46 | September 2005 | ||||
Laura E. Piotrowski | Assistant | Re-elected by | Managing Director, the Advisor since January 2008; Senior Vice President, the Advisor (January | ||
777 East Wisconsin Avenue | Treasurer | Board annually; | 2003-December 2007); Controller, the Advisor since January 2003 | ||
Milwaukee, WI 53202 | Since | ||||
Age: 40 | August 2007 | ||||
John R. Sokolowski | AML | Re-elected by | AML Compliance Officer, the Advisor since March 2009; Internal Auditor, the Advisor | ||
777 East Wisconsin Avenue | Compliance | Board annually; | (December 2006-March 2009); Accounting Analyst, UMB Fund Services (December 2005- | ||
Milwaukee, WI 53202 | Officer | Since | December 2006); United States Air Force (July 2001-December 2005) | ||
Age: 34 | March 2009 | ||||
Bret T. Reese | Assistant | Re-elected by | First Vice President, the Advisor since January 2009; Vice President, the Advisor (June | ||
777 East Wisconsin Avenue | Secretary | Board annually; | 2005-December 2008); Associate General Counsel, the Advisor since June 2005; Senior Financial | ||
Milwaukee, WI 53202 | Since | Analyst, the Advisor (August 2004-June 2005) | |||
Age: 40 | August 2006 | ||||
Page 29
Additional Information
Proxy Voting
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Fund’s website at www.bairdfunds.com; and by accessing the SEC’s website at www.sec.gov.
The Fund’s proxy voting record for the most recent 12-month period ended June 30 is available without charge, upon request, by calling toll free, 1-866-44BAIRD, or by accessing the Fund’s website at www.bairdfunds.com; and by accessing the SEC’s website at www.sec.gov.
Portfolio Holdings Disclosure
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-732-0330. The Fund’s Forms N-Q may also be obtained by calling toll-free 1-866-44BAIRD.
Qualified Dividend Income/Dividends Received Deduction
For the fiscal year ended December 31, 2009, certain dividends paid by the Fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The percentage of dividends declared from ordinary income designated as qualified dividend income was 99.40%.
For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends received deduction for the fiscal year ended December 31, 2009 was 99.50%.
Other Tax Information
The percentage of taxable ordinary income distributions that are designated as short-term capital gain distributions under Internal Revenue Section 871(k)(2)(C) for the Fund was 0.38%.
Page 30
(This Page Intentionally Left Blank.)
BAIRD FUNDS, INC.
PRIVACY POLICY
This disclosure is being made pursuant to Regulation S-P concerning the Fund’s privacy policy. It is our policy to protect the privacy and security of your personal and financial information. We treat your information as confidential and recognize the importance of protecting access to it.
We protect your privacy and treat as confidential any personal or financial information about you that we receive.
We collect and maintain information about you so that we can open and maintain your account in the Funds and provide various services to you. We may collect and maintain the following personal information about you:
• | Information we receive from you or your financial advisor on account applications or other forms, correspondence, or conversations, such as your name, address, e-mail address, phone number, social security number, assets, income and date of birth; and |
• | Information about your transactions with us, our affiliates, or others, such as your account number and balance, positions, activity, history, cost basis information, and other financial information. |
We do not sell any of your information to third parties. We do not disclose any nonpublic personal information about our current or former shareholders to nonaffiliated third parties, except as requested or authorized by the current or former shareholder, as necessary to process a transaction or service an account, as requested by regulatory authorities or as otherwise permitted or required by law. For example, we are permitted by law to disclose all of the information we collect, as described above, to our transfer agent to process your transactions. We may also provide your name and address to third party service providers who send account statements and other Fund-related material to you. We restrict access to your nonpublic personal information to those persons who require such information to provide products or services to you. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
In the event that you hold shares of the fund(s) through a financial intermediary, including, but not limited to, a broker-dealer, bank, or trust company, the privacy policy of your financial intermediary would govern how your nonpublic personal information would be shared with nonaffiliated third parties.
Page A-1
Baird Funds, Inc.
RiverFront Long-Term Growth Fund
c/o U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
1-866-44BAIRD
Board of Directors
G. Frederick Kasten, Jr. (Chairman)
John W. Feldt
Frederick P. Stratton, Jr.
Cory L. Nettles
Marlyn J. Spear
Investment Advisor and Distributor
Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, WI 53202
Sub-Advisor
RiverFront Investment Group, LLC
9011 Arboretum Parkway
Suite 110
Richmond, VA 23236
Administrator and Transfer Agent
U.S. Bancorp Fund Services, LLC
P.O. Box 701
615 East Michigan Street
Milwaukee, WI 53202
Custodian
U.S. Bank, N.A.
1555 N. RiverCenter Drive, Suite 302
Milwaukee, WI 53212
Legal Counsel
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, WI 53202
Independent Registered Public Accounting Firm
Grant Thornton LLP
175 West Jackson Boulevard, 13th Floor
Chicago, IL 60604
Item 2. Code of Ethics.
As of the end of the period covered by this report, the Registrant has adopted a code of ethics that applies to the President, Treasurer and Assistant Treasurer of the Registrant. The Registrant has not made any amendments to its code of ethics during the period covered by this report. The Registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report.
Item 3. Audit Committee Financial Expert.
The Registrant’s board of directors has determined that John W. Feldt, Frederick P. Stratton, Jr., and Marlyn J. Spear, members of the audit committee, each qualify as an “audit committee financial expert” as such term is defined in paragraph (b) of Item 3 of Form N-CSR. Mr. Feldt, Mr. Stratton, and Ms. Spear are each “independent” as such term is defined in paragraph (a)(2) of Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
Fees Billed by Grant Thornton LLP. The aggregate fees billed for professional services by Grant Thornton LLP (“GT”) during the last two fiscal years were as follows:
FYE 12/31/2009 | FYE 12/31/2008 | |
Audit Fees | $104,660 | $103,194 |
Audit-Related Fees | - | - |
Tax Fees | $26,400 | $26,730 |
All Other Fees | - | - |
In the above table, “audit fees” are fees billed for professional services for the audit of the Registrant’s annual financial statements or for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements. “Tax fees” are fees billed for professional services rendered for tax compliance, tax advice and tax planning, and specifically relate to GT’s review of the Registrant’s federal and state tax returns.
The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services rendered to the Registrant, as well as all non-audit services provided to the Registrant’s investment adviser and any entity affiliated with the Registrant’s investment adviser with respect to any engagement that relates directly to the operations and financial reporting of the Registrant. In accordance with its policies and procedures, the audit committee pre-approved all audit and tax services provided by GT to the Registrant during fiscal 2009. During the past two fiscal years, the Registrant did not receive any non-audit services from GT pursuant to any waivers of the pre-approval requirement under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. All of GT’s hours spent on auditing the Registrant’s financial statements were attributed to work performed by full-time permanent employees of GT.
During the last two fiscal years, GT has served as the auditor to Robert W. Baird & Co. Incorporated (“RWB”), the Registrant’s investment adviser, and has rendered non-audit services to RWB. The non-audit services that GT provided to RWB in 2009 and 2008 consisted of a review of state and federal tax returns and tax services for RWB associates working overseas. Additional non-audit services that GT provided to RWB in 2008 consisted of consulting on state apportionment of revenues for tax purposes. GT charged the following amounts for such non-audit services to RWB: $103,180 for 2009 and $334,885 for 2008. None of the non-audit services provided by GT to RWB in 2009 and 2008 directly related to the operations or financial reporting of the Registrant. During the last two fiscal years, GT has also provided audit and non-audit services to affiliates of RWB, but those affiliates do not provide ongoing services to the Registrant. Those services include audits of the financial statements of RWB affiliates, investment partnerships (and their management companies) affiliated with RWB and the portfolio companies owned by such partnerships, reviews of tax returns of RWB affiliates and investment partnerships (and their management companies) affiliated with RWB, tax consulting services for RWB’s Asian affiliates, a transfer pricing study for RWB’s Asian affiliates, and advice regarding the value added tax and repatriation of income for RWB’s UK affiliate. The Audit Committee has concluded that the provision of these audit and non-audit services to RWB and non-audit services to RWB affiliates is compatible with GT’s independence. None of the non-audit services provided to RWB directly related to the operations and financial reporting of the Registrant.
Item 5. Audit Committee of Listed Registrants.
Not applicable because the Registrant is not a "listed issuer" within the meaning of Rule 10A-3 under the Securities Exchange Act of 1934.
Item 6. Schedule of Investments.
The Schedules of Investments are included as part of the reports to shareholders filed under Item 1 of this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable because the Registrant is not a closed-end management investment company.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable because the Registrant is not a closed-end management investment company.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable because the Registrant is not a closed-end management investment company.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of directors.
Item 11. Controls and Procedures.
(a) | The Registrant’s management, with the participation of its principal executive and principal financial officers, has evaluated the effectiveness of the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)), as of a date within 90 days prior to the filing date of this Form N-CSR. Based on such evaluation, the Registrant's principal executive and principal financial officers have concluded that the design and operation of the Registrant's disclosure controls and procedures are effective in providing reasonable assurance that the information required to be disclosed on Form N-CSR is recorded, processed, summarized and reported within the applicable time periods. |
(b) | There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 12. Exhibits.
(a) | (1) Code of ethics. |
Incorporated by reference to the Registrant’s Form N-CSR filed on March 9, 2004.
(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable because the Registrant is not a closed-end management investment company.
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BAIRD FUNDS, INC.
By: _/s/ Mary Ellen Stanek________
Mary Ellen Stanek, President
Date: _3/8/2010_________________
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: _/s/ Mary Ellen Stanek________
Mary Ellen Stanek, President
Date: _3/8/2010_________________
By: _/s/ Leonard M. Rush_________
Leonard M. Rush, Treasurer
Date: _3/8/2010_________________