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)
Andrew D. Ketter
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, 2010
Date of reporting period: December 31, 2010
Item 1. Reports to Stockholders.
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 |
2010 Bond Market Overview | 2 |
Baird Short-Term Bond Fund | 6 |
Baird Intermediate Bond Fund | 28 |
Baird Intermediate Municipal Bond Fund | 49 |
Baird Aggregate Bond Fund | 72 |
Baird Core Plus Bond Fund | 99 |
Additional Information on Fund Expenses | 123 |
Statements of Assets and Liabilities | 125 |
Statements of Operations | 126 |
Statements of Changes in Net Assets | 127 |
Financial Highlights | 132 |
Notes to the Financial Statements | 141 |
Report of Independent Registered Public Accounting Firm | 155 |
Directors and Officers | 156 |
Disclosure Regarding the Board of Directors’ Approval | |
of the Investment Advisory Agreement for Baird Bond Funds | 158 |
Additional Information | 161 |
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
1-866-442-2473
www.bairdfunds.com
February 25, 2011
Dear Shareholder,
We are pleased to present this annual report. Overall, 2010 was a good year for bond investors. We are pleased with the performance of the funds in 2010 and the value the portfolio management team has added with its quality conscious, duration-neutral investment management approach.
The net assets of the seven mutual funds in our family have grown to more than $4.7 billion as of the end of 2010, an increase of more than 30% compared to the prior year end. We expanded our reputation for consistent, competitive returns and continued to provide excellent stewardship of shareholder assets.
The Baird Funds marked a significant milestone in 2010. Five of the seven Baird Funds celebrated their 10th anniversary during the year and received excellent recognition by Morningstar, The Wall Street Journal, Kiplinger’s, US News, and others for their leadership in investment management.
On the following pages, we review the bond market in 2010 and the performance and composition of each of the Baird Bond Funds.
Thank you again for choosing Baird Funds. We appreciate the confidence and trust that you have placed in our experienced investment team to help you achieve your financial goals.
Sincerely,
Mary Ellen Stanek, CFA
President
Baird Funds
Page 1
2010 Bond Market Overview
Treasury Yields Plummet, Then Rise in 2010
Quantitative easing (QE) by the Federal Reserve Board and concerns that the Greek debt crisis might unravel the European Union and dramatically slow global economic growth caused Treasury yields to plummet by as much as 135 basis points (bps) through the second and third quarters of 2010. In the fourth quarter, however, Treasury yields reversed course and rose by as much as 85 bps (7-year Treasuries were up 60 bps in December alone) as the market’s focus shifted to heavy supply and more attractive opportunities in higher yielding sectors. Treasury yields still finished the year 20-60 bps lower with the greatest declines in 3-7 year maturities. The yield curve also steepened with the spread between 2 and 30 year Treasuries increasing to 378 bps at year-end from 350 bps on 12/31/09 (see chart and table below).
Treasury Yields (Source: Bloomberg)
Dec 31, | Sep 30, | Dec 31, | Q4 | YTD | ||
Maturity | 2009 | 2010 | 2010 | Change | Change | |
1 | 0.44% | 0.25% | 0.26% | 0.01% | -0.18 | |
2 | 1.14% | 0.42% | 0.59% | 0.17% | -0.55 | |
3 | 1.68% | 0.63% | 0.99% | 0.36% | -0.69 | |
5 | 2.68% | 1.26% | 2.01% | 0.75% | -0.67 | |
7 | 3.38% | 1.91% | 2.70% | 0.79% | -0.68 | |
10 | 3.84% | 2.51% | 3.29% | 0.78% | -0.55 | |
30 | 4.64% | 3.69% | 4.33% | 0.64% | -0.31 | |
Tough 4th Quarter Reduces Strong 2010 Returns
The sharp rise in yields into year-end resulted in negative returns for most sectors of the market in the fourth quarter. Municipals experienced a dramatic decline (Q4 -4.17%) that substantially reduced 2010 returns (+2.38%) as the discontinuation of the BABs program and extension of the Bush tax cuts triggered a short-term supply/demand imbalance early in December that sent prices tumbling. Treasuries followed close behind (Q4 -2.64%) but managed to post a more robust +5.87% return for 2010. Government Agencies, which as a sector are shorter than Treasuries overall in duration, had more modest losses in the quarter (Q4 -1.11%) and a more modest 2010 (+4.56%). Consistent demand for asset-backed securities (ABS) in 2010 resulted in a good year (+5.85%), but this sector also suffered declines late in the year (Q4 -1.48%). Investment grade corporate bonds suffered less severe losses (Q4 -1.61%) as investor demand remained relatively strong and this sector returned an impressive +9.00% for the year. Treasury Inflation-Protected Securities (TIPS) were hit hard by the volatility in December (-1.55%, Q4 -0.65%), but investor interest in inflation protection gave TIPS a +6.31% return in 2010. The stand-out sector all year long was commercial mortgage-backed securities (CMBS) (+20.40%) and this was the only investment grade sector with a positive return in December (+0.13%, Q4 +0.91%). While Government Agency pass-throughs (mortgage-backed securities or MBS) lost some ground in December (-0.55%), they were positive for the quarter (+0.24%) and posted a respectable return of +5.37% in 2010. High yield bonds behaved much like stocks with strong December, fourth quarter and 2010 returns of +1.81%, +3.22% and +15.12% respectively. Despite a tough fourth quarter, broad investment grade market indices posted good returns in 2010 (see table on next page).
Page 2
2010 Bond Market Overview
Total Returns of Selected Barclays Capital (BC) Sectors and Indices | |||||
Sector/Index | 4th Quarter | 2010 | 2009 | ||
U.S. Treasury Sector | -2.64% | 5.87% | -3.57% | ||
Gov’t Agency Sector | -1.11% | 4.56% | 1.95% | ||
Corporate Sector | -1.61% | 9.00% | 18.68% | ||
MBS Sector | 0.24% | 5.37% | 5.89% | ||
CMBS Sector | 0.91% | 20.40% | 28.45% | ||
ABS Sector | -1.48% | 5.85% | 24.72% | ||
Municipal Sector | -4.17% | 2.38% | 12.91% | ||
TIPS | -0.65% | 6.31% | 11.41% | ||
High Yield Sector | 3.22% | 15.12% | 58.21% | ||
BC Aggregate Index | -1.30% | 6.54% | 5.93% | ||
BC Gov’t/Credit Index | -2.17% | 6.59% | 4.52% | ||
BC Int. Gov’t/Credit Index | -1.44% | 5.89% | 5.24% | ||
BC 1-3 yr. Gov’t/Credit Index | -0.07% | 2.80% | 3.83% |
Mutual Fund Flows Plummet in 4th Quarter
Heavy monthly bond fund inflows through the first three quarters which (1) put downward pressure on interest rates, (2) pushed yield spreads tighter and (3) drove strong fixed income returns through September, plummeted in the fourth quarter of 2010 (see chart below left). Taxable inflows, which averaged $21.5 billion in each of the first nine months of the year, fell to just $6.2 billion in November and -$4.5 billion in December. Municipal flows, which averaged $3.5 billion through September, reversed to -$7.6 billion in November and -$13.4 billion in December. This collapse in flows was a major factor behind the dramatic rise in yields in the fourth quarter (see chart below right) as well as the increase in general market volatility late in 2010. The 10-year Treasury yield, which was more than 140 bps lower than the 12/31/09 level in early October at 2.40%, rose by more than 110 bps to 3.53% on 12/15 before finishing the year at 3.29%. Yields on 10-year AAA-rated general obligation debt, which were 100 bps below 2009 year-end levels in early September 2010 at 2.30%, also rose by over 110 bps to 3.44% at year-end.
Mutual Fund Flows | 10-year Treasury and Muni Yields |
Source: Morningstar | Source: Bloomberg |
Page 3
2010 Bond Market Overview
Painful Duration Extensions
The swift increase in yields resulted in significant duration extensions for several indices in the fourth quarter, particularly those with higher optionality (e.g. mortgages and long municipals). The duration- to-worst of the Barclays U.S. MBS (Gov’t. Agency pass-throughs) jumped from 3.79 years on September 30 to 4.99 years at year-end as higher interest rates caused option models to anticipate slower principal prepayments and longer average lives. The Barclays Long Municipal Bond Index (22+ years) saw its duration-to-worst leap from 7.59 years on September 30 to 12.08 years at year-end. Many bonds that in prior months had been measured to their shorter 10-year calls were suddenly being priced to their longer maturity dates as interest rates rose. Duration-to-worst measures the sensitivity of the prices of bonds to changes in prevailing interest rates, using the bonds’ nearest call date or maturity, whichever is worse for investors. The resulting duration extensions were particularly painful as those bonds rolled up and out the steep yield curve to higher yields and sharply lower prices. The Long Municipal Bond Index lost 3.46% in December alone (Q4 -7.38%, 2010 +1.12%) and many long municipal bond funds experienced similar declines.
Corporate and Municipal Credit – Two Different Tales
Corporate balance sheets continued to strengthen overall in 2010 on solid earnings and positive cash flow. Additionally, many companies took advantage of historically low interest rates and termed out much of their debt, further adding to liquidity and fortifying their overall capital structure. As a result, corporate ratings as a whole migrated upward last year. In contrast, municipal balance sheets saw further deterioration in 2010. With revenues hovering well below peak levels of prior years, many municipalities struggled with ominous structural budget deficits as the necessary reduction in expenditures proved difficult to achieve. Although issuance of additional debt solved short-term liquidity crises for some, ongoing budget imbalances persist and downward ratings pressure for many municipal credits will likely continue in 2011. Entities and projects with more narrow streams of revenue will face the greatest challenges while municipalities with broader jurisdiction and sources of revenue (viz. states) will have more flexibility to resolve imbalances over time.
Outlook
Interest rates – While we anticipate that heavy Treasury supply will put some upward pressure on rates, we do not anticipate a significant rise in rates in 2011. Despite price increases in several commodities, we maintain that wages need to rise before inflation can take hold, and there is still considerable slack in global labor markets. Expected economic growth of 2.5-3.5% will not bring unemployment down significantly from above 9% any time soon and we caution that tightening from the Fed will likely come later and be more modest than many currently expect. With Fed policy still very accommodative, Treasury supply plentiful and consensus expectations for higher yields, we expect the curve to remain steep in 2011.
Sectors – With heavy supply and waning demand, we are less optimistic on Treasuries and believe spread sectors offer better relative value, particularly if a rising rate environment develops. Given strong credit fundamentals, we are biased to corporates, but caution that high levels of balance sheet cash could be drawn down in favor of shareholders’ interests (e.g. share buybacks, dividends, LBOs), particularly in the industrial sector. We favor financials where spreads are still relatively wide and managements’ desire to maintain higher credit ratings offers better protection for bondholders. We still see value in earlier vintage (pre-2007) senior CMBS structures with superior credit enhancement but are cautious on residential mortgage pass-through structures that could experience further duration extensions. We prefer well-structured CMOs with more certain average lives and still see exceptional value in certain senior, non-Agency mortgage structures with fixed-rate collateral. In the municipal sector we are biased to higher quality issues (pre-refunded, general obligation and essential service revenue bonds) and caution that downgrades and associated price declines will have a more profound (and negative) impact
Page 4
2010 Bond Market Overview
on lower quality issues. While we recognize that an increase in municipal defaults is likely, we believe they will be limited to a very select number of issuers with extenuating circumstances and do not anticipate pervasive defaults or bankruptcies in this sector.
Environment
We expect volatility to persist in 2011 as the range of potential outcomes for the economy, the European debt crisis, Government market intervention and geo-political conflicts remains very wide. At this juncture of the economic and market cycles, we caution fixed income investors against getting overly aggressive by going too far out the yield curve or too far down in quality.
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 Fund entered the year with a significant yield advantage over its benchmark and was able to convert it into strong relative and absolute net performance in 2010. The primary factors for the Fund’s outperformance over its benchmark index were:
• The underweight to U.S. Treasuries was beneficial to the Fund’s performance as Treasuries generally underperformed equal duration securities from the other high quality “spread sectors” of the bond market in 2010.
• An overweight to the corporate credit sector and specifically financial issues. An overweight to credit was positive for relative performance as the credit sector performed well in 2010. Financials were the best performing credit sector during the year.
• Price appreciation of non-Agency mortgage-backed securities. Non-Agency mortgages continued to perform well due to strong demand in the marketplace.
• Price recovery from certain securities with sound fundamental value whose market prices had temporarily fallen and subsequently appreciated in value.
The Fund maintained its duration-neutral positioning relative to its benchmark index, holding a broadly diversified portfolio of 351 securities at year end.
We are pleased with the Fund’s performance in 2010 and are confident in the individual issues and the overall structure of the Fund. The Fund’s yield advantage over the benchmark is meaningful and we are optimistic regarding the Fund’s relative performance as we head into 2011.
Portfolio Characteristics
Quality Distribution* | Sector Weightings* |
Net Assets: | $919,026,165 | Annualized Expense Ratio: | |||
SEC 30-Day Yield:** | Institutional Class: | 0.30 | % | ||
Institutional Class: | 1.96% | Portfolio Turnover Rate: | 58.7 | % | |
Average Effective Duration: | 1.85 years | Total Number of Holdings: | 351 | ||
Average Effective Maturity: | 2.38 years |
* | Percentages shown are based on the Fund’s total investments (less investments purchased with cash proceeds from securities lending). |
** | SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2010. |
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, 2010 | One Year | Five Years | Inception(1) |
Institutional Class | 4.39% | 4.24% | 3.65% |
Barclays Capital 1-3 Year U.S. Government/Credit Bond Index(2) | 2.80% | 4.53% | 3.85% |
(1) | For the period from August 31, 2004 (commencement of operations) to December 31, 2010. |
(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, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% | |||||||
Asset Backed Securities – 0.8% | |||||||
$ | 35,408 | Bombardier Capital | |||||
Mortgage Securitization, | |||||||
Series 1998-A, Class A3, | |||||||
6.23%, 04/15/2028 | $ | 34,319 | |||||
Countrywide Asset- | |||||||
Backed Certificates: | |||||||
1,466,944 | Series 2006-13, | ||||||
Class 1AF2, 5.884%, | |||||||
01/25/2037 | 1,341,373 | ||||||
2,451,801 | Series 2006-13, | ||||||
Class 1AF3, 5.944%, | |||||||
01/25/2037 | 1,383,443 | ||||||
1,500,000 | Series 2006-9, | ||||||
Class 1AF3, 5.859%, | |||||||
10/25/2046 | 793,739 | ||||||
493,429 | Credit Based Asset | ||||||
Servicing and Securities, | |||||||
Series 2005-CB8, | |||||||
Class AF2, 5.303%, | |||||||
12/25/2035 | 482,850 | ||||||
Green Tree Financial | |||||||
Corporation: | |||||||
79,767 | Series 1996-3, Class A5, | ||||||
7.35%, 05/15/2027 | |||||||
(Callable 07/15/2012) | 83,826 | ||||||
44,351 | Series 1998-2, Class A5, | ||||||
6.24%, 12/01/2028 | 43,917 | ||||||
1,297,484 | Series 1997-5, Class A6, | ||||||
6.82%, 05/15/2029 | 1,329,584 | ||||||
508,128 | Series 1998-3, Class A5, | ||||||
6.22%, 03/01/2030 | 538,192 | ||||||
2,000,000 | Renaissance Home | ||||||
Equity Loan Trust, | |||||||
Series 2007-2, Class AF2, | |||||||
5.675%, 06/25/2037 | 1,045,950 | ||||||
227,666 | Residential Asset | ||||||
Mortgage Products, Inc., | |||||||
Series 2003-RS7, | |||||||
Class AI6, 5.34%, | |||||||
08/25/2033 | 229,419 | ||||||
551,800 | Residential Asset | ||||||
Securities Corporation, | |||||||
Series 2006-KS7, | |||||||
0.346%, 09/25/2036 | 548,772 | ||||||
7,855,384 | |||||||
Commercial Mortgage Backed Securities – 4.2% | |||||||
3,992,825 | First Union National | ||||||
Bank Commercial | |||||||
Mortgage Securities Inc., | |||||||
Series 2001-C4, Class A2, | |||||||
6.223%, 12/12/2033 | 4,092,088 | ||||||
GE Capital Commercial | |||||||
Mortgage Corporation: | |||||||
2,526,555 | Series 2004-C3, Class A3, | ||||||
4.865%, 07/10/2039 | 2,578,270 | ||||||
7,000,000 | Series 2004-C3, Class A4, | ||||||
5.189%, 07/10/2039 | 7,436,614 | ||||||
840,550 | GMAC Commercial | ||||||
Mortgage Securities, Inc., | |||||||
Series 2001-C1, Class A2, | |||||||
6.465%, 04/15/2034 | 840,257 | ||||||
969,818 | Government National | ||||||
Mortgage Association | |||||||
(GNMA), Series 2006-15, | |||||||
Class A, 3.727%, | |||||||
03/16/2027 | 991,817 | ||||||
8,000,000 | J.P. Morgan Chase | ||||||
Commercial Mortgage, | |||||||
Series 2003-CB7, Class A4, | |||||||
4.879%, 01/12/2038 | 8,475,708 |
The accompanying notes are an integral part of these financial statements.
Page 9
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Commercial Mortgage | |||||||
Backed Securities – 4.2% (cont.) | |||||||
$ | 1,158,202 | Morgan Stanley Dean | |||||
Witter Capital I, | |||||||
Series 2001-TOP1, | |||||||
Class A4, 6.66%, | |||||||
02/15/2033 | $ | 1,157,554 | |||||
4,365,738 | RBSCF Trust, | ||||||
Series 2010-MB1, | |||||||
2.367%, 04/17/2024 | |||||||
(Acquired 04/09/2010; | |||||||
Cost $4,365,646)* | 4,403,870 | ||||||
2,161,187 | Salomon Brothers | ||||||
Mortgage Securities VII, | |||||||
Series 2001-C2, Class A3, | |||||||
6.50%, 11/13/2036 | 2,212,011 | ||||||
6,000,000 | Wachovia Bank | ||||||
Commercial Mortgage | |||||||
Trust, Series 2003-C3, | |||||||
Class A2, 4.867%, | |||||||
02/15/2035 | 6,293,251 | ||||||
38,481,440 | |||||||
Financial – 31.4% | |||||||
3,400,000 | Aegon NV, | ||||||
4.75%, 06/01/2013 f | 3,558,845 | ||||||
4,735,000 | AIG SunAmerica Global | ||||||
Financing VI, 6.30%, | |||||||
05/10/2011 (Acquired | |||||||
11/23/2009 through | |||||||
10/18/2010; Aggregate | |||||||
Cost $4,772,222)* | 4,806,025 | ||||||
Allstate Corporation: | |||||||
1,890,000 | 6.125%, 02/15/2012 | 1,991,021 | |||||
883,000 | 7.50%, 06/15/2013 | 997,880 | |||||
1,080,000 | 5.00%, 08/15/2014 | 1,179,316 | |||||
3,460,000 | American Express Credit | ||||||
Corporation, Series C, | |||||||
7.30%, 08/20/2013 | 3,898,929 | ||||||
1,350,000 | American General | ||||||
Finance Corporation, | |||||||
4.00%, 03/15/2011 @ | 1,339,875 | ||||||
950,000 | American Honda | ||||||
Finance Corporation, | |||||||
0.414%, 02/21/2012 | |||||||
(Acquired 10/19/2009; | |||||||
Cost $937,308)* | 948,722 | ||||||
1,100,000 | Amsouth Bank NA, | ||||||
4.85%, 04/01/2013 | 1,067,000 | ||||||
3,135,000 | ANZ National | ||||||
International, | |||||||
6.20%, 07/19/2013 | |||||||
(Acquired 05/25/2010 | |||||||
through 08/25/2010; | |||||||
Aggregate Cost | |||||||
$3,398,409)* f | 3,451,547 | ||||||
3,600,000 | AON Corporation, | ||||||
7.375%, 12/14/2012 | 3,920,746 | ||||||
2,200,000 | Bancwest Corporation, | ||||||
8.30%, 01/15/2011 | 2,200,266 | ||||||
3,500,000 | Bank of Ireland, | ||||||
2.75%, 03/02/2012 | |||||||
(Acquired 06/01/2010; | |||||||
Cost $3,453,891)* f | 3,336,372 | ||||||
2,450,000 | Bank Tokyo – | ||||||
Mitsubishi UFJ Ltd., | |||||||
7.40%, 06/15/2011 f @ | 2,496,445 | ||||||
2,277,000 | BankAmerica | ||||||
Institutional, | |||||||
8.07%, 12/31/2026 | |||||||
(Callable 02/07/2011) | |||||||
(Acquired 07/22/2010; | |||||||
Cost $2,254,230)* | 2,291,231 |
The accompanying notes are an integral part of these financial statements.
Page 10
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Financial – 31.4% (cont.) | |||||||
Barclays Bank PLC Senior | |||||||
Unsecured Notes: f | |||||||
$ | 600,000 | 5.45%, 09/12/2012 | $ | 643,004 | |||
2,000,000 | 2.50%, 01/23/2013 @ | 2,032,470 | |||||
1,000,000 | 5.20%, 07/10/2014 | 1,080,082 | |||||
2,000,000 | Berkshire Hathaway Inc., | ||||||
0.68%, 02/11/2013 | 2,009,918 | ||||||
744,000 | Capital One Bank USA | ||||||
NA, 6.50%, 06/13/2013 | 814,651 | ||||||
Capital One | |||||||
Financial Corporation: | |||||||
3,050,000 | 4.80%, 02/21/2012 | 3,156,695 | |||||
1,000,000 | 7.375%, 05/23/2014 | 1,137,931 | |||||
2,790,000 | CDP Financial Inc., | ||||||
3.00%, 11/25/2014 | |||||||
(Acquired 11/20/2009 | |||||||
through 06/25/2010; | |||||||
Aggregate | |||||||
Cost $2,791,241)* f | 2,836,052 | ||||||
555,000 | Charter One Bank NA, | ||||||
5.50%, 04/26/2011 | 563,008 | ||||||
1,135,000 | Citicorp, | ||||||
7.25%, 10/15/2011 | 1,180,208 | ||||||
CIT Group, Inc.: | |||||||
191,367 | 7.00%, 05/01/2013 | ||||||
(Callable 02/22/2011) @ | 195,194 | ||||||
287,050 | 7.00%, 05/01/2014 | ||||||
(Callable 02/22/2011) @ | 289,921 | ||||||
287,050 | 7.00%, 05/01/2015 | ||||||
(Callable 02/22/2011) | 287,768 | ||||||
478,417 | 7.00%, 05/01/2016 | ||||||
(Callable 02/22/2011) | 480,211 | ||||||
669,783 | 7.00%, 05/01/2017 | ||||||
(Callable 02/22/2011) @ | 671,457 | ||||||
Citigroup, Inc.: | |||||||
2,000,000 | 6.00%, 02/21/2012 | 2,097,940 | |||||
900,000 | 6.50%, 08/19/2013 | 988,253 | |||||
7,000,000 | 6.01%, 01/15/2015 | 7,679,181 | |||||
5,100,000 | CNA Financial | ||||||
Corporation, | |||||||
6.00%, 08/15/2011 | 5,234,823 | ||||||
4,000,000 | Commonwealth | ||||||
Bank of Australia, | |||||||
3.50%, 03/19/2015 | |||||||
(Acquired 08/30/2010; | |||||||
Cost $4,157,514)* f | 4,110,084 | ||||||
1,388,000 | Corestates Capital Trust | ||||||
I, 8.00%, 12/15/2026 | |||||||
(Callable 02/07/2011) | |||||||
(Acquired 01/26/2006 | |||||||
through 09/30/2009; | |||||||
Cost $1,349,498)* | 1,416,669 | ||||||
Countrywide | |||||||
Financial Corporation: | |||||||
990,000 | 5.80%, 06/07/2012 | 1,041,576 | |||||
200,000 | 6.25%, 05/15/2016 | 205,097 | |||||
3,871,000 | Credit Suisse New York, | ||||||
5.00%, 05/15/2013 f @ | 4,166,288 | ||||||
1,055,000 | Credit Suisse USA Inc., | ||||||
6.50%, 01/15/2012 | 1,114,604 | ||||||
979,000 | Deutsche Bank | ||||||
Trust Corporation | |||||||
Subordinated Notes, | |||||||
7.25%, 10/15/2011 | 1,026,745 | ||||||
Fifth Third Bancorp: | |||||||
1,000,000 | 6.25%, 05/01/2013 | 1,083,876 | |||||
3,640,000 | 0.479%, 05/17/2013 | 3,498,870 | |||||
1,000,000 | First Empire Capital Trust | ||||||
I, 8.234%, 02/01/2027 | |||||||
(Callable 02/07/2011) | 994,009 |
The accompanying notes are an integral part of these financial statements.
Page 11
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Financial – 31.4% (cont.) | |||||||
$ | 1,500,000 | First Hawaiian Capital | |||||
Trust I, Series B, | |||||||
8.343%, 07/01/2027 | |||||||
(Callable 02/07/2011) | $ | 1,511,250 | |||||
4,750,000 | First Tennessee Bank, | ||||||
0.59%, 02/14/2011 | 4,749,212 | ||||||
800,000 | First Union Capital I, | ||||||
Series A, | |||||||
7.935%, 01/15/2027 | |||||||
(Callable 02/07/2011) | 822,990 | ||||||
5,190,000 | FMR LLC, | ||||||
4.75%, 03/01/2013 | |||||||
(Acquired 10/04/2010 | |||||||
through 10/26/2010; | |||||||
Cost $5,498,579)* | 5,450,630 | ||||||
General Electric | |||||||
Capital Corporation: | |||||||
1,550,000 | 5.72%, 08/22/2011 | ||||||
(Callable 07/22/2011) | 1,593,101 | ||||||
1,200,000 | 5.875%, 02/15/2012 | 1,262,318 | |||||
1,000,000 | 1.158%, 11/01/2012 | 994,702 | |||||
2,000,000 | 5.90%, 05/13/2014 | 2,213,518 | |||||
800,000 | 4.75%, 09/15/2014 | 855,386 | |||||
5,000,000 | 4.875%, 03/04/2015 | 5,335,439 | |||||
1,250,000 | Genworth Global | ||||||
Funding Trust, | |||||||
5.125%, 03/15/2011 | 1,259,060 | ||||||
1,480,000 | Genworth Life | ||||||
Institutional Funding, | |||||||
5.875%, 05/03/2013 | |||||||
(Acquired 04/07/2010; | |||||||
Aggregate Cost | |||||||
$1,527,981)* | 1,552,057 | ||||||
3,845,000 | Glencore Funding LLC, | ||||||
6.00%, 04/15/2014 | |||||||
(Acquired 01/12/2010 | |||||||
through 03/31/2010; | |||||||
Aggregate Cost | |||||||
$3,986,552)* | 4,063,388 | ||||||
787,000 | GMAC Inc., | ||||||
7.50%, 12/31/2013 | 844,058 | ||||||
225,000 | The Goldman Sachs | ||||||
Group Inc., | |||||||
3.70%, 08/01/2015 | 229,255 | ||||||
Goldman Sachs Group LP: | |||||||
2,000,000 | 6.60%, 01/15/2012 | 2,114,926 | |||||
3,450,000 | 8.00%, 03/01/2013 | ||||||
(Acquired 04/16/2009 | |||||||
through 10/20/2009; | |||||||
Aggregate Cost | |||||||
$3,685,828)* | 3,842,134 | ||||||
2,000,000 | Hartford Financial | ||||||
Services Group Inc., | |||||||
5.25%, 10/15/2011 | 2,058,980 | ||||||
1,000,000 | Hartford Life | ||||||
Global Funding, | |||||||
0.609%, 01/17/2012 | 995,940 | ||||||
HSBC Finance | |||||||
Corporation: | |||||||
396,000 | 7.00%, 05/15/2012 | 424,886 | |||||
2,000,000 | 5.90%, 06/19/2012 | 2,119,936 | |||||
1,451,000 | 4.75%, 07/15/2013 | 1,530,332 | |||||
221,000 | 6.676%, 01/15/2021 | ||||||
(Acquired 09/29/2010; | |||||||
Cost $216,363)* | 223,272 | ||||||
1,500,000 | HSBC USA Capital Trust | ||||||
II, 8.38%, 05/15/2027 | |||||||
(Callable 02/07/2011) | |||||||
(Acquired 11/06/2007; | |||||||
Cost $1,543,766)* | 1,514,801 |
The accompanying notes are an integral part of these financial statements.
Page 12
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Financial – 31.4% (cont.) | |||||||
$ | 4,700,000 | Hutchison Whampoa | |||||
International Ltd., | |||||||
6.50%, 02/13/2013 | |||||||
(Acquired 01/20/2010 | |||||||
through 07/26/2010; | |||||||
Aggregate Cost | |||||||
$5,062,092)* f | $ | 5,133,015 | |||||
5,000,000 | ING Bank N.V., | ||||||
2.00%, 10/18/2013 | |||||||
(Acquired 10/13/2010 | |||||||
through 10/28/2010; | |||||||
Aggregate Cost | |||||||
$4,993,650)* f | 4,940,350 | ||||||
Invesco Ltd.: f | |||||||
4,880,000 | 5.625%, 04/17/2012 | 5,069,846 | |||||
325,000 | 5.375%, 02/27/2013 | 343,777 | |||||
5,050,000 | Irish Life & Permanent | ||||||
Group Holdings PLC, | |||||||
3.60%, 01/14/2013 | |||||||
(Acquired 01/07/2010 | |||||||
through 08/05/2010; | |||||||
Aggregate Cost | |||||||
$5,057,241)* f | 4,529,941 | ||||||
2,246,000 | Jackson National | ||||||
Life Global, | |||||||
5.125%, 02/10/2011 | |||||||
(Acquired 07/21/2009 | |||||||
through 09/21/2009; | |||||||
Cost $2,247,624)* | 2,254,980 | ||||||
1,150,000 | Jefferies Group, Inc., | ||||||
7.75%, 03/15/2012 | 1,229,307 | ||||||
1,072,000 | Jefferson-Pilot Corp., | ||||||
4.75%, 01/30/2014 | 1,125,181 | ||||||
940,000 | John Hancock Global | ||||||
Funding II, | |||||||
6.50%, 03/01/2011 | |||||||
(Acquired 01/29/2010; | |||||||
Cost $947,829)* | 948,092 | ||||||
J.P. Morgan Chase & Co.: | |||||||
1,950,000 | 5.75%, 01/02/2013 | 2,112,936 | |||||
500,000 | 4.65%, 06/01/2014 | 533,695 | |||||
Key Bank NA: | |||||||
2,375,000 | 7.00%, 02/01/2011 | 2,384,719 | |||||
1,000,000 | 7.30%, 05/01/2011 | 1,019,892 | |||||
200,000 | KeyCorp, | ||||||
6.50%, 05/14/2013 | 217,143 | ||||||
3,000,000 | Kookmin Bank, | ||||||
7.25%, 05/14/2014 | |||||||
(Acquired 05/26/2009 | |||||||
through 03/10/2010; | |||||||
Aggregate Cost | |||||||
$3,154,170)* f | 3,384,720 | ||||||
Liberty Mutual Group: | |||||||
1,975,000 | 7.25%, 09/01/2012 | ||||||
(Acquired 03/31/2010 | |||||||
through 10/01/2010; | |||||||
Aggregate Cost | |||||||
$2,092,530)* | 2,095,935 | ||||||
3,188,000 | 5.75%, 03/15/2014 | ||||||
(Acquired 09/03/2009 | |||||||
through 10/05/2010; | |||||||
Aggregate Cost | |||||||
$2,982,966)* | 3,315,852 | ||||||
1,700,000 | Lincoln National Corp., | ||||||
5.65%, 08/27/2012 | 1,808,326 | ||||||
1,000,000 | Lloyds TSB Bank PLC, | ||||||
4.375%, 01/12/2015 | |||||||
(Acquired 01/05/2010; | |||||||
Cost $999,960)* f | 999,772 |
The accompanying notes are an integral part of these financial statements.
Page 13
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Financial – 31.4% (cont.) | |||||||
$ | 620,000 | Manufacturers & | |||||
Traders Trust Co., | |||||||
1.751%, 04/01/2013 | |||||||
(Callable 04/01/2011) | $ | 612,597 | |||||
Marsh & McLennan | |||||||
Companies, Inc.: | |||||||
2,512,000 | 6.25%, 03/15/2012 | 2,620,641 | |||||
2,550,000 | 4.85%, 02/15/2013 | 2,664,860 | |||||
2,671,000 | MBNA Capital, Series A, | ||||||
8.278%, 12/01/2026 | |||||||
(Callable 02/07/2011) | 2,704,388 | ||||||
2,552,000 | Mercantile Bankshares | ||||||
Corporation Subordinated | |||||||
Notes, Series B, | |||||||
4.625%, 04/15/2013 | 2,681,953 | ||||||
300,000 | Merrill Lynch | ||||||
& Company, | |||||||
6.05%, 08/15/2012 | 317,670 | ||||||
Metropolitan Life Global | |||||||
Funding I: | |||||||
1,600,000 | 2.875%, 09/17/2012 | ||||||
(Acquired 09/10/2009; | |||||||
Cost $1,595,440)* | 1,639,894 | ||||||
3,023,000 | 5.125%, 04/10/2013 | ||||||
(Acquired 10/25/2010 | |||||||
through 11/30/2010; | |||||||
Aggregate Cost | |||||||
$3,268,614)* | 3,254,919 | ||||||
2,323,000 | 5.20%, 09/18/2013 | ||||||
(Acquired 10/21/2010; | |||||||
Aggregate Cost | |||||||
$2,549,298)* | 2,516,076 | ||||||
2,302,000 | Monumental Global | ||||||
Funding II, | |||||||
5.65%, 07/14/2011 | 2,343,116 | ||||||
Monumental Global | |||||||
Funding III: | |||||||
350,000 | 0.46%, 01/25/2013 | ||||||
(Acquired 07/28/2009; | |||||||
Cost $321,747)* | 340,251 | ||||||
1,265,000 | 5.50%, 04/22/2013 | ||||||
(Acquired 09/23/2009 | |||||||
through 03/16/2010; | |||||||
Aggregate Cost | |||||||
$1,312,649)* | 1,353,704 | ||||||
3,516,000 | Morgan Stanley Dean | ||||||
Witter & Co., | |||||||
6.75%, 10/15/2013 | 3,833,199 | ||||||
Morgan Stanley: | |||||||
450,000 | 5.625%, 01/09/2012 | 469,865 | |||||
355,000 | 6.60%, 04/01/2012 | 378,241 | |||||
1,000,000 | 4.00%, 07/24/2015 | 1,005,185 | |||||
2,000,000 | The NASDAQ | ||||||
OMX Group Inc., | |||||||
2.50%, 08/15/2013 | 1,980,000 | ||||||
1,500,000 | National City | ||||||
Bank of Cleveland | |||||||
Subordinated Notes, | |||||||
6.25%, 03/15/2011 | 1,515,635 | ||||||
278,000 | National City | ||||||
Bank of Kentucky | |||||||
Subordinated Notes, | |||||||
6.30%, 02/15/2011 | 279,649 | ||||||
Nationwide | |||||||
Financial Services: | |||||||
3,450,000 | 6.25%, 11/15/2011 | 3,594,545 | |||||
350,000 | 5.90%, 07/01/2012 | 369,411 | |||||
1,300,000 | Nationwide Life | ||||||
Global Funding, | |||||||
5.35%, 03/15/2011 | |||||||
(Acquired 03/24/2009; | |||||||
Cost $1,286,341)* | 1,307,732 |
The accompanying notes are an integral part of these financial statements.
Page 14
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Financial – 31.4% (cont.) | |||||||
$ | 2,273,000 | NB Capital Trust IV, | |||||
8.25%, 04/15/2027 | |||||||
(Callable 02/07/2011) | $ | 2,301,413 | |||||
1,000,000 | Nomura Holdings Inc., | ||||||
5.00%, 03/04/2015 f | 1,042,591 | ||||||
1,000,000 | North Fork Capital Trust | ||||||
II, 8.00%, 12/15/2027 | |||||||
(Callable 02/07/2011) | 1,005,000 | ||||||
925,000 | PNC Funding Corp., | ||||||
5.50%, 09/28/2012 | 986,813 | ||||||
200,000 | Pooled Funding Trust I, | ||||||
2.74%, 02/15/2012 | |||||||
(Acquired 09/29/2010; | |||||||
Cost $204,185)* | 203,653 | ||||||
2,000,000 | Pooled Funding Trust II, | ||||||
2.625%, 03/30/2012 | |||||||
(Acquired 03/27/2009; | |||||||
Cost $1,998,800)* | 2,031,356 | ||||||
4,525,000 | Principal Life Global, | ||||||
6.25%, 02/15/2012 | |||||||
(Acquired 08/18/2009 | |||||||
through 04/06/2010; | |||||||
Aggregate Cost | |||||||
$4,673,759)* | 4,722,295 | ||||||
1,180,000 | Principal Life | ||||||
Income Funding, | |||||||
5.30%, 12/14/2012 | 1,269,431 | ||||||
Protective Life | |||||||
Secured Trust: | |||||||
4,500,000 | 4.00%, 04/01/2011 | 4,538,174 | |||||
2,221,000 | 5.45%, 09/28/2012 | 2,373,005 | |||||
Prudential Financial Inc.: | |||||||
3,900,000 | 2.75%, 01/14/2013 | 3,971,187 | |||||
1,300,000 | 5.15%, 01/15/2013 | 1,386,572 | |||||
1,370,000 | 4.50%, 07/15/2013 | 1,452,873 | |||||
2,455,000 | 6.20%, 01/15/2015 | 2,707,396 | |||||
1,000,000 | Rabobank Nederland | ||||||
Global Senior | |||||||
Unsecured Notes, | |||||||
4.20%, 05/13/2014 | |||||||
(Acquired 05/06/2009; | |||||||
Cost $998,170)* f | 1,063,829 | ||||||
200,000 | Regions Financial Corp., | ||||||
7.00%, 03/01/2011 @ | 200,400 | ||||||
Royal Bank of Scotland: f | |||||||
1,000,000 | 3.40%, 08/23/2013 | 1,010,157 | |||||
2,000,000 | 4.875%, 08/25/2014 | ||||||
(Acquired 08/18/2009; | |||||||
Cost $1,994,040)* | 2,048,340 | ||||||
2,675,000 | Santander | ||||||
Financial Issuances, | |||||||
6.375%, 02/15/2011 f | 2,688,340 | ||||||
1,600,000 | Santander U.S. Debt | ||||||
S.A. Unipersonal, | |||||||
2.991%, 10/07/2013 | |||||||
(Acquired 09/27/2010 | |||||||
through 12/14/2010; | |||||||
Aggregate Cost | |||||||
$1,593,643)* f | 1,554,350 | ||||||
4,000,000 | Simon Property | ||||||
Group LP, | |||||||
7.75%, 01/20/2011 | 4,006,796 | ||||||
SLM Corporation: | |||||||
2,000,000 | 5.45%, 04/25/2011 | 2,017,434 | |||||
1,750,000 | 5.40%, 10/25/2011 | 1,780,879 | |||||
1,000,000 | 5.375%, 01/15/2013 @ | 1,019,967 | |||||
5,000,000 | Societe Generale, | ||||||
2.20%, 09/14/2013 | |||||||
(Acquired 09/07/2010; | |||||||
Cost $4,994,350)* f | 4,979,825 | ||||||
850,000 | SouthTrust Corporation, | ||||||
5.80%, 06/15/2014 | 920,043 |
The accompanying notes are an integral part of these financial statements.
Page 15
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Financial – 31.4% (cont.) | |||||||
$ | 4,000,000 | Sumitomo Mitsui | |||||
Banking Corporation, | |||||||
2.15%, 07/22/2013 | |||||||
(Acquired 07/14/2010; | |||||||
Cost $3,998,480)* f | $ | 4,053,180 | |||||
1,000,000 | Sun Life Financial | ||||||
Global Funding, | |||||||
0.472%, 07/06/2011 | |||||||
(Acquired 07/28/2009; | |||||||
Cost $985,741)* | 997,295 | ||||||
4,755,000 | Suntrust Banks, Inc., | ||||||
5.25%, 11/05/2012 | 5,008,066 | ||||||
1,150,000 | UFJ Finance | ||||||
Aruba A.E.C., | |||||||
6.75%, 07/15/2013 f @ | 1,282,370 | ||||||
1,075,000 | Union Planters | ||||||
Corporation, | |||||||
7.75%, 03/01/2011 | 1,085,029 | ||||||
1,000,000 | U.S. Bancorp, | ||||||
1.125%, 10/30/2013 | |||||||
(Callable 09/30/2013) | 990,365 | ||||||
2,500,000 | Westpac Banking | ||||||
Corporation, | |||||||
1.90%, 12/14/2012 | |||||||
(Acquired 12/07/2009; | |||||||
Cost $2,498,700)* f | 2,542,280 | ||||||
710,000 | Westpac Securities | ||||||
NZ Ltd., | |||||||
2.50%, 05/25/2012 | |||||||
(Acquired 03/05/2010; | |||||||
Cost $719,429)* f | 726,536 | ||||||
288,280,626 | |||||||
Industrial – 22.2% | |||||||
2,300,000 | Aetna, Inc., | ||||||
5.75%, 06/15/2011 | 2,350,947 | ||||||
4,140,000 | Allied Waste North | ||||||
America, Inc., Series B, | |||||||
7.125%, 05/15/2016 | |||||||
(Callable 05/15/2011) | 4,383,225 | ||||||
2,900,000 | Anglo American | ||||||
Capital PLC, | |||||||
2.15%, 09/27/2013 | |||||||
(Acquired 09/20/2010; | |||||||
Cost $2,897,564)* f | 2,924,934 | ||||||
Anheuser Busch | |||||||
Inbev Worldwide: | |||||||
2,854,000 | 3.00%, 10/15/2012 | 2,944,791 | |||||
3,000,000 | 2.50%, 03/26/2013 @ | 3,069,918 | |||||
ArcelorMittal: f | |||||||
341,000 | 9.00%, 02/15/2015 | 405,861 | |||||
1,275,000 | 3.75%, 08/05/2015 | 1,285,616 | |||||
3,000,000 | BP Capital Markets PLC, | ||||||
5.25%, 11/07/2013 f | 3,249,039 | ||||||
Bunge Limited | |||||||
Finance Corporation: | |||||||
2,345,000 | 5.875%, 05/15/2013 | 2,510,529 | |||||
3,000,000 | 5.35%, 04/15/2014 | 3,153,342 | |||||
1,140,000 | Cadbury Schweppes | ||||||
U.S. Finance LLC, | |||||||
5.125%, 10/01/2013 | |||||||
(Acquired 09/03/2010 | |||||||
through 12/02/2010; | |||||||
Aggregate Cost | |||||||
$1,239,366)* | 1,235,449 | ||||||
305,000 | CBS Corporation, | ||||||
5.625%, 08/15/2012 | 323,487 | ||||||
3,361,000 | Chevron Phillips | ||||||
Chemical Company | |||||||
LLC, 7.00%, 06/15/2014 | |||||||
(Acquired 07/20/2010; | |||||||
Cost $3,795,932)* @ | 3,810,238 |
The accompanying notes are an integral part of these financial statements.
Page 16
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Industrial – 22.2% (cont.) | |||||||
Cigna Corporation: | |||||||
$ | 4,920,000 | 7.00%, 01/15/2011 | $ | 4,927,528 | |||
320,000 | 6.375%, 10/15/2011 | 333,784 | |||||
4,115,000 | Comcast Cable Holdings, | ||||||
9.80%, 02/01/2012 | 4,478,902 | ||||||
2,091,000 | Comcast Holdings | ||||||
Corporation, | |||||||
10.625%, 07/15/2012 | 2,368,921 | ||||||
7,137,000 | Computer Sciences | ||||||
Corporation, | |||||||
5.50%, 03/15/2013 | 7,631,465 | ||||||
COX | |||||||
Communications Inc.: | |||||||
2,962,000 | 7.125%, 10/01/2012 | 3,248,488 | |||||
200,000 | 5.45%, 12/15/2014 | 220,175 | |||||
66,000 | CRH America Inc., | ||||||
5.625%, 09/30/2011 | 68,081 | ||||||
1,260,000 | CSX Corporation, | ||||||
6.30%, 03/15/2012 | 1,336,888 | ||||||
3,785,000 | Daimler Finance | ||||||
NA LLC, | |||||||
7.75%, 01/18/2011 | 3,793,679 | ||||||
200,000 | Deutsche Telekom | ||||||
International Finance B.V., | |||||||
5.25%, 07/22/2013 f | 216,607 | ||||||
3,000,000 | DIRECTV | ||||||
Holdings/Financing, | |||||||
7.625%, 05/15/2016 | |||||||
(Callable 05/15/2012) | 3,326,250 | ||||||
780,000 | Duke Energy | ||||||
Field Services LLC, | |||||||
6.875%, 02/01/2011 | 783,403 | ||||||
1,325,000 | EnCana Holdings | ||||||
Finance Corp., | |||||||
5.80%, 05/01/2014 f | 1,475,568 | ||||||
Enterprise Products | |||||||
Operating LLC: | |||||||
3,000,000 | 7.625%, 02/15/2012 | 3,198,141 | |||||
1,250,000 | 6.125%, 02/01/2013 | 1,346,678 | |||||
1,500,000 | EOG Co. of Canada, | ||||||
7.00%, 12/01/2011 | |||||||
(Acquired 10/18/2010; | |||||||
Cost $1,584,446)* f | 1,585,934 | ||||||
FedEx Corporation: | |||||||
325,000 | 9.65%, 06/15/2012 | 363,369 | |||||
700,000 | 7.375%, 01/15/2014 | 802,751 | |||||
2,877,000 | Fiserv, Inc., | ||||||
6.125%, 11/20/2012 | 3,111,409 | ||||||
Fortune Brands Inc.: | |||||||
3,500,000 | 5.125%, 01/15/2011 | 3,503,399 | |||||
2,300,000 | 3.00%, 06/01/2012 @ | 2,334,495 | |||||
3,970,000 | Freeport-McMoRan | ||||||
Copper & Gold Inc., | |||||||
8.25%, 04/01/2015 | |||||||
(Callable 04/01/2011) | 4,183,388 | ||||||
2,000,000 | Georgia-Pacific LLC, | ||||||
7.00%, 01/15/2015 | |||||||
(Callable 02/07/2011) | |||||||
(Acquired 10/29/2010; | |||||||
Cost $2,073,836)* | 2,075,000 | ||||||
2,525,000 | Health Care Service | ||||||
Corporation Notes, | |||||||
7.75%, 06/15/2011 | |||||||
(Acquired 06/15/2009 | |||||||
through 06/15/2010; | |||||||
Aggregate Cost | |||||||
$2,569,485)* | 2,557,232 | ||||||
4,000,000 | HP Enterprise Services | ||||||
LLC, Series B, | |||||||
6.00%, 08/01/2013 | 4,458,552 |
The accompanying notes are an integral part of these financial statements.
Page 17
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Industrial – 22.2% (cont.) | |||||||
$ | 2,800,000 | Kraft Foods Inc. | |||||
Senior Unsecured Notes, | |||||||
2.625%, 05/08/2013 @ | $ | 2,879,570 | |||||
6,025,000 | Laboratory Corporation | ||||||
of America Holdings, | |||||||
5.50%, 02/01/2013 | 6,429,186 | ||||||
4,090,000 | Lafarge SA, | ||||||
6.15%, 07/15/2011 f | 4,196,684 | ||||||
4,795,000 | Marathon Oil | ||||||
Canada Corporation, | |||||||
8.375%, 05/01/2012 f | 5,217,070 | ||||||
2,500,000 | Medtronic, Inc., Series A, | ||||||
1.50%, 04/15/2011 @ | 2,500,000 | ||||||
4,500,000 | Mosaic Co., | ||||||
7.625%, 12/01/2016 | |||||||
(Callable 12/01/2011) | |||||||
(Acquired 07/19/2010 | |||||||
through 10/25/2010; | |||||||
Aggregate Cost | |||||||
$4,843,249)* | 4,842,090 | ||||||
6,030,000 | Motiva Enterprises LLC | ||||||
Senior Unsecured Notes, | |||||||
5.20%, 09/15/2012 | |||||||
(Acquired 05/13/2009 | |||||||
through 10/22/2010; | |||||||
Aggregate Cost | |||||||
$6,239,731)* | 6,380,662 | ||||||
Nabors Industries, Inc.: | |||||||
1,000,000 | 0.94%, 05/15/2011 | ||||||
(Convertible until | |||||||
05/15/2011) | 993,750 | ||||||
3,325,000 | 5.375%, 08/15/2012 | 3,510,389 | |||||
175,000 | News America | ||||||
Holdings Inc., | |||||||
9.25%, 02/01/2013 | 201,687 | ||||||
1,000,000 | Pfizer Inc., | ||||||
4.45%, 03/15/2012 | 1,043,455 | ||||||
475,000 | Plum Creek | ||||||
Timberlands, L.P., | |||||||
5.875%, 11/15/2015 | 511,338 | ||||||
4,300,000 | Posco, | ||||||
8.75%, 03/26/2014 | |||||||
(Acquired 03/19/2009 | |||||||
through 08/11/2010; | |||||||
Aggregate Cost | |||||||
$4,682,714)* f | 5,039,677 | ||||||
4,950,000 | Qwest Corporation, | ||||||
8.875%, 03/15/2012 | 5,352,188 | ||||||
542,000 | Rio Tinto Alcan, Inc., | ||||||
5.20%, 01/15/2014 f | 582,381 | ||||||
1,672,000 | Teck Resources Limited, | ||||||
9.75%, 05/15/2014 f | 2,092,292 | ||||||
Telecom Italia Capital: f | |||||||
120,000 | 5.25%, 11/15/2013 | 125,017 | |||||
4,875,000 | 4.95%, 09/30/2014 | 4,994,647 | |||||
175,000 | 5.25%, 10/01/2015 @ | 179,175 | |||||
2,535,000 | Telefonica | ||||||
Emisiones S.A.U., | |||||||
5.855%, 02/04/2013 f | 2,706,589 | ||||||
1,000,000 | Telefonica Moviles Chile SA, | ||||||
2.875%, 11/09/2015 | |||||||
(Acquired 11/03/2010; | |||||||
Cost $997,270)* f | 959,778 | ||||||
1,236,000 | Texas Gas Transmission | ||||||
LLC, 5.50%, 04/01/2013 | |||||||
(Acquired 11/02/2010 | |||||||
through 11/10/2010; | |||||||
Aggregate Cost | |||||||
$1,327,698)* | 1,328,830 | ||||||
Time Warner Inc.: | |||||||
2,916,000 | 8.875%, 10/01/2012 | 3,277,275 | |||||
3,600,000 | 3.15%, 07/15/2015 @ | 3,657,665 |
The accompanying notes are an integral part of these financial statements.
Page 18
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Industrial – 22.2% (cont.) | |||||||
$ | 300,000 | Tyco Electronics | |||||
Group S.A., | |||||||
6.00%, 10/01/2012 f | $ | 322,550 | |||||
5,614,000 | Union Pacific Railroad | ||||||
Co 2004 Pass Through | |||||||
Trust, 5.214%, | |||||||
09/30/2014 (Acquired | |||||||
10/22/2010 through | |||||||
12/03/2010; Aggregate | |||||||
Cost $6,211,898)* | 6,033,478 | ||||||
1,000,000 | United Parcel | ||||||
Service, Inc., | |||||||
0.00%, 02/28/2053 | |||||||
(Callable 02/28/2033) ^ | 990,590 | ||||||
280,000 | UnitedHealth | ||||||
Group, Inc., | |||||||
5.25%, 03/15/2011 | 282,373 | ||||||
1,500,000 | USX Corporation, | ||||||
9.125%, 01/15/2013 | 1,683,057 | ||||||
5,901,000 | Vale Inco Limited, | ||||||
7.75%, 05/15/2012 f | 6,328,002 | ||||||
1,600,000 | Verizon New Jersey, | ||||||
Inc., Series A, | |||||||
5.875%, 01/17/2012 | 1,675,426 | ||||||
4,372,000 | Verizon New York | ||||||
Inc., Series A, | |||||||
6.875%, 04/01/2012 | 4,663,835 | ||||||
4,366,000 | Vodafone Group PLC, | ||||||
5.35%, 02/27/2012 f | 4,578,026 | ||||||
3,000,000 | Volkswagen International | ||||||
Finance N.V., | |||||||
1.625%, 08/12/2013 | |||||||
(Acquired 08/05/2010; | |||||||
Cost $2,991,000)* f | 2,998,461 | ||||||
3,125,000 | Vulcan Materials Co., | ||||||
5.60%, 11/30/2012 | 3,303,988 | ||||||
Waste Management, Inc.: | |||||||
1,925,000 | 7.65%, 03/15/2011 | 1,948,987 | |||||
2,094,000 | 6.375%, 11/15/2012 @ | 2,283,578 | |||||
1,185,000 | Wellpoint, Inc., | ||||||
6.80%, 08/01/2012 | 1,286,940 | ||||||
932,000 | Williams Partners LP, | ||||||
7.50%, 06/15/2011 | 959,350 | ||||||
203,717,499 | |||||||
Other Government Related Securities – 1.1% | |||||||
2,500,000 | Corp Andina | ||||||
De Fomento Notes, | |||||||
5.20%, 05/21/2013 f | 2,704,353 | ||||||
3,241,000 | Export-Import | ||||||
Bank Korea Notes, | |||||||
5.125%, 02/14/2011 f | 3,252,674 | ||||||
350,000 | Korea Development Bank, | ||||||
5.30%, 01/17/2013 f | 370,825 | ||||||
3,440,000 | Landesbank Baden- | ||||||
Wurttemberg | |||||||
Subordinated Notes, | |||||||
6.35%, 04/01/2012 f | 3,652,299 | ||||||
9,980,151 | |||||||
Residential Mortgage Backed Securities – 2.1% | |||||||
497,356 | Bank of America | ||||||
Alternative Loan Trust, | |||||||
Series 2003-4, Class 2A1, | |||||||
5.00%, 06/25/2018 | 509,781 | ||||||
119,853 | Citicorp Mortgage | ||||||
Securities, Inc., | |||||||
Series 2004-3, Class A2, | |||||||
5.25%, 05/25/2034 | 121,983 | ||||||
Countrywide Alternative | |||||||
Loan Trust: | |||||||
770,403 | Series 2005-50CB, | ||||||
Class 4A1, 5.00%, | |||||||
11/25/2020 | 676,758 |
The accompanying notes are an integral part of these financial statements.
Page 19
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Residential Mortgage Backed Securities – 2.1% (cont.) | |||||||
$ | 1,309,529 | Series 2005-34CB, | |||||
Class 1A6, 5.50%, | |||||||
09/25/2035 | $ | 1,315,113 | |||||
424,266 | Series 2005-73CB, Class | ||||||
1A7, 5.50%, 01/25/2036 | 373,167 | ||||||
1,906,838 | Series 2006-28CB, Class | ||||||
A17, 6.00%, 10/25/2036 | 1,336,699 | ||||||
79,491 | Credit Suisse First Boston | ||||||
Mortgage Securities Corp., | |||||||
Series 2005-11, Class 5A1, | |||||||
5.25%, 12/25/2020 | 80,308 | ||||||
64,286 | Deutsche Alternative | ||||||
Securities, Inc. Mortgage, | |||||||
Series 2005-4, Class A2, | |||||||
5.05%, 09/25/2035 | 64,151 | ||||||
Federal Home Loan | |||||||
Mortgage Corporation | |||||||
(FHLMC): | |||||||
38,115 | Series R015, Class AN, | ||||||
3.75%, 02/15/2013 | 38,270 | ||||||
400,881 | Series 3033, Class LU, | ||||||
5.50%, 03/15/2013 | 418,904 | ||||||
1,400,672 | Series 3124, Class VP, | ||||||
6.00%, 06/15/2014 | 1,488,636 | ||||||
67,399 | Series R014, Class AL, | ||||||
5.50%, 10/15/2014 | 67,383 | ||||||
530,160 | Series R001, Class AE, | ||||||
4.375%, 04/15/2015 | 540,448 | ||||||
187,168 | Series 2789, Class VM, | ||||||
5.50%, 04/15/2015 | 189,463 | ||||||
1,021,922 | Series 2857, Class VA, | ||||||
5.00%, 09/15/2015 | 1,076,721 | ||||||
965,856 | Series R007, Class AC, | ||||||
5.875%, 05/15/2016 | 974,789 | ||||||
502,649 | Series 2910, Class BD, | ||||||
4.50%, 11/15/2018 | 523,376 | ||||||
28,650 | Series 5, Class B, | ||||||
1.013%, 05/15/2019 | |||||||
(Callable 02/15/2011) | 28,666 | ||||||
169,583 | Series 2970, Class DA, | ||||||
5.50%, 01/15/2023 | 175,057 | ||||||
Federal National Mortgage | |||||||
Association (FNMA): | |||||||
350,000 | 2.00%, 04/19/2013 | ||||||
(Callable 10/19/2011) | 354,335 | ||||||
1,000,000 | 2.00%, 06/24/2013 | ||||||
(Callable 06/24/2011) | 1,005,712 | ||||||
1,000,000 | 1.00%, 09/23/2013 | 998,487 | |||||
225,468 | 5.50%, 07/01/2015 | 241,848 | |||||
118,810 | Series 2002-73, Class 0D, | ||||||
5.00%, 06/25/2016 | 119,140 | ||||||
324,413 | Series 2006-B1, Class AB, | ||||||
6.00%, 06/25/2016 | 332,434 | ||||||
2,336,409 | Series 2004-W6, Class | ||||||
1A4, 5.50%, 07/25/2034 | 2,522,957 | ||||||
993,423 | Series 2004-W6, Class | ||||||
1A6, 5.50%, 07/25/2034 | 1,072,741 | ||||||
1,576,190 | Series 2004-W10, Class | ||||||
A24, 5.00%, 08/25/2034 | 1,575,124 | ||||||
592,123 | J.P. Morgan Alternative | ||||||
Loan Trust, | |||||||
Series 2006-S2, Class A2, | |||||||
5.81%, 05/25/2036 | 587,015 | ||||||
301,228 | Merrill Lynch Mortgage | ||||||
Investors Trust, Series | |||||||
2005-A8, Class A1C1, | |||||||
5.25%, 08/25/2036 | 302,627 |
The accompanying notes are an integral part of these financial statements.
Page 20
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Residential Mortgage Backed Securities – 2.1% (cont.) | |||||||
Washington Mutual, Inc. | |||||||
Pass-Thru Certificates: | |||||||
$ | 359,527 | Series 2004-CB4, | |||||
Class 21A, 5.50%, | |||||||
12/25/2019 | $ | 371,986 | |||||
331,953 | Series 2004-CB4, | ||||||
Class 22A, 6.00%, | |||||||
12/25/2019 | 342,664 | ||||||
19,826,743 | |||||||
Taxable Municipal Bonds – 1.9% | |||||||
Alaska Municipal | |||||||
Bond Bank Authority: | |||||||
1,000,000 | 1.422%, 08/01/2012 | 995,550 | |||||
1,000,000 | 1.918%, 08/01/2013 | 990,010 | |||||
City of Des Moines IA: | |||||||
1,000,000 | 2.082%, 06/01/2012 | 998,640 | |||||
1,240,000 | 2.587%, 06/01/2013 | 1,238,438 | |||||
336,765 | Educational Enhancement | ||||||
Funding Corporation, | |||||||
6.72%, 06/01/2025 | 305,318 | ||||||
Illinois State: | |||||||
6,000,000 | 2.186%, 02/01/2012 | 5,979,480 | |||||
445,000 | 4.071%, 01/01/2014 | 447,999 | |||||
60,000 | Missouri State Housing | ||||||
Development Revenue | |||||||
Bond, 5.74%, 03/01/2037 | |||||||
(Callable 09/01/2015) | 58,781 | ||||||
5,000,000 | Regional Transportation | ||||||
Authority Illinois, | |||||||
2.843%, 07/01/2012 | 5,046,100 | ||||||
1,000,000 | San Francisco | ||||||
California City & | |||||||
County Revenue Bonds, | |||||||
1.869%, 05/01/2012 | 1,003,500 | ||||||
185,000 | Tobacco Settlement | ||||||
Authority Iowa, | |||||||
6.50%, 06/01/2023 | |||||||
(Callable 06/01/2015) | 169,750 | ||||||
17,233,566 | |||||||
Utilities – 15.4% | |||||||
3,985,000 | Allegheny Energy | ||||||
Supply Co. Senior | |||||||
Unsecured Notes, | |||||||
8.25%, 04/15/2012 | |||||||
(Acquired 07/28/2010 | |||||||
through 12/09/2010; | |||||||
Aggregate Cost | |||||||
$4,260,674)* | 4,275,451 | ||||||
3,000,000 | Ameren Corporation, | ||||||
8.875%, 05/15/2014 | 3,375,507 | ||||||
2,650,000 | Arizona Public Service | ||||||
Co., 6.50%, 03/01/2012 | 2,800,594 | ||||||
600,000 | Baltimore Gas & | ||||||
Electric Co. Senior | |||||||
Unsecured Notes, | |||||||
6.125%, 07/01/2013 | 662,188 | ||||||
115,000 | Beaver Valley Funding | ||||||
Corporation Debentures, | |||||||
9.00%, 06/01/2017 | 125,043 | ||||||
4,978,000 | Chugach | ||||||
Electric Association, | |||||||
6.55%, 03/15/2011 | 5,028,123 | ||||||
940,000 | Commonwealth Edison | ||||||
Co., Series 98, | |||||||
6.15%, 03/15/2012 | 998,274 | ||||||
4,635,000 | Consolidated Natural | ||||||
Gas, Series A, | |||||||
5.00%, 03/01/2014 | 4,972,530 | ||||||
4,649,000 | Constellation Energy | ||||||
Group, Inc., | |||||||
7.00%, 04/01/2012 | 5,002,459 |
The accompanying notes are an integral part of these financial statements.
Page 21
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Utilities – 15.4% (cont.) | |||||||
$ | 3,340,000 | DCP Midstream LLC, | |||||
9.70%, 12/01/2013 | |||||||
(Acquired 07/29/2010 | |||||||
through 09/17/2010; | |||||||
Aggregate Cost | |||||||
$4,035,129)* | $ | 4,003,003 | |||||
6,920,000 | DTE Energy Company, | ||||||
7.05%, 06/01/2011 | 7,094,170 | ||||||
500,000 | Duke Energy Corp., | ||||||
6.30%, 02/01/2014 | 556,923 | ||||||
3,160,000 | Duquesne Light | ||||||
Co., Series O, | |||||||
6.70%, 04/15/2012 | 3,360,098 | ||||||
5,000,000 | El Paso Pipeline Partners | ||||||
Operating Co LLC, | |||||||
4.10%, 11/15/2015 | 4,949,635 | ||||||
4,000,000 | Enel Finance International, | ||||||
5.70%, 01/15/2013 | |||||||
(Acquired 03/10/2010 | |||||||
through 03/31/2010; | |||||||
Aggregate Cost | |||||||
$4,248,635)* f | 4,243,764 | ||||||
Energy Transfer Partners: | |||||||
2,500,000 | 5.65%, 08/01/2012 | 2,648,760 | |||||
2,000,000 | 5.95%, 02/01/2015 @ | 2,193,838 | |||||
1,000,000 | 9.70%, 03/15/2019 | 1,292,460 | |||||
407,000 | Entergy Mississippi Inc., | ||||||
4.65%, 05/01/2011 | 410,872 | ||||||
4,000,000 | Exelon Generation | ||||||
Company, LLC, | |||||||
5.35%, 01/15/2014 | 4,330,284 | ||||||
2,873,000 | FirstEnergy Corp., | ||||||
Series B, | |||||||
6.45%, 11/15/2011 | 2,989,900 | ||||||
1,265,475 | GG1C Funding | ||||||
Corporation, | |||||||
5.129%, 01/15/2014 | |||||||
(Callable 02/07/2011) | |||||||
(Acquired 04/02/2009; | |||||||
Cost $1,220,562)* | 1,306,477 | ||||||
1,585,000 | Hydro-Quebec, | ||||||
11.75%, 02/01/2012 f | 1,761,342 | ||||||
4,895,000 | Indiana Michigan | ||||||
Power, Series E, | |||||||
6.375%, 11/01/2012 | 5,283,687 | ||||||
1,700,000 | Ipalco Enterprises Inc., | ||||||
8.625%, 11/14/2011 | 1,763,750 | ||||||
Kinder Morgan Energy | |||||||
Partners Senior | |||||||
Unsecured Notes: | |||||||
2,145,000 | 6.75%, 03/15/2011 | 2,168,812 | |||||
2,500,000 | 5.85%, 09/15/2012 | 2,680,628 | |||||
3,180,000 | Midamerican Energy | ||||||
Holdings Co., | |||||||
5.875%, 10/01/2012 | 3,431,102 | ||||||
4,700,000 | National Oilwell Varco | ||||||
Inc., Series B, | |||||||
6.125%, 08/15/2015 | |||||||
(Callable 02/07/2011) | 4,853,864 | ||||||
1,655,000 | National Rural | ||||||
Utilities Corporation, | |||||||
7.25%, 03/01/2012 | 1,774,153 | ||||||
2,500,000 | Northeast Utilities, | ||||||
7.25%, 04/01/2012 | 2,673,525 | ||||||
155,000 | Old Dominion | ||||||
Electric Company, | |||||||
6.25%, 06/01/2011 | 158,461 | ||||||
1,648,000 | ONEOK Inc., | ||||||
7.125%, 04/15/2011 | 1,676,889 | ||||||
4,705,000 | ONEOK Partners LP Notes, | ||||||
5.90%, 04/01/2012 @ | 4,968,941 |
The accompanying notes are an integral part of these financial statements.
Page 22
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
Principal | ||||||||
Amount | Value | |||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | ||||||||
Utilities – 15.4% (cont.) | ||||||||
$ | 3,745,000 | Pacific Gas and | ||||||
Electric Company, | ||||||||
6.25%, 12/01/2013 | $ | 4,198,224 | ||||||
1,100,000 | Pennsylvania | |||||||
Electric Co., | ||||||||
5.125%, 04/01/2014 | 1,161,790 | |||||||
Plains All | ||||||||
American Pipeline: | ||||||||
525,000 | 4.25%, 09/01/2012 | 547,468 | ||||||
2,870,000 | 7.75%, 10/15/2012 | 3,151,840 | ||||||
2,500,000 | 5.625%, 12/15/2013 | 2,734,333 | ||||||
PPL Energy Supply, | ||||||||
LLC Senior Notes: | ||||||||
3,004,000 | 6.40%, 11/01/2011 | 3,144,434 | ||||||
200,000 | Series A, 5.70%, | |||||||
10/15/2015 | 218,907 | |||||||
3,739,000 | Progress Energy Inc. | |||||||
Senior Notes, | ||||||||
6.85%, 04/15/2012 | 4,005,093 | |||||||
1,771,000 | PSE&G Power LLC, | |||||||
6.95%, 06/01/2012 | 1,909,421 | |||||||
4,535,000 | Spectra Energy Capital, | |||||||
5.668%, 08/15/2014 | 4,998,953 | |||||||
2,810,000 | Trans-Allegheny | |||||||
Interstate Line Company, | ||||||||
4.00%, 01/15/2015 | ||||||||
(Acquired 01/19/2010 | ||||||||
through 07/15/2010; | ||||||||
Aggregate Cost | ||||||||
$2,810,512)* | 2,885,626 | |||||||
4,088,000 | Transcontinental Gas | |||||||
Pipe Line Corporation | ||||||||
Senior Notes, | ||||||||
8.875%, 07/15/2012 | 4,517,424 | |||||||
1,080,000 | United Energy | |||||||
Distribution, | ||||||||
4.70%, 04/15/2011 | ||||||||
(Acquired 11/17/2009 | ||||||||
through 10/05/2010; | ||||||||
Aggregate Cost | ||||||||
$1,086,773)* f | 1,088,486 | |||||||
3,935,000 | Valero Energy | |||||||
Corporation, | ||||||||
6.875%, 04/15/2012 | 4,187,552 | |||||||
600,000 | Vectren Utility Holdings, | |||||||
Inc., 5.25%, 08/01/2013 | 645,589 | |||||||
2,650,000 | Veolia Environnement, | |||||||
5.25%, 06/03/2013 f | 2,862,731 | |||||||
142,073,378 | ||||||||
U.S. Government Agency Issues – 5.2% | ||||||||
7,000,000 | Federal Farm Credit Bank, | |||||||
3.00%, 09/22/2014 | 7,377,041 | |||||||
Federal National Mortgage | ||||||||
Association (FNMA): | ||||||||
13,150,000 | 4.375%, 03/15/2013 | 14,169,388 | ||||||
2,450,000 | 1.125%, 09/17/2013 | |||||||
(Callable 03/17/2011) | 2,444,353 | |||||||
22,425,000 | 2.75%, 03/13/2014 | 23,438,902 | ||||||
47,429,684 | ||||||||
U.S. Treasury Obligations – 11.8% | ||||||||
U.S. Treasury Bonds: | ||||||||
20,000,000 | 0.875%, 01/31/2012 @ | 20,111,720 | ||||||
13,200,000 | 3.125%, 08/31/2013 @ | 14,003,339 | ||||||
3,000,000 | 2.00%, 11/30/2013 @ | 3,088,593 | ||||||
64,650,000 | 2.25%, 05/31/2014 @ | 66,877,386 | ||||||
4,000,000 | 2.375%, 10/31/2014 @ | 4,140,312 | ||||||
108,221,350 | ||||||||
Total Long-Term | ||||||||
Investments | ||||||||
(Cost $877,333,734) | 883,099,821 |
The accompanying notes are an integral part of these financial statements.
Page 23
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
Shares | Value | |||||||
SHORT-TERM INVESTMENTS – 2.7% | ||||||||
Money Market Mutual Funds – 2.7% | ||||||||
8,282,914 | Dreyfus Institutional | |||||||
Cash Advantage Fund, | ||||||||
0.18% « | $ | 8,282,914 | ||||||
16,750,777 | The AIM STIT – | |||||||
Liquid Assets Portfolio, | ||||||||
0.19% « | 16,750,777 | |||||||
Total Short-Term | ||||||||
Investments | ||||||||
(Cost $25,033,691) | 25,033,691 | |||||||
Principal | ||||||||
Amount | ||||||||
INVESTMENTS PURCHASED | ||||||||
WITH CASH PROCEEDS FROM | ||||||||
SECURITIES LENDING – 15.3% | ||||||||
Commercial Paper – 0.1% | ||||||||
$ | 1,003,514 | Atlantic East | ||||||
Funding LLC, | ||||||||
0.59%, 03/25/2011 †** | 680,927 | |||||||
Total Commercial Paper | ||||||||
(Cost $1,003,514) | 680,927 | |||||||
Shares | ||||||||
Investment Companies – 15.2% | ||||||||
139,505,551 | Mount Vernon Securities | |||||||
Lending Trust Prime | ||||||||
Portfolio, 0.29% « | 139,505,551 | |||||||
Total Investment | ||||||||
Companies | ||||||||
(Cost $139,505,551) | 139,505,551 | |||||||
Total Investments | ||||||||
Purchased With Cash | ||||||||
Proceeds From | ||||||||
Securities Lending | ||||||||
(Cost $140,509,065) | 140,186,478 | |||||||
Total Investments | ||||||||
(Cost $1,042,876,490) | ||||||||
– 114.1% | 1,048,319,990 | |||||||
Asset Relating to Securities | ||||||||
Lending Investments – 0.0% | ||||||||
Support | ||||||||
Agreement** ^ a | 322,587 | |||||||
Total (Cost $0) | 322,587 | |||||||
Liabilities in Excess of | ||||||||
Other Assets – (14.1)% | (129,616,412 | ) | ||||||
TOTAL NET | ||||||||
ASSETS – 100.0% | $ | 919,026,165 |
Notes to Schedule of Investments
* | Restricted Security Deemed Liquid |
** | Illiquid Security |
@ | This security or portion of this security is out on loan at December 31, 2010. |
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 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. |
The accompanying notes are an integral part of these financial statements.
Page 24
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
Summary of Fair Value Exposure at December 31, 2010
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 standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Management has determined that these standards have no material impact on the Funds’ financial statements. The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability. These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized into three broad levels and described below:
Level 1 – | Unadjusted quoted prices in active markets for identical unrestricted 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 factors that market participants would use in valuing the security) based on the best information available. |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Page 25
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2010:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 7,855,384 | $ | — | $ | 7,855,384 | ||||||||
Commercial Mortgage Backed Securities | — | 38,481,440 | — | 38,481,440 | ||||||||||||
Corporate Debt Securities | — | 634,071,503 | — | 634,071,503 | ||||||||||||
Other Government Related Securities | — | 9,980,151 | — | 9,980,151 | ||||||||||||
Residential Mortgage Backed Securities | — | 19,826,743 | — | 19,826,743 | ||||||||||||
Taxable Municipal Bonds | — | 17,233,566 | — | 17,233,566 | ||||||||||||
U.S. Government Agency Issues | — | 47,429,684 | — | 47,429,684 | ||||||||||||
U.S. Treasury Obligations | — | 108,221,350 | — | 108,221,350 | ||||||||||||
Total Fixed Income | — | 883,099,821 | — | 883,099,821 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 25,033,691 | — | — | 25,033,691 | ||||||||||||
Total Short-Term Investments | 25,033,691 | — | — | 25,033,691 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 680,927 | — | 680,927 | ||||||||||||
Money Market Mutual Funds | 139,505,551 | — | — | 139,505,551 | ||||||||||||
Total Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | 139,505,551 | 680,927 | — | 140,186,478 | ||||||||||||
Total Investments | $ | 164,539,242 | $ | 883,780,748 | $ | — | $ | 1,048,319,990 | ||||||||
Asset Relating to Securities Lending Investments | — | 322,587 | — | 322,587 |
Changes in valuation techniques may result in transfers into or out of current assigned levels within the hierarchy. There were no significant transfers between Level 1 and Level 2 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.
Page 26
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2010 |
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, 2009 | $ | 85,625 | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | (10,975 | ) | ||
Change in unrealized appreciation (depreciation) | 15,887 | |||
Net purchases (sales/paydowns) | (90,537 | ) | ||
Transfers in and/or out of Level 3* | — | |||
Balance as of December 31, 2010 | $ | — |
* | The information used in the above reconciliation represents fiscal year 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 27
Baird Intermediate Bond Fund
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 Fund entered the year with a significant yield advantage over its benchmark and was able to convert it into strong relative and absolute net performance in 2010. The primary factors for the Fund’s outperformance over its benchmark index were:
• The underweight to U.S. Treasuries was beneficial to the Fund’s performance as Treasuries generally underperformed equal duration securities from the other high quality “spread sectors” of the bond market in 2010.
• An overweight to the corporate credit sector and specifically financial issues. An overweight to credit was positive for relative performance as the credit sector performed well in 2010. Financials were the best performing credit sector during the year.
• Price appreciation of Non-Agency mortgage-backed securities. Non-Agency mortgages continued to perform well due to strong demand in the marketplace.
• Exposure to commercial mortgage backed securities (CMBS). CMBS outperformed all other sectors during the year as limited supply was met with strong demand.
• Price recovery from certain securities with sound credit fundamentals whose market prices had temporarily fallen and subsequently appreciated in value.
The Fund maintained its duration-neutral positioning relative to its benchmark index, holding a broadly diversified portfolio of 339 securities at year end.
We are pleased with the Fund’s performance in 2010 and are confident in the individual issues and the overall structure of the Fund. The Fund’s yield advantage over the benchmark is meaningful and we are optimistic regarding the Fund’s relative performance as we head into 2011.
Portfolio Characteristics
Quality Distribution* | Sector Weightings* |
Net Assets: | $603,903,646 | Annualized Expense Ratio: | |||
SEC 30-Day Yield:** | Institutional Class: | 0.30 | % | ||
Institutional Class: | 3.37% | Investor Class: | 0.55 | %*** | |
Investor Class: | 3.11% | Portfolio Turnover Rate: | 38.7 | % | |
Average Effective Duration: | 3.91 years | Total Number of Holdings: | 339 | ||
Average Effective Maturity: | 5.01 years |
* | Percentages shown are based on the Fund’s total investments (less investments purchased with cash proceeds from securities lending). |
** | SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2010. |
*** | Includes 0.25% 12b-1 fee. |
Page 28
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 29
Baird Intermediate Bond Fund
Average Annual Total Returns
Since | ||||
For the Periods Ended December 31, 2010 | One Year | Five Years | Ten Years | Inception(1) |
Institutional Class Shares | 7.54% | 5.78% | 5.51% | 6.03% |
Investor Class Shares | 7.30% | 5.49% | 5.23% | 5.77% |
Barclays Capital Intermediate | ||||
U.S. Government/Credit Bond Index(2) | 5.89% | 5.53% | 5.51% | 5.75% |
(1) | For the period from September 29, 2000 (commencement of operations) through December 31, 2010. |
(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 30
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.5% | |||||||
Asset Backed Securities – 1.9% | |||||||
$ | 97,453 | Amresco Residential | |||||
Securities Mortgage | |||||||
Loan Trust, | |||||||
Series 1998-1, Class A6, | |||||||
6.51%, 08/25/2027 | |||||||
(Callable 01/25/2011) | $ | 98,707 | |||||
3,596 | Cityscape Home | ||||||
Equity Loan Trust, | |||||||
Series 1997-C, Class A4, | |||||||
7.00%, 07/25/2028 | 3,425 | ||||||
Countrywide Asset- | |||||||
Backed Certificates: | |||||||
1,565,835 | Series 2006-S3, Class A2, | ||||||
6.085%, 06/25/2021 | 645,426 | ||||||
48,214 | Series 2006-S2, Class A2, | ||||||
5.627%, 07/25/2027 | 44,013 | ||||||
107,068 | Series 2004-12, Class AF6, | ||||||
4.634%, 03/25/2035 | |||||||
(Callable 05/25/2019) | 107,909 | ||||||
4,282,311 | Series 2005-1, Class AF6, | ||||||
5.03%, 07/25/2035 | |||||||
(Callable 06/25/2020) | 4,266,758 | ||||||
2,933,888 | Series 2006-13, | ||||||
Class 1AF2, 5.884%, | |||||||
01/25/2037 | 2,682,747 | ||||||
368,507 | Series 2006-13, | ||||||
Class 1AF3, 5.944%, | |||||||
01/25/2037 | 207,932 | ||||||
1,380,000 | Series 2006-9, | ||||||
Class 1AF3, 5.859%, | |||||||
10/25/2046 | 730,239 | ||||||
Delta Funding Home | |||||||
Equity Loan Trust: | |||||||
50,885 | Series 1997-2, Class A6, | ||||||
7.04%, 06/25/2027 | 53,231 | ||||||
14,420 | Series 1999-1, Class A6F, | ||||||
6.34%, 12/15/2028 | 14,022 | ||||||
538,268 | Series 1999-2, Class A7F, | ||||||
7.03%, 08/15/2030 | 532,875 | ||||||
15,346 | Equivantage Home | ||||||
Equity Loan Trust, | |||||||
Series 1996-3, Class A3, | |||||||
7.70%, 09/25/2027 | 14,774 | ||||||
Green Tree Financial | |||||||
Corporation: | |||||||
92,282 | Series 1993-4, Class A5, | ||||||
7.05%, 01/15/2019 | |||||||
(Callable 01/15/2011) | 94,473 | ||||||
690,677 | Series 1998-2, Class A5, | ||||||
6.24%, 12/01/2028 | 683,922 | ||||||
928,180 | Series 1998-3, Class A5, | ||||||
6.22%, 03/01/2030 | 983,097 | ||||||
352,716 | Series 1998-4, Class A5, | ||||||
6.18%, 04/01/2030 | 357,399 | ||||||
33,668 | IMC Home Equity Loan | ||||||
Trust, Series 1998-1, Class | |||||||
A6, 7.02%, 06/20/2029 | 33,746 | ||||||
154,420 | Oakwood Mortgage | ||||||
Investors, Inc., | |||||||
Series 1999-B, Class A3, | |||||||
6.45%, 11/15/2017 | |||||||
(Callable 01/15/2011) | 144,197 | ||||||
13,882 | Residential Asset | ||||||
Mortgage Products, Inc., | |||||||
Series 2003-RS7, Class AI6, | |||||||
5.34%, 08/25/2033 | 13,989 | ||||||
73,171 | Structured Asset Securities | ||||||
Corporation, Series | |||||||
2005-2XS, Class 1A2A, | |||||||
4.51%, 02/25/2035 | 73,463 | ||||||
11,786,344 |
The accompanying notes are an integral part of these financial statements.
Page 31
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.5% (cont.) | |||||||
Commercial Mortgage Backed Securities – 2.1% | |||||||
$ | 5,600,000 | Citigroup Deutsche Bank, | |||||
Series 2005-CD1, | |||||||
Class A4, 5.222%, | |||||||
07/15/2044 | $ | 6,026,795 | |||||
1,095,262 | GMAC Commercial | ||||||
Mortgage Securities, Inc., | |||||||
Series 2001-C1, Class A2, | |||||||
6.465%, 04/15/2034 | 1,094,881 | ||||||
5,000,000 | Wachovia Bank | ||||||
Commercial Mortgage | |||||||
Trust, Series 2005-C22, | |||||||
Class A4, 5.27%, | |||||||
12/15/2044 | 5,359,942 | ||||||
12,481,618 | |||||||
Financial – 23.7% | |||||||
2,787,000 | American Express Credit | ||||||
Corporation, Series C, | |||||||
7.30%, 08/20/2013 | 3,140,552 | ||||||
550,000 | American General | ||||||
Finance Corporation, | |||||||
4.00%, 03/15/2011 @ | 545,875 | ||||||
630,000 | AmSouth Bancorporation | ||||||
Subordinated Debentures, | |||||||
6.75%, 11/01/2025 | 549,867 | ||||||
1,475,000 | ANZ National (Int’l) LTD, | ||||||
2.375%, 12/21/2012 | |||||||
(Acquired 12/15/2009; | |||||||
Cost $1,473,171)* f @ | 1,497,758 | ||||||
600,000 | Banco Santander Chile, | ||||||
7.375%, 07/18/2012 f | 636,059 | ||||||
1,900,000 | Bancwest Corporation, | ||||||
8.30%, 01/15/2011 | 1,900,230 | ||||||
835,000 | Bank of America | ||||||
Corporation Subordinated | |||||||
Notes, 10.20%, 07/15/2015 | 989,253 | ||||||
2,390,000 | Bank of Ireland, | ||||||
2.75%, 03/02/2012 | |||||||
(Acquired 06/01/2010 | |||||||
through 07/23/2010; | |||||||
Aggregate | |||||||
Cost $2,368,539)* f | 2,278,265 | ||||||
1,500,000 | Bank of Tokyo – | ||||||
Mitsubishi/UFJ Ltd., | |||||||
7.40%, 06/15/2011 f | 1,528,436 | ||||||
2,695,000 | BankAmerica Institutional, | ||||||
8.07%, 12/31/2026 | |||||||
(Callable 02/07/2011) | |||||||
(Acquired 01/04/2006 | |||||||
through 11/06/2007; | |||||||
Aggregate | |||||||
Cost $2,760,217)* | 2,711,844 | ||||||
2,500,000 | Banponce Trust I, Series A, | ||||||
8.327%, 02/01/2027 | |||||||
(Callable 02/07/2011) | 1,831,560 | ||||||
2,390,000 | Barclays Bank PLC, | ||||||
5.00%, 09/22/2016 f @ | 2,529,098 | ||||||
2,322,000 | BB&T Corporation, | ||||||
6.85%, 04/30/2019 @ | 2,674,918 | ||||||
1,150,000 | Bear Stearns Cos., Inc., | ||||||
6.40%, 10/02/2017 | 1,311,044 | ||||||
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 | 300,000 | ||||||
1,000,000 | Capital One | ||||||
Financial Corporation, | |||||||
7.375%, 05/23/2014 | 1,137,931 | ||||||
1,000,000 | CDP Financial Inc., | ||||||
4.40%, 11/25/2019 | |||||||
(Acquired 11/20/2009; | |||||||
Cost $997,520)* f | 1,016,676 |
The accompanying notes are an integral part of these financial statements.
Page 32
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.5% (cont.) | |||||||
Financial – 23.7% (cont.) | |||||||
$ | 77,178 | CIT Group Funding, | |||||
10.25%, 05/01/2017 | $ | 78,822 | |||||
CIT Group, Inc.: | |||||||
19,535 | 7.00%, 05/01/2013 | ||||||
(Callable 02/22/2011) @ | 19,926 | ||||||
29,303 | 7.00%, 05/01/2014 | ||||||
(Callable 02/22/2011) @ | 29,596 | ||||||
29,302 | 7.00%, 05/01/2015 | ||||||
(Callable 02/22/2011) | 29,375 | ||||||
48,839 | 7.00%, 05/01/2016 | ||||||
(Callable 02/22/2011) | 49,022 | ||||||
68,374 | 7.00%, 05/01/2017 | ||||||
(Callable 02/22/2011) @ | 68,545 | ||||||
Citigroup, Inc.: | |||||||
1,000,000 | 5.50%, 04/11/2013 | 1,064,830 | |||||
200,000 | 5.50%, 10/15/2014 @ | 215,489 | |||||
950,000 | 6.01%, 01/15/2015 | 1,042,175 | |||||
2,000,000 | CNA Financial | ||||||
Corporation, | |||||||
6.50%, 08/15/2016 | 2,141,800 | ||||||
1,760,000 | Corestates Capital Trust I, | ||||||
8.00%, 12/15/2026 | |||||||
(Callable 02/07/2011) | |||||||
(Acquired 11/29/2005 | |||||||
through 10/10/2007; | |||||||
Aggregate | |||||||
Cost $1,800,694)* | 1,796,353 | ||||||
1,900,000 | Countrywide | ||||||
Financial Corporation, | |||||||
6.25%, 05/15/2016 | 1,948,423 | ||||||
2,000,000 | Credit Suisse New York | ||||||
Branch Senior Notes, | |||||||
4.375%, 08/05/2020 f | 1,963,598 | ||||||
1,000,000 | Daimler Finance | ||||||
North America LLC, | |||||||
7.30%, 01/15/2012 @ | 1,062,483 | ||||||
1,577,000 | Dresdner Bank-New York | ||||||
Subordinated Debentures, | |||||||
7.25%, 09/15/2015 f @ | 1,670,928 | ||||||
403,816 | First National Bank of | ||||||
Chicago Pass-Thru | |||||||
Certificates, Series 1993-A, | |||||||
8.08%, 01/05/2018 | 444,416 | ||||||
2,125,000 | First Union Capital I, Series | ||||||
A, 7.935%, 01/15/2027 | |||||||
(Callable 02/07/2011) | 2,186,068 | ||||||
1,546,000 | FMR LLC, | ||||||
4.75%, 03/01/2013 | |||||||
(Acquired 02/26/2003 | |||||||
through 12/01/2009; | |||||||
Aggregate | |||||||
Cost $1,559,585)* | 1,623,637 | ||||||
General Electric | |||||||
Capital Corporation: | |||||||
800,000 | 4.375%, 09/21/2015 | 838,842 | |||||
2,000,000 | 5.625%, 09/15/2017 @ | 2,193,000 | |||||
1,600,000 | 6.00%, 08/07/2019 @ | 1,780,146 | |||||
2,300,000 | 5.50%, 01/08/2020 @ | 2,459,820 | |||||
1,150,000 | Genworth Financial Inc., | ||||||
5.75%, 06/15/2014 | 1,191,972 | ||||||
3,456,000 | Glencore Funding LLC, | ||||||
6.00%, 04/15/2014 | |||||||
(Acquired 03/31/2004 | |||||||
through 02/02/2010; | |||||||
Aggregate | |||||||
Cost $3,490,048)* | 3,652,293 | ||||||
GMAC Inc.: | |||||||
80,000 | 7.50%, 12/31/2013 | 85,800 | |||||
96,000 | 8.00%, 12/31/2018 @ | 101,520 |
The accompanying notes are an integral part of these financial statements.
Page 33
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.5% (cont.) | |||||||
Financial – 23.7% (cont.) | |||||||
$ | 200,000 | GMAC LLC, | |||||
6.75%, 12/01/2014 | $ | 209,562 | |||||
The Goldman | |||||||
Sachs Group, Inc.: | |||||||
1,125,000 | 5.15%, 01/15/2014 | 1,211,697 | |||||
1,000,000 | 6.00%, 05/01/2014 @ | 1,101,638 | |||||
2,000,000 | 6.15%, 04/01/2018 | 2,202,386 | |||||
1,800,000 | Great West Life & | ||||||
Annuity Insurance, | |||||||
7.153%, 05/16/2046 | |||||||
(Callable 05/16/2016) | |||||||
(Acquired 05/16/2006 | |||||||
through 11/08/2007; | |||||||
Aggregate | |||||||
Cost $1,792,736)* | 1,800,000 | ||||||
1,000,000 | Hartford Financial | ||||||
Services Group, | |||||||
4.00%, 03/30/2015 @ | 1,002,716 | ||||||
1,758,000 | HSBC Finance | ||||||
Corporation, | |||||||
6.676%, 01/15/2021 | |||||||
(Acquired 12/09/2009; | |||||||
Aggregate | |||||||
Cost $1,702,767)* | 1,776,074 | ||||||
ING Bank N.V.: f | |||||||
2,000,000 | 2.00%, 10/18/2013 | ||||||
(Acquired 10/28/2010; | |||||||
Cost $2,002,100)* | 1,976,140 | ||||||
1,000,000 | 3.00%, 09/01/2015 | ||||||
(Acquired 08/17/2010; | |||||||
Cost $997,320)* | 975,260 | ||||||
Invesco Ltd.: f | |||||||
2,755,000 | 5.625%, 04/17/2012 | 2,862,178 | |||||
1,000,000 | 5.375%, 02/27/2013 | 1,057,776 | |||||
2,075,000 | Irish Life & Permanent | ||||||
Group Holdings PLC, | |||||||
3.60%, 01/14/2013 | |||||||
(Acquired 01/07/2010; | |||||||
Cost $2,073,880)* f | 1,861,312 | ||||||
Istar Financial, Inc.: | |||||||
1,050,000 | 5.95%, 10/15/2013 @ | 963,375 | |||||
75,000 | 5.85%, 03/15/2017 @ | 64,594 | |||||
2,000,000 | Jackson National | ||||||
Life Global, | |||||||
5.125%, 02/10/2011 | |||||||
(Acquired 07/21/2009; | |||||||
Cost $2,001,329)* | 2,007,996 | ||||||
2,000,000 | Jefferies Group Inc., | ||||||
6.875%, 04/15/2021 | 2,078,542 | ||||||
J.P. Morgan Chase & Co.: | |||||||
500,000 | 6.625%, 03/15/2012 | 531,502 | |||||
575,000 | 5.75%, 01/02/2013 | 623,045 | |||||
2,000,000 | Key Bank NA, | ||||||
7.413%, 05/06/2015 | 2,217,668 | ||||||
2,600,000 | Kookmin Bank, | ||||||
7.25%, 05/14/2014 | |||||||
(Acquired 06/12/2009; | |||||||
Cost $2,631,716)* f | 2,933,424 | ||||||
Liberty Mutual Group Inc.: | |||||||
1,300,000 | 7.25%, 09/01/2012 | ||||||
(Acquired 08/03/2004 | |||||||
through 11/23/2010; | |||||||
Aggregate | |||||||
Cost $1,355,893)* | 1,379,603 | ||||||
1,000,000 | 5.75%, 03/15/2014 | ||||||
(Acquired 09/03/2009 | |||||||
through 10/15/2010; | |||||||
Aggregate Cost $979,813)* | 1,040,104 |
The accompanying notes are an integral part of these financial statements.
Page 34
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.5% (cont.) | |||||||
Financial – 23.7% (cont.) | |||||||
$ | 1,650,000 | Lloyds TSB Bank PLC, | |||||
5.80%, 01/13/2020 | |||||||
(Acquired 02/09/2010; | |||||||
Cost $1,609,308)* f @ | $ | 1,629,152 | |||||
1,650,000 | Manulife Financial | ||||||
Corporation, | |||||||
4.90%, 09/17/2020 f | 1,570,270 | ||||||
Marsh & McLennan | |||||||
Companies, Inc.: | |||||||
1,825,000 | 6.25%, 03/15/2012 | 1,903,929 | |||||
700,000 | 4.85%, 02/15/2013 | 731,530 | |||||
1,076,000 | 5.375%, 07/15/2014 | 1,144,647 | |||||
500,000 | MBIA Insurance Corp., | ||||||
14.00%, 01/15/2033 | |||||||
(Callable 01/15/2013) | |||||||
(Acquired 01/11/2008; | |||||||
Cost $500,000)* | 268,750 | ||||||
Merrill Lynch & Company.: | |||||||
1,000,000 | 5.70%, 05/02/2017 | 1,003,361 | |||||
1,000,000 | 6.875%, 04/25/2018 | 1,094,358 | |||||
2,500,000 | Monumental Global | ||||||
Funding II, | |||||||
5.65%, 07/14/2011 | 2,544,653 | ||||||
Morgan Stanley: | |||||||
1,000,000 | 5.625%, 01/09/2012 | 1,044,144 | |||||
100,000 | 4.75%, 04/01/2014 | 102,403 | |||||
1,400,000 | 6.625%, 04/01/2018 | 1,518,677 | |||||
750,000 | Morgan Stanley | ||||||
Dean Witter & Co., | |||||||
6.75%, 10/15/2013 | 817,662 | ||||||
534,000 | National City | ||||||
Bank of Kentucky | |||||||
Subordinated Notes, | |||||||
6.30%, 02/15/2011 | 537,168 | ||||||
2,320,000 | Navigators Group Inc. | ||||||
Senior Unsecured Notes, | |||||||
7.00%, 05/01/2016 | 2,373,181 | ||||||
1,260,000 | NB Capital Trust IV, | ||||||
8.25%, 04/15/2027 | |||||||
(Callable 02/07/2011) | 1,275,750 | ||||||
2,500,000 | Nomura Holdings Inc., | ||||||
5.00%, 03/04/2015 f | 2,606,478 | ||||||
1,000,000 | North Fork Capital Trust | ||||||
II, 8.00%, 12/15/2027 | |||||||
(Callable 02/07/2011) | 1,005,000 | ||||||
1,500,000 | Pooled Funding Trust I, | ||||||
2.74%, 02/15/2012 | |||||||
(Acquired 08/10/2009; | |||||||
Cost $1,511,768)* | 1,527,395 | ||||||
Protective Life | |||||||
Secured Trust: | |||||||
3,091,000 | 5.45%, 09/28/2012 | 3,302,547 | |||||
225,000 | 4.30%, 06/01/2013 | 234,149 | |||||
3,125,000 | Prudential Financial Inc., | ||||||
5.15%, 01/15/2013 | 3,333,105 | ||||||
2,000,000 | Rabobank Nederland | ||||||
Global Senior Unsecured | |||||||
Notes, 4.20%, 05/13/2014 | |||||||
(Acquired 05/06/2009; | |||||||
Cost $1,996,340)* f | 2,127,658 | ||||||
1,650,000 | Regions Bank, | ||||||
7.50%, 05/15/2018 @ | 1,699,500 | ||||||
3,100,000 | Royal Bank of Scotland | ||||||
Group PLC, | |||||||
5.625%, 08/24/2020 f @ | 3,082,020 | ||||||
1,800,000 | Santander | ||||||
Financial Issuances, | |||||||
6.375%, 02/15/2011 f | 1,808,977 | ||||||
1,300,000 | Schwab Capital Trust I, | ||||||
7.50%, 11/15/2037 | |||||||
(Callable 11/15/2017) | 1,344,772 |
The accompanying notes are an integral part of these financial statements.
Page 35
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.5% (cont.) | |||||||
Financial – 23.7% (cont.) | |||||||
SLM Corporation: | |||||||
$ | 1,500,000 | 5.40%, 10/25/2011 | $ | 1,526,468 | |||
250,000 | 5.375%, 05/15/2014 | 251,232 | |||||
1,000,000 | Sovereign Bancorp Inc., | ||||||
8.75%, 05/30/2018 | 1,090,445 | ||||||
1,000,000 | St. Paul Travelers, Inc., | ||||||
6.25%, 06/20/2016 | 1,151,724 | ||||||
2,000,000 | Susa Partnership LP, | ||||||
8.20%, 06/01/2017 | 2,358,278 | ||||||
1,046,000 | Toll Road Inv. Partnership | ||||||
II, 0.00%, 02/15/2011 | |||||||
(Acquired 09/28/2004; | |||||||
Cost $1,040,220)* ^ | 1,038,267 | ||||||
850,000 | UFJ Finance Aruba A.E.C., | ||||||
6.75%, 07/15/2013 f @ | 947,838 | ||||||
650,000 | Unionbancal Corporation, | ||||||
5.25%, 12/16/2013 | 700,887 | ||||||
1,000,000 | Washington Mutual | ||||||
Financial Corporation, | |||||||
6.875%, 05/15/2011 | 1,020,883 | ||||||
3,000,000 | Westpac Banking | ||||||
Corporation, | |||||||
3.00%, 08/04/2015 f | 3,015,174 | ||||||
142,927,269 | |||||||
Industrial – 18.5% | |||||||
2,775,000 | Allied Waste North | ||||||
America, Inc., Series B, | |||||||
7.125%, 05/15/2016 | |||||||
(Callable 05/15/2011) | 2,938,031 | ||||||
Ameritech Capital | |||||||
Funding Debentures: | |||||||
931,500 | 9.10%, 06/01/2016 | 1,092,947 | |||||
1,008,000 | 6.45%, 01/15/2018 | 1,134,449 | |||||
1,000,000 | Anadarko Petroleum | ||||||
Corporation Senior | |||||||
Unsecured Notes, | |||||||
6.95%, 06/15/2019 | 1,121,935 | ||||||
2,500,000 | BP Capital Markets PLC, | ||||||
4.75%, 03/10/2019 f @ | 2,577,488 | ||||||
2,000,000 | British | ||||||
Telecommunications PLC, | |||||||
5.95%, 01/15/2018 f | 2,189,040 | ||||||
Bunge Limited | |||||||
Finance Corporation: | |||||||
1,925,000 | 5.35%, 04/15/2014 | 2,023,394 | |||||
1,085,000 | 5.10%, 07/15/2015 | 1,119,171 | |||||
2,900,000 | Chevron Phillips | ||||||
Chemical Company LLC, | |||||||
7.00%, 06/15/2014 | |||||||
(Acquired 04/16/2010; | |||||||
Cost $3,219,867)* @ | 3,287,619 | ||||||
1,250,000 | Clear Channel | ||||||
Communications, | |||||||
5.50%, 12/15/2016 | 812,500 | ||||||
Comcast Cable Holdings: | |||||||
1,856,000 | 9.80%, 02/01/2012 | 2,020,132 | |||||
125,000 | 8.375%, 03/15/2013 | 142,237 | |||||
525,000 | Comcast Corporation, | ||||||
6.50%, 01/15/2017 | 605,205 | ||||||
75,000 | Comcast Holdings | ||||||
Corporation, | |||||||
10.625%, 07/15/2012 | 84,968 | ||||||
3,275,000 | Computer Sciences | ||||||
Corporation, | |||||||
5.50%, 03/15/2013 | 3,501,898 | ||||||
2,650,000 | ConAgra Foods, Inc., | ||||||
5.875%, 04/15/2014 | 2,933,865 | ||||||
1,281,000 | COX Communications Inc., | ||||||
7.125%, 10/01/2012 | 1,404,900 |
The accompanying notes are an integral part of these financial statements.
Page 36
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.5% (cont.) | |||||||
Industrial – 18.5% (cont.) | |||||||
CSX Corporation: | |||||||
$ | 1,775,000 | 5.75%, 03/15/2013 | $ | 1,935,345 | |||
450,000 | 6.25%, 04/01/2015 | 511,393 | |||||
1,300,000 | Deutsche Telekom | ||||||
International Finance BV, | |||||||
6.00%, 07/08/2019 f | 1,470,622 | ||||||
3,000,000 | DIRECTV | ||||||
Holdings/Financing, | |||||||
7.625%, 05/15/2016 | |||||||
(Callable 05/15/2012) | 3,326,249 | ||||||
Donnelley (R.R.) | |||||||
& Sons Co.: | |||||||
1,000,000 | 8.60%, 08/15/2016 | 1,148,647 | |||||
875,000 | 6.125%, 01/15/2017 | 894,457 | |||||
1,000,000 | 7.625%, 06/15/2020 @ | 1,071,116 | |||||
1,000,000 | D.R. Horton Inc. | ||||||
Unsubordinated Notes, | |||||||
6.50%, 04/15/2016 | 1,027,500 | ||||||
2,000,000 | Enterprise Products | ||||||
Operating LLC, | |||||||
7.625%, 02/15/2012 | 2,132,094 | ||||||
837,074 | Federal Express | ||||||
Corporation 1995 | |||||||
Pass-Thru Certificates, | |||||||
Series B2, | |||||||
7.11%, 01/02/2014 | |||||||
(Callable 02/07/2011) | 840,004 | ||||||
1,261,000 | Fiserv, Inc., | ||||||
6.125%, 11/20/2012 | 1,363,743 | ||||||
2,000,000 | Freeport-McMoRan | ||||||
Copper & Gold Inc., | |||||||
8.375%, 04/01/2017 | |||||||
(Callable 04/01/2012) | 2,212,500 | ||||||
1,260,000 | GTE Corporation, | ||||||
6.84%, 04/15/2018 | 1,428,357 | ||||||
1,375,000 | Hanson | ||||||
Australia Funding, | |||||||
5.25%, 03/15/2013 f | 1,402,500 | ||||||
650,000 | Hanson PLC Notes, | ||||||
6.125%, 08/15/2016 f | 663,000 | ||||||
1,195,000 | Health Care Service | ||||||
Corporation Notes, | |||||||
7.75%, 06/15/2011 | |||||||
(Acquired 06/20/2001 | |||||||
through 10/19/2006; | |||||||
Aggregate | |||||||
Cost $1,200,362)* | 1,210,254 | ||||||
620,000 | Highmark Inc. Notes, | ||||||
6.80%, 08/15/2013 | |||||||
(Acquired 08/14/2003 | |||||||
through 06/16/2010; | |||||||
Aggregate Cost $633,710)* | 696,886 | ||||||
250,000 | Historic Time Warner Inc., | ||||||
6.875%, 06/15/2018 | 292,837 | ||||||
2,000,000 | Humana Inc., | ||||||
7.20%, 06/15/2018 | 2,259,296 | ||||||
2,500,000 | Hutchison Whampoa | ||||||
International LTD, | |||||||
7.625%, 04/09/2019 | |||||||
(Acquired 10/16/2009 | |||||||
through 04/28/2010; | |||||||
Aggregate | |||||||
Cost $2,825,433)* f | 2,998,827 | ||||||
1,000,000 | Ingersoll-Rand | ||||||
Company Debentures, | |||||||
6.391%, 11/15/2027 f | 1,081,499 | ||||||
1,625,000 | Johnson Controls Inc., | ||||||
5.50%, 01/15/2016 @ | 1,777,019 | ||||||
1,675,000 | Laboratory Corporation | ||||||
of America Holdings, | |||||||
5.50%, 02/01/2013 | 1,787,367 |
The accompanying notes are an integral part of these financial statements.
Page 37
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.5% (cont.) | |||||||
Industrial – 18.5% (cont.) | |||||||
Lafarge SA: f | |||||||
$ | 1,000,000 | 5.50%, 07/09/2015 | �� | ||||
(Acquired 07/06/2010; | |||||||
Cost $999,140)* | $ | 1,039,130 | |||||
625,000 | 6.50%, 07/15/2016 | 665,718 | |||||
180,000 | Limited Brands, Inc., | ||||||
5.25%, 11/01/2014 @ | 186,300 | ||||||
1,225,000 | Marathon Global | ||||||
Funding Corporation, | |||||||
6.00%, 07/01/2012 | 1,308,899 | ||||||
75,000 | Martin Marietta Materials, | ||||||
Inc., 6.60%, 04/15/2018 | 80,635 | ||||||
1,625,000 | Masco Corporation, | ||||||
6.125%, 10/03/2016 | 1,660,701 | ||||||
2,000,000 | Mosaic Co., | ||||||
7.625%, 12/01/2016 | |||||||
(Callable 12/01/2011) | |||||||
(Acquired 05/19/2010; | |||||||
Cost $2,142,437)* | 2,152,040 | ||||||
Nabors Industries, Inc.: | |||||||
2,500,000 | 0.94%, 05/15/2011 | ||||||
(Convertible until | |||||||
05/15/2011) | 2,484,375 | ||||||
825,000 | 6.15%, 02/15/2018 | 880,568 | |||||
2,307,000 | Nextel Communications | ||||||
Senior Notes, Series E, | |||||||
6.875%, 10/31/2013 | |||||||
(Callable 01/18/2011) @ | 2,312,768 | ||||||
700,000 | PCCW-HKT Capital II | ||||||
Ltd., 6.00%, 07/15/2013 | |||||||
(Acquired 07/10/2003; | |||||||
Cost $696,731)* f | 754,149 | ||||||
925,000 | Pearson Dollar Finance | ||||||
PLC, 5.70%, 06/01/2014 | |||||||
(Acquired 09/28/2005 | |||||||
through 12/14/2007; | |||||||
Aggregate | |||||||
Cost $929,364)* f | 1,002,724 | ||||||
2,045,000 | Plum Creek Timberlands, | ||||||
L.P., 5.875%, 11/15/2015 | 2,201,447 | ||||||
100,000 | Qwest Capital | ||||||
Funding, Inc., | |||||||
7.25%, 02/15/2011 | 100,250 | ||||||
2,000,000 | Qwest Corporation, | ||||||
8.875%, 03/15/2012 | 2,162,500 | ||||||
2,093,000 | Reed Elsevier | ||||||
Capital Notes, | |||||||
4.625%, 06/15/2012 | 2,176,687 | ||||||
450,000 | Rio Tinto Alcan, Inc., | ||||||
5.00%, 06/01/2015 f | 490,144 | ||||||
Rio Tinto Financial | |||||||
USA Ltd.: f | |||||||
1,800,000 | 6.50%, 07/15/2018 | 2,098,521 | |||||
500,000 | 3.50%, 11/02/2020 | 474,635 | |||||
500,000 | Sprint Nextel Corporation, | ||||||
6.00%, 12/01/2016 @ | 483,125 | ||||||
1,175,000 | Sunoco, Inc. Senior | ||||||
Unsecured Notes, | |||||||
5.75%, 01/15/2017 @ | 1,226,944 | ||||||
TCI Communications, Inc.: | |||||||
550,000 | 7.875%, 08/01/2013 | 628,891 | |||||
1,583,000 | 8.75%, 08/01/2015 | 1,948,497 | |||||
1,045,000 | Teck Resources Limited, | ||||||
10.25%, 05/15/2016 | |||||||
(Callable 05/15/2013) f @ | 1,293,188 | ||||||
Telecom Italia Capital: f | |||||||
1,360,000 | 4.95%, 09/30/2014 | 1,393,378 | |||||
725,000 | 5.25%, 10/01/2015 @ | 742,297 |
The accompanying notes are an integral part of these financial statements.
Page 38
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.5% (cont.) | |||||||
Industrial – 18.5% (cont.) | |||||||
Telefonica Emisiones, | |||||||
S.A.U.: f | |||||||
$ | 1,725,000 | 6.421%, 06/20/2016 | $ | 1,885,411 | |||
1,000,000 | 6.221%, 07/03/2017 | 1,075,426 | |||||
1,000,000 | Time Warner Cable, Inc., | ||||||
5.85%, 05/01/2017 @ | 1,115,798 | ||||||
1,000,000 | Time Warner, Inc., | ||||||
4.70%, 01/15/2021 @ | 1,018,169 | ||||||
1,470,000 | Transocean, Inc., | ||||||
6.625%, 04/15/2011 f | 1,491,680 | ||||||
500,000 | Tyco Electronics Group | ||||||
S. A., 6.55%, 10/01/2017 f | 568,208 | ||||||
650,000 | Tyco International Finance, | ||||||
6.00%, 11/15/2013 f | 721,070 | ||||||
United AirLines, Inc. | |||||||
Pass-Thru Certificates: | |||||||
169,206 | Series 1991-A, Class A-2, | ||||||
10.02%, 03/22/2014 | 72,970 | ||||||
192,514 | Series 2000-2, Class C, | ||||||
7.762%, 04/29/2049 § | 124,893 | ||||||
1,500,000 | Vale Overseas Limited, | ||||||
6.25%, 01/23/2017 f | 1,672,658 | ||||||
375,000 | Verizon Communications, | ||||||
Inc., 5.50%, 04/01/2017 | 414,408 | ||||||
1,050,000 | Verizon New York | ||||||
Inc., Series A, | |||||||
6.875%, 04/01/2012 | 1,120,089 | ||||||
500,000 | Viacom Inc., | ||||||
6.25%, 04/30/2016 | 569,015 | ||||||
2,000,000 | Vulcan Materials Co., | ||||||
7.00%, 06/15/2018 @ | 2,096,240 | ||||||
25,000 | Waste Management, Inc., | ||||||
5.00%, 03/15/2014 | 27,020 | ||||||
1,450,000 | Wellpoint, Inc., | ||||||
6.80%, 08/01/2012 | 1,574,736 | ||||||
500,000 | Willamette Industries, | ||||||
Inc. Notes, | |||||||
6.60%, 06/05/2012 | 523,181 | ||||||
1,000,000 | Williams Partners LP, | ||||||
5.25%, 03/15/2020 | 1,036,600 | ||||||
111,577,374 | |||||||
Other Government Related Securities – 1.6% | |||||||
375,000 | Corp Andina | ||||||
De Fomento Notes, | |||||||
7.375%, 01/18/2011 f @ | 375,970 | ||||||
1,000,000 | Export-Import | ||||||
Bank Korea Notes, | |||||||
5.125%, 02/14/2011 f | 1,003,602 | ||||||
3,000,000 | KFW, | ||||||
4.875%, 06/17/2019 f | 3,326,532 | ||||||
300,000 | Korea Electric | ||||||
Power Corporation, | |||||||
6.75%, 08/01/2027 f | 326,014 | ||||||
350,000 | National Bank of Hungary | ||||||
Yankee Debentures, | |||||||
8.875%, 11/01/2013 f | 386,257 | ||||||
2,650,000 | United Mexican States, | ||||||
5.125%, 01/15/2020 f | 2,762,625 | ||||||
1,495,000 | Westdeutsche Landesbank | ||||||
Subordinated Notes, | |||||||
4.796%, 07/15/2015 f | 1,590,523 | ||||||
9,771,523 | |||||||
Residential Mortgage Backed Securities – 6.9% | |||||||
Bank of America | |||||||
Alternative Loan Trust: | |||||||
319,917 | Series 2003-11, Class 4A1, | ||||||
4.75%, 01/25/2019 | 321,446 | ||||||
890,212 | Series 2004-2, Class 5A1, | ||||||
5.50%, 03/25/2019 | 897,939 | ||||||
1,169,738 | Series 2004-11, Class 4A1, | ||||||
5.50%, 12/25/2019 | 1,179,448 |
The accompanying notes are an integral part of these financial statements.
Page 39
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.5% (cont.) | |||||||
Residential Mortgage Backed Securities – 6.9% (cont.) | |||||||
$ | 50,320 | Series 2005-6, Class 7A1, | |||||
5.50%, 07/25/2020 | $ | 49,033 | |||||
613,583 | Series 2006-2, Class 7A1, | ||||||
6.00%, 03/25/2021 | 587,249 | ||||||
897,849 | Series 2006-3, Class 6A1, | ||||||
6.00%, 04/25/2036 | 861,835 | ||||||
959,052 | Series 2006-4, Class 3CB4, | ||||||
6.00%, 05/25/2046 | 852,796 | ||||||
682,801 | Bank of America | ||||||
Funding Corporation, | |||||||
Series 2003-3, Class 1A41, | |||||||
5.50%, 10/25/2033 | 698,656 | ||||||
Citicorp Mortgage | |||||||
Securities, Inc.: | |||||||
941,001 | Series 2004-5, Class 1A25, | ||||||
5.50%, 10/25/2014 | 962,441 | ||||||
603,432 | Series 2004-4, Class A5, | ||||||
5.50%, 06/25/2034 | 604,576 | ||||||
Countrywide Alternative | |||||||
Loan Trust: | |||||||
202,608 | Series 2005-5R, Class A2, | ||||||
4.75%, 12/25/2018 | 206,961 | ||||||
885,964 | Series 2005-50CB, Class | ||||||
4A1, 5.00%, 11/25/2020 | 778,271 | ||||||
915,213 | Series 2005-85CB, Class | ||||||
3A1, 5.25%, 02/25/2021 | |||||||
(Acquired 09/26/2007 | |||||||
through 01/28/2009; | |||||||
Aggregate Cost $878,728)* | 874,670 | ||||||
1,368,125 | Series 2006-7CB, Class | ||||||
3A1, 5.25%, 05/25/2021 | |||||||
(Callable 04/25/2018) | 1,161,596 | ||||||
108,943 | Series 2005-10CB, Class | ||||||
1A6, 5.50%, 05/25/2035 | 107,004 | ||||||
85,917 | Series 2005-11CB, Class | ||||||
2A1, 5.50%, 06/25/2035 | 72,613 | ||||||
646,681 | Series 2005-34CB, Class | ||||||
1A6, 5.50%, 09/25/2035 | 649,438 | ||||||
Credit Suisse First Boston | |||||||
Mortgage Securities | |||||||
Corporation: | |||||||
37,096 | Series 2005-11, Class 5A1, | ||||||
5.25%, 12/25/2020 | 37,477 | ||||||
95,556 | Series 2005-3, Class 3A27, | ||||||
5.50%, 07/25/2035 | 98,487 | ||||||
Federal Gold Loan Mortgage | |||||||
Corporation (FGLMC) | |||||||
Pass-Thru Certificates: | |||||||
346,781 | 5.00%, 08/01/2011 | 355,438 | |||||
549,142 | 6.00%, 06/01/2021 | 599,681 | |||||
30,241 | 6.00%, 07/01/2028 | 33,235 | |||||
Federal Home Loan Mortgage | |||||||
Corporation (FHLMC): | |||||||
698,991 | Series 3033, Class LU, | ||||||
5.50%, 03/15/2013 | 730,417 | ||||||
176,809 | Series 2695, Class UA, | ||||||
5.50%, 09/15/2014 | 176,911 | ||||||
161,907 | Series R014, Class AL, | ||||||
5.50%, 10/15/2014 | 161,867 | ||||||
1,496,387 | Series R003, Class VA, | ||||||
5.50%, 08/15/2016 | 1,617,750 | ||||||
1,933,077 | Series 3122, Class VA, | ||||||
6.00%, 01/15/2017 | 2,043,789 | ||||||
1,367,898 | Series R010, Class VA, | ||||||
5.50%, 04/15/2017 | 1,490,122 | ||||||
1,286,051 | Series R009, Class AJ, | ||||||
5.75%, 12/15/2018 | 1,345,602 | ||||||
3,525 | Series 74, Class F, | ||||||
6.00%, 10/15/2020 | |||||||
(Callable 02/15/2011) | 3,879 | ||||||
67,961 | Series 2673, Class NC, | ||||||
5.50%, 05/15/2021 | 69,767 |
The accompanying notes are an integral part of these financial statements.
Page 40
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.5% (cont.) | |||||||
Residential Mortgage Backed Securities – 6.9% (cont.) | |||||||
$ | 28,165 | Series 1395, Class G, | |||||
6.00%, 10/15/2022 | |||||||
(Callable 01/15/2011) | $ | 30,999 | |||||
1,314,267 | Series 2970, Class DA, | ||||||
5.50%, 01/15/2023 | 1,356,694 | ||||||
Federal National Mortgage | |||||||
Association (FNMA): | |||||||
220,958 | Series 2006-B2, Class AB, | ||||||
5.50%, 05/25/2014 | 225,075 | ||||||
67,991 | Series 2005-6, Class VE, | ||||||
5.50%, 04/25/2016 | 71,455 | ||||||
465,105 | Series 2006-B1, Class AB, | ||||||
6.00%, 06/25/2016 | 476,606 | ||||||
6,907 | Series 2003-35, Class TD, | ||||||
5.00%, 12/25/2016 | 6,936 | ||||||
17,737 | Series 1989-2, Class D, | ||||||
8.80%, 01/25/2019 | 21,699 | ||||||
1,262 | Series G-29, Class O, | ||||||
8.50%, 09/25/2021 | 1,412 | ||||||
99,693 | Series 1991-137, Class H, | ||||||
7.00%, 10/25/2021 | 111,942 | ||||||
77,071 | Series 1992-136, Class PK, | ||||||
6.00%, 08/25/2022 | 84,346 | ||||||
49,441 | Series 1993-32, Class H, | ||||||
6.00%, 03/25/2023 | 54,069 | ||||||
2,189,140 | Series 2002-85, Class PD, | ||||||
5.50%, 05/25/2031 | 2,260,092 | ||||||
52,325 | Series 2004-90, Class YB, | ||||||
4.00%, 07/25/2032 | 53,818 | ||||||
1,757,594 | Series 2004-W6, Class | ||||||
1A6, 5.50%, 07/25/2034 | 1,897,927 | ||||||
1,418,571 | Series 2004-W10, Class | ||||||
A24, 5.00%, 08/25/2034 | 1,417,612 | ||||||
1,048,008 | GMAC Mortgage | ||||||
Corporation Loan Trust, | |||||||
Series 2004-J4, Class A2, | |||||||
5.50%, 09/25/2034 | 1,061,337 | ||||||
262,584 | Government National | ||||||
Mortgage Association | |||||||
(GNMA), | |||||||
Series 1999-4, Class ZB, | |||||||
6.00%, 02/20/2029 | 287,563 | ||||||
J.P. Morgan Alternative | |||||||
Loan Trust: | |||||||
2,388,163 | Series 2005-S1, Class 3A1, | ||||||
5.50%, 10/25/2020 | 2,178,430 | ||||||
1,077,899 | Series 2006-A1, Class 2A1, | ||||||
5.799%, 03/25/2036 | 703,526 | ||||||
888,185 | Series 2006-S2, Class A2, | ||||||
5.81%, 05/25/2036 | 880,522 | ||||||
457,427 | Lehman Mortgage Trust, | ||||||
Series 2006-4, Class 3A1, | |||||||
5.00%, 08/25/2021 | |||||||
(Callable 04/25/2015) | 443,705 | ||||||
Master Alternative | |||||||
Loans Trust: | |||||||
1,407,501 | Series 2004-1, Class 1A1, | ||||||
5.00%, 01/25/2019 | 1,426,712 | ||||||
317,657 | Series 2004-3, Class 1A1, | ||||||
5.00%, 03/25/2019 | |||||||
(Callable 06/25/2018) | 322,947 | ||||||
264,667 | Series 2005-3, Class 4A1, | ||||||
5.50%, 03/25/2020 | 261,688 | ||||||
45,184 | Merrill Lynch Mortgage | ||||||
Investors Trust, | |||||||
Series 2005-A8, Class | |||||||
A1C1, 5.25%, 08/25/2036 | 45,394 |
The accompanying notes are an integral part of these financial statements.
Page 41
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.5% (cont.) | |||||||
Residential Mortgage Backed Securities – 6.9% (cont.) | |||||||
Residential Accredit | |||||||
Loans, Inc.: | |||||||
$ | 130,273 | Series 2004-QS6, Class A1, | |||||
5.00%, 05/25/2019 | |||||||
(Callable 04/25/2015) | $ | 133,094 | |||||
39,312 | Series 2004-QS13, Class | ||||||
CB, 5.00%, 09/25/2019 | |||||||
(Callable 11/25/2015) | 40,312 | ||||||
225,024 | Salomon Brothers | ||||||
Mortgage Securities VII, | |||||||
Series 2003-UP2, Class A2, | |||||||
4.00%, 06/25/2033 | |||||||
(Callable 03/25/2014) | 228,829 | ||||||
Washington Mutual, Inc. | |||||||
Pass-Thru Certificates: | |||||||
1,621,118 | Series 2004-CB1, Class 5A, | ||||||
5.00%, 06/25/2019 | 1,677,278 | ||||||
2,198,815 | Series 2004-CB3, Class 3A, | ||||||
5.50%, 10/25/2019 | 2,236,682 | ||||||
757,530 | Series 2004-CB3, Class 4A, | ||||||
6.00%, 10/25/2019 | 778,560 | ||||||
512,325 | Series 2004-CB4, Class | ||||||
21A, 5.50%, 12/25/2019 | 530,080 | ||||||
663,907 | Series 2004-CB4, Class | ||||||
22A, 6.00%, 12/25/2019 | 685,327 | ||||||
41,623,062 | |||||||
Taxable Municipal Bonds – 3.8% | |||||||
Alaska Municipal Bond | |||||||
Bank Authority: | |||||||
1,000,000 | 4.309%, 08/01/2018 | 963,180 | |||||
1,340,000 | 4.459%, 08/01/2019 | 1,287,673 | |||||
3,375,000 | California Qualified School | ||||||
Construction Bonds, | |||||||
5.955%, 03/01/2019 | 3,385,361 | ||||||
2,500,000 | California School | ||||||
Finance Authority, | |||||||
4.426%, 07/01/2020 | 2,366,550 | ||||||
California State: | |||||||
900,000 | 5.45%, 04/01/2015 | 939,816 | |||||
500,000 | 5.50%, 03/01/2016 | 513,675 | |||||
2,500,000 | Contra Costa County | ||||||
California Pension | |||||||
Obligation, | |||||||
5.14%, 06/01/2017 | 2,508,200 | ||||||
1,465,000 | Dallas Independent | ||||||
School District, | |||||||
4.95%, 02/15/2022 | |||||||
(Callable 02/15/2021) | 1,452,342 | ||||||
1,000,000 | Davie Florida Water | ||||||
& Sewer Revenue, | |||||||
6.062%, 10/01/2025 | |||||||
(Callable 10/01/2020) | 1,006,340 | ||||||
5,000,000 | Illinois State, | ||||||
3.636%, 02/01/2014 | 4,972,051 | ||||||
2,100,000 | North East Independent | ||||||
School District Texas, | |||||||
5.24%, 08/01/2027 | 1,982,190 | ||||||
1,330,000 | Tobacco Settlement | ||||||
Authority Iowa, | |||||||
6.50%, 06/01/2023 | |||||||
(Callable 06/01/2015) | 1,220,368 | ||||||
22,597,746 | |||||||
Utilities – 9.5% | |||||||
3,000,000 | Ameren Corporation, | ||||||
8.875%, 05/15/2014 | 3,375,506 | ||||||
2,765,000 | Baltimore Gas | ||||||
& Electric Co. | |||||||
Senior Unsecured Notes, | |||||||
6.125%, 07/01/2013 | 3,051,581 |
The accompanying notes are an integral part of these financial statements.
Page 42
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.5% (cont.) | |||||||
Utilities – 9.5% (cont.) | |||||||
Dominion Resources Inc.: | |||||||
$ | 1,380,000 | 6.25%, 06/30/2012 | $ | 1,483,023 | |||
1,000,000 | Series C, 5.15%, | ||||||
07/15/2015 | 1,106,854 | ||||||
425,000 | 6.00%, 11/30/2017 | 481,202 | |||||
1,000,000 | DTE Energy Company, | ||||||
7.625%, 05/15/2014 | 1,152,622 | ||||||
3,000,000 | El Paso Pipeline Partners | ||||||
Operating Co LLC, | |||||||
4.10%, 11/15/2015 | 2,969,781 | ||||||
2,000,000 | Enel Finance | ||||||
International, | |||||||
5.70%, 01/15/2013 | |||||||
(Acquired 03/31/2010; | |||||||
Cost $2,123,393)* f | 2,121,882 | ||||||
Energy Transfer Partners: | |||||||
600,000 | 5.65%, 08/01/2012 | 635,702 | |||||
1,336,000 | 5.95%, 02/01/2015 @ | 1,465,484 | |||||
515,000 | 9.70%, 03/15/2019 | 665,617 | |||||
1,000,000 | Exelon Corporation, | ||||||
4.90%, 06/15/2015 | 1,066,431 | ||||||
2,585,000 | Exelon Generation | ||||||
Company LLC, | |||||||
5.35%, 01/15/2014 | 2,798,446 | ||||||
2,500,000 | Kinder Morgan Finance, | ||||||
5.70%, 01/05/2016 f | 2,531,250 | ||||||
199,594 | Kiowa Power Partners LLC, | ||||||
4.811%, 12/30/2013 | |||||||
(Acquired 11/19/2004; | |||||||
Cost $214,585)* | 205,451 | ||||||
1,000,000 | Korea Hydro & Nuclear | ||||||
Power Company Senior | |||||||
Unsecured Notes, | |||||||
6.25%, 06/17/2014 | |||||||
(Acquired 06/10/2009; | |||||||
Cost $989,350)* f @ | 1,097,450 | ||||||
3,139,000 | Midamerican Energy | ||||||
Holdings Co., | |||||||
5.875%, 10/01/2012 | 3,386,864 | ||||||
2,475,000 | National Grid PLC | ||||||
Senior Unsecured Notes, | |||||||
6.30%, 08/01/2016 f | 2,825,554 | ||||||
2,000,000 | National Rural | ||||||
Utilities Corporation, | |||||||
10.375%, 11/01/2018 | 2,758,848 | ||||||
1,100,000 | NiSource Finance | ||||||
Corporation, | |||||||
10.75%, 03/15/2016 | 1,471,133 | ||||||
1,875,000 | ONEOK Inc., | ||||||
7.125%, 04/15/2011 | 1,907,869 | ||||||
935,000 | ONEOK Partners LP Notes, | ||||||
5.90%, 04/01/2012 | 987,452 | ||||||
PPL Energy Supply, LLC | |||||||
Senior Notes: | |||||||
388,000 | 6.40%, 11/01/2011 | 406,139 | |||||
1,775,000 | Series A, 5.70%, | ||||||
10/15/2015 | 1,942,798 | ||||||
1,175,000 | Progress Energy Inc. | ||||||
Senior Notes, | |||||||
6.85%, 04/15/2012 | 1,258,621 | ||||||
PSE&G Power LLC: | |||||||
425,000 | 5.00%, 04/01/2014 @ | 456,047 | |||||
144,000 | 5.32%, 09/15/2016 | 157,565 | |||||
220,000 | 5.125%, 04/15/2020 | 228,914 | |||||
736,181 | RGS (I&M) Funding | ||||||
Corporation Debentures, | |||||||
9.82%, 12/07/2022 | 822,910 | ||||||
1,000,000 | Rockies Express Pipeline | ||||||
LLC, 5.625%, 04/15/2020 | |||||||
(Acquired 03/17/2010; | |||||||
Cost $999,110)* | 966,625 | ||||||
2,700,000 | Spectra Energy Capital, | ||||||
5.668%, 08/15/2014 | 2,976,224 |
The accompanying notes are an integral part of these financial statements.
Page 43
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.5% (cont.) | |||||||
Utilities – 9.5% (cont.) | |||||||
$ | 2,500,000 | Trans-Allegheny | |||||
Interstate Line Company, | |||||||
4.00%, 01/15/2015 | |||||||
(Acquired 01/19/2010; | |||||||
Cost $2,490,650)* | $ | 2,567,283 | |||||
2,005,000 | Transcontinental | ||||||
Gas Pipe Line | |||||||
Corporation | |||||||
Senior Notes, | |||||||
8.875%, 07/15/2012 | 2,215,615 | ||||||
Vectren Utility | |||||||
Holdings, Inc.: | |||||||
1,000,000 | 6.625%, 12/01/2011 | 1,050,401 | |||||
575,000 | 5.25%, 08/01/2013 | 618,690 | |||||
2,000,000 | West Penn | ||||||
Power Company, | |||||||
5.875%, 08/15/2016 | |||||||
(Acquired 10/25/2010; | |||||||
Cost $2,283,692)* | 2,215,194 | ||||||
57,429,028 | |||||||
U.S. Government Agency Issues – 8.1% | |||||||
7,000,000 | Federal Farm Credit Bank, | ||||||
3.00%, 09/22/2014 @ | 7,377,041 | ||||||
225,000 | Federal Home Loan | ||||||
Mortgage Corporation | |||||||
(FHLMC), | |||||||
4.50%, 07/15/2013 | 245,135 | ||||||
Federal National Mortgage | |||||||
Association (FNMA): | |||||||
32,125,000 | 2.75%, 03/13/2014 @ | 33,577,468 | |||||
7,500,000 | 2.625%, 11/20/2014 @ | 7,785,165 | |||||
48,984,809 | |||||||
U.S. Treasury Obligations – 20.4% | |||||||
U.S. Treasury Bonds: | |||||||
48,050,000 | 2.375%, 03/31/2016 @ | 48,658,121 | |||||
24,500,000 | 3.875%, 05/15/2018 @ | 26,360,481 | |||||
15,175,000 | 9.125%, 05/15/2018 @ | 21,742,922 | |||||
10,000,000 | 7.875%, 02/15/2021 @ | 13,950,000 | |||||
10,000,000 | 6.25%, 08/15/2023 @ | 12,568,750 | |||||
123,280,274 | |||||||
Total Long-Term | |||||||
Investments | |||||||
(Cost $570,912,803) | 582,459,047 | ||||||
Shares | |||||||
SHORT-TERM INVESTMENTS – 2.3% | |||||||
Money Market Mutual Funds – 2.3% | |||||||
2,978,634 | Dreyfus Institutional | ||||||
Cash Advantage | |||||||
Fund, 0.18% « | 2,978,634 | ||||||
11,089,142 | The AIM STIT – Liquid | ||||||
Assets Portfolio, 0.19% « | 11,089,142 | ||||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $14,067,776) | 14,067,776 | ||||||
Principal | |||||||
Amount | |||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 29.8% | |||||||
Commercial Paper – 0.3% | |||||||
$ | 2,535,728 | Atlantic East Funding LLC, | |||||
0.59%, 03/25/2011 †** | 1,720,601 | ||||||
Total Commercial Paper | |||||||
(Cost $2,535,728) | 1,720,601 |
The accompanying notes are an integral part of these financial statements.
Page 44
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2010 |
Shares | Value | |||||||
INVESTMENTS PURCHASED | ||||||||
WITH CASH PROCEEDS FROM | ||||||||
SECURITIES LENDING – 29.8% (cont.) | ||||||||
Investment Companies – 29.5% | ||||||||
178,013,857 | Mount Vernon Securities | |||||||
Lending Trust Prime | ||||||||
Portfolio, 0.29% « | $ | 178,013,857 | ||||||
Total Investment | ||||||||
Companies | ||||||||
(Cost $178,013,857) | 178,013,857 | |||||||
Total Investments | ||||||||
Purchased With Cash | ||||||||
Proceeds From | ||||||||
Securities Lending | ||||||||
(Cost $180,549,585) | 179,734,458 | |||||||
Total Investments | ||||||||
(Cost $765,530,164) | ||||||||
– 128.6% | 776,261,281 | |||||||
Asset Relating to Securities | ||||||||
Lending Investments – 0.1% | ||||||||
Support Agreement** ^ a | 815,127 | |||||||
Total (Cost $0) | 815,127 | |||||||
Liabilities in Excess of | ||||||||
Other Assets – (28.7)% | (173,172,762 | ) | ||||||
TOTAL NET | ||||||||
ASSETS – 100.0% | $ | 603,903,646 |
Notes to Schedule of Investments
* | Restricted Security Deemed Liquid |
** | Illiquid Security |
@ | This security or portion of this security is out on loan at December 31, 2010. |
f | Foreign Security |
^ | Non-Income Producing |
« | 7-Day Yield |
§ | Security in Default |
† | 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 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. |
The accompanying notes are an integral part of these financial statements.
Page 45
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2010 |
Summary of Fair Value Exposure at December 31, 2010
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 standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Management has determined that these standards have no material impact on the Funds’ financial statements. The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability. These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized into three broad levels and described below:
Level 1 – | Unadjusted quoted prices in active markets for identical unrestricted 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 factors that market participants would use in valuing the security) based on the best information available. |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Page 46
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2010 |
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2010:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 11,786,344 | $ | — | $ | 11,786,344 | ||||||||
Commercial Mortgage Backed Securities | — | 12,481,618 | — | 12,481,618 | ||||||||||||
Corporate Debt Securities | — | 311,933,671 | — | 311,933,671 | ||||||||||||
Other Government Related Securities | — | 9,771,523 | — | 9,771,523 | ||||||||||||
Residential Mortgage Backed Securities | — | 41,623,062 | — | 41,623,062 | ||||||||||||
Taxable Municipal Bonds | — | 22,597,746 | — | 22,597,746 | ||||||||||||
U.S. Government Agency Issues | — | 48,984,809 | — | 48,984,809 | ||||||||||||
U.S. Treasury Obligations | — | 123,280,274 | — | 123,280,274 | ||||||||||||
Total Fixed Income | — | 582,459,047 | — | 582,459,047 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 14,067,776 | — | — | 14,067,776 | ||||||||||||
Total Short-Term Investments | 14,067,776 | — | — | 14,067,776 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 1,720,601 | — | 1,720,601 | ||||||||||||
Money Market Mutual Funds | 178,013,857 | — | — | 178,013,857 | ||||||||||||
Total Investments Purchased with | ||||||||||||||||
Cash Proceeds from Securities Lending | 178,013,857 | 1,720,601 | — | 179,734,458 | ||||||||||||
Total Investments | $ | 192,081,633 | $ | 584,179,648 | $ | — | $ | 776,261,281 | ||||||||
Asset Relating to Securities Lending Investments | $ | — | $ | 815,127 | $ | — | $ | 815,127 |
Changes in valuation techniques may result in transfers into or out of current assigned levels within the hierarchy. There were no significant transfers between Level 1 and Level 2 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.
Page 47
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2010 |
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, 2009 | $ | 607,755 | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | (77,902 | ) | ||
Change in unrealized appreciation (depreciation) | 112,761 | |||
Net purchases (sales) | (642,614 | ) | ||
Transfers in and/or out of Level 3* | — | |||
Balance as of December 31, 2010 | $ | — |
* | The information used in the above reconciliation represents fiscal year 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 48
Baird Intermediate Municipal Bond Fund
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 delivered solid, positive returns in 2010. The Fund’s focus on high quality issues detracted from relative performance for the year as lower quality issues significantly outperformed higher quality issues.
We remain concerned that declining credit fundamentals in many municipalities could result in prevalent downgrades and selective price declines in the market in 2011 and we continue to emphasize high quality, intermediate holdings. The Fund was comprised of a broadly diversified portfolio of 286 securities at year end, with 65% of its investments in pre-refunded bonds.
With its focus on high quality holdings, we believe the Fund is well-positioned for 2011.
Portfolio Characteristics
Quality Distribution* | Sector Weightings* |
Net Assets: | $941,753,894 | Annualized Expense Ratio: | |||
SEC 30-Day Yield:*** | Institutional Class: | 0.30 | % | ||
Institutional Class: | 2.35% | Investor Class: | 0.55 | %**** | |
Investor Class: | 2.10% | Portfolio Turnover Rate: | 8.7 | % | |
Average Effective Duration: | 5.12 years | Total Number of Holdings: | 286 | ||
Average Effective Maturity: | 6.10 years |
* | Percentages shown are based on the Fund’s total investments. |
** | Includes pre-refunded and escrowed-to-maturity (ETM) bonds. |
*** | SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2010. |
**** | Includes 0.25% 12b-1 fee. |
Page 49
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 50
Baird Intermediate Municipal Bond Fund
Average Annual Total Returns
Since | |||
For the Periods Ended December 31, 2010 | One Year | Five Years | Inception(1) |
Institutional Class Shares | 2.42% | 4.71% | 4.92% |
Investor Class Shares | 2.11% | 4.43% | 4.65% |
Barclays Capital 7-Year General Obligation Bond Index(2) | 4.34% | 5.15% | 5.00% |
(1) | For the period from March 30, 2001 (commencement of operations) through December 31, 2010. |
(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 51
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% | |||||||
Alabama – 2.2% | |||||||
$ | 1,000,000 | Alabama State Public | |||||
School & College | |||||||
Authority, 5.00%, | |||||||
05/01/2019 | $ | 1,126,660 | |||||
1,000,000 | Camden Alabama | ||||||
Industrial Development | |||||||
Board Revenue, | |||||||
6.125%, 12/01/2024 | |||||||
(Pre-refunded to | |||||||
12/01/2013) | 1,138,970 | ||||||
1,080,000 | Gulf Shores Alabama, | ||||||
5.00%, 12/15/2018 | |||||||
(Callable 12/15/2017) | 1,142,878 | ||||||
Montgomery Alabama | |||||||
Special Care | |||||||
Facility Revenue: | |||||||
11,385,000 | 5.00%, 11/15/2021 | ||||||
(Pre-refunded to | |||||||
11/15/2014) | 12,851,387 | ||||||
3,985,000 | 5.25%, 11/15/2029 | ||||||
(Pre-refunded to | |||||||
11/15/2014) | 4,535,448 | ||||||
20,795,343 | |||||||
Alaska – 0.1% | |||||||
1,000,000 | Alaska State Housing | ||||||
Finance Corporation, | |||||||
5.00%, 06/01/2017 | |||||||
(Callable 06/01/2015) | |||||||
(Insured by NPFGC) | 1,071,690 | ||||||
Arizona – 1.9% | |||||||
Arizona Health Facilities | |||||||
Authority Hospital Revenue: | |||||||
3,000,000 | 6.00%, 02/15/2032 | ||||||
(Pre-refunded to | |||||||
02/15/2012) | 3,207,510 | ||||||
1,415,000 | 6.375%, 12/01/2037 | ||||||
(Pre-refunded to | |||||||
12/01/2012) | 1,575,801 | ||||||
2,375,000 | Arizona School Facilities | ||||||
Board Revenue, 5.75%, | |||||||
07/01/2018 (Pre-refunded | |||||||
to 07/01/2014) | 2,725,574 | ||||||
1,860,000 | Maricopa County Arizona | ||||||
University School District | |||||||
No. 48 Scottsdale, 4.00%, | |||||||
07/01/2026 (Pre-refunded | |||||||
to 07/01/2016) | 2,067,799 | ||||||
1,540,000 | Phoenix Arizona Civic | ||||||
Corporation of Wastewater | |||||||
Systems Revenue, | |||||||
5.00%, 07/01/2015 | |||||||
(Callable 07/01/2014) | |||||||
(Partially Pre-refunded, | |||||||
Insured by NPFGC) | 1,691,120 | ||||||
Pima County Arizona | |||||||
Industrial Development | |||||||
Authority: | |||||||
1,000,000 | 7.125%, 07/01/2024 | ||||||
(Pre-refunded to | |||||||
07/01/2014) | 1,175,570 | ||||||
2,000,000 | 7.50%, 07/01/2034 | ||||||
(Pre-refunded to | |||||||
07/01/2014) | 2,376,360 | ||||||
2,870,000 | 7.50%, 07/01/2034 | ||||||
(Pre-refunded to | |||||||
07/01/2014) | 3,291,173 | ||||||
18,110,907 |
The accompanying notes are an integral part of these financial statements.
Page 52
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
California – 6.8% | |||||||
$ | 4,260,000 | Bakersfield California | |||||
Certificates Participation, | |||||||
0.00%, 04/15/2021 | |||||||
(ETM) ^ | $ | 2,852,709 | |||||
2,500,000 | Coalinga California | ||||||
Regional Medical Center, | |||||||
5.125%, 03/01/2032 | |||||||
(Pre-refunded to | |||||||
03/01/2015) | 2,790,250 | ||||||
3,000,000 | Contra Costa County | ||||||
California Certificate | |||||||
Participation, 0.00%, | |||||||
11/01/2014 (ETM) ^ | 2,822,730 | ||||||
3,620,000 | Golden State Tobacco | ||||||
Securitization Corporation | |||||||
Asset Backed Bonds, | |||||||
5.50%, 06/01/2043 | |||||||
(Pre-refunded to | |||||||
06/01/2013) | 3,983,412 | ||||||
Golden State Tobacco | |||||||
Securitization Corporation | |||||||
Revenue Bonds: | |||||||
8,645,000 | 6.25%, 06/01/2033 | ||||||
(Callable 06/01/2013) | |||||||
(Pre-refunded to | |||||||
various dates) | 9,424,520 | ||||||
875,000 | 5.00%, 06/01/2038 | ||||||
(Pre-refunded to | |||||||
06/01/2013) | 952,508 | ||||||
6,950,000 | 5.625%, 06/01/2038 | ||||||
(Pre-refunded to | |||||||
06/01/2013) | 7,668,283 | ||||||
1,205,000 | Mount Diablo California | ||||||
Hospital District Revenue, | |||||||
5.00%, 12/01/2013 (ETM) | 1,288,049 | ||||||
2,975,000 | Pittsburg California | ||||||
Redevelopment Agency | |||||||
Residential Mortgage | |||||||
Revenue, 9.60%, | |||||||
06/01/2016 (ETM) | 4,091,101 | ||||||
1,600,000 | Port Oakland | ||||||
California Revenue, | |||||||
5.00%, 11/01/2017 | |||||||
(Insured by NPFGC) | 1,737,376 | ||||||
San Joaquin Hills | |||||||
California Transportation | |||||||
Corridor Agency Toll | |||||||
Road Revenue: (ETM) ^ | |||||||
6,865,000 | 0.00%, 01/01/2020 | 5,021,473 | |||||
14,000,000 | 0.00%, 01/01/2023 | 8,639,400 | |||||
17,295,000 | San Marcos California | ||||||
Public Facilities Authority | |||||||
Revenue, 0.00%, | |||||||
09/01/2019 (ETM) ^ | 12,496,328 | ||||||
90,000 | Santa Rosa California | ||||||
Hospital Revenue, 10.30%, | |||||||
03/01/2011 (Callable | |||||||
02/07/2011) (ETM) | 91,393 | ||||||
63,859,532 | |||||||
Colorado – 6.6% | |||||||
2,000,000 | Adams County Colorado | ||||||
Single Family Mortgage | |||||||
Revenue, 8.875%, | |||||||
08/01/2012 (ETM) | 2,255,860 | ||||||
1,000,000 | Aspen Grove Colorado | ||||||
Business Improvement | |||||||
District, 7.625%, | |||||||
12/01/2025 (Pre-refunded | |||||||
to 12/01/2011) | 1,066,010 |
The accompanying notes are an integral part of these financial statements.
Page 53
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
Colorado – 6.6% (cont.) | |||||||
$ | 805,000 | Colorado Educational & | |||||
Cultural Facilities Authority, | |||||||
7.625%, 03/15/2032 | |||||||
(Pre-refunded to | |||||||
03/15/2013) | $ | 907,106 | |||||
9,830,000 | Colorado Springs | ||||||
Colorado Utilities Revenue | |||||||
Bonds, 5.875%, | |||||||
11/15/2017 (ETM) | 10,957,500 | ||||||
1,000,000 | Conservatory Metropolitan | ||||||
District Colorado, 6.75%, | |||||||
12/01/2034 (Pre-refunded | |||||||
to 12/01/2013) | 1,160,050 | ||||||
12,745,000 | Dawson Ridge | ||||||
Metropolitan District No. | |||||||
1 Colorado, 0.00%, | |||||||
10/01/2022 (ETM) ^ | 7,914,645 | ||||||
Denver Colorado | |||||||
Convention Center & | |||||||
Hotel Authority | |||||||
Revenue Bonds: | |||||||
1,000,000 | 5.00%, 12/01/2021 | ||||||
(Pre-refunded to | |||||||
12/01/2013) | 1,102,440 | ||||||
2,950,000 | 5.00%, 12/01/2022 | ||||||
(Pre-refunded to | |||||||
12/01/2013) | 3,252,198 | ||||||
1,500,000 | 5.00%, 12/01/2023 | ||||||
(Pre-refunded to | |||||||
12/01/2013) | 1,653,660 | ||||||
5,065,000 | 5.00%, 12/01/2024 | ||||||
(Pre-refunded to | |||||||
12/01/2013) | 5,583,859 | ||||||
7,975,000 | Denver Colorado Health | ||||||
& Hospital Authority | |||||||
Healthcare Revenue, | |||||||
6.25%, 12/01/2033 | |||||||
(Pre-refunded to | |||||||
12/01/2014) | 9,416,641 | ||||||
Regional Transportation | |||||||
District Colorado Sales | |||||||
Tax Revenue: | |||||||
8,370,000 | 5.00%, 11/01/2023 | ||||||
(Pre-refunded to | |||||||
11/01/2013) | 9,311,625 | ||||||
6,750,000 | 5.00%, 11/01/2036 | ||||||
(Pre-refunded to | |||||||
11/01/2016) | 7,897,973 | ||||||
62,479,567 | |||||||
Delaware – 0.1% | |||||||
950,000 | Delaware State Economic | ||||||
Development Authority | |||||||
Revenue, 6.75%, | |||||||
01/01/2013 (ETM) | 1,003,656 | ||||||
Florida – 10.8% | |||||||
4,140,000 | Bartram Springs | ||||||
Community Development | |||||||
District Special Assessment, | |||||||
6.65%, 05/01/2034 | |||||||
(Pre-refunded to | |||||||
05/01/2013) | 4,560,665 | ||||||
1,925,000 | Brevard County Florida | ||||||
School Board, | |||||||
5.00%, 07/01/2020 | |||||||
(Callable 07/01/2017) | |||||||
(Insured by AMBAC) | 2,013,897 |
The accompanying notes are an integral part of these financial statements.
Page 54
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
Florida – 10.8% (cont.) | |||||||
$ | 5,000,000 | Coral Gables Florida | |||||
Health Facility Authority | |||||||
Hospital Revenue, 5.00%, | |||||||
08/15/2029 (Pre-refunded | |||||||
to 08/15/2014) | $ | 5,641,050 | |||||
2,125,000 | Dade County Florida | ||||||
Health Facility Authority | |||||||
Hospital Revenue, 5.75%, | |||||||
05/01/2021 (ETM) | 2,398,551 | ||||||
13,800,000 | Florida State | ||||||
Board of Education, | |||||||
5.00%, 06/01/2022 | |||||||
(Callable 06/01/2019) | 14,888,819 | ||||||
2,500,000 | Florida State Department | ||||||
of Management Services, | |||||||
5.00%, 08/01/2018 | 2,749,225 | ||||||
7,850,000 | Florida State Mid-Bay | ||||||
Bridge Authority Revenue, | |||||||
6.875%, 10/01/2022 | |||||||
(ETM) | 10,102,950 | ||||||
1,500,000 | Gulf Environmental | ||||||
Services Inc. Florida | |||||||
Revenue Bonds, 5.00%, | |||||||
10/01/2018 (ETM) | 1,672,275 | ||||||
Highlands County Florida | |||||||
Health Facilities Revenue: | |||||||
9,650,000 | 5.875%, 11/15/2029 | ||||||
(Pre-refunded to | |||||||
11/15/2013) | 10,885,778 | ||||||
5,000,000 | 5.375%, 11/15/2035 | ||||||
(Pre-refunded to | |||||||
11/15/2013) | 5,570,350 | ||||||
2,000,000 | Hillsborough County | ||||||
Florida School Board | |||||||
Master Lease Program, | |||||||
5.50%, 07/01/2018 | |||||||
(Insured by NPFGC) | 2,215,660 | ||||||
1,830,000 | Hillsborough County | ||||||
Industrial Development | |||||||
Authority, 5.625%, | |||||||
08/15/2029 (Pre-refunded | |||||||
to 08/15/2018) | 2,198,782 | ||||||
2,000,000 | Islands At Doral (SW) | ||||||
Community Development | |||||||
District, 6.375%, | |||||||
05/01/2035 (Pre-refunded | |||||||
to 05/01/2013) | 2,182,740 | ||||||
300,000 | Jacksonville Florida Health | ||||||
Facility Authority Hospital | |||||||
Revenue, 11.50%, | |||||||
10/01/2012 (Callable | |||||||
02/07/2011) (ETM) | 355,719 | ||||||
2,240,000 | Laguna Lakes Community | ||||||
Development District | |||||||
Special Assessment | |||||||
Revenue Bonds, 6.40%, | |||||||
05/01/2033 (Pre-refunded | |||||||
to 05/01/2013) | 2,505,978 | ||||||
1,470,000 | Miami Beach Florida Resort | ||||||
Tax Revenue, 6.25%, | |||||||
10/01/2022 (ETM) | 1,796,075 | ||||||
3,000,000 | Miami Dade County | ||||||
Florida Entitlement | |||||||
Revenue Bonds, | |||||||
5.00%, 08/01/2015 | |||||||
(Insured by NPFGC) | 3,250,500 |
The accompanying notes are an integral part of these financial statements.
Page 55
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
Florida – 10.8% (cont.) | |||||||
$ | 3,000,000 | Miami-Dade County | |||||
Florida School Board, | |||||||
5.00%, 05/01/2016 | |||||||
(Insured by NPFGC) | $ | 3,192,660 | |||||
2,270,000 | Miami-Dade County | ||||||
Florida Water & | |||||||
Sewer Revenue, | |||||||
5.00%, 10/01/2013 | |||||||
(Insured by NPFGC) | 2,490,077 | ||||||
3,815,000 | Oakstead Florida | ||||||
Community Development | |||||||
District Capital | |||||||
Improvement Revenue | |||||||
Bonds, 6.875%, | |||||||
05/01/2033 (Pre-refunded | |||||||
to 05/01/2012) | 4,101,354 | ||||||
4,220,000 | Orange County Florida | ||||||
Health Facilities Authority | |||||||
Revenue Bond, 6.25%, | |||||||
10/01/2013 (ETM) | 4,792,401 | ||||||
1,000,000 | Orlando Florida Utilities | ||||||
Commission Water & | |||||||
Electric Revenue, 6.75%, | |||||||
10/01/2017 (ETM) | 1,173,820 | ||||||
1,000,000 | Palm Beach County | ||||||
Florida Revenue, | |||||||
5.00%, 11/01/2018 | |||||||
(Callable 11/01/2017) | 1,099,200 | ||||||
2,550,000 | Pinellas County Housing | ||||||
Finance Authority, | |||||||
4.25%, 03/01/2027 | |||||||
(Callable 09/01/2019) | 2,665,260 | ||||||
1,000,000 | Sarasota County Florida | ||||||
School Board, | |||||||
5.00%, 07/01/2015 | |||||||
(Insured by NPFGC) | 1,084,720 | ||||||
5,200,000 | Seminole County Florida | ||||||
Water & Sewage Revenue, | |||||||
6.00%, 10/01/2019 | |||||||
(ETM) | 6,090,552 | ||||||
101,679,058 | |||||||
Georgia – 2.8% | |||||||
8,445,000 | Atlanta Georgia Water | ||||||
& Wastewater Revenue, | |||||||
5.50%, 11/01/2017 | |||||||
(Insured by AGM) | 9,412,881 | ||||||
3,330,000 | Forsyth County Georgia | ||||||
Hospital Authority | |||||||
Revenue Anticipation | |||||||
Certificates, 6.375%, | |||||||
10/01/2028 (Callable | |||||||
02/07/2011) (ETM) | 4,016,813 | ||||||
680,000 | Fulton County Georgia | ||||||
Hospital Authority | |||||||
Revenue, 7.875%, | |||||||
10/01/2013 (Callable | |||||||
02/07/2011) (ETM) | 757,377 | ||||||
Georgia Municipal Electric | |||||||
Authority Power Revenue: | |||||||
120,000 | 6.50%, 01/01/2017 | ||||||
(Insured by AGM) | 138,852 | ||||||
7,350,000 | 6.50%, 01/01/2017 | ||||||
(Insured by AGM) | 8,583,845 | ||||||
2,770,000 | Northwestern Gwinnett | ||||||
County Georgia Facilities | |||||||
Corporation I Certificate | |||||||
Participation, 5.75%, | |||||||
06/15/2019 (Callable | |||||||
06/15/2014) (Pre-refunded | |||||||
to 06/15/2015) | 3,101,458 | ||||||
26,011,226 |
The accompanying notes are an integral part of these financial statements.
Page 56
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
Illinois – 10.2% | |||||||
Chicago Illinois: | |||||||
$ | 695,000 | 5.00%, 01/01/2017 | |||||
(Callable 01/01/2016) | |||||||
(Insured by AGM) | $ | 752,595 | |||||
305,000 | 5.00%, 01/01/2017 | ||||||
(Pre-refunded to | |||||||
01/01/2016) | 350,427 | ||||||
Chicago Illinois | |||||||
Board of Education: | |||||||
4,345,000 | 5.00%, 12/01/2017 | ||||||
(Callable 12/01/2016) | |||||||
(Insured by AGM) | 4,797,141 | ||||||
1,000,000 | 5.00%, 12/01/2017 | ||||||
(Insured by AMBAC) | 1,092,560 | ||||||
1,000,000 | 6.00%, 01/01/2020 | ||||||
(Insured by NPFGC) | 1,087,170 | ||||||
Chicago Illinois Public | |||||||
Building Community | |||||||
Building Revenue: (ETM) | |||||||
4,510,000 | 7.00%, 01/01/2015 | 5,000,057 | |||||
1,555,000 | 7.00%, 01/01/2020 | 1,967,215 | |||||
2,605,000 | Cook County Illinois | ||||||
School District No. 097, | |||||||
9.00%, 12/01/2015 | |||||||
(Insured by NPFGC) | 3,321,141 | ||||||
1,430,000 | Cook County Illinois | ||||||
School District No. 100, | |||||||
8.10%, 12/01/2016 (ETM) | 1,909,794 | ||||||
2,000,000 | Cook County Illinois | ||||||
School District No. 159, | |||||||
0.00%, 12/01/2022 | |||||||
(ETM) ^ | 1,205,180 | ||||||
1,075,000 | Dupage County Illinois | ||||||
Stormwater Project, | |||||||
5.60%, 01/01/2021 | 1,225,995 | ||||||
12,285,000 | Illinois Development | ||||||
Financial Authority, | |||||||
0.00%, 07/15/2023 | |||||||
(ETM) ^ | 7,052,081 | ||||||
2,330,000 | Illinois Finance Authority | ||||||
Revenue, 5.50%, | |||||||
08/15/2043 (Pre-refunded | |||||||
to 08/15/2014) | 2,660,790 | ||||||
1,000,000 | Illinois Municipal Electric | ||||||
Agency Power Supply | |||||||
Revenue Bonds, | |||||||
5.25%, 02/01/2016 | |||||||
(Insured by NPFGC) | 1,108,590 | ||||||
Illinois State: | |||||||
1,000,000 | 5.00%, 01/01/2019 | ||||||
(Insured by AGM) | 1,007,850 | ||||||
5,000,000 | 4.00%, 09/01/2019 | ||||||
(Callable 09/01/2018) | |||||||
(Insured by AGM) | 4,609,400 | ||||||
3,000,000 | 6.00%, 11/01/2026 | ||||||
(Insured by NPFGC) | 2,954,490 | ||||||
2,100,000 | Illinois State Toll Highway | ||||||
Authority Priority Revenue | |||||||
Bonds, 5.50%, 01/01/2016 | |||||||
(Insured by AGM) | 2,359,161 | ||||||
Illinois State Toll Highway | |||||||
Authority Revenue Bonds: | |||||||
1,020,000 | 5.00%, 01/01/2026 | ||||||
(Pre-refunded to | |||||||
07/01/2016) | 1,181,191 | ||||||
2,055,000 | 5.00%, 01/01/2031 | ||||||
(Pre-refunded to | |||||||
07/01/2016) | 2,379,752 |
The accompanying notes are an integral part of these financial statements.
Page 57
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
Illinois – 10.2% (cont.) | |||||||
$ | 6,750,000 | Kane Cook & Dupage | |||||
Counties Illinois | |||||||
Community United | |||||||
School District No. 303, | |||||||
5.00%, 01/01/2014 | |||||||
(Insured by AGM) | $ | 7,332,593 | |||||
2,130,000 | Kane Cook & Dupage | ||||||
Counties Illinois School | |||||||
District No. 46 Elgin, | |||||||
0.00%, 01/01/2013 | |||||||
(Insured by AGM) ^ | 2,055,429 | ||||||
Kane McHenry Cook & | |||||||
De Kalb Counties Illinois | |||||||
School District No. 300: | |||||||
1,000,000 | 9.00%, 01/01/2015 | ||||||
(Insured by AMBAC) | 1,218,510 | ||||||
6,140,000 | 7.00%, 01/01/2018 | ||||||
(Insured by AMBAC) | 7,220,640 | ||||||
Lake County Illinois | |||||||
Community Consolidated | |||||||
School District: | |||||||
1,755,000 | 0.00%, 12/01/2012 | ||||||
(Insured by NPFGC) ^ | 1,671,023 | ||||||
1,920,000 | 0.00%, 12/01/2013 | ||||||
(Insured by NPFGC) ^ | 1,769,453 | ||||||
1,875,000 | 0.00%, 12/01/2014 | ||||||
(Insured by NPFGC) ^ | 1,647,469 | ||||||
1,025,000 | Lake County Illinois | ||||||
Community High School | |||||||
District No. 124 Grant, | |||||||
5.00%, 12/01/2017 | 1,150,624 | ||||||
1,000,000 | Lake County Illinois | ||||||
Community High School | |||||||
District No. 128, | |||||||
5.00%, 01/01/2013 | 1,073,850 | ||||||
McHenry & Kane | |||||||
Counties Illinois | |||||||
Community School | |||||||
District No. 158: | |||||||
1,870,000 | 0.00%, 01/01/2013 | ||||||
(Insured by NPFGC) ^ | 1,770,778 | ||||||
1,970,000 | 0.00%, 01/01/2016 | ||||||
(Insured by NPFGC) ^ | 1,611,263 | ||||||
Metropolitan Pier & | |||||||
Exposition Authority | |||||||
Illinois: (ETM) | |||||||
1,805,000 | 5.50%, 06/15/2016 | 2,119,160 | |||||
2,000,000 | 5.50%, 12/15/2023 | 2,299,480 | |||||
2,000,000 | Northwest Suburban | ||||||
Illinois Municipal Joint | |||||||
Action Revenue, 5.00%, | |||||||
05/01/2014 (ETM) | 2,250,940 | ||||||
4,705,000 | Regional Transportation | ||||||
Authority Illinois, | |||||||
6.00%, 07/01/2022 | |||||||
(Insured by NPFGC) | 5,301,171 | ||||||
2,745,000 | Round Lake Illinois, | ||||||
6.70%, 03/01/2033 | |||||||
(Pre-refunded to | |||||||
03/01/2013) | 3,088,839 | ||||||
Southern Illinois | |||||||
University Revenue: | |||||||
1,000,000 | 5.25%, 04/01/2018 | ||||||
(Insured by NPFGC) | 1,067,460 | ||||||
1,390,000 | 5.25%, 04/01/2019 | ||||||
(Insured by NPFGC) | 1,465,908 | ||||||
950,000 | Winnebago & Boone | ||||||
Counties Illinois School | |||||||
District No. 205, | |||||||
5.00%, 02/01/2013 | |||||||
(Insured by AMBAC) | 1,009,546 |
The accompanying notes are an integral part of these financial statements.
Page 58
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
Illinois – 10.2% (cont.) | |||||||
Winnebago County Illinois | |||||||
School District No. 122 | |||||||
Harlam-Loves Park: | |||||||
$ | 1,205,000 | 0.00%, 01/01/2018 | |||||
(Insured by AGM) ^ | $ | 898,135 | |||||
155,000 | 0.00%, 01/01/2018 | ||||||
(ETM) ^ | 126,573 | ||||||
96,171,424 | |||||||
Indiana – 1.7% | |||||||
1,990,000 | Franklin Community | ||||||
Multi-School Building | |||||||
Corp, 5.00%, 07/15/2020 | 2,115,529 | ||||||
Hammond Indiana | |||||||
Multi-School Building | |||||||
Corporation | |||||||
Revenue Bonds: | |||||||
1,000,000 | 6.00%, 01/15/2018 (ETM) | 1,139,490 | |||||
1,330,000 | 5.00%, 07/15/2018 | ||||||
(Insured by NPFGC) | 1,487,126 | ||||||
1,000,000 | Indiana State Office | ||||||
Building Commissions | |||||||
Facilities Revenue Bonds, | |||||||
5.25%, 07/01/2017 | 1,123,000 | ||||||
835,000 | Indiana Toll Road | ||||||
Commission, 9.00%, | |||||||
01/01/2015 (ETM) | 967,464 | ||||||
1,155,000 | Indianapolis Local Public | ||||||
Improvement Bond Bank, | |||||||
5.50%, 01/01/2019 | |||||||
(Insured by NPFGC) | 1,282,477 | ||||||
3,460,000 | Indianapolis Local Public | ||||||
Improvement Bond | |||||||
Waterworks Project, | |||||||
5.50%, 07/01/2018 | |||||||
(Insured by NPFGC) | 3,878,522 | ||||||
1,000,000 | Perry Township | ||||||
Multi School | |||||||
Building Corporation, | |||||||
5.00%, 07/10/2018 | |||||||
(Callable 07/10/2015) | 1,079,890 | ||||||
1,650,000 | Purdue University | ||||||
Indiana Revenue, | |||||||
5.00%, 07/01/2015 | 1,875,176 | ||||||
1,000,000 | South Bend Indiana | ||||||
Community School | |||||||
Building Corporation, | |||||||
5.00%, 07/15/2017 | |||||||
(Insured by NPFGC) | 1,120,280 | ||||||
16,068,954 | |||||||
Iowa – 1.0% | |||||||
1,010,000 | Des Moines Iowa | ||||||
Metropolitan Wastewater | |||||||
Reclamation Authority, | |||||||
5.00%, 06/01/2015 | |||||||
(Callable 06/01/2014) | |||||||
(Insured by NPFGC) | 1,099,850 | ||||||
3,325,000 | Iowa Financial Authority | ||||||
Health Care Facility | |||||||
Revenue Bonds, 9.25%, | |||||||
07/01/2025 (Pre-refunded | |||||||
to 07/01/2011) | 3,563,004 | ||||||
260,000 | Muscatine Iowa Electric | ||||||
Revenue, 6.70%, | |||||||
01/01/2013 (Callable | |||||||
07/01/2011) (ETM) | 274,711 | ||||||
2,000,000 | Wapello County Iowa | ||||||
Hospital Revenue, 6.25%, | |||||||
10/01/2022 (Pre-refunded | |||||||
to 10/01/2012) | 2,175,780 |
The accompanying notes are an integral part of these financial statements.
Page 59
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
Iowa – 1.0% (cont.) | |||||||
$ | 2,000,000 | Waterloo Iowa | |||||
Community | |||||||
School District, | |||||||
3.75%, 05/01/2012 | |||||||
(Callable 05/01/2011) | $ | 2,017,620 | |||||
9,130,965 | |||||||
Kansas – 0.2% | |||||||
1,865,000 | Wyandotte County | ||||||
Kansas Revenue, | |||||||
5.00%, 09/01/2019 | |||||||
(Callable 03/01/2019) | |||||||
(Insured by BHAC) | 2,067,483 | ||||||
Kentucky – 0.5% | |||||||
3,340,000 | Jefferson County | ||||||
Kentucky School District | |||||||
Financial School Building | |||||||
Revenue Bonds, | |||||||
5.50%, 01/01/2018 | |||||||
(Insured by AGM) | 3,878,909 | ||||||
1,035,000 | Kentucky Economic | ||||||
Development Finance | |||||||
Authority Health System | |||||||
Revenue, 5.80%, | |||||||
10/01/2014 (Pre-refunded | |||||||
to 10/01/2013) | 1,175,915 | ||||||
5,054,824 | |||||||
Louisiana – 2.6% | |||||||
1,000,000 | Houma-Terrebonne Public | ||||||
Trust Financing Authority | |||||||
Single Family Mortgage | |||||||
Revenue, 7.30%, | |||||||
04/01/2011 (ETM) | 1,016,330 | ||||||
Louisiana Public Facilities | |||||||
Authority Revenue: | |||||||
585,000 | 5.50%, 05/15/2027 | ||||||
(Pre-refunded to | |||||||
05/15/2026) | 644,588 | ||||||
10,205,000 | 5.50%, 05/15/2032 | ||||||
(Pre-refunded to | |||||||
05/15/2026) | 11,291,423 | ||||||
10,000,000 | State of Louisiana, | ||||||
5.00%, 11/15/2020 | |||||||
(Callable 05/15/2020) | 11,213,599 | ||||||
24,165,940 | |||||||
Maine – 0.5% | |||||||
4,340,000 | Maine Health & Higher | ||||||
Education Facilities | |||||||
Authority, 5.00%, | |||||||
07/01/2035 (Pre-refunded | |||||||
to 07/15/2015) | 4,970,602 | ||||||
Massachusetts – 2.2% | |||||||
5,820,000 | Massachusetts State, | ||||||
5.00%, 08/01/2020 | |||||||
(Pre-refunded to | |||||||
08/01/2016) | 6,786,353 | ||||||
3,000,000 | Massachusetts State Health | ||||||
& Educational Facilities | |||||||
Authority Revenue, 6.35%, | |||||||
07/15/2032 (Pre-refunded | |||||||
to 07/15/2012) | 3,278,070 | ||||||
Massachusetts State | |||||||
Obligations Tax Revenue: | |||||||
1,000,000 | 5.25%, 01/01/2026 | ||||||
(Pre-refunded to | |||||||
01/01/2014) | 1,114,180 | ||||||
1,835,000 | 5.75%, 01/01/2032 | ||||||
(Pre-refunded to | |||||||
01/01/2014) | 2,071,311 |
The accompanying notes are an integral part of these financial statements.
Page 60
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
Massachusetts – 2.2% (cont.) | |||||||
Massachusetts State | |||||||
Water Resources | |||||||
Authority: (ETM) | |||||||
$ | 4,105,000 | 5.25%, 12/01/2015 | $ | 4,491,486 | |||
2,345,000 | 6.50%, 07/15/2019 | 2,797,163 | |||||
20,538,563 | |||||||
Michigan – 2.5% | |||||||
1,550,000 | Clarkston Michigan | ||||||
Community Schools, | |||||||
5.00%, 05/01/2013 | |||||||
(Insured by AGM) | 1,650,595 | ||||||
1,000,000 | Cornell Township Michigan | ||||||
Economic Development | |||||||
Revenue, 5.875%, | |||||||
05/01/2018 (Pre-refunded | |||||||
to 05/01/2012) | 1,064,680 | ||||||
1,000,000 | Detroit Michigan City | ||||||
School District, | |||||||
5.00%, 05/01/2016 | |||||||
(Callable 05/01/2015) | |||||||
(Insured by AGM) | 1,067,080 | ||||||
2,185,000 | Detroit Michigan Sewer | ||||||
Disposal Revenue, 5.00%, | |||||||
07/01/2030 (Pre-refunded | |||||||
to 07/01/2015) | 2,497,389 | ||||||
1,550,000 | Harper Creek Michigan | ||||||
Community School District, | |||||||
5.00%, 05/01/2016 | |||||||
(Callable 05/01/2015) | |||||||
(Insured by AGM) | 1,707,093 | ||||||
1,390,000 | Jenison Michigan | ||||||
Public Schools, | |||||||
5.25%, 05/01/2015 | |||||||
(Insured by NPFGC) | 1,516,421 | ||||||
2,275,000 | Lakeview Public | ||||||
School District, | |||||||
5.00%, 05/01/2017 | |||||||
(Insured by NPFGC) | 2,507,619 | ||||||
Livonia Michigan Public | |||||||
Schools School District: | |||||||
4,295,000 | 5.00%, 05/01/2017 | ||||||
(Callable 05/01/2014) | |||||||
(Insured by NPFGC) | 4,609,566 | ||||||
3,000,000 | 5.00%, 05/01/2022 | ||||||
(Callable 05/01/2014) | |||||||
(Insured by NPFGC) | 3,085,710 | ||||||
4,000,000 | Michigan State Housing | ||||||
Development Authority, | |||||||
4.75%, 06/01/2016 | 4,205,920 | ||||||
23,912,073 | |||||||
Minnesota – 0.6% | |||||||
1,040,000 | Centennial Independent | ||||||
School District No. 12 | |||||||
Minnesota, 5.00%, | |||||||
02/01/2014 (Pre-refunded | |||||||
to 02/01/2012, Insured | |||||||
by AGM) | 1,082,536 | ||||||
1,125,000 | Minnesota State Housing | ||||||
Finance Agency | |||||||
Homeownership | |||||||
Finance Bond, | |||||||
4.25%, 07/01/2028 | |||||||
(Callable 01/01/2020) | 1,175,276 | ||||||
1,215,000 | Robbinsdale Independent | ||||||
School District No. 281, | |||||||
5.00%, 07/01/2020 | |||||||
(Pre-refunded to | |||||||
02/01/2012, Insured | |||||||
by AGM) | 1,264,694 |
The accompanying notes are an integral part of these financial statements.
Page 61
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
Minnesota – 0.6% (cont.) | |||||||
$ | 1,960,000 | Western Minnesota | |||||
Municipal Power Agency, | |||||||
6.375%, 01/01/2016 | |||||||
(ETM) | $ | 2,210,998 | |||||
5,733,504 | |||||||
Mississippi – 0.3% | |||||||
1,110,000 | Mississippi Development | ||||||
Bank Special Obligations, | |||||||
5.25%, 10/01/2030 | |||||||
(Pre-refunded to | |||||||
10/01/2015) | 1,281,539 | ||||||
850,000 | Mississippi Housing | ||||||
Financial Corporation, | |||||||
0.00%, 06/01/2015 | |||||||
(ETM) ^ | 777,623 | ||||||
1,000,000 | Mississippi State, | ||||||
5.00%, 11/01/2021 | |||||||
(Pre-refunded to | |||||||
11/01/2012) | 1,073,360 | ||||||
3,132,522 | |||||||
Missouri – 0.4% | |||||||
1,000,000 | St. Charles County | ||||||
Missouri Francis Howell | |||||||
School District, | |||||||
4.50%, 03/01/2018 | 1,118,450 | ||||||
2,000,000 | St. Louis County | ||||||
Industrial Development | |||||||
Authority, 6.625%, | |||||||
11/15/2035 (Pre-refunded | |||||||
to 11/15/2013) | 2,313,420 | ||||||
3,431,870 | |||||||
Nebraska – 1.3% | |||||||
1,640,000 | Nebraska Public Power | ||||||
District Revenue, | |||||||
5.00%, 01/01/2015 | |||||||
(Insured by NPFGC) | 1,821,072 | ||||||
9,150,000 | Omaha Nebraska Public | ||||||
Electric Power District | |||||||
Revenue, 6.20%, | |||||||
02/01/2017 (ETM) | 10,456,985 | ||||||
12,278,057 | |||||||
Nevada – 0.2% | |||||||
2,080,000 | Las Vegas Clark County | ||||||
Nevada Library District, | |||||||
5.00%, 01/01/2017 | 2,282,571 | ||||||
New Hampshire – 0.1% | |||||||
1,000,000 | State of New Hampshire, | ||||||
5.00%, 07/01/2021 | |||||||
(Callable 07/01/2020) | 1,136,660 | ||||||
New Jersey – 2.2% | |||||||
New Jersey Economic | |||||||
Development Authority | |||||||
Revenue Bonds: | |||||||
2,250,000 | 6.375%, 04/01/2018 | ||||||
(Pre-refunded to | |||||||
05/15/2014) | 2,633,220 | ||||||
3,000,000 | 6.375%, 04/01/2031 | ||||||
(Pre-refunded to | |||||||
05/15/2014) | 3,510,960 | ||||||
1,300,000 | New Jersey Sports & | ||||||
Exposition Authority State | |||||||
Contract Bonds, 6.50%, | |||||||
03/01/2013 (ETM) | 1,381,432 |
The accompanying notes are an integral part of these financial statements.
Page 62
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
New Jersey – 2.2% (cont.) | |||||||
New Jersey State | |||||||
Transportation Trust | |||||||
Fund Authority: | |||||||
$ | 2,595,000 | 5.50%, 12/15/2015 | |||||
(Insured by AMBAC) | $ | 2,927,887 | |||||
5,000,000 | 5.25%, 12/15/2020 | 5,380,950 | |||||
New Jersey State | |||||||
Turnpike Authority, | |||||||
1,630,000 | 6.50%, 01/01/2016 (ETM) | 1,858,435 | |||||
2,500,000 | Tobacco Settlement | ||||||
Financing Corporation, | |||||||
6.25%, 06/01/2043 | |||||||
(Pre-refunded to | |||||||
06/01/2013) | 2,814,350 | ||||||
20,507,234 | |||||||
New Mexico – 0.4% | |||||||
New Mexico Mortgage | |||||||
Financial Authority: | |||||||
1,500,000 | 4.625%, 09/01/2025 | ||||||
(Callable 03/01/2020) | 1,574,055 | ||||||
1,200,000 | 4.50%, 09/01/2028 | ||||||
(Callable 03/01/2020) | 1,266,924 | ||||||
1,000,000 | New Mexico State | ||||||
Hospital Equipment Loan | |||||||
Council Hospital Revenue, | |||||||
5.25%, 07/01/2025 | |||||||
(Pre-refunded to | |||||||
07/01/2015) | 1,146,740 | ||||||
3,987,719 | |||||||
New York – 6.6% | |||||||
2,000,000 | Long Island Power | ||||||
Authority and Electric | |||||||
System Revenue, | |||||||
5.00%, 12/01/2017 | |||||||
(Callable 12/01/2016) | |||||||
(Insured by NPFGC) | 2,211,540 | ||||||
13,230,000 | Metropolitan Transit | ||||||
Authority New York, | |||||||
6.00%, 04/01/2020 | |||||||
(ETM) | 16,180,289 | ||||||
4,730,000 | New York City, New York | ||||||
Transitional Financial | |||||||
Authority Building Aid | |||||||
Revenue Bonds, | |||||||
5.00%, 01/15/2015 | |||||||
(Insured by AGM) | 5,264,821 | ||||||
New York, New York: | |||||||
1,000,000 | 5.00%, 03/01/2016 | ||||||
(Callable 03/01/2015) | |||||||
(Insured by FGIC-TCRS) | 1,100,970 | ||||||
5,000,000 | 5.00%, 08/01/2017 | 5,636,850 | |||||
1,125,000 | 5.25%, 08/15/2021 | ||||||
(Callable 08/15/2018) | 1,225,688 | ||||||
2,000,000 | New York State Dormitory | ||||||
Authority and Personal | |||||||
Income Tax Revenue, | |||||||
5.00%, 12/15/2017 | 2,314,160 | ||||||
4,040,000 | New York State | ||||||
Thruway Authority, | |||||||
5.00%, 03/15/2022 | |||||||
(Callable 03/15/2019) | 4,369,543 | ||||||
New York State | |||||||
University Dormitory | |||||||
Authority Revenues: | |||||||
1,800,000 | 5.50%, 05/15/2013 | ||||||
(Insured by NPFGC) | 1,919,898 | ||||||
4,730,000 | 5.25%, 05/15/2015 | 5,275,274 |
The accompanying notes are an integral part of these financial statements.
Page 63
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
New York – 6.6% (cont.) | |||||||
$ | 185,000 | TSASC Inc. New York, | |||||
4.75%, 06/01/2022 | |||||||
(Callable 06/01/2016) | $ | 178,205 | |||||
12,775,000 | Westchester Tobacco Asset | ||||||
Securitization Corp. New | |||||||
York, 6.95%, 07/15/2039 | |||||||
(Pre-refunded to | |||||||
07/15/2017) | 16,439,636 | ||||||
62,116,874 | |||||||
North Carolina – 3.0% | |||||||
North Carolina Eastern | |||||||
Municipal Power Agency | |||||||
Power Systems Revenue: | |||||||
(ETM) | |||||||
2,980,000 | 5.00%, 01/01/2017 | 3,379,320 | |||||
5,700,000 | 6.40%, 01/01/2021 | 6,947,103 | |||||
5,500,000 | 4.50%, 01/01/2024 | ||||||
(Pre-refunded to | |||||||
01/01/2022) | 6,042,520 | ||||||
1,060,000 | 6.00%, 01/01/2026 | ||||||
(Pre-refunded to | |||||||
01/01/2022) | 1,300,016 | ||||||
6,495,000 | North Carolina Medical | ||||||
Care Community Hospital | |||||||
Revenue, 5.25%, | |||||||
11/01/2029 (Pre-refunded | |||||||
to 11/01/2014) | 7,267,840 | ||||||
1,730,000 | North Carolina Municipal | ||||||
Power Agency No. 1 | |||||||
Catawba Electric Revenue, | |||||||
5.50%, 01/01/2013 (ETM) | 1,805,463 | ||||||
1,000,000 | North Carolina State, | ||||||
5.00%, 05/01/2016 | |||||||
(Pre-refunded to | |||||||
05/01/2013) | 1,096,920 | ||||||
27,839,182 | |||||||
Ohio – 0.7% | |||||||
1,000,000 | Akron Ohio Community | ||||||
Learning Center Income | |||||||
Tax Revenue, | |||||||
5.25%, 12/01/2016 | |||||||
(Callable 12/01/2013) | |||||||
(Insured by NPFGC) | 1,077,750 | ||||||
2,000,000 | Cincinnati Ohio City | ||||||
School District, | |||||||
5.00%, 12/01/2016 | |||||||
(Insured by AGM) | 2,296,560 | ||||||
105,000 | Miamisburg Ohio Water | ||||||
Revenue, 7.00%, | |||||||
11/15/2016 (Callable | |||||||
02/07/2011) (ETM) | 116,885 | ||||||
3,000,000 | Ohio Housing | ||||||
Finance Agency, | |||||||
5.00%, 11/01/2028 | |||||||
(Callable 05/01/2020) | 3,225,690 | ||||||
6,716,885 | |||||||
Oklahoma – 0.4% | |||||||
1,000,000 | Cherokee County | ||||||
Oklahoma Economic | |||||||
Development Authority, | |||||||
0.00%, 11/01/2011 | |||||||
(ETM) ^ | 994,680 |
The accompanying notes are an integral part of these financial statements.
Page 64
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
Oklahoma – 0.4% (cont.) | |||||||
$ | 2,360,000 | Tulsa County Oklahoma | |||||
Home Financing Authority | |||||||
Single Family Mortgage | |||||||
Revenue, 6.90%, | |||||||
08/01/2011 (ETM) | $ | 2,446,872 | |||||
3,441,552 | |||||||
Pennsylvania – 4.1% | |||||||
1,275,000 | Central Dauphin | ||||||
Pennsylvania School | |||||||
District, 6.75%, | |||||||
02/01/2024 (Pre-refunded | |||||||
to 02/01/2016) | 1,578,909 | ||||||
1,250,000 | Erie Pennsylvania Sewer | ||||||
Authority Revenue, 5.125%, | |||||||
06/01/2020 (ETM) | 1,420,463 | ||||||
6,795,000 | Pennsylvania Convention | ||||||
Center Authority Revenue | |||||||
Bonds, 6.00%, | |||||||
09/01/2019 (ETM) | 8,064,510 | ||||||
Pennsylvania Housing | |||||||
Finance Agency: | |||||||
2,130,000 | 3.70%, 04/01/2018 | 2,096,666 | |||||
1,760,000 | 3.75%, 10/01/2018 | 1,730,872 | |||||
1,025,000 | 3.90%, 04/01/2019 | 1,009,328 | |||||
1,675,000 | 3.90%, 10/01/2019 | ||||||
(Callable 04/01/2019) | 1,648,100 | ||||||
3,390,000 | Pennsylvania State Higher | ||||||
Education Facilities | |||||||
Authority Revenue, 5.00%, | |||||||
01/01/2029 (Pre-refunded | |||||||
to 01/01/2013) | 3,668,285 | ||||||
3,000,000 | Pennsylvania State Public | ||||||
School Building Authority | |||||||
Lease Revenue, 5.00%, | |||||||
11/15/2034 (Pre-refunded | |||||||
to 11/15/2014) | 3,392,430 | ||||||
1,790,000 | Philadelphia Pennsylvania | ||||||
Authority For Industrial | |||||||
Development Revenue, | |||||||
5.25%, 01/01/2027 | |||||||
(Pre-refunded to | |||||||
01/01/2017) | 2,096,967 | ||||||
3,135,000 | Philadelphia Pennsylvania | ||||||
Gas Works, 7.00%, | |||||||
05/15/2020 (ETM) | 3,679,738 | ||||||
Pittsburgh Pennsylvania | |||||||
Water & Sewer Authority | |||||||
Revenue Bonds: | |||||||
1,130,000 | 7.25%, 09/01/2014 | ||||||
(Callable 01/24/2011) | |||||||
(ETM) | 1,274,538 | ||||||
4,500,000 | 5.00%, 09/01/2029 | ||||||
(Pre-refunded to | |||||||
09/01/2015) | 5,144,535 | ||||||
1,500,000 | St. Mary Hospital | ||||||
Authority Pennsylvania | |||||||
Health Revenue, 5.375%, | |||||||
11/15/2034 (Pre-refunded | |||||||
to 11/15/2014) | 1,723,320 | ||||||
38,528,661 | |||||||
Puerto Rico – 0.3% | |||||||
1,625,000 | Puerto Rico Public | ||||||
Building Authority, 5.50%, | |||||||
07/01/2022 (Pre-refunded | |||||||
to 07/01/2014) | 1,848,113 |
The accompanying notes are an integral part of these financial statements.
Page 65
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
Puerto Rico – 0.3% (cont.) | |||||||
$ | 1,080,000 | Puerto Rico Public Finance | |||||
Corporation, 6.00%, | |||||||
08/01/2026 (ETM) | $ | 1,275,966 | |||||
3,124,079 | |||||||
South Carolina – 2.1% | |||||||
Lexington County South | |||||||
Carolina Health Services | |||||||
District Hospital Revenue: | |||||||
1,000,000 | 6.00%, 11/01/2018 | ||||||
(Pre-refunded to | |||||||
11/01/2013) | 1,135,780 | ||||||
4,520,000 | 5.50%, 11/01/2032 | ||||||
(Pre-refunded to | |||||||
11/01/2013) | 5,071,078 | ||||||
5,875,000 | Piedmont Municipal | ||||||
Power Agency South | |||||||
Carolina Electric Revenue, | |||||||
6.75%, 01/01/2020 | |||||||
(ETM) | 7,414,368 | ||||||
South Carolina Jobs | |||||||
Economic Development | |||||||
Authority Hospital | |||||||
Facilities Revenue: | |||||||
2,575,000 | 7.00%, 08/01/2030 | ||||||
(Pre-refunded to | |||||||
08/01/2013) | 2,945,079 | ||||||
2,430,000 | 6.375%, 08/01/2034 | ||||||
(Pre-refunded to | |||||||
08/01/2013) | 2,740,943 | ||||||
19,307,248 | |||||||
South Dakota – 0.1% | |||||||
1,195,000 | Heartland Consumers | ||||||
Power District, 7.00%, | |||||||
01/01/2016 (ETM) | 1,359,348 | ||||||
Tennessee – 1.4% | |||||||
1,000,000 | Metropolitan Government | ||||||
Nashville & Davidson | |||||||
County Tennessee H&E, | |||||||
0.00%, 06/01/2021 | |||||||
(ETM) ^ | 662,920 | ||||||
1,545,000 | Metropolitan Government | ||||||
Nashville & Davidson | |||||||
County Tennessee Water | |||||||
& Sewer Revenue, 6.50%, | |||||||
12/01/2014 (ETM) | 1,845,379 | ||||||
5,000,000 | Shelby County Tennessee | ||||||
Health Educational & | |||||||
Housing Facilities Revenue, | |||||||
5.50%, 08/15/2019 (ETM) | 5,637,650 | ||||||
5,055,000 | Tennessee Housing | ||||||
Development Agency, | |||||||
4.50%, 07/01/2028 | |||||||
(Callable 01/01/2020) | 5,346,269 | ||||||
13,492,218 | |||||||
Texas – 13.9% | |||||||
1,125,000 | Barbers Hill Texas | ||||||
Independent School | |||||||
District General Obligation, | |||||||
5.00%, 02/15/2017 | |||||||
(Callable 02/15/2015) | |||||||
(PSF Guaranteed) | 1,248,615 | ||||||
6,060,000 | Capital Area Housing | ||||||
Finance Corporation | |||||||
Texas, 0.00%, | |||||||
01/01/2016 (ETM) ^ | 5,403,944 | ||||||
1,500,000 | Central Texas Housing | ||||||
Finance Corporation, | |||||||
0.00%, 09/01/2016 | |||||||
(ETM) ^ | 1,310,670 |
The accompanying notes are an integral part of these financial statements.
Page 66
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
Texas – 13.9% (cont.) | |||||||
$ | 1,000,000 | Copperas Cove Texas | |||||
Independent School District, | |||||||
5.00%, 08/15/2016 | |||||||
(Callable 08/15/2015) | |||||||
(PSF Guaranteed) | $ | 1,132,910 | |||||
1,500,000 | Cypress-Fairbanks | ||||||
Texas Independent | |||||||
School District, | |||||||
5.00%, 02/15/2017 | |||||||
(Callable 02/15/2016) | |||||||
(PSF Guaranteed) | 1,697,295 | ||||||
2,410,000 | Dallas Texas Independent | ||||||
School District, | |||||||
5.00%, 02/15/2020 | |||||||
(PSF Guaranteed) | 2,748,364 | ||||||
1,355,000 | El Paso Texas Waterworks | ||||||
& Sewer Revenue, | |||||||
5.00%, 08/15/2018 | 1,553,033 | ||||||
1,625,000 | Frisco Texas Independent | ||||||
School District, | |||||||
6.00%, 08/15/2018 | |||||||
(Callable 08/15/2016) | |||||||
(PSF Guaranteed) | 1,905,199 | ||||||
1,000,000 | Georgetown Texas | ||||||
Independent School District, | |||||||
5.00%, 02/15/2016 | |||||||
(Callable 02/15/2015) | |||||||
(PSF Guaranteed) | 1,118,650 | ||||||
Harris County Texas: | |||||||
2,000,000 | 5.25%, 10/01/2017 | ||||||
(Pre-refunded to | |||||||
10/01/2013) | 2,231,940 | ||||||
1,500,000 | 5.00%, 10/01/2019 | 1,706,790 | |||||
2,860,000 | 5.75%, 10/01/2028 | ||||||
(Pre-refunded to | |||||||
10/01/2018) | 3,447,673 | ||||||
Harris County Texas | |||||||
Health Facilities | |||||||
Development Corporation | |||||||
Hospital Revenue: (ETM) | |||||||
8,000,000 | 5.50%, 10/01/2013 | 8,499,280 | |||||
3,720,000 | 5.50%, 10/01/2019 | 4,278,558 | |||||
10,960,000 | Houston Texas Health | ||||||
Facilities Corporate | |||||||
Facilities Revenue, 7.125%, | |||||||
02/15/2034 (Pre-refunded | |||||||
to 02/15/2014) | 12,935,210 | ||||||
1,205,000 | Houston Texas Sewer | ||||||
System Revenue, 9.375%, | |||||||
10/01/2013 (Callable | |||||||
04/01/2011) (ETM) | 1,376,833 | ||||||
3,000,000 | Houston Texas Utility | ||||||
System Revenue, | |||||||
5.25%, 05/15/2015 | |||||||
(Callable 05/15/2014) | |||||||
(Insured by NPFGC) | 3,338,100 | ||||||
Houston Texas Water | |||||||
& Sewer System | |||||||
Revenue Bonds: | |||||||
9,550,000 | 5.50%, 12/01/2029 | ||||||
(ETM) | 10,863,124 | ||||||
1,000,000 | 5.00%, 12/01/2030 | ||||||
(Pre-refunded to | |||||||
12/01/2012) | 1,078,860 | ||||||
1,315,000 | La Porte Texas | ||||||
Independent School District, | |||||||
5.00%, 02/15/2018 | |||||||
(Callable 02/15/2015) | |||||||
(Insured by NPFGC) | 1,413,336 | ||||||
3,425,000 | Lubbock Texas, | ||||||
5.00%, 02/15/2021 | |||||||
(Callable 02/15/2018) | |||||||
(Insured by AGM) | 3,725,578 |
The accompanying notes are an integral part of these financial statements.
Page 67
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
Texas – 13.9% (cont.) | |||||||
$ | 1,735,000 | Lufkin Texas Independent School | |||||
District, 5.00%, 08/15/2015 | |||||||
(Callable 08/15/2014) | |||||||
(PSF Guaranteed) | $ | 1,944,397 | |||||
1,050,000 | Magnolia Texas | ||||||
Independent School District, | |||||||
5.00%, 08/15/2016 | |||||||
(PSF Guaranteed) | 1,213,370 | ||||||
1,265,000 | Mission Consolidation | ||||||
Independent School District, | |||||||
5.00%, 02/15/2019 | |||||||
(Callable 02/15/2015) | |||||||
(PSF Guaranteed) | 1,362,127 | ||||||
1,125,000 | North Central Texas Health | ||||||
Facilities Revenue, 5.75%, | |||||||
02/15/2015 (ETM) | 1,281,611 | ||||||
1,210,000 | Pearland Texas Waterworks | ||||||
& Sewage, 5.25%, | |||||||
03/01/2023 (Pre-refunded | |||||||
to 03/01/2014) | 1,363,694 | ||||||
2,035,000 | Retama Texas Development | ||||||
Corporation Special Facilities | |||||||
Revenue, 8.75%, | |||||||
12/15/2018 (ETM) | 2,823,440 | ||||||
1,295,000 | Rockwall Texas Independent | ||||||
School District, | |||||||
5.00%, 02/15/2015 | |||||||
(PSF Guaranteed) | 1,469,488 | ||||||
11,565,000 | San Antonio Texas | ||||||
Electric & Gas Revenue, | |||||||
5.65%, 02/01/2019 (ETM) | 13,518,906 | ||||||
2,100,000 | San Antonio Texas Hotel | ||||||
Occupancy Tax Revenue | |||||||
Bonds, 0.00%, | |||||||
08/15/2015 (ETM) ^ | 1,908,879 | ||||||
2,000,000 | San Antonio Texas | ||||||
Independent School District, | |||||||
5.00%, 08/15/2017 | |||||||
(Callable 08/15/2015) | |||||||
(PSF Guaranteed) | 2,240,500 | ||||||
1,000,000 | Spring Texas Independent | ||||||
School District, | |||||||
5.00%, 08/15/2019 | |||||||
(Callable 08/15/2018) | |||||||
(PSF Guaranteed) | 1,135,160 | ||||||
7,775,000 | Tarrant County Texas | ||||||
Health Facilities Revenue, | |||||||
6.00%, 09/01/2024 (ETM) | 9,330,078 | ||||||
1,800,000 | Tarrant County Texas | ||||||
Housing Finance | |||||||
Corporation Revenue | |||||||
Bonds, 0.00%, | |||||||
09/15/2016 (ETM) ^ | 1,566,936 | ||||||
95,000 | Texas Public Building | ||||||
Authority Revenue, 7.125%, | |||||||
08/01/2011 (ETM) | 95,455 | ||||||
Texas State: | |||||||
6,285,000 | 5.00%, 10/01/2018 | 7,217,254 | |||||
3,965,000 | 5.00%, 04/01/2020 | ||||||
(Callable 04/01/2016) | 4,374,941 | ||||||
1,900,000 | Trinity River Authority | ||||||
Texas Revenue, 5.50%, | |||||||
02/01/2021 (Pre-refunded | |||||||
to 02/01/2013) | 2,081,906 | ||||||
1,000,000 | University of Houston Texas, | ||||||
5.25%, 02/15/2012 | |||||||
(Insured by AGM) | 1,049,690 | ||||||
1,225,000 | University of Texas Revenue | ||||||
Bonds, 5.25%, | |||||||
02/15/2012 (Pre-refunded | |||||||
to 08/15/2016) | 1,412,082 | ||||||
130,403,876 |
The accompanying notes are an integral part of these financial statements.
Page 68
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
Utah – 0.1% | |||||||
$ | 500,000 | Salt Lake City Utah | |||||
Hospital Revenue, 8.125%, | |||||||
05/15/2015 (Callable | |||||||
02/07/2011) (ETM) | $ | 567,925 | |||||
Virginia – 0.6% | |||||||
1,095,000 | Bristol Virginia Utility | ||||||
Systems General | |||||||
Obligations, 5.50%, | |||||||
11/01/2018 (ETM) | 1,269,455 | ||||||
3,870,000 | Tobacco Settlement | ||||||
Financing Corporation | |||||||
Revenue, 5.625%, | |||||||
06/01/2037 (Pre-refunded | |||||||
to 06/01/2015) | 4,506,692 | ||||||
5,776,147 | |||||||
Washington – 2.4% | |||||||
1,005,000 | City of Ocean Shores WA, | ||||||
5.50%, 12/01/2021 | |||||||
(Callable 06/01/2012) | |||||||
(Insured by NPFGC) | 1,037,894 | ||||||
4,500,000 | Snohomish County School | ||||||
District No. 201, | |||||||
4.00%, 12/01/2021 | |||||||
(Callable 12/01/2020) | 4,629,825 | ||||||
1,000,000 | Snohomish County | ||||||
Washington Public Utilities | |||||||
Revenue, 6.80%, | |||||||
01/01/2020 (Callable | |||||||
02/07/2011) (ETM) | 1,214,020 | ||||||
2,755,000 | Thurston & Pierce | ||||||
Counties Washington | |||||||
Community Schools, | |||||||
4.25%, 12/01/2021 | |||||||
(Callable 12/01/2020) | 2,868,010 | ||||||
Washington State: | |||||||
1,500,000 | 5.00%, 07/01/2018 | ||||||
(Callable 07/01/2013) | 1,615,560 | ||||||
10,000,000 | 5.00%, 01/01/2021 | 11,219,399 | |||||
22,584,708 | |||||||
West Virginia – 1.8% | |||||||
7,365,000 | Berkeley Brooke Fayette | ||||||
Counties West Virginia | |||||||
Single Family Mortgage | |||||||
Revenue, 0.00%, | |||||||
12/01/2014 (ETM) ^ | 6,875,154 | ||||||
8,390,000 | West Virginia State | ||||||
Building Community | |||||||
Lease Revenue Bonds, | |||||||
7.00%, 07/01/2013 | |||||||
(ETM) | 9,635,579 | ||||||
16,510,733 | |||||||
Wisconsin – 1.4% | |||||||
Badger Tobacco Asset | |||||||
Securitization Corporation | |||||||
Wisconsin: | |||||||
960,000 | 5.75%, 06/01/2012 (ETM) | 1,025,856 | |||||
5,115,000 | 6.125%, 06/01/2027 | ||||||
(Callable 06/01/2012) | |||||||
(Pre-refunded to | |||||||
various dates) | 5,341,543 | ||||||
3,000,000 | Ladysmith-Hawkins | ||||||
Wisconsin School District | |||||||
General Obligation, | |||||||
5.20%, 04/01/2018 | |||||||
(Callable 04/01/2016) | |||||||
(Insured by NPFGC) | 3,043,680 |
The accompanying notes are an integral part of these financial statements.
Page 69
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 97.1% (cont.) | |||||||
Wisconsin – 1.4% (cont.) | |||||||
$ | 3,320,000 | Wisconsin State | |||||
Health & Educational | |||||||
Facilities Revenue, | |||||||
5.00%, 12/01/2019 | |||||||
(Callable 12/01/2014) | |||||||
(Insured by NPFGC) | $ | 3,376,340 | |||||
12,787,419 | |||||||
Total Municipal Bonds | |||||||
(Cost $901,997,949) | 914,138,799 | ||||||
Shares | |||||||
SHORT-TERM INVESTMENTS – 0.8% | |||||||
Money Market Mutual Fund – 0.8% | |||||||
7,677,392 | Goldman Sachs Financial | ||||||
Square Funds, 0.17% « | 7,677,392 | ||||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $7,677,392) | 7,677,392 | ||||||
Total Investments | |||||||
(Cost $909,675,341) | |||||||
– 97.9% | 921,816,191 | ||||||
Other Assets in Excess | |||||||
of Liabilities – 2.1% | 19,937,703 | ||||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 941,753,894 |
Notes to Schedule of Investments
AGM – Assured Guaranty Municipal
AMBAC – Ambac Assurance Corporation. Ambac Assurance’s plan of rehabilitation transferring certain troubled insurance policies and assets (mostly relating to insurance coverage and credit default swaps on residential mortgage-backed securities) to a segregated account has obtained court approval but has not yet been implemented.
BHAC – Berkshire Hathaway Assurance Corp.
FGIC – Financial Guaranty Insurance Company
NPFGC – National Public Finance Guarantee Corp.
PSF – Texas Permanent School Fund
ETM – Escrowed to Maturity
^ | Non-Income Producing |
« | 7-Day Yield |
The accompanying notes are an integral part of these financial statements.
Page 70
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2010 |
Summary of Fair Value Exposure at December 31, 2010
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 standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Management has determined that these standards have no material impact on the Funds’ financial statements. The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability. These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized into three broad levels and described below:
Level 1 – | Unadjusted quoted prices in active markets for identical unrestricted 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 factors that market participants would use in valuing the security) based on the best information available. |
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, 2010:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
Municipal Bonds | $ | — | $ | 914,138,799 | $ | — | $ | 914,138,799 | ||||||||
Total Fixed Income | — | 914,138,799 | — | 914,138,799 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Fund | 7,677,392 | — | — | 7,677,392 | ||||||||||||
Total Short-Term Investments | 7,677,392 | — | — | 7,677,392 | ||||||||||||
Total Investments | $ | 7,677,392 | $ | 914,138,799 | $ | — | $ | 921,816,191 |
Changes in valuation techniques may result in transfers into or out of current assigned levels within the hierarchy. There were no significant transfers between Level 1 and Level 2 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.
Page 71
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, U.S. dollar denominated fixed-rate taxable bonds, including Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities, with maturities of at least one year.
The Fund entered the year with a significant yield advantage over its benchmark and was able to convert it into strong relative and absolute net performance in 2010. The primary factors for the Fund’s outperformance over its benchmark index were:
• The underweight to U.S. Treasuries was beneficial to the Fund’s performance as Treasuries generally underperformed equal duration securities from the other high quality “spread sectors” of the bond market in 2010.
• An overweight to the corporate credit sector and specifically financial issues. An overweight to credit was positive for relative performance as the credit sector performed well in 2010. Financials were the best performing credit sector during the year.
• Price appreciation of non-Agency mortgage-backed securities. Non-Agency mortgages continued to perform well due to strong demand in the marketplace.
• Price recovery from certain securities with sound fundamental value whose market prices had temporarily fallen and subsequently appreciated in value.
• An underweight to Agency mortgage pass-through securities detracted from relative performance.
The Fund maintained its duration-neutral positioning relative to its benchmark index, holding a broadly diversified portfolio of 492 securities at year end.
We are pleased with the Fund’s performance in 2010 and are confident in the individual issues and the overall structure of the Fund. The Fund’s yield advantage over the benchmark is meaningful and we are optimistic regarding the Fund’s relative performance as we head into 2011.
Portfolio Characteristics
Quality Distribution* | Sector Weightings* |
Net Assets: | $1,697,334,757 | Annualized Expense Ratio: | |||
SEC 30-Day Yield:** | Institutional Class: | 0.30 | % | ||
Institutional Class: | 3.99% | Investor Class: | 0.55 | %*** | |
Investor Class: | 3.72% | Portfolio Turnover Rate: | 41.4 | % | |
Average Effective Duration: | 4.98 years | Total Number of Holdings: | 492 | ||
Average Effective Maturity: | 7.26 years |
* | Percentages shown are based on the Fund’s total investments (less investments purchased with cash proceeds from securities lending). |
** | SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2010. |
*** | Includes 0.25% 12b-1 fee. |
Page 72
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 73
Baird Aggregate Bond Fund
Average Annual Total Returns
Since | ||||
For the Periods Ended December 31, 2010 | One Year | Five Years | Ten Years | Inception(1) |
Institutional Class Shares | 8.34% | 5.37% | 5.88% | 6.31% |
Investor Class Shares | 8.16% | 5.13% | 5.63% | 6.07% |
Barclays Capital U.S. Aggregate Bond Index(2) | 6.54% | 5.80% | 5.84% | 6.11% |
(1) | For the period from September 29, 2000 (commencement of operations) through December 31, 2010. |
(2) | The Barclays Capital U.S. Aggregate Bond Index is an unmanaged, market value weighted index of investment grade, U.S. dollar denominated, fixed-rate taxable bonds, including Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities and commercial 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 74
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% | |||||||
Asset Backed Securities – 4.3% | |||||||
$ | 1,521 | Amresco Residential | |||||
Securities Mortgage | |||||||
Loan Trust, | |||||||
Series 1997-3, Class A9, | |||||||
6.96%, 03/25/2027 | $ | 1,527 | |||||
Bayview Financial | |||||||
Acquisition Trust: | |||||||
1,555,422 | Series 2006-A, Class 1A2, | ||||||
5.483%, 02/28/2041 | 1,563,319 | ||||||
2,500,000 | Series 2007-B, Class 1A2, | ||||||
6.831%, 08/28/2047 | 1,251,825 | ||||||
1,275,000 | Chase Issuance Trust, | ||||||
Series 2007-A10, Class | |||||||
A10, 0.296%, 06/15/2014 | 1,271,059 | ||||||
452 | Contimortgage Home | ||||||
Equity Trust, | |||||||
Series 1997-2, Class A9, | |||||||
7.09%, 04/15/2028 | |||||||
(Callable 01/15/2011) | 446 | ||||||
Countrywide Asset- | |||||||
Backed Certificates: | |||||||
1,317,851 | Series 2006-S2, Class A2, | ||||||
5.627%, 07/25/2027 | 1,203,030 | ||||||
1,282,218 | Series 2005-17, | ||||||
Class 1AF2, 5.363%, | |||||||
03/25/2030 | 1,028,685 | ||||||
2,320,053 | Series 2004-S1, Class A3, | ||||||
4.615%, 02/25/2035 | |||||||
(Callable 09/25/2012) | 2,190,427 | ||||||
7,227,806 | Series 2004-15, | ||||||
Class AF6, 4.613%, | |||||||
04/25/2035 | |||||||
(Callable 01/25/2018) | 7,056,927 | ||||||
10,320,370 | Series 2005-1, Class AF6, | ||||||
5.03%, 07/25/2035 | |||||||
(Callable 06/25/2020) | 10,282,886 | ||||||
12,698,441 | Series 2005-11, | ||||||
Class AF3, 4.778%, | |||||||
02/25/2036 | 10,724,416 | ||||||
4,719,405 | Series 2005-10, | ||||||
Class AF6, 4.915%, | |||||||
02/25/2036 | 3,973,819 | ||||||
5,396,094 | Series 2005-13, | ||||||
Class AF3, 5.43%, | |||||||
04/25/2036 | 3,993,908 | ||||||
1,915,860 | Series 2005-17, | ||||||
Class 1AF5, 5.564%, | |||||||
05/25/2036 | |||||||
(Callable 12/25/2026) | 1,275,145 | ||||||
1,887,135 | Series 2007-S1, Class A6, | ||||||
5.693%, 11/25/2036 | |||||||
(Callable 09/25/2016) | 1,209,378 | ||||||
5,134,303 | Series 2006-13, | ||||||
Class 1AF2, 5.884%, | |||||||
01/25/2037 | 4,694,807 | ||||||
1,500,000 | Series 2006-10, | ||||||
Class 1AF3, 5.971%, | |||||||
09/25/2046 | 913,595 | ||||||
526,324 | Credit Based Asset | ||||||
Servicing and Securities, | |||||||
Series 2005-CB8, Class | |||||||
AF2, 5.303%, 12/25/2035 | 515,039 | ||||||
125,480 | Equivantage Home | ||||||
Equity Loan Trust, | |||||||
Series 1996-3, Class A3, | |||||||
7.70%, 09/25/2027 | 120,799 | ||||||
3,113,801 | FedEx Corporation | ||||||
Pass-Thru Certificates, | |||||||
Series 1998-1, 6.845%, | |||||||
01/15/2019 | 3,541,949 |
The accompanying notes are an integral part of these financial statements.
Page 75
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Asset Backed Securities – 4.3% (cont.) | |||||||
GE Capital Mortgage | |||||||
Services, Inc.: | |||||||
$ | 1,154 | Series 1997-HE4, | |||||
Class A7, 6.735%, | |||||||
12/25/2028 | $ | 1,141 | |||||
18,560 | Series 1999-HE1, Class | ||||||
A7, 6.265%, 04/25/2029 | |||||||
(Callable 01/25/2011) | 18,162 | ||||||
Green Tree Financial | |||||||
Corporation: | |||||||
704,984 | Series 1993-3, Class A7, | ||||||
6.40%, 10/15/2018 | |||||||
(Callable 01/15/2011) | 708,509 | ||||||
493,354 | Series 1993-4, Class A5, | ||||||
7.05%, 01/15/2019 | |||||||
(Callable 01/15/2011) | 505,065 | ||||||
42,907 | Series 1997-1, Class A5, | ||||||
6.86%, 03/15/2028 | 45,087 | ||||||
1,546,797 | Series 1998-2, Class A5, | ||||||
6.24%, 12/01/2028 | 1,531,670 | ||||||
78,955 | Series 1997-6, Class A8, | ||||||
7.07%, 01/15/2029 | 82,528 | ||||||
1,299,113 | Series 1998-3, Class A5, | ||||||
6.22%, 03/01/2030 | 1,375,977 | ||||||
794,492 | Series 1998-4, Class A5, | ||||||
6.18%, 04/01/2030 | 805,041 | ||||||
344,365 | GSAA Home Equity Trust, | ||||||
Series 2005-1, Class AF2, | |||||||
4.316%, 11/25/2034 | 346,758 | ||||||
52,895 | IMC Home Equity | ||||||
Loan Trust, | |||||||
Series 1997-5, Class A10, | |||||||
5.749%, 11/20/2028 | 52,007 | ||||||
77,210 | Oakwood Mortgage | ||||||
Investors, Inc., | |||||||
Series 1999-B, Class A3, | |||||||
6.45%, 11/15/2017 | |||||||
(Callable 01/15/2011) | 72,099 | ||||||
928,888 | RAAC Series, | ||||||
Series 2004-SP1, | |||||||
Class AI4, 5.285%, | |||||||
08/25/2027 | 929,102 | ||||||
3,000,000 | Renaissance Home | ||||||
Equity Loan Trust, | |||||||
Series 2007-1, Class AF3, | |||||||
5.612%, 04/25/2037 | 1,578,312 | ||||||
Residential Asset | |||||||
Mortgage Products, Inc.: | |||||||
3,662,097 | Series 2003-RS7, | ||||||
Class AI6, 5.34%, | |||||||
08/25/2033 | 3,690,291 | ||||||
769,613 | Series 2005-RS1, | ||||||
Class AI6, 4.713%, | |||||||
01/25/2035 | 726,204 | ||||||
Residential Asset | |||||||
Securities Corporation: | |||||||
1,984,998 | Series 2003-KS2, Class | ||||||
AI6, 3.99%, 04/25/2033 | |||||||
(Callable 02/25/2013) | 1,944,895 | ||||||
182,962 | Series 2003-KS5, Class | ||||||
AI6, 3.62%, 07/25/2033 | |||||||
(Callable 06/25/2014) | 163,376 | ||||||
222,706 | Series 2004-KS2, Class | ||||||
AI6, 4.30%, 03/25/2034 | |||||||
(Callable 03/25/2017) | 218,357 |
The accompanying notes are an integral part of these financial statements.
Page 76
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Asset Backed Securities – 4.3% (cont.) | |||||||
$ | 1,393,935 | Structured Asset | |||||
Securities Corporation, | |||||||
Series 2005-7XS, | |||||||
Class 1A4B, 5.44%, | |||||||
04/25/2035 | |||||||
(Callable 12/25/2017) | $ | 1,264,290 | |||||
72,871,857 | |||||||
Commercial Mortgage Backed Securities – 5.6% | |||||||
15,850,000 | Citigroup Deutsche Bank, | ||||||
Series 2005-CD1, Class | |||||||
A4, 5.222%, 07/15/2044 | 17,057,985 | ||||||
16,450,000 | Commercial Mortgage | ||||||
Pass-Through Certificates, | |||||||
Series 2005-C6, | |||||||
Class A5A, 5.116%, | |||||||
06/10/2044 | 17,604,477 | ||||||
2,948,980 | First Union National | ||||||
Bank Commercial | |||||||
Mortgage Securities Inc., | |||||||
Series 2001-C4, Class A2, | |||||||
6.223%, 12/12/2033 | 3,022,292 | ||||||
GE Capital Commercial | |||||||
Mortgage Corporation: | |||||||
2,865,000 | Series 2002-3A, Class | ||||||
AZ, 4.996%, 12/10/2037 | 3,006,903 | ||||||
6,950,000 | Series 2004-C3, Class | ||||||
A4, 5.189%, 07/10/2039 | 7,383,495 | ||||||
10,100,000 | GMAC Commercial | ||||||
Mortgage Securities, Inc., | |||||||
Series 2003-C1, Class A2, | |||||||
4.079%, 05/10/2036 | 10,474,513 | ||||||
800,000 | Government National | ||||||
Mortgage Association | |||||||
(GNMA), | |||||||
Series 2004-78, Class C, | |||||||
4.658%, 04/16/2029 | 848,020 | ||||||
14,355,000 | J.P. Morgan Chase | ||||||
Commercial Mortgage | |||||||
Trust, Series 2005-CB12, | |||||||
Class A4, 4.895%, | |||||||
09/12/2037 | 15,203,650 | ||||||
296,500 | Morgan Stanley Dean | ||||||
Witter Capital I, | |||||||
Series 2001-TOP1, | |||||||
Class A4, 6.66%, | |||||||
02/15/2033 | 296,334 | ||||||
2,726,698 | Salomon Brothers | ||||||
Mortgage Securities VII, | |||||||
Series 2001-C2, Class A3, | |||||||
6.50%, 11/13/2036 | 2,790,821 | ||||||
Wachovia Bank | |||||||
Commercial | |||||||
Mortgage Trust: | |||||||
2,350,000 | Series 2003-C3, Class A2, | ||||||
4.867%, 02/15/2035 | 2,464,856 | ||||||
14,835,000 | Series 2005-C22, Class | ||||||
A4, 5.27%, 12/15/2044 | 15,902,946 | ||||||
96,056,292 | |||||||
Financial – 17.8% | |||||||
3,500,000 | Aegon NV, | ||||||
4.75%, 06/01/2013 f | 3,663,517 |
The accompanying notes are an integral part of these financial statements.
Page 77
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Financial – 17.8% (cont.) | |||||||
$ | 4,300,000 | AIG SunAmerica | |||||
Global Financing VI, | |||||||
6.30%, 05/10/2011 | |||||||
(Acquired 11/12/2010 | |||||||
through 12/06/2010; | |||||||
Aggregate | |||||||
Cost $4,371,808)* | $ | 4,364,500 | |||||
2,450,000 | American Express Credit | ||||||
Corporation, Series C, | |||||||
7.30%, 08/20/2013 | 2,760,802 | ||||||
American General | |||||||
Finance Corporation: | |||||||
1,000,000 | 5.85%, 06/01/2013 | 907,500 | |||||
500,000 | 6.90%, 12/15/2017 | 403,750 | |||||
1,000,000 | American International | ||||||
Group Inc., | |||||||
8.175%, 05/15/2058 | |||||||
(Callable 05/15/2038) @ | 1,064,809 | ||||||
2,000,000 | Ameriprise Financial, Inc., | ||||||
7.30%, 06/28/2019 | 2,363,268 | ||||||
250,000 | AmSouth Bancorporation | ||||||
Subordinated Debentures, | |||||||
6.75%, 11/01/2025 | 218,201 | ||||||
1,708,000 | Arden Realty LP, | ||||||
5.25%, 03/01/2015 | |||||||
(Callable 12/01/2014) | 1,798,444 | ||||||
400,000 | BAC Capital Trust VI, | ||||||
5.625%, 03/08/2035 | 339,730 | ||||||
1,715,000 | Bank of America | ||||||
Corporation | |||||||
Subordinated Notes, | |||||||
10.20%, 07/15/2015 | 2,031,819 | ||||||
2,435,000 | Bank of Tokyo- | ||||||
Mitsubishi/UFJ Ltd., | |||||||
7.40%, 06/15/2011 f | 2,481,160 | ||||||
100,000 | BankAmerica | ||||||
Capital II, Series 2, | |||||||
8.00%, 12/15/2026 | |||||||
(Callable 02/07/2011) | 100,625 | ||||||
2,175,000 | Banponce Trust I, Series | ||||||
A, 8.327%, 02/01/2027 | |||||||
(Callable 02/07/2011) | 1,593,457 | ||||||
2,500,000 | Barclays Bank PLC, | ||||||
6.75%, 05/22/2019 f @ | 2,823,765 | ||||||
2,400,000 | Bear Stearns Cos., | ||||||
Inc., Series B, | |||||||
6.95%, 08/10/2012 | 2,618,390 | ||||||
1,500,000 | BOI Capital Funding II, | ||||||
5.571%, 02/01/2049 | |||||||
(Callable 02/01/2016) | |||||||
(Acquired 09/03/2008; | |||||||
Cost $1,071,326)* f | 450,000 | ||||||
2,000,000 | BOI Capital Funding III, | ||||||
6.107%, 02/04/2016 | |||||||
(Callable 02/04/2016) f | 620,000 | ||||||
100,000 | Capital One | ||||||
Financial Corporation, | |||||||
6.15%, 09/01/2016 | 108,262 | ||||||
5,000,000 | CDP Financial Inc., | ||||||
4.40%, 11/25/2019 | |||||||
(Acquired 11/20/2009; | |||||||
Cost $4,987,600)* f @ | 5,083,380 | ||||||
444,475 | CIT Group Funding, | ||||||
10.25%, 05/01/2017 | 453,943 | ||||||
CIT Group, Inc.: | |||||||
35,478 | 7.00%, 05/01/2013 | ||||||
(Callable 02/22/2011) @ | 36,188 | ||||||
53,217 | 7.00%, 05/01/2014 | ||||||
(Callable 02/22/2011) @ | 53,749 | ||||||
53,217 | 7.00%, 05/01/2015 | ||||||
(Callable 02/22/2011) | 53,350 |
The accompanying notes are an integral part of these financial statements.
Page 78
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Financial – 17.8% (cont.) | |||||||
$ | 88,694 | 7.00%, 05/01/2016 | |||||
(Callable 02/22/2011) | $ | 89,027 | |||||
124,172 | 7.00%, 05/01/2017 | ||||||
(Callable 02/22/2011) @ | 124,482 | ||||||
2,000,000 | Citigroup Capital XXI, | ||||||
8.30%, 12/21/2057 | |||||||
(Callable 12/21/2037) @ | 2,080,000 | ||||||
Citigroup, Inc.: | |||||||
1,000,000 | 5.50%, 04/11/2013 | 1,064,830 | |||||
3,125,000 | 6.01%, 01/15/2015 | 3,428,206 | |||||
CNA Financial | |||||||
Corporation: | |||||||
3,000,000 | 6.00%, 08/15/2011 | 3,079,308 | |||||
5,000,000 | 6.50%, 08/15/2016 | 5,354,500 | |||||
5,330,000 | Countrywide Financial | ||||||
Corporation, | |||||||
6.25%, 05/15/2016 | 5,465,840 | ||||||
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 | 857,500 | ||||||
1,500,000 | Credit Suisse New York | ||||||
Branch Senior Notes, | |||||||
4.375%, 08/05/2020 f @ | 1,472,699 | ||||||
6,909,000 | Daimler Finance | ||||||
North America LLC, | |||||||
7.30%, 01/15/2012 @ | 7,340,695 | ||||||
330,000 | Deutsche Bank Trust | ||||||
Corporation | |||||||
Subordinated Notes, | |||||||
7.25%, 10/15/2011 | 346,094 | ||||||
3,135,000 | First Empire | ||||||
Capital Trust I, | |||||||
8.234%, 02/01/2027 | |||||||
(Callable 02/07/2011) | 3,116,218 | ||||||
1,575,000 | First Empire | ||||||
Capital Trust II, | |||||||
8.277%, 06/01/2027 | |||||||
(Callable 02/07/2011) | 1,570,048 | ||||||
3,749,000 | First Hawaiian Capital | ||||||
Trust I, Series B, | |||||||
8.343%, 07/01/2027 | |||||||
(Callable 02/07/2011) | 3,777,118 | ||||||
666,297 | First National | ||||||
Bank of Chicago | |||||||
Pass-Thru Certificates, | |||||||
Series 1993-A, | |||||||
8.08%, 01/05/2018 | 733,286 | ||||||
5,700,000 | First Tennessee Bank, | ||||||
0.59%, 02/14/2011 | 5,699,054 | ||||||
1,748,000 | First Union Capital | ||||||
I, Series A, | |||||||
7.935%, 01/15/2027 | |||||||
(Callable 02/07/2011) | 1,798,234 | ||||||
5,107,000 | First Union Institutional | ||||||
Capital I, Series A, | |||||||
8.04%, 12/01/2026 | |||||||
(Callable 02/07/2011) @ | 5,209,436 | ||||||
1,460,000 | First Union Institutional | ||||||
Capital II, | |||||||
7.85%, 01/01/2027 | |||||||
(Callable 02/07/2011) | 1,475,767 | ||||||
2,500,000 | Fleet Capital Trust II, | ||||||
7.92%, 12/11/2026 | |||||||
(Callable 02/07/2011) | 2,512,500 | ||||||
3,025,000 | FMR LLC, | ||||||
4.75%, 03/01/2013 | |||||||
(Acquired 02/26/2003 | |||||||
through 12/15/2010; | |||||||
Aggregate | |||||||
Cost $3,026,786)* | 3,176,909 |
The accompanying notes are an integral part of these financial statements.
Page 79
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Financial – 17.8% (cont.) | |||||||
General Electric | |||||||
Capital Corporation: | |||||||
$ | 2,530,000 | 5.50%, 11/15/2011 | |||||
(Callable 05/15/2011) | $ | 2,565,617 | |||||
1,389,000 | 1.146%, 08/02/2012 | 1,382,665 | |||||
1,400,000 | 5.90%, 05/13/2014 | 1,549,463 | |||||
2,475,000 | 4.375%, 09/21/2015 | 2,595,166 | |||||
4,700,000 | 5.625%, 05/01/2018 | 5,125,416 | |||||
1,416,000 | Genworth Financial, Inc., | ||||||
5.75%, 06/15/2014 | 1,467,680 | ||||||
7,485,000 | Glencore Funding LLC, | ||||||
6.00%, 04/15/2014 | |||||||
(Acquired 03/31/2004 | |||||||
through 11/16/2010; | |||||||
Aggregate | |||||||
Cost $7,529,926)* | 7,910,133 | ||||||
GMAC Inc.: | |||||||
336,000 | 7.50%, 12/31/2013 | 360,360 | |||||
403,000 | 8.00%, 12/31/2018 @ | 426,172 | |||||
GMAC LLC: | |||||||
100,000 | 7.25%, 03/02/2011 | 100,633 | |||||
150,000 | 6.75%, 12/01/2014 | 157,172 | |||||
1,180,000 | Goldman Sachs Capital I, | ||||||
6.345%, 02/15/2034 @ | 1,124,363 | ||||||
The Goldman Sachs | |||||||
Group, Inc.: | |||||||
2,200,000 | 3.70%, 08/01/2015 | 2,241,606 | |||||
1,000,000 | 6.25%, 09/01/2017 @ | 1,103,551 | |||||
4,500,000 | 6.15%, 04/01/2018 | 4,955,369 | |||||
2,520,000 | Goldman Sachs Group LP, | ||||||
8.00%, 03/01/2013 | |||||||
(Acquired 01/05/2009 | |||||||
through 09/23/2010; | |||||||
Aggregate | |||||||
Cost $2,758,535)* | 2,806,428 | ||||||
2,800,000 | Great West Life & | ||||||
Annuity Insurance, | |||||||
7.153%, 05/16/2046 | |||||||
(Callable 05/16/2016) | |||||||
(Acquired 05/16/2006 | |||||||
through 11/08/2007; | |||||||
Cost $2,783,656)* | 2,800,000 | ||||||
2,200,000 | Hartford Financial | ||||||
Services Group Inc., | |||||||
8.125%, 06/15/2038 | |||||||
(Callable 06/15/2018) @ | 2,337,500 | ||||||
950,000 | HSBC Bank PLC | ||||||
Subordinated Notes, | |||||||
6.95%, 03/15/2011 f | 961,370 | ||||||
2,100,000 | HSBC Holdings PLC | ||||||
Subordinated Notes, | |||||||
6.50%, 09/15/2037 f @ | 2,199,204 | ||||||
400,000 | HSBC USA | ||||||
Capital Trust I, | |||||||
7.808%, 12/15/2026 | |||||||
(Callable 02/07/2011) | |||||||
(Acquired 03/08/2007; | |||||||
Cost $409,288)* | 408,000 | ||||||
500,000 | HSBC USA | ||||||
Capital Trust II, | |||||||
8.38%, 05/15/2027 | |||||||
(Callable 02/07/2011) | |||||||
(Acquired 11/06/2007; | |||||||
Cost $514,588)* | 504,934 | ||||||
Invesco Ltd.: f | |||||||
3,720,000 | 5.625%, 04/17/2012 | 3,864,719 | |||||
4,235,000 | 5.375%, 02/27/2013 | 4,479,681 | |||||
1,246,000 | 5.375%, 12/15/2014 | 1,289,093 |
The accompanying notes are an integral part of these financial statements.
Page 80
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Financial – 17.8% (cont.) | |||||||
$ | 7,025,000 | Irish Life & Permanent | |||||
Group Holdings PLC, | |||||||
3.60%, 01/14/2013 | |||||||
(Acquired 01/07/2010; | |||||||
Cost $7,021,207)* f | $ | 6,301,551 | |||||
J.P. Morgan | |||||||
Chase & Co.: | |||||||
2,700,000 | 3.70%, 01/20/2015 | 2,794,198 | |||||
100,000 | 4.25%, 10/15/2020 @ | 97,665 | |||||
Jefferies Group Inc.: | |||||||
4,000,000 | 6.875%, 04/15/2021 | 4,157,084 | |||||
1,395,000 | 6.25%, 01/15/2036 | 1,249,638 | |||||
6,800,000 | John Hancock Mutual | ||||||
Life Insurance Company, | |||||||
7.375%, 02/15/2024 | |||||||
(Acquired 08/26/2010; | |||||||
Cost $7,707,221)* | 7,488,051 | ||||||
1,250,000 | Kaupthing Bank, | ||||||
5.75%, 10/04/2011 | |||||||
(Acquired 06/06/2008 | |||||||
through 07/22/2008; | |||||||
Aggregate | |||||||
Cost $969,047)* f § | 334,375 | ||||||
3,400,000 | Key Bank NA, | ||||||
7.413%, 05/06/2015 | 3,770,036 | ||||||
5,000,000 | Kookmin Bank, 7.25%, | ||||||
05/14/2014 (Acquired | |||||||
08/24/2009 through | |||||||
03/10/2010; Aggregate | |||||||
Cost $5,394,760)* f | 5,641,200 | ||||||
2,500,000 | Liberty Mutual | ||||||
Group, Inc., | |||||||
10.75%, 06/15/2058 | |||||||
(Callable 06/15/2038) | |||||||
(Acquired 05/21/2008; | |||||||
Cost $2,445,125)* | 3,025,000 | ||||||
565,000 | Liberty Mutual | ||||||
Insurance Company, | |||||||
7.697%, 10/15/2097 | |||||||
(Acquired 03/26/2003; | |||||||
Cost $361,717)* | 500,940 | ||||||
Lincoln National | |||||||
Corporation: | |||||||
3,947,000 | 6.20%, 12/15/2011 | 4,133,985 | |||||
1,125,000 | 6.05%, 04/20/2067 | ||||||
(Callable 04/20/2017) | 1,037,813 | ||||||
1,600,000 | Lloyds TSB Bank PLC, | ||||||
5.80%, 01/13/2020 | |||||||
(Acquired 02/10/2010; | |||||||
Cost $1,555,591)* f | 1,579,784 | ||||||
100,000 | Manulife Financial | ||||||
Corporation, | |||||||
4.90%, 09/17/2020 f | 95,168 | ||||||
Marsh & McLennan | |||||||
Companies, Inc.: | |||||||
5,000,000 | 6.25%, 03/15/2012 | 5,216,245 | |||||
3,750,000 | 4.85%, 02/15/2013 | 3,918,911 | |||||
1,290,000 | 5.375%, 07/15/2014 | 1,372,299 | |||||
500,000 | 9.25%, 04/15/2019 | 630,854 | |||||
1,000,000 | Massachusetts Mutual | ||||||
Life Insurance Company, | |||||||
8.875%, 06/01/2039 | |||||||
(Acquired 05/27/2009; | |||||||
Cost $987,100)* @ | 1,338,427 | ||||||
800,000 | MBIA Insurance Corp., | ||||||
14.00%, 01/15/2033 | |||||||
(Callable 01/15/2013) | |||||||
(Acquired 01/11/2008; | |||||||
Cost $800,000)* | 430,000 | ||||||
Merrill Lynch & Company: | |||||||
1,000,000 | 6.40%, 08/28/2017 @ | 1,057,271 | |||||
1,750,000 | 6.875%, 04/25/2018 | 1,915,127 | |||||
1,275,000 | 7.75%, 05/14/2038 | 1,323,231 |
The accompanying notes are an integral part of these financial statements.
Page 81
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Financial – 17.8% (cont.) | |||||||
$ | 422,000 | Metlife Inc., | |||||
6.50%, 12/15/2032 | $ | 468,547 | |||||
1,650,000 | Monumental Global | ||||||
Funding Limited, | |||||||
5.50%, 04/22/2013 | |||||||
(Acquired 07/09/2010; | |||||||
Aggregate | |||||||
Cost $1,756,015)* f | 1,765,701 | ||||||
Morgan Stanley: | |||||||
2,000,000 | 5.625%, 01/09/2012 | 2,088,288 | |||||
1,075,000 | 4.75%, 04/01/2014 | 1,100,829 | |||||
1,000,000 | 4.00%, 07/24/2015 | 1,005,185 | |||||
150,000 | 6.625%, 04/01/2018 | 162,715 | |||||
3,644,000 | Morgan Stanley | ||||||
Dean Witter & Co., | |||||||
6.75%, 10/15/2013 | 3,972,747 | ||||||
1,000,000 | The NASDAQ OMX | ||||||
Group Inc., | |||||||
4.00%, 01/15/2015 | 1,017,832 | ||||||
1,310,000 | National City | ||||||
Bank of Cleveland | |||||||
Subordinated Notes, | |||||||
4.625%, 05/01/2013 | 1,383,557 | ||||||
2,850,000 | National City | ||||||
Bank of Kentucky | |||||||
Subordinated Notes, | |||||||
6.30%, 02/15/2011 | 2,866,906 | ||||||
3,500,000 | Nationwide | ||||||
Financial Services, Inc., | |||||||
6.25%, 11/15/2011 | 3,646,640 | ||||||
2,950,000 | Nationwide Life | ||||||
Global Funding, | |||||||
5.35%, 03/15/2011 | |||||||
(Acquired 06/16/2010; | |||||||
Aggregate | |||||||
Cost $2,971,498)* | 2,967,547 | ||||||
4,921,000 | Navigators Group Inc. | ||||||
Senior Unsecured Notes, | |||||||
7.00%, 05/01/2016 | 5,033,804 | ||||||
4,334,000 | NB Capital Trust IV, | ||||||
8.25%, 04/15/2027 | |||||||
(Callable 02/07/2011) | 4,388,175 | ||||||
2,500,000 | North Fork | ||||||
Capital Trust II, | |||||||
8.00%, 12/15/2027 | |||||||
(Callable 02/07/2011) | 2,512,500 | ||||||
2,750,000 | Protective Life Corp., | ||||||
7.375%, 10/15/2019 | 2,977,213 | ||||||
Prudential Financial | |||||||
Inc., Series D: | |||||||
2,500,000 | 5.10%, 12/14/2011 | 2,583,493 | |||||
2,000,000 | 3.625%, 09/17/2012 | 2,075,630 | |||||
1,000,000 | Regions Financial Corp., | ||||||
7.75%, 11/10/2014 @ | 1,040,000 | ||||||
4,750,000 | Regions Financing Trust | ||||||
II, 6.625%, 05/15/2047 | |||||||
(Callable 05/15/2027) | 4,096,875 | ||||||
1,000,000 | Republic New York | ||||||
Capital I, | |||||||
7.75%, 11/15/2026 | |||||||
(Callable 02/07/2011) | 1,021,875 | ||||||
700,000 | Republic New York | ||||||
Corporation Debentures, | |||||||
9.125%, 05/15/2021 | 843,921 | ||||||
3,430,000 | Santander | ||||||
Financial Issuances, | |||||||
6.375%, 02/15/2011 f | 3,447,105 | ||||||
1,500,000 | Santander Issuances, | ||||||
6.50%, 08/11/2019 | |||||||
(Callable 08/11/2014) | |||||||
(Acquired 10/18/2007; | |||||||
Cost $1,719,992)* f | 1,440,966 |
The accompanying notes are an integral part of these financial statements.
Page 82
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Financial – 17.8% (cont.) | |||||||
$ | 1,100,000 | Santander U.S. Debt | |||||
S.A. Unipersonal, | |||||||
2.991%, 10/07/2013 | |||||||
(Acquired 09/27/2010; | |||||||
Cost $1,100,000)* f | $ | 1,068,616 | |||||
8,760,000 | Schwab Capital Trust I, | ||||||
7.50%, 11/15/2037 | |||||||
(Callable 11/15/2017) @ | 9,061,693 | ||||||
4,761,000 | Simon Property Group | ||||||
LP, 7.75%, 01/20/2011 | 4,769,089 | ||||||
SLM Corporation: | |||||||
5,510,000 | 5.45%, 04/25/2011 | 5,558,031 | |||||
1,000,000 | 5.375%, 01/15/2013 | 1,019,967 | |||||
500,000 | 5.625%, 08/01/2033 | 392,326 | |||||
1,500,000 | Sovereign Bancorp, Inc., | ||||||
8.75%, 05/30/2018 | 1,635,668 | ||||||
550,000 | SunTrust Banks Inc., | ||||||
5.25%, 11/05/2012 | 579,272 | ||||||
1,032,000 | Susa Partnership LP, | ||||||
8.20%, 06/01/2017 | 1,216,871 | ||||||
1,000,000 | Symetra Financial | ||||||
Corporation, | |||||||
6.125%, 04/01/2016 | |||||||
(Acquired 03/23/2006; | |||||||
Cost $995,570)* | 1,008,537 | ||||||
3,000,000 | TD Ameritrade | ||||||
Holding Corporation, | |||||||
5.60%, 12/01/2019 | 3,141,624 | ||||||
2,400,000 | Toll Road Inv. | ||||||
Partnership II, | |||||||
0.00%, 02/15/2011 | |||||||
(Acquired 06/19/2008; | |||||||
Cost $2,378,699)* ^ | 2,382,257 | ||||||
1,000,000 | Travelers Companies, Inc., | ||||||
6.75%, 06/20/2036 | 1,169,406 | ||||||
560,000 | UFJ Finance | ||||||
Aruba A.E.C., | |||||||
6.75%, 07/15/2013 f | 624,458 | ||||||
150,000 | Union Planters | ||||||
Corporation, | |||||||
7.75%, 03/01/2011 | 151,399 | ||||||
750,000 | Willis North | ||||||
America Inc., | |||||||
5.625%, 07/15/2015 | 788,089 | ||||||
4,000,000 | Xstrata Finance Canada, | ||||||
5.50%, 11/16/2011 | |||||||
(Acquired 06/17/2010; | |||||||
Cost $4,101,136)* f | 4,151,772 | ||||||
302,916,634 | |||||||
Industrial – 13.8% | |||||||
4,200,000 | Acuity Brands Lighting | ||||||
Inc., 6.00%, 12/15/2019 | 4,370,659 | ||||||
Allied Waste North | |||||||
America, Inc.: | |||||||
6,000,000 | Series B, 7.125%, | ||||||
05/15/2016 (Callable | |||||||
05/15/2011) | 6,352,500 | ||||||
2,000,000 | 6.875%, 06/01/2017 | ||||||
(Callable 06/02/2012) | 2,200,000 | ||||||
Ameritech Capital | |||||||
Funding Debentures: | |||||||
1,993,410 | 9.10%, 06/01/2016 | 2,338,906 | |||||
1,500,000 | 6.45%, 01/15/2018 | 1,688,168 | |||||
2,000,000 | Anglo American | ||||||
Capital PLC, | |||||||
9.375%, 04/08/2019 | |||||||
(Acquired 04/02/2009; | |||||||
Cost $2,000,000)* f | 2,690,270 | ||||||
6,000,000 | BP Capital Markets PLC, | ||||||
4.75%, 03/10/2019 f @ | 6,185,970 |
The accompanying notes are an integral part of these financial statements.
Page 83
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Industrial – 13.8% (cont.) | |||||||
$ | 600,000 | Bunge Limited | |||||
Finance Corporation, | |||||||
5.35%, 04/15/2014 | $ | 630,668 | |||||
3,800,000 | Bunge NA Finance LP, | ||||||
5.90%, 04/01/2017 | 3,910,709 | ||||||
1,000,000 | Canadian | ||||||
National Resources, | |||||||
6.25%, 03/15/2038 f @ | 1,104,930 | ||||||
8,164,000 | Chevron Phillips | ||||||
Chemical Company LLC, | |||||||
7.00%, 06/15/2014 | |||||||
(Acquired 10/27/2010 | |||||||
through 10/28/2010; | |||||||
Aggregate | |||||||
Cost $9,331,187)* | 9,255,216 | ||||||
800,000 | Clear Channel | ||||||
Communications, | |||||||
5.50%, 12/15/2016 | 520,000 | ||||||
400,000 | Comcast Cable Holdings, | ||||||
8.375%, 03/15/2013 | 455,159 | ||||||
1,000,000 | Comcast Corporation, | ||||||
6.95%, 08/15/2037 @ | 1,131,068 | ||||||
2,640,000 | Comcast Holdings | ||||||
Corporation, | |||||||
10.625%, 07/15/2012 | 2,990,890 | ||||||
1,380,000 | Comcast-Cable Holdings, | ||||||
7.875%, 08/01/2013 | 1,577,946 | ||||||
6,075,000 | Computer Sciences | ||||||
Corporation, | |||||||
5.50%, 03/15/2013 | 6,495,888 | ||||||
ConAgra Foods, Inc.: | |||||||
1,687,000 | 5.819%, 06/15/2017 | 1,831,195 | |||||
120,000 | 9.75%, 03/01/2021 | 159,258 | |||||
Continental Airlines, Inc. | |||||||
Pass-Thru Certificates: | |||||||
28,035 | Series 2000-2, Class C, | ||||||
8.312%, 04/02/2011 | 28,315 | ||||||
351,290 | Series 1997-4, Class A, | ||||||
6.90%, 01/02/2018 | 373,246 | ||||||
COX | |||||||
Communications Inc.: | |||||||
2,301,000 | 7.125%, 10/01/2012 | 2,523,555 | |||||
2,000,000 | 5.45%, 12/15/2014 | 2,201,752 | |||||
2,000,000 | CVS Caremark Corp., | ||||||
5.75%, 06/01/2017 | 2,225,300 | ||||||
410,000 | Deutsche Telekom | ||||||
International Finance BV, | |||||||
8.75%, 06/15/2030 f | 551,019 | ||||||
7,000,000 | DIRECTV | ||||||
Holdings/Financing, | |||||||
7.625%, 05/15/2016 | |||||||
(Callable 05/15/2012) | 7,761,250 | ||||||
Donnelley (R.R.) | |||||||
& Sons Co.: | |||||||
2,500,000 | 8.60%, 08/15/2016 | 2,871,618 | |||||
2,000,000 | 6.125%, 01/15/2017 | 2,044,472 | |||||
1,000,000 | 7.625%, 06/15/2020 @ | 1,071,116 | |||||
1,000,000 | D.R. Horton Inc. | ||||||
Unsubordinated Notes, | |||||||
6.50%, 04/15/2016 | 1,027,500 | ||||||
Enterprise Products | |||||||
Operating LLC: | |||||||
6,125,000 | 7.625%, 02/15/2012 | 6,529,537 | |||||
1,725,000 | 6.125%, 02/01/2013 | 1,858,415 | |||||
740,000 | FedEx Corporation, | ||||||
9.65%, 06/15/2012 | 827,362 | ||||||
3,757,000 | Fiserv, Inc., | ||||||
6.125%, 11/20/2012 | 4,063,109 | ||||||
3,765,000 | Fortune Brands Inc., | ||||||
5.125%, 01/15/2011 | 3,768,656 |
The accompanying notes are an integral part of these financial statements.
Page 84
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Industrial – 13.8% (cont.) | |||||||
$ | 8,907,000 | Freeport-McMoRan | |||||
Copper & Gold Inc., | |||||||
8.375%, 04/01/2017 | |||||||
(Callable 04/01/2012) | $ | 9,853,368 | |||||
Georgia-Pacific LLC: | |||||||
500,000 | 7.00%, 01/15/2015 | ||||||
(Callable 02/07/2011) | |||||||
(Acquired 10/29/2010; | |||||||
Cost $518,459)* | 518,750 | ||||||
7,000,000 | 8.25%, 05/01/2016 | ||||||
(Callable 05/01/2013) | |||||||
(Acquired 12/10/2010; | |||||||
Cost $7,795,358)* | 7,901,249 | ||||||
GTE Corporation: | |||||||
2,400,000 | 6.84%, 04/15/2018 | 2,720,681 | |||||
100,000 | 8.75%, 11/01/2021 | 129,058 | |||||
3,500,000 | Health Care Service | ||||||
Corporation Notes, | |||||||
7.75%, 06/15/2011 | |||||||
(Acquired 06/20/2001 | |||||||
through 06/15/2009; | |||||||
Aggregate | |||||||
Cost $3,552,791)* | 3,544,678 | ||||||
650,000 | Health Management | ||||||
Association, | |||||||
6.125%, 04/15/2016 | 656,500 | ||||||
1,950,000 | Highmark Inc. Notes, | ||||||
6.80%, 08/15/2013 | |||||||
(Acquired 08/14/2003 | |||||||
through 12/17/2007; | |||||||
Aggregate | |||||||
Cost $1,968,095)* | 2,191,818 | ||||||
1,000,000 | Holcim US Finance, | ||||||
6.00%, 12/30/2019 | |||||||
(Acquired 09/24/2009; | |||||||
Cost $986,740)* f | 1,038,444 | ||||||
2,000,000 | Humana Inc., | ||||||
7.20%, 06/15/2018 | 2,259,296 | ||||||
5,700,000 | Hutchison Whampoa | ||||||
International LTD, | |||||||
7.625%, 04/09/2019 | |||||||
(Acquired 10/22/2009 | |||||||
through 10/29/2009; | |||||||
Aggregate | |||||||
Cost $6,363,258)* f | 6,837,326 | ||||||
950,000 | Johnson Controls Inc., | ||||||
6.00%, 01/15/2036 | 969,845 | ||||||
400,000 | Laboratory Corporation | ||||||
of America Holdings, | |||||||
5.625%, 12/15/2015 | 438,447 | ||||||
Lafarge SA: f | |||||||
5,538,000 | 6.15%, 07/15/2011 | 5,682,453 | |||||
1,000,000 | 7.125%, 07/15/2036 | 968,507 | |||||
1,000,000 | Martin Marietta | ||||||
Materials, Inc., | |||||||
6.25%, 05/01/2037 | 962,481 | ||||||
1,000,000 | Masco Corporation, | ||||||
6.125%, 10/03/2016 | 1,021,970 | ||||||
8,000,000 | Mosaic Co., | ||||||
7.625%, 12/01/2016 | |||||||
(Callable 12/01/2011) | |||||||
(Acquired 05/19/2010 | |||||||
through 12/10/2010; | |||||||
Aggregate | |||||||
Cost $8,610,339)* | 8,608,159 | ||||||
Nabors Industries, Inc.: | |||||||
4,500,000 | 0.94%, 05/15/2011 | ||||||
(Convertible until | |||||||
05/15/2011) | 4,471,875 | ||||||
1,100,000 | 6.15%, 02/15/2018 | 1,174,091 | |||||
1,300,000 | New Cingular Wireless | ||||||
Services, Inc., | |||||||
8.75%, 03/01/2031 | 1,757,705 |
The accompanying notes are an integral part of these financial statements.
Page 85
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Industrial – 13.8% (cont.) | |||||||
$ | 1,500,000 | Nextel Communications, | |||||
Series D, 7.375%, | |||||||
08/01/2015 (Callable | |||||||
01/18/2011) @ | $ | 1,501,875 | |||||
320,000 | Pactiv Corporation, | ||||||
7.95%, 12/15/2025 @ | 280,116 | ||||||
400,000 | PCCW-HKT | ||||||
Capital II Ltd., | |||||||
6.00%, 07/15/2013 | |||||||
(Acquired 07/10/2003; | |||||||
Cost $398,132)* f | 430,942 | ||||||
4,355,000 | Plum Creek | ||||||
Timberlands, L.P., | |||||||
5.875%, 11/15/2015 | 4,688,166 | ||||||
1,000,000 | Questar Market | ||||||
Resources Inc., | |||||||
6.80%, 03/01/2020 | 987,187 | ||||||
200,000 | Qwest Capital | ||||||
Funding, Inc., | |||||||
7.25%, 02/15/2011 | 200,500 | ||||||
2,000,000 | Ralcorp Holdings, Inc., | ||||||
4.95%, 08/15/2020 | 1,992,312 | ||||||
500,000 | Rio Tinto Alcan, Inc., | ||||||
5.75%, 06/01/2035 f | 507,211 | ||||||
3,700,000 | Rio Tinto | ||||||
Financial USA Ltd., | |||||||
6.50%, 07/15/2018 f @ | 4,313,627 | ||||||
1,500,000 | SK Telecom, | ||||||
6.625%, 07/20/2027 | |||||||
(Acquired 07/13/2007; | |||||||
Cost $1,482,015)* f | 1,667,658 | ||||||
Sprint Capital | |||||||
Corporation: | |||||||
2,800,000 | 6.90%, 05/01/2019 | 2,765,000 | |||||
358,000 | 8.75%, 03/15/2032 @ | 361,580 | |||||
2,793,000 | Teck Resources | ||||||
Limited, 10.25%, | |||||||
05/15/2016 (Callable | |||||||
05/15/2013) f | 3,456,338 | ||||||
Telecom Italia Capital: f | |||||||
2,000,000 | 7.175%, 06/18/2019 @ | 2,139,866 | |||||
5,519,000 | 7.20%, 07/18/2036 | 5,182,683 | |||||
Telefonica | |||||||
Emisiones S.A.U.: f | |||||||
100,000 | 6.421%, 06/20/2016 | 109,299 | |||||
5,075,000 | 6.221%, 07/03/2017 | 5,457,787 | |||||
Time Warner, Inc.: | |||||||
1,050,000 | 4.70%, 01/15/2021 @ | 1,069,077 | |||||
1,100,000 | 7.625%, 04/15/2031 @ | 1,337,251 | |||||
500,000 | 7.70%, 05/01/2032 | 610,346 | |||||
1,000,000 | 6.55%, 05/01/2037 | 1,070,695 | |||||
3,100,000 | 6.75%, 06/15/2039 @ | 3,423,869 | |||||
3,000,000 | Tyco Electronics | ||||||
Group S.A., | |||||||
6.55%, 10/01/2017 f | 3,409,245 | ||||||
300,000 | Tyco International | ||||||
Finance, | |||||||
6.00%, 11/15/2013 f | 332,801 | ||||||
211,765 | United AirLines, Inc. | ||||||
Pass-Thru Certificates, | |||||||
Series 2000-2, Class C, | |||||||
7.762%, 04/29/2049 § | 137,383 | ||||||
1,215,000 | UnitedHealth Group, Inc., | ||||||
4.875%, 02/15/2013 | 1,293,542 | ||||||
398,287 | U.S. Airways | ||||||
Pass-Thru Certificate, | |||||||
Series 1998-1, 6.85%, | |||||||
01/30/2018 | 392,811 | ||||||
Vale Overseas Limited: f | |||||||
3,550,000 | 8.25%, 01/17/2034 | 4,415,160 | |||||
1,550,000 | 6.875%, 11/21/2036 | 1,704,972 | |||||
1,000,000 | 6.875%, 11/10/2039 | 1,104,930 |
The accompanying notes are an integral part of these financial statements.
Page 86
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Industrial – 13.8% (cont.) | |||||||
$ | 2,000,000 | Verizon Wireless | |||||
Cap LLC, | |||||||
8.50%, 11/15/2018 | $ | 2,617,100 | |||||
1,975,000 | Vodafone Group PLC, | ||||||
6.15%, 02/27/2037 f @ | 2,114,238 | ||||||
Vulcan Materials Co.: | |||||||
2,000,000 | 7.00%, 06/15/2018 | 2,096,240 | |||||
500,000 | 7.15%, 11/30/2037 | 473,823 | |||||
1,000,000 | Wal-Mart Stores, | ||||||
5.25%, 09/01/2035 | 1,006,348 | ||||||
100,000 | Westvaco Corporation, | ||||||
9.75%, 06/15/2020 | 122,190 | ||||||
2,000,000 | Weyerhaeuser Company, | ||||||
7.25%, 07/01/2013 | 2,112,100 | ||||||
3,100,000 | Williams Partners LP, | ||||||
6.30%, 04/15/2040 | 3,226,750 | ||||||
3,600,000 | Woodside Finance Ltd., | ||||||
8.125%, 03/01/2014 | |||||||
(Acquired 02/24/2009; | |||||||
Cost $3,598,884)* f | 4,141,822 | ||||||
233,577,163 | |||||||
Other Government Related Securities – 1.2% | |||||||
Corp Andina De | |||||||
Fomento Notes: f | |||||||
675,000 | 7.375%, 01/18/2011 @ | 676,746 | |||||
640,000 | 5.75%, 01/12/2017 @ | 673,741 | |||||
5,750,000 | Export-Import | ||||||
Bank Korea Notes, | |||||||
5.125%, 02/14/2011 f | 5,770,711 | ||||||
Korea Electric Power | |||||||
Corporation: f | |||||||
342,000 | 7.75%, 04/01/2013 | 381,728 | |||||
2,165,000 | 6.75%, 08/01/2027 | 2,352,736 | |||||
510,000 | National Bank of Hungary | ||||||
Yankee Debentures, | |||||||
8.875%, 11/01/2013 f | 562,832 | ||||||
3,000,000 | PEMEX Finance Ltd., | ||||||
10.61%, 08/15/2017 f | 3,603,429 | ||||||
2,800,000 | PEMEX Project | ||||||
Funding Master Trust, | |||||||
5.75%, 03/01/2018 f | 2,993,724 | ||||||
1,000,000 | Petrobras International | ||||||
Finance Company, | |||||||
5.75%, 01/20/2020 f | 1,037,568 | ||||||
301,000 | United Mexican States, | ||||||
6.75%, 09/27/2034 f | 338,625 | ||||||
2,788,000 | Westdeutsche Landesbank | ||||||
Subordinated Notes, | |||||||
4.796%, 07/15/2015 f | 2,966,139 | ||||||
21,357,979 | |||||||
Residential Mortgage Backed Securities – 27.3% | |||||||
Bank of America | |||||||
Alternative Loan Trust: | |||||||
378,423 | Series 2003-4, Class 2A1, | ||||||
5.00%, 06/25/2018 | 387,877 | ||||||
4,939,235 | Series 2003-5, Class 2A1, | ||||||
5.00%, 07/25/2018 | |||||||
(Callable 01/25/2017) | 5,075,736 | ||||||
630,948 | Series 2003-11, Class | ||||||
4A1, 4.75%, 01/25/2019 | 633,962 | ||||||
401,465 | Series 2004-6, Class 4A1, | ||||||
5.00%, 07/25/2019 | 406,029 | ||||||
437,380 | Series 2004-11, Class | ||||||
4A1, 5.50%, 12/25/2019 | 441,011 | ||||||
630,621 | Series 2005-2, Class 4A1, | ||||||
5.50%, 03/25/2020 | 628,578 | ||||||
2,845,166 | Series 2005-4, Class 3A1, | ||||||
5.50%, 05/25/2020 | 2,523,497 |
The accompanying notes are an integral part of these financial statements.
Page 87
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Residential Mortgage | |||||||
Backed Securities – 27.3% (cont.) | |||||||
$ | 2,206,122 | Series 2005-10, | |||||
Class 5A1, 5.25%, | |||||||
11/25/2020 | $ | 2,034,256 | |||||
3,124,359 | Series 2007-1, | ||||||
Class 1A1, 6.098%, | |||||||
04/25/2022 | 2,583,992 | ||||||
1,250,203 | Series 2003-11, Class | ||||||
2A1, 6.00%, 01/25/2034 | 1,246,285 | ||||||
628,397 | Series 2005-2, Class | ||||||
1CB2, 5.50%, 03/25/2035 | 582,527 | ||||||
901,327 | Series 2005-9, Class | ||||||
1CB3, 5.50%, 10/25/2035 | 864,811 | ||||||
513,906 | Series 2005-11, Class | ||||||
1CB4, 5.50%, 12/25/2035 | 440,926 | ||||||
1,827,560 | Series 2006-5, Class CB7, | ||||||
6.00%, 06/25/2046 | 1,356,718 | ||||||
3,385,787 | Bear Stearns Asset | ||||||
Backed Securities Trust, | |||||||
Series 2004-AC2, Class | |||||||
2A, 5.00%, 05/25/2034 | |||||||
(Callable 06/25/2014) | 3,431,539 | ||||||
Chase Mortgage | |||||||
Finance Corporation: | |||||||
914,343 | Series 2003-S13, Class | ||||||
A11, 5.50%, 11/25/2033 | 935,191 | ||||||
48,837 | Series 2003-S14, Class | ||||||
3A6, 5.50%, 01/25/2034 | 49,869 | ||||||
6,000,000 | Series 2006-A1, Class | ||||||
2A3, 6.00%, 09/25/2036 | |||||||
(Callable 09/25/2020) | 4,725,612 | ||||||
119,853 | Citicorp Mortgage | ||||||
Securities, Inc., | |||||||
Series 2004-3, Class A2, | |||||||
5.25%, 05/25/2034 | 121,983 | ||||||
925,987 | Citigroup Mortgage | ||||||
Loan Trust, Inc., | |||||||
Series 2005-9, Class 2A2, | |||||||
5.50%, 11/25/2035 | |||||||
(Callable 02/25/2018) | 897,125 | ||||||
Countrywide Alternative | |||||||
Loan Trust: | |||||||
963,004 | Series 2005-50CB, Class | ||||||
4A1, 5.00%, 11/25/2020 | 845,947 | ||||||
4,372,260 | Series 2006-7CB, Class | ||||||
3A1, 5.25%, 05/25/2021 | |||||||
(Callable 04/25/2018) | 3,712,232 | ||||||
1,005,700 | Series 2006-J5, Class 3A1, | ||||||
6.132%, 07/25/2021 | |||||||
(Callable 06/25/2019) | 790,037 | ||||||
1,141,192 | Series 2006-43CB, Class | ||||||
2A1, 6.00%, 02/25/2022 | 886,862 | ||||||
318,289 | Series 2002-11, Class A4, | ||||||
6.25%, 10/25/2032 | |||||||
(Callable 01/25/2011) | 315,127 | ||||||
12,676,247 | Series 2003-20CB, Class | ||||||
1A1, 5.50%, 10/25/2033 | |||||||
(Callable 07/25/2019) | 13,277,228 | ||||||
2,614,639 | Series 2005-10CB, Class | ||||||
1A6, 5.50%, 05/25/2035 | 2,568,096 | ||||||
1,207,138 | Series 2005-34CB, Class | ||||||
1A6, 5.50%, 09/25/2035 | 1,212,285 | ||||||
2,145,192 | Series 2006-28CB, Class | ||||||
A17, 6.00%, 10/25/2036 | 1,503,786 | ||||||
282,238 | Countrywide | ||||||
Home Loans, Inc., | |||||||
Series 2003-39, Class A5, | |||||||
5.00%, 05/25/2012 | 282,012 |
The accompanying notes are an integral part of these financial statements.
Page 88
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Residential Mortgage | |||||||
Backed Securities – 27.3% (cont.) | |||||||
$ | 548,917 | Credit Suisse First Boston | |||||
Mortgage Securities | |||||||
Corporation, Series | |||||||
2004-4, Class 2A5, | |||||||
5.50%, 06/25/2015 | $ | 548,250 | |||||
Deutsche Mortgage | |||||||
Securities Inc.: | |||||||
1,614,120 | Series 2006-AR5, Class | ||||||
21A, 6.00%, 10/25/2021 | 1,396,362 | ||||||
289,927 | Series 2004-4, Class 1A6, | ||||||
5.65%, 04/25/2034 | |||||||
(Callable 12/25/2013) | 257,308 | ||||||
Federal Gold Loan | |||||||
Mortgage Corporation | |||||||
(FGLMC): | |||||||
70,907 | 6.50%, 07/01/2014 | 75,658 | |||||
673,077 | 6.00%, 06/01/2020 | 732,077 | |||||
383,442 | 5.50%, 11/01/2022 | 411,422 | |||||
420,222 | 5.00%, 06/01/2023 | 446,657 | |||||
387,692 | 5.50%, 07/01/2023 | 415,739 | |||||
955,513 | 6.50%, 06/01/2029 | 1,074,393 | |||||
3,506,886 | 5.50%, 01/01/2036 | 3,759,085 | |||||
2,128,865 | 6.00%, 12/01/2036 | 2,313,660 | |||||
3,304,658 | 5.50%, 04/01/2037 | 3,525,790 | |||||
10,321,748 | 5.50%, 05/01/2038 | 11,009,205 | |||||
11,062,510 | 5.50%, 08/01/2038 | 11,799,304 | |||||
Federal Home Loan | |||||||
Mortgage Corporation | |||||||
(FHLMC): | |||||||
642,860 | Series 3124, Class VP, | ||||||
6.00%, 06/15/2014 | 683,233 | ||||||
53,411 | Series 2695, Class UA, | ||||||
5.50%, 09/15/2014 | 53,442 | ||||||
318,409 | Series R007, Class AC, | ||||||
5.875%, 05/15/2016 | 321,354 | ||||||
2,785,353 | Series R003, Class VA, | ||||||
5.50%, 08/15/2016 | 3,011,258 | ||||||
1,764,106 | Series 3097, Class MC, | ||||||
6.00%, 11/15/2016 | 1,874,725 | ||||||
268,394 | Series 2391, Class QR, | ||||||
5.50%, 12/15/2016 | 291,160 | ||||||
1,691,481 | Series R009, Class AJ, | ||||||
5.75%, 12/15/2018 | 1,769,805 | ||||||
99,352 | Series 206, Class E, | ||||||
0.00%, 07/15/2019 | |||||||
(Callable 03/15/2011) ^ | 93,492 | ||||||
821,170 | Series R010, Class AB, | ||||||
5.50%, 12/15/2019 | 865,707 | ||||||
47,620 | Series 141, Class D, | ||||||
5.00%, 05/15/2021 | |||||||
(Callable 02/15/2011) | 49,941 | ||||||
52,896 | Series 1074, Class I, | ||||||
6.75%, 05/15/2021 | |||||||
(Callable 01/15/2011) | 62,070 | ||||||
312,730 | Series 1081, Class K, | ||||||
7.00%, 05/15/2021 | |||||||
(Callable 01/15/2011) | 351,247 | ||||||
53,422 | Series 163, Class F, | ||||||
6.00%, 07/15/2021 | |||||||
(Callable 02/15/2011) | 58,798 | ||||||
101,165 | Series 188, Class H, | ||||||
7.00%, 09/15/2021 | |||||||
(Callable 02/15/2011) | 118,711 | ||||||
45,496 | Series 1286, Class A, | ||||||
6.00%, 05/15/2022 | |||||||
(Callable 01/15/2011) | 50,074 | ||||||
1,537,130 | Series 1694, Class PK, | ||||||
6.50%, 03/15/2024 | |||||||
(Callable 09/15/2013) | 1,665,541 | ||||||
12,802,796 | Series 2009-15, Class MA, | ||||||
4.00%, 03/25/2024 | 13,460,806 |
The accompanying notes are an integral part of these financial statements.
Page 89
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Residential Mortgage | |||||||
Backed Securities – 27.3% (cont.) | |||||||
$ | 1,251,306 | Series 2552, Class ND, | |||||
5.50%, 10/15/2031 | $ | 1,308,841 | |||||
44,467,075 | 4.50%, 08/01/2040 | 45,609,232 | |||||
14,689,720 | 4.50%, 09/01/2040 | 15,067,032 | |||||
Federal National | |||||||
Mortgage Association | |||||||
(FNMA): | |||||||
1,429,115 | 5.00%, 12/01/2019 | 1,530,270 | |||||
13,155,600 | 5.00%, 11/01/2021 | 14,086,770 | |||||
886,875 | 5.50%, 01/01/2023 | 960,292 | |||||
1,449,479 | 5.50%, 07/01/2023 | 1,569,468 | |||||
3,613,048 | 5.00%, 11/01/2023 | 3,847,558 | |||||
1,448,056 | 6.00%, 03/01/2026 | 1,580,870 | |||||
3,258,780 | 6.00%, 05/01/2026 | 3,557,672 | |||||
3,955,282 | 5.00%, 05/01/2028 | 4,162,296 | |||||
414,173 | 6.00%, 03/01/2033 | 456,254 | |||||
422,365 | 5.00%, 11/01/2033 | 446,715 | |||||
22,311,157 | 5.50%, 04/01/2034 | 24,049,157 | |||||
10,566,308 | 5.50%, 04/01/2034 | 11,345,874 | |||||
1,879,772 | 5.50%, 09/01/2034 | 2,023,266 | |||||
455,687 | 6.00%, 11/01/2034 | 499,850 | |||||
3,226,840 | 5.50%, 02/01/2035 | 3,473,163 | |||||
3,250,824 | 5.50%, 02/01/2035 | 3,498,978 | |||||
7,287,123 | 5.00%, 06/01/2035 | 7,698,126 | |||||
6,967,472 | 5.00%, 07/01/2035 | 7,360,446 | |||||
33,066,871 | 5.00%, 10/01/2035 | 34,911,215 | |||||
3,669,833 | 5.00%, 11/01/2035 | 3,874,522 | |||||
25,837,624 | 5.00%, 02/01/2036 | 27,278,749 | |||||
15,961,060 | 5.00%, 03/01/2036 | 16,851,308 | |||||
13,458,498 | 5.50%, 04/01/2036 | 14,473,245 | |||||
4,153,528 | 5.50%, 11/01/2036 | 4,453,717 | |||||
16,820,777 | 5.50%, 04/01/2037 | 18,110,060 | |||||
778,232 | 6.00%, 08/01/2037 | 842,467 | |||||
11,662,272 | 5.50%, 06/01/2038 | 12,486,920 | |||||
15,735,786 | 4.00%, 08/01/2040 | 15,669,639 | |||||
1,236,753 | Series 2006-B2, | ||||||
Class AB, 5.50%, | |||||||
05/25/2014 | 1,259,797 | ||||||
40,011 | Series 2002-56, Class | ||||||
MC, 5.50%, 09/25/2017 | 43,509 | ||||||
311,030 | Series 1989-37, Class G, | ||||||
8.00%, 07/25/2019 | 370,304 | ||||||
79,885 | Series 1989-94, Class G, | ||||||
7.50%, 12/25/2019 | 90,467 | ||||||
14,057 | Series 1990-58, Class J, | ||||||
7.00%, 05/25/2020 | 15,745 | ||||||
125,827 | Series 1990-76, Class G, | ||||||
7.00%, 07/25/2020 | 140,937 | ||||||
55,880 | Series 1990-105, Class J, | ||||||
6.50%, 09/25/2020 | 61,964 | ||||||
19,589 | Series 1990-108, Class G, | ||||||
7.00%, 09/25/2020 | 21,939 | ||||||
38,875 | Series 1991-1, Class G, | ||||||
7.00%, 01/25/2021 | 43,599 | ||||||
45,729 | Series 1991-86, Class Z, | ||||||
6.50%, 07/25/2021 | 50,872 | ||||||
1,266,504 | Series 2003-33, Class LD, | ||||||
4.25%, 09/25/2022 | 1,312,576 | ||||||
529,377 | Series 1993-58, Class H, | ||||||
5.50%, 04/25/2023 | 578,540 | ||||||
332,087 | Series 1998-66, Class C, | ||||||
6.00%, 12/25/2028 | 367,149 | ||||||
673,582 | Series 2002-85, Class PD, | ||||||
5.50%, 05/25/2031 | 695,413 | ||||||
43,960 | Series 2003-44, Class AB, | ||||||
3.75%, 05/25/2033 | 45,981 | ||||||
1,799,035 | Series 2004-W6, Class | ||||||
1A4, 5.50%, 07/25/2034 | 1,942,676 | ||||||
3,476,979 | Series 2004-W6, Class | ||||||
1A6, 5.50%, 07/25/2034 | 3,754,594 |
The accompanying notes are an integral part of these financial statements.
Page 90
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Residential Mortgage | |||||||
Backed Securities – 27.3% (cont.) | |||||||
$ | 2,784,603 | Series 2004-W10, | |||||
Class A24, 5.00%, | |||||||
08/25/2034 | $ | 2,782,720 | |||||
4,100,000 | Series 2004-W10, Class | ||||||
A4, 5.75%, 08/25/2034 | 4,272,951 | ||||||
First Horizon Alternative | |||||||
Mortgage Securities: | |||||||
664,432 | Series 2005-FA7, Class | ||||||
2A1, 5.00%, 09/25/2020 | 594,197 | ||||||
1,002,552 | Series 2006-FA6, Class | ||||||
3A1, 5.75%, 11/25/2021 | 910,900 | ||||||
2,633,188 | Series 2006-FA8, Class | ||||||
2A1, 5.75%, 02/25/2037 | 2,427,186 | ||||||
128,327 | GMAC Mortgage | ||||||
Corporation Loan Trust, | |||||||
Series 2004-J4, Class A2, | |||||||
5.50%, 09/25/2034 | 129,960 | ||||||
270,829 | Impac CMB Trust, | ||||||
Series 2004-4, Class 2A2, | |||||||
5.441%, 09/25/2034 | |||||||
(Callable 01/25/2011) | 267,851 | ||||||
1,077,899 | J.P. Morgan Alternative | ||||||
Loan Trust, | |||||||
Series 2006-A1, Class | |||||||
2A1, 5.799%, 03/25/2036 | 703,526 | ||||||
J.P. Morgan | |||||||
Mortgage Trust: | |||||||
3,100,000 | Series 2006-A7, | ||||||
Class 2A4R, 5.457%, | |||||||
01/25/2037 (Callable | |||||||
04/25/2018) | 2,305,287 | ||||||
725,580 | Series 2006-A7, | ||||||
Class 2A2, 5.83%, | |||||||
01/25/2037 (Callable | |||||||
04/25/2018) | 541,198 | ||||||
6,100,000 | Series 2007-A2, | ||||||
Class 2A3, 5.715%, | |||||||
04/25/2037 (Callable | |||||||
10/25/2018) | 4,833,115 | ||||||
Master Alternative | |||||||
Loans Trust: | |||||||
1,970,502 | Series 2004-1, Class 1A1, | ||||||
5.00%, 01/25/2019 | 1,997,397 | ||||||
112,510 | Series 2004-2, Class 4A1, | ||||||
5.00%, 02/25/2019 | 113,165 | ||||||
1,357,590 | Series 2004-4, Class 4A1, | ||||||
5.00%, 04/25/2019 | 1,374,169 | ||||||
666,221 | Series 2003-5, Class 6A1, | ||||||
6.00%, 08/25/2033 | 688,248 | ||||||
452,123 | Residential Accredit | ||||||
Loans, Inc., | |||||||
Series 2004-QS6, Class | |||||||
A1, 5.00%, 05/25/2019 | |||||||
(Callable 04/25/2015) | 461,915 | ||||||
327,559 | Residential Funding | ||||||
Mortgage Security I, | |||||||
Series 2003-S11, Class | |||||||
A2, 4.00%, 06/25/2018 | |||||||
(Callable 08/25/2011) | 328,511 | ||||||
871,970 | Salomon Brothers | ||||||
Mortgage Securities VII, | |||||||
Series 2003-UP2, Class | |||||||
A2, 4.00%, 06/25/2033 | |||||||
(Callable 03/25/2014) | 886,711 | ||||||
Washington Mutual, Inc. | |||||||
Pass-Thru Certificates: | |||||||
1,630,168 | Series 2004-CB1, Class | ||||||
5A, 5.00%, 06/25/2019 | 1,686,642 | ||||||
2,893,348 | Series 2004-CB2, Class | ||||||
7A, 5.50%, 08/25/2019 | 3,001,217 |
The accompanying notes are an integral part of these financial statements.
Page 91
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Residential Mortgage | |||||||
Backed Securities – 27.3% (cont.) | |||||||
$ | 71,217 | Series 2004-CB3, | |||||
Class 3A, 5.50%, | |||||||
10/25/2019 | $ | 72,443 | |||||
931,762 | Series 2004-CB3, Class | ||||||
4A, 6.00%, 10/25/2019 | 957,629 | ||||||
625,576 | Series 2004-CB4, | ||||||
Class 21A, 5.50%, | |||||||
12/25/2019 | 647,256 | ||||||
463,171,638 | |||||||
Taxable Municipal Bonds – 3.8% | |||||||
California | |||||||
Qualified School | |||||||
Construction Bonds: | |||||||
2,500,000 | 5.041%, 07/01/2020 | 2,464,325 | |||||
7,500,000 | 7.155%, 03/01/2027 | 7,465,950 | |||||
6,500,000 | California State, | ||||||
5.75%, 03/01/2017 | 6,644,885 | ||||||
5,975,000 | Contra Costa County | ||||||
California Pension | |||||||
Obligation, | |||||||
5.14%, 06/01/2017 | 5,994,598 | ||||||
1,000,000 | Cuyahoga County Ohio | ||||||
Industrial Development | |||||||
Revenue, | |||||||
9.125%, 10/01/2023 | 770,510 | ||||||
2,580,000 | Eaton Ohio Community | ||||||
City Schools, | |||||||
5.39%, 08/25/2027 | |||||||
(Callable 06/01/2020) | 2,465,293 | ||||||
4,975,000 | Elgin Ohio LOC | ||||||
School District, | |||||||
5.499%, 08/31/2027 | |||||||
(Callable 12/01/2019) | 4,669,485 | ||||||
10,000,000 | Illinois State, | ||||||
3.636%, 02/01/2014 | 9,944,100 | ||||||
6,500,000 | San Dieguito California | ||||||
Public Facilities, | |||||||
6.459%, 05/01/2027 | 6,479,135 | ||||||
5,000,000 | State Public School | ||||||
Building Authorities | |||||||
Revenue, | |||||||
5.00%, 09/15/2027 | 4,512,200 | ||||||
2,650,000 | Three Rivers Ohio | ||||||
LOC School District, | |||||||
5.209%, 09/15/2027 | |||||||
(Callable 12/01/2020) | 2,481,063 | ||||||
7,830,000 | Tobacco Settlement | ||||||
Authority Iowa, | |||||||
6.50%, 06/01/2023 | |||||||
(Callable 06/01/2015) | 7,184,573 | ||||||
4,000,000 | Westlake Ohio City | ||||||
School District, | |||||||
5.227%, 12/01/2026 | |||||||
(Callable 12/01/2020) | 3,844,120 | ||||||
64,920,237 | |||||||
Utilities – 6.5% | |||||||
Allegheny Energy | |||||||
Supply Co. Senior | |||||||
Unsecured Notes: | |||||||
5,500,000 | 8.25%, 04/15/2012 | ||||||
(Acquired 06/17/2010 | |||||||
through 09/21/2010; | |||||||
Aggregate | |||||||
Cost $5,870,921)* | 5,900,873 | ||||||
1,900,000 | 5.75%, 10/15/2019 | ||||||
(Acquired 09/22/2009 | |||||||
through 06/30/2010; | |||||||
Aggregate | |||||||
Cost $1,891,569)* @ | 1,912,428 |
The accompanying notes are an integral part of these financial statements.
Page 92
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Utilities – 6.5% (cont.) | |||||||
$ | 6,900,000 | Ameren Corporation, | |||||
8.875%, 05/15/2014 | $ | 7,763,666 | |||||
850,000 | Arizona Pubic Service | ||||||
Senior Unsecured Notes, | |||||||
8.75%, 03/01/2019 | 1,064,300 | ||||||
2,482,000 | Beaver Valley Funding | ||||||
Corporation Debentures, | |||||||
9.00%, 06/01/2017 | 2,698,753 | ||||||
Constellation Energy | |||||||
Group Inc.: | |||||||
6,575,000 | 7.00%, 04/01/2012 | 7,074,891 | |||||
1,000,000 | 4.55%, 06/15/2015 | 1,037,387 | |||||
4,500,000 | El Paso Pipeline Partners | ||||||
Operating Co LLC, | |||||||
7.50%, 11/15/2040 | 4,663,656 | ||||||
Enel Finance | |||||||
International: f | |||||||
2,475,000 | 5.125%, 10/07/2019 | ||||||
(Acquired 09/30/2009; | |||||||
Cost $2,464,110)* | 2,452,787 | ||||||
1,900,000 | 6.80%, 09/15/2037 | ||||||
(Acquired 09/13/2007; | |||||||
Cost $1,894,965)* | 1,922,986 | ||||||
Energy Transfer Partners: | |||||||
750,000 | 5.65%, 08/01/2012 | 794,628 | |||||
1,173,000 | 8.50%, 04/15/2014 | 1,361,929 | |||||
2,500,000 | FPL Group Capital, | ||||||
Inc., Series D, | |||||||
7.30%, 09/01/2067 | |||||||
(Callable 09/01/2017) @ | 2,581,250 | ||||||
514,904 | GG1C Funding | ||||||
Corporation, | |||||||
5.129%, 01/15/2014 | |||||||
(Callable 02/07/2011) | |||||||
(Acquired 06/27/2006; | |||||||
Cost $503,672)* | 531,587 | ||||||
Kinder Morgan Energy | |||||||
Partners Senior Notes: | |||||||
1,000,000 | 9.00%, 02/01/2019 | 1,259,305 | |||||
2,250,000 | 6.95%, 01/15/2038 | 2,444,850 | |||||
1,000,000 | 6.50%, 09/01/2039 | 1,033,035 | |||||
900,000 | Kinder Morgan Finance, | ||||||
5.70%, 01/05/2016 f | 911,250 | ||||||
119,757 | Kiowa Power Partners LLC, | ||||||
4.811%, 12/30/2013 | |||||||
(Acquired 11/19/2004; | |||||||
Cost $128,751)* | 123,270 | ||||||
2,600,000 | Korea Gas Corp., | ||||||
4.25%, 11/02/2020 | |||||||
(Acquired 10/26/2010; | |||||||
Cost $2,587,026)* f | 2,466,773 | ||||||
2,118,000 | Midamerican Energy | ||||||
Holdings Co., | |||||||
5.875%, 10/01/2012 | 2,285,244 | ||||||
1,325,000 | National Grid PLC | ||||||
Senior Unsecured Notes, | |||||||
6.30%, 08/01/2016 f | 1,512,670 | ||||||
7,045,000 | National Oilwell Varco | ||||||
Inc., Series B, | |||||||
6.125%, 08/15/2015 | |||||||
(Callable 02/01/2011) | 7,275,632 | ||||||
National Rural | |||||||
Utilities Corporation: | |||||||
4,647,000 | 10.375%, 11/01/2018 | 6,410,183 | |||||
100,000 | 8.00%, 03/01/2032 | 126,589 | |||||
3,724,000 | Nisource Finance | ||||||
Corporation, | |||||||
6.15%, 03/01/2013 | 4,062,527 | ||||||
1,525,000 | ONEOK Inc., | ||||||
7.125%, 04/15/2011 | 1,551,733 | ||||||
1,000,000 | Plains All | ||||||
American Pipeline, | |||||||
5.625%, 12/15/2013 | 1,093,733 |
The accompanying notes are an integral part of these financial statements.
Page 93
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.8% (cont.) | |||||||
Utilities – 6.5% (cont.) | |||||||
PPL Energy Supply, | |||||||
LLC Senior Notes: | |||||||
$ | 300,000 | 6.40%, 11/01/2011 | $ | 314,025 | |||
2,060,000 | Series A, 5.70%, | ||||||
10/15/2015 | 2,254,740 | ||||||
PSE&G Power LLC: | |||||||
450,000 | 5.00%, 04/01/2014 @ | 482,873 | |||||
144,000 | 5.32%, 09/15/2016 | 157,565 | |||||
4,005,000 | 5.125%, 04/15/2020 | 4,167,275 | |||||
1,429,057 | RGS (I&M) Funding | ||||||
Corporation Debentures, | |||||||
9.82%, 12/07/2022 | 1,597,414 | ||||||
2,000,000 | Rockies Express | ||||||
Pipeline LLC, | |||||||
5.625%, 04/15/2020 | |||||||
(Acquired 03/17/2010; | |||||||
Cost $1,998,220)* | 1,933,250 | ||||||
1,400,000 | Southern Natural Gas, | ||||||
5.90%, 04/01/2017 | |||||||
(Acquired 03/14/2007; | |||||||
Cost $1,397,676)* | 1,501,308 | ||||||
3,000,000 | Southwestern Public | ||||||
Service Co., | |||||||
5.60%, 10/01/2016 | 3,287,073 | ||||||
7,500,000 | Spectra Energy Capital, | ||||||
5.668%, 08/15/2014 | 8,267,287 | ||||||
1,000,000 | Talisman Energy Inc., | ||||||
7.75%, 06/01/2019 f | 1,234,552 | ||||||
2,000,000 | Trans-Canada Pipelines, | ||||||
6.50%, 08/15/2018 f | 2,360,714 | ||||||
Transcontinental Gas | |||||||
Pipe Line Corporation | |||||||
Senior Notes: | |||||||
1,000,000 | Series B, 7.00%, | ||||||
08/15/2011 | 1,037,280 | ||||||
2,200,000 | 8.875%, 07/15/2012 | 2,431,099 | |||||
1,500,000 | Valero Energy | ||||||
Corporation, 6.875%, | |||||||
04/15/2012 @ | 1,596,272 | ||||||
Vectren Utility | |||||||
Holdings, Inc.: | |||||||
1,175,000 | 6.625%, 12/01/2011 | 1,234,221 | |||||
1,100,000 | 5.25%, 08/01/2013 | 1,183,580 | |||||
109,358,443 | |||||||
U.S. Government Agency Issues – 1.9% | |||||||
Government National | |||||||
Mortgage Association | |||||||
(GNMA): | |||||||
278,607 | 6.00%, 11/20/2033 | 307,572 | |||||
30,926,067 | 4.50%, 05/20/2040 | 32,150,016 | |||||
32,457,588 | |||||||
U.S. Treasury Obligations – 15.6% | |||||||
U.S. Treasury Bonds: | |||||||
36,775,000 | 2.375%, 03/31/2016 @ | 37,240,424 | |||||
105,300,000 | 6.25%, 08/15/2023 @ | 132,348,938 | |||||
56,025,000 | 5.25%, 11/15/2028 @ | 64,209,916 | |||||
29,825,000 | 4.375%, 02/15/2038 @ | 30,141,891 | |||||
263,941,169 | |||||||
Total Long-Term | |||||||
Investments | |||||||
(Cost $1,638,898,873) | 1,660,629,000 |
The accompanying notes are an integral part of these financial statements.
Page 94
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Shares | Value | ||||||
SHORT-TERM INVESTMENTS – 4.3% | |||||||
Money Market Mutual Funds – 4.3% | |||||||
39,830,334 | Dreyfus Institutional | ||||||
Cash Advantage | |||||||
Fund, 0.18% « | $ | 39,830,334 | |||||
32,795,193 | The AIM STIT – | ||||||
Liquid Assets | |||||||
Portfolio, 0.19% « | 32,795,193 | ||||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $72,625,527) | 72,625,527 | ||||||
Principal | |||||||
Amount | |||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 15.3% | |||||||
Commercial Paper – 0.2% | |||||||
$ | 3,481,486 | Atlantic East | |||||
Funding LLC, | |||||||
0.59%, 03/25/2011 †** | 2,362,338 | ||||||
Total Commercial Paper | |||||||
(Cost $3,481,486) | 2,362,338 | ||||||
Shares | |||||||
Investment Companies – 15.1% | |||||||
256,681,023 | Mount Vernon | ||||||
Securities Lending | |||||||
Trust Prime | |||||||
Portfolio, 0.29% « | 256,681,023 | ||||||
Total Investment | |||||||
Companies | |||||||
(Cost $256,681,023) | 256,681,023 | ||||||
Total Investments | |||||||
Purchased With Cash | |||||||
Proceeds From | |||||||
Securities Lending | |||||||
(Cost $260,162,509) | 259,043,361 | ||||||
Total Investments | |||||||
(Cost $1,971,686,909) | |||||||
– 117.4% | 1,992,297,888 | ||||||
Asset Relating to Securities | |||||||
Lending Investments – 0.1% | |||||||
Support | |||||||
Agreement** ^ a | 1,119,148 | ||||||
Total (Cost $0) | 1,119,148 | ||||||
Liabilities in Excess of | |||||||
Other Assets – (17.5)% | (296,082,279 | ) | |||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 1,697,334,757 |
Notes to Schedule of Investments
* | Restricted Security Deemed Liquid |
** | Illiquid Security |
@ | This security or portion of this security is out on loan at December 31, 2010. |
f | Foreign Security |
^ | Non-Income Producing |
« | 7-Day Yield |
§ | Security in Default |
† | 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 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. |
The accompanying notes are an integral part of these financial statements.
Page 95
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
Summary of Fair Value Exposure at December 31, 2010
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 standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Management has determined that these standards have no material impact on the Funds’ financial statements. The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability. These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized into three broad levels and described below:
Level 1 – | Unadjusted quoted prices in active markets for identical unrestricted 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 factors that market participants would use in valuing the security) based on the best information available. |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Page 96
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2010:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 72,871,857 | $ | — | $ | 72,871,857 | ||||||||
Commercial Mortgage Backed Securities | — | 96,056,292 | — | 96,056,292 | ||||||||||||
Corporate Debt Securities | — | 645,852,240 | — | 645,852,240 | ||||||||||||
Other Government Related Securities | — | 21,357,979 | — | 21,357,979 | ||||||||||||
Residential Mortgage Backed Securities | — | 463,171,638 | — | 463,171,638 | ||||||||||||
Taxable Municipal Bonds | — | 64,920,237 | — | 64,920,237 | ||||||||||||
U.S. Government Agency Issues | — | 32,457,588 | — | 32,457,588 | ||||||||||||
U.S. Treasury Obligations | — | 263,941,169 | — | 263,941,169 | ||||||||||||
Total Fixed Income | — | 1,660,629,000 | — | 1,660,629,000 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 72,625,527 | — | — | 72,625,527 | ||||||||||||
Total Short-Term Investments | 72,625,527 | — | — | 72,625,527 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 2,362,338 | — | 2,362,338 | ||||||||||||
Money Market Mutual Funds | 256,681,023 | — | — | 256,681,023 | ||||||||||||
Total Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | 256,681,023 | 2,362,338 | — | 259,043,361 | ||||||||||||
Total Investments | $ | 329,306,550 | $ | 1,662,991,338 | $ | — | $ | 1,992,297,888 | ||||||||
Asset Relating to Securities Lending Investments | $ | — | $ | 1,119,148 | $ | — | $ | 1,119,148 |
Changes in valuation techniques may result in transfers into or out of current assigned levels within the hierarchy. There were no significant transfers between Level 1 and Level 2 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.
Page 97
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2010 |
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, 2009 | $ | 2,829,765 | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | (901,943 | ) | ||
Change in unrealized appreciation (depreciation) | 210,610 | |||
Net purchases (sales) | (1,743,806 | ) | ||
Transfers in and/or out of Level 3* | (394,626 | ) | ||
Balance as of December 31, 2010 | $ | — |
* | The information used in the above reconciliation represents fiscal year 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 98
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 Fund entered the year with a significant yield advantage over its benchmark and was able to convert it into strong relative and absolute net performance in 2010. The primary factors for the Fund’s outperformance over its benchmark index were:
• The underweight to U.S. Treasuries was beneficial to the Fund’s performance as Treasuries generally underperformed equal duration securities from the other high quality “spread sectors” of the bond market in 2010.
• An overweight to the corporate credit sector and specifically financial issues. An overweight to credit was positive for relative performance as the credit sector performed well in 2010. Financials were the best performing credit sector during the year.
• Price appreciation of non-Agency mortgage-backed securities. Non-Agency mortgages continued to perform well due to strong demand in the marketplace.
• Price recovery from certain securities with sound fundamental value whose market prices had temporarily fallen and subsequently appreciated in value.
• An underweight to Agency mortgage pass-through securities detracted from relative performance.
The Fund maintained its duration-neutral positioning relative to its benchmark index, holding a broadly diversified portfolio of 446 securities at year end.
We are pleased with the Fund’s performance in 2010 and are confident in the individual issues and the overall structure of the Fund. The Fund’s yield advantage over the benchmark is meaningful and we are optimistic regarding the Fund’s relative performance as we head into 2011.
Portfolio Characteristics
Quality Distribution* | Sector Weightings* |
Net Assets: | $510,771,805 | Annualized Expense Ratio: | |||
SEC 30-Day Yield:** | Institutional Class: | 0.30 | % | ||
Institutional Class: | 4.44% | Investor Class: | 0.55 | %*** | |
Investor Class: | 4.20% | Portfolio Turnover Rate: | 61.5 | % | |
Average Effective Duration: | 4.94 years | Total Number of Holdings: | 446 | ||
Average Effective Maturity: | 7.17 years |
* | Percentages shown are based on the Fund’s total investments (less investments purchased with cash proceeds from securities lending). |
** | SEC yields are based on SEC guidelines and are calculated for the 30 days ended December 31, 2010. |
*** | Includes 0.25% 12b-1 fee. |
Page 99
Baird Core Plus 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 100
Baird Core Plus Bond Fund
Average Annual Total Returns
Since | ||||
For the Periods Ended December 31, 2010 | One Year | Five Years | Ten Years | Inception(1) |
Institutional Class Shares | 9.81% | 7.04% | 6.63% | 7.06% |
Investor Class Shares | 9.53% | 6.79% | 6.37% | 6.79% |
Barclays Capital U.S. Universal Bond Index(2) | 7.16% | 5.90% | 6.08% | 6.30% |
(1) | For the period from September 29, 2000 (commencement of operations) through December 31, 2010. |
(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 101
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% | |||||||
Asset Backed Securities – 3.6% | |||||||
$ | 59,292 | Amresco Residential | |||||
Securities Mortgage | |||||||
Loan Trust, | |||||||
Series 1998-2, Class A6, | |||||||
6.45%, 12/25/2027 | |||||||
(Callable 01/25/2011) | $ | 58,794 | |||||
Bayview Financial | |||||||
Acquisition Trust: | |||||||
700,000 | Series 2007-A, | ||||||
6.205%, 05/28/2037 | 693,477 | ||||||
150,000 | Series 2007-B, Class 1A2, | ||||||
6.831%, 08/28/2047 | 75,110 | ||||||
Countrywide Asset- | |||||||
Backed Certificates: | |||||||
64,285 | Series 2006-S2, Class A2, | ||||||
5.627%, 07/25/2027 | 58,684 | ||||||
214,135 | Series 2004-12, Class AF6, | ||||||
4.634%, 03/25/2035 | |||||||
(Callable 05/25/2019) | 215,818 | ||||||
1,341,588 | Series 2004-15, Class AF6, | ||||||
4.613%, 04/25/2035 | |||||||
(Callable 01/25/2018) | 1,309,870 | ||||||
2,057,503 | Series 2005-7, Class AF6, | ||||||
4.693%, 08/25/2035 | |||||||
(Callable 05/25/2024) | 1,886,427 | ||||||
540,390 | Series 2005-10, Class AF6, | ||||||
4.915%, 02/25/2036 | 455,017 | ||||||
2,327,143 | Series 2005-11, Class AF3, | ||||||
4.778%, 02/25/2036 | 1,965,378 | ||||||
2,080,399 | Series 2005-13, Class AF3, | ||||||
5.43%, 04/25/2036 | 1,539,802 | ||||||
279,103 | Series 2006-S9, Class A3, | ||||||
5.728%, 08/25/2036 | 158,098 | ||||||
182,626 | Series 2007-S1, Class A6, | ||||||
5.693%, 11/25/2036 | |||||||
(Callable 09/25/2016) | 117,037 | ||||||
733,472 | Series 2006-13, | ||||||
Class 1AF2, 5.884%, | |||||||
01/25/2037 | 670,687 | ||||||
245,671 | Series 2006-13, | ||||||
Class 1AF3, 5.944%, | |||||||
01/25/2037 | 138,622 | ||||||
210,521 | Series 2007-S2, Class A2, | ||||||
5.649%, 05/25/2037 | 168,205 | ||||||
300,000 | Series 2007-4, Class A3, | ||||||
5.714%, 09/25/2037 | 159,074 | ||||||
1,300,000 | Series 2006-10, Class 1AF3, | ||||||
5.971%, 09/25/2046 | 791,782 | ||||||
616,000 | Series 2006-9, Class 1AF3, | ||||||
5.859%, 10/25/2046 | 325,962 | ||||||
441,513 | Credit-Based Asset | ||||||
Servicing and Security, | |||||||
Series 2005-CB3, | |||||||
4.725%, 02/25/2033 | 441,145 | ||||||
4,997 | GE Capital Mortgage | ||||||
Services, Inc., | |||||||
Series 1999-HE1, Class A7, | |||||||
6.265%, 04/25/2029 | |||||||
(Callable 01/25/2011) | 4,890 | ||||||
Green Tree Financial | |||||||
Corporation: | |||||||
49,690 | Series 1993-4, Class A5, | ||||||
7.05%, 01/15/2019 | |||||||
(Callable 01/15/2011) | 50,870 | ||||||
17,163 | Series 1997-1, Class A5, | ||||||
6.86%, 03/15/2028 | 18,035 | ||||||
56,121 | Series 1997-4, Class A5, | ||||||
6.88%, 02/15/2029 | 58,604 | ||||||
741,420 | Series 1997-5, Class A6, | ||||||
6.82%, 05/15/2029 | 759,763 | ||||||
720,186 | Series 1998-3, Class A5, | ||||||
6.22%, 03/01/2030 | 762,797 |
The accompanying notes are an integral part of these financial statements.
Page 102
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Asset Backed Securities – 3.6% (cont.) | |||||||
$ | 304,217 | Series 1998-4, Class A5, | |||||
6.18%, 04/01/2030 | $ | 308,257 | |||||
44,120 | Oakwood Mortgage | ||||||
Investors, Inc., | |||||||
Series 1999-B, Class A3, | |||||||
6.45%, 11/15/2017 | |||||||
(Callable 01/15/2011) | 41,199 | ||||||
Renaissance Home | |||||||
Equity Loan Trust: | |||||||
249,163 | Series 2005-1, Class AF6, | ||||||
4.97%, 05/25/2035 | |||||||
(Callable 11/25/2020) | 234,629 | ||||||
819,000 | Series 2006-2, Class AF3, | ||||||
5.797%, 08/25/2036 | 484,920 | ||||||
717,833 | Series 2006-3, Class AF2, | ||||||
5.58%, 11/25/2036 | 574,862 | ||||||
500,000 | Series 2007-1, Class AF2, | ||||||
5.512%, 04/25/2037 | 263,720 | ||||||
300,000 | Series 2007-1, Class AF3, | ||||||
5.612%, 04/25/2037 | 157,831 | ||||||
1,500,000 | Series 2007-2, Class AF2, | ||||||
5.675%, 06/25/2037 | 784,463 | ||||||
188,877 | Residential Asset | ||||||
Mortgage Products, Inc., | |||||||
Series 2003-RS10, Class | |||||||
AI7, 4.85%, 11/25/2033 | 185,128 | ||||||
Residential Asset | |||||||
Securities Corporation: | |||||||
235,237 | Series 2003-KS5, Class | ||||||
AI6, 3.62%, 07/25/2033 | |||||||
(Callable 06/25/2014) | 210,055 | ||||||
175,499 | Series 2003-KS9, Class | ||||||
AI6, 4.71%, 11/25/2033 | |||||||
(Callable 07/25/2016) | 160,243 | ||||||
626,238 | Series 2006-EMX8, | ||||||
0.364%, 10/25/2036 | 583,272 | ||||||
1,557,928 | Structured Asset | ||||||
Securities Corporation, | |||||||
Series 2005-7XS, | |||||||
Class 1A4B, | |||||||
5.44%, 04/25/2035 | |||||||
(Callable 12/25/2017) | 1,413,030 | ||||||
18,285,557 | |||||||
Commercial Mortgage Backed Securities – 7.4% | |||||||
5,425,000 | Citigroup Deutsche Bank, | ||||||
Series 2005-CD1, Class | |||||||
A4, 5.222%, 07/15/2044 | 5,838,459 | ||||||
3,875,000 | Commercial Mortgage | ||||||
Pass-Through Certificates, | |||||||
Series 2005-C6, Class A5A, | |||||||
5.116%, 06/10/2044 | 4,146,951 | ||||||
1,006,398 | First Union National Bank | ||||||
Commercial Mortgage | |||||||
Securities Inc., | |||||||
Series 2001-C4, Class A2, | |||||||
6.223%, 12/12/2033 | 1,031,417 | ||||||
GE Capital Commercial | |||||||
Mortgage Corporation: | |||||||
1,610,000 | Series 2003-C2, Class A4, | ||||||
5.145%, 07/10/2037 | 1,710,970 | ||||||
1,600,000 | Series 2004-C3, Class A4, | ||||||
5.189%, 07/10/2039 | 1,699,797 | ||||||
GMAC Commercial | |||||||
Mortgage Securities, Inc.: | |||||||
204,534 | Series 2001-C1, Class A2, | ||||||
6.465%, 04/15/2034 | 204,463 | ||||||
1,750,000 | Series 2003-C1, Class A2, | ||||||
4.079%, 05/10/2036 | 1,814,891 | ||||||
6,727,000 | Series 2004-C2, Class A4, | ||||||
5.301%, 08/10/2038 | 7,160,672 |
The accompanying notes are an integral part of these financial statements.
Page 103
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Commercial Mortgage | |||||||
Backed Securities – 7.4% (cont.) | |||||||
$ | 5,280,000 | J.P. Morgan Chase | |||||
Commercial Mortgage | |||||||
Trust, Series 2005-CB12, | |||||||
Class A4, 4.895%, | |||||||
09/12/2037 | $ | 5,592,147 | |||||
1,440,791 | Salomon Brothers | ||||||
Mortgage Securities VII, | |||||||
Series 2001-C2, Class A3, | |||||||
6.50%, 11/13/2036 | 1,474,674 | ||||||
Wachovia Bank | |||||||
Commercial | |||||||
Mortgage Trust: | |||||||
1,550,000 | Series 2003-C3, Class A2, | ||||||
4.867%, 02/15/2035 | 1,625,756 | ||||||
5,000,000 | Series 2005-C22, | ||||||
Class A4, 5.27%, | |||||||
12/15/2044 | 5,359,942 | ||||||
37,660,139 | |||||||
Financial – 19.5% | |||||||
745,000 | Abbey National | ||||||
Treasury Services PLC, | |||||||
3.875%, 11/10/2014 | |||||||
(Acquired 02/25/2010 | |||||||
through 07/14/2010; | |||||||
Aggregate | |||||||
Cost $742,888)* @ | 738,249 | ||||||
175,000 | The Allstate Corporation, | ||||||
5.35%, 06/01/2033 | 172,333 | ||||||
1,065,000 | Ally Financial Inc., | ||||||
8.30%, 02/12/2015 | 1,171,500 | ||||||
935,000 | American Express Credit | ||||||
Corporation, Series C, | |||||||
7.30%, 08/20/2013 | 1,053,612 | ||||||
American General | |||||||
Finance Corporation: | |||||||
430,000 | 4.00%, 03/15/2011 @ | 426,775 | |||||
275,000 | 5.85%, 06/01/2013 | 249,563 | |||||
1,000,000 | 6.90%, 12/15/2017 | 807,500 | |||||
225,000 | AmSouth Bancorporation | ||||||
Subordinated Debentures, | |||||||
6.75%, 11/01/2025 | 196,381 | ||||||
2,500,000 | AON Corp., | ||||||
3.50%, 09/30/2015 | 2,501,232 | ||||||
975,000 | Arden Realty LP, | ||||||
5.25%, 03/01/2015 | |||||||
(Callable 12/01/2014) | 1,026,629 | ||||||
500,000 | Bancwest Corporation, | ||||||
8.30%, 01/15/2011 | 500,061 | ||||||
200,000 | BankAmerica Capital | ||||||
II, Series 2, | |||||||
8.00%, 12/15/2026 | |||||||
(Callable 02/07/2011) | 201,250 | ||||||
1,000,000 | BankAmerica Institutional, | ||||||
8.07%, 12/31/2026 | |||||||
(Callable 02/07/2011) | |||||||
(Acquired 07/22/2010; | |||||||
Cost $990,000)* | 1,006,250 | ||||||
575,000 | Bank of America | ||||||
Corporation Subordinated | |||||||
Notes, 10.20%, 07/15/2015 | 681,222 | ||||||
250,000 | Bank Tokyo – | ||||||
Mitsubishi UFJ Ltd., | |||||||
7.40%, 06/15/2011 f | 254,739 | ||||||
300,000 | Banponce Trust I, Series A, | ||||||
8.327%, 02/01/2027 | |||||||
(Callable 02/07/2011) | 219,787 | ||||||
400,000 | Bear Stearns Cos., | ||||||
Inc., Series B, | |||||||
6.95%, 08/10/2012 | 436,398 |
The accompanying notes are an integral part of these financial statements.
Page 104
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Financial – 19.5% (cont.) | |||||||
$ | 1,000,000 | BOI Capital Funding III, | |||||
6.107%, 02/04/2016 | |||||||
(Callable 02/04/2016) f | $ | 310,000 | |||||
125,000 | Capital One | ||||||
Financial Corp., | |||||||
6.15%, 09/01/2016 | 135,328 | ||||||
315,726 | CIT Group Funding, | ||||||
10.25%, 05/01/2017 | 322,451 | ||||||
CIT Group, Inc.: | |||||||
28,726 | 7.00%, 05/01/2013 | ||||||
(Callable 02/22/2011) @ | 29,301 | ||||||
43,088 | 7.00%, 05/01/2014 | ||||||
(Callable 02/22/2011) @ | 43,519 | ||||||
43,088 | 7.00%, 05/01/2015 | ||||||
(Callable 02/22/2011) | 43,196 | ||||||
571,814 | 7.00%, 05/01/2016 | ||||||
(Callable 02/22/2011) | 573,958 | ||||||
100,540 | 7.00%, 05/01/2017 | ||||||
(Callable 02/22/2011) @ | 100,791 | ||||||
700,000 | Citigroup Capital XXI, | ||||||
8.30%, 12/21/2057 | |||||||
(Callable 12/21/2037) @ | 728,000 | ||||||
1,100,000 | Citigroup, Inc., | ||||||
6.01%, 01/15/2015 | 1,206,729 | ||||||
CNA Financial | |||||||
Corporation: | |||||||
1,000,000 | 6.50%, 08/15/2016 | 1,070,900 | |||||
1,500,000 | 5.875%, 08/15/2020 | 1,493,510 | |||||
1,675,000 | Comerica Bank, | ||||||
5.75%, 11/21/2016 | 1,806,836 | ||||||
300,000 | Corestates Capital Trust I, | ||||||
8.00%, 12/15/2026 | |||||||
(Callable 02/07/2011) | |||||||
(Acquired 10/29/2010; | |||||||
Cost $306,707)* | 306,197 | ||||||
1,100,000 | Countrywide | ||||||
Financial Corporation, | |||||||
6.25%, 05/15/2016 | 1,128,035 | ||||||
2,700,000 | Dresdner Bank-New York | ||||||
Subordinated Debentures, | |||||||
7.25%, 09/15/2015 f @ | 2,860,814 | ||||||
500,000 | First Empire Capital Trust | ||||||
I, 8.234%, 02/01/2027 | |||||||
(Callable 02/07/2011) | 497,005 | ||||||
1,000,000 | First Empire Capital Trust | ||||||
II, 8.277%, 06/01/2027 | |||||||
(Callable 02/07/2011) | 996,856 | ||||||
2,000,000 | First Horizon | ||||||
National Corporation, | |||||||
5.375%, 12/15/2015 | 2,018,840 | ||||||
383,626 | First National Bank of | ||||||
Chicago Pass-Thru | |||||||
Certificates, Series 1993-A, | |||||||
8.08%, 01/05/2018 | 422,195 | ||||||
1,500,000 | First Tennessee | ||||||
Capital I, Series A, | |||||||
8.07%, 01/06/2027 | |||||||
(Callable 01/14/2011) | 1,501,875 | ||||||
650,000 | First Union | ||||||
Capital I, Series A, | |||||||
7.935%, 01/15/2027 | |||||||
(Callable 02/07/2011) | 668,680 | ||||||
General Electric | |||||||
Capital Corporation: | |||||||
1,150,000 | 5.625%, 09/15/2017 @ | 1,260,975 | |||||
1,500,000 | 5.50%, 01/08/2020 @ | 1,604,231 | |||||
1,627,000 | Genworth Global | ||||||
Funding Trust, | |||||||
5.125%, 03/15/2011 | 1,638,793 |
The accompanying notes are an integral part of these financial statements.
Page 105
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Financial – 19.5% (cont.) | |||||||
$ | 3,010,000 | Glencore Funding LLC, | |||||
6.00%, 04/15/2014 | |||||||
(Acquired 03/31/2004 | |||||||
through 12/16/2010; | |||||||
Aggregate | |||||||
Cost $3,110,969)* | $ | 3,180,961 | |||||
GMAC Inc.: | |||||||
1,000,000 | 6.00%, 05/23/2012 @ | 1,030,000 | |||||
1,305,000 | 7.50%, 12/31/2013 | 1,399,612 | |||||
984,000 | 8.00%, 12/31/2018 @ | 1,040,580 | |||||
250,000 | GMAC LLC, | ||||||
6.75%, 12/01/2014 | 261,953 | ||||||
125,000 | Goldman Sachs Capital I, | ||||||
6.345%, 02/15/2034 @ | 119,106 | ||||||
The Goldman | |||||||
Sachs Group, Inc.: | |||||||
100,000 | 5.15%, 01/15/2014 @ | 107,706 | |||||
1,000,000 | 5.95%, 01/18/2018 | 1,084,883 | |||||
300,000 | 6.75%, 10/01/2037 | 306,719 | |||||
1,805,000 | Goldman Sachs Group LP, | ||||||
8.00%, 03/01/2013 | |||||||
(Acquired 05/19/2006 | |||||||
through 10/28/2010; | |||||||
Aggregate | |||||||
Cost $1,955,892)* | 2,010,160 | ||||||
800,000 | Hartford Financial | ||||||
Services Group, | |||||||
8.125%, 06/15/2038 | |||||||
(Callable 06/15/2018) @ | 850,000 | ||||||
175,000 | HSBC Bank PLC | ||||||
Subordinated Notes, | |||||||
6.95%, 03/15/2011 f | 177,094 | ||||||
750,000 | HSBC Finance | ||||||
Corporation, | |||||||
7.00%, 05/15/2012 | 804,709 | ||||||
Invesco Ltd.: f | |||||||
2,010,000 | 5.625%, 04/17/2012 | 2,088,195 | |||||
275,000 | 5.375%, 02/27/2013 | 290,888 | |||||
1,110,000 | 5.375%, 12/15/2014 | 1,148,389 | |||||
2,500,000 | Irish Life & Permanent | ||||||
Group Holdings PLC, | |||||||
3.60%, 01/14/2013 | |||||||
(Acquired 12/01/2010; | |||||||
Cost $2,257,759)* f | 2,242,545 | ||||||
400,000 | Istar Financial, Inc., | ||||||
5.85%, 03/15/2017 @ | 344,500 | ||||||
875,000 | Jefferies Group, Inc., | ||||||
6.45%, 06/08/2027 | 836,603 | ||||||
3,100,000 | J.P. Morgan Chase & Co., | ||||||
4.25%, 10/15/2020 @ | 3,027,614 | ||||||
1,500,000 | John Hancock Mutual | ||||||
Life Insurance Company, | |||||||
7.375%, 02/15/2024 | |||||||
(Acquired 08/26/2010; | |||||||
Cost $1,700,122)* | 1,651,776 | ||||||
Key Bank NA: | |||||||
600,000 | 7.413%, 05/06/2015 | 665,300 | |||||
1,279,000 | 5.45%, 03/03/2016 | 1,345,957 | |||||
1,500,000 | Kookmin Bank, | ||||||
7.25%, 05/14/2014 | |||||||
(Acquired 03/10/2010; | |||||||
Cost $1,647,565)* f | 1,692,360 | ||||||
Liberty Mutual | |||||||
Group Inc.: | |||||||
655,000 | 5.75%, 03/15/2014 | ||||||
(Acquired 12/21/2010; | |||||||
Cost $681,521)* | 681,268 | ||||||
225,000 | 6.50%, 03/15/2035 | ||||||
(Acquired 09/29/2008 | |||||||
through 11/23/2010; | |||||||
Aggregate Cost $182,132)* | 199,339 |
The accompanying notes are an integral part of these financial statements.
Page 106
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Financial – 19.5% (cont.) | |||||||
$ | 900,000 | 10.75%, 06/15/2058 | |||||
(Callable 06/15/2038) | |||||||
(Acquired 05/21/2008 | |||||||
through 05/06/2009; | |||||||
Aggregate | |||||||
Cost $750,289)* | $ | 1,089,000 | |||||
375,000 | Liberty Mutual | ||||||
Insurance Company, | |||||||
7.697%, 10/15/2097 | |||||||
(Acquired 03/26/2003; | |||||||
Cost $240,078)* | 332,483 | ||||||
825,000 | Lincoln National | ||||||
Corporation, | |||||||
6.05%, 04/20/2067 | |||||||
(Callable 04/20/2017) | 761,063 | ||||||
1,300,000 | Lloyds TSB Bank PLC, | ||||||
5.80%, 01/13/2020 | |||||||
(Acquired 01/05/2010 | |||||||
through 11/19/2010; | |||||||
Aggregate | |||||||
Cost $1,304,839)* f @ | 1,283,575 | ||||||
Manufacturer And | |||||||
Traders Trust Co.: | |||||||
500,000 | 6.625%, 12/04/2017 | 561,325 | |||||
265,000 | 5.585%, 12/28/2020 | ||||||
(Callable 12/28/2015) | 251,017 | ||||||
2,350,000 | Marsh & McLennan | ||||||
Companies, Inc., | |||||||
5.375%, 07/15/2014 | 2,499,925 | ||||||
700,000 | MBIA Insurance Corp., | ||||||
14.00%, 01/15/2033 | |||||||
(Callable 01/15/2013) | |||||||
(Acquired 01/11/2008; | |||||||
Cost $700,000)* | 376,250 | ||||||
150,000 | MBNA Capital, Series A, | ||||||
8.278%, 12/01/2026 | |||||||
(Callable 02/07/2011) | 151,875 | ||||||
Merrill Lynch | |||||||
& Company: | |||||||
100,000 | 5.00%, 02/03/2014 | 103,491 | |||||
800,000 | 6.875%, 04/25/2018 | 875,486 | |||||
725,000 | 7.75%, 05/14/2038 | 752,425 | |||||
300,000 | Metlife Inc., Series A, | ||||||
6.817%, 08/15/2018 | 349,765 | ||||||
M&I Marshall & | |||||||
Ilsley Bank Senior | |||||||
Unsecured Notes: | |||||||
520,000 | 5.30%, 09/08/2011 | 523,807 | |||||
600,000 | 4.85%, 06/16/2015 | 609,608 | |||||
1,550,000 | Monumental Global | ||||||
Funding III, | |||||||
0.46%, 01/25/2013 | |||||||
(Acquired 10/14/2010; | |||||||
Cost $1,521,977)* | 1,506,828 | ||||||
Morgan Stanley: | |||||||
800,000 | 5.625%, 01/09/2012 | 835,315 | |||||
575,000 | 4.75%, 04/01/2014 | 588,816 | |||||
650,000 | 6.00%, 04/28/2015 | 703,952 | |||||
300,000 | 5.375%, 10/15/2015 | 315,111 | |||||
125,000 | 6.625%, 04/01/2018 | 135,596 | |||||
1,136,000 | National City Bank, | ||||||
6.20%, 12/15/2011 | 1,190,852 | ||||||
500,000 | National City | ||||||
Bank of Kentucky | |||||||
Subordinated Notes, | |||||||
6.30%, 02/15/2011 | 502,966 | ||||||
800,000 | Nationwide Financial | ||||||
Services, Inc., | |||||||
5.90%, 07/01/2012 | 844,369 |
The accompanying notes are an integral part of these financial statements.
Page 107
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Financial – 19.5% (cont.) | |||||||
$ | 100,000 | Nationwide Mutual | |||||
Insurance Company, | |||||||
7.875%, 04/01/2033 | |||||||
(Acquired 10/13/2009; | |||||||
Cost $90,110)* | $ | 100,767 | |||||
1,909,000 | Navigators Group Inc. | ||||||
Senior Unsecured Notes, | |||||||
7.00%, 05/01/2016 | 1,952,760 | ||||||
325,000 | Nomura Holdings Inc., | ||||||
6.70%, 03/04/2020 f | 347,845 | ||||||
375,000 | PHH Corporation, | ||||||
7.125%, 03/01/2013 | 374,063 | ||||||
1,550,000 | Principal Life | ||||||
Income Funding, | |||||||
5.10%, 04/15/2014 | 1,671,670 | ||||||
950,000 | Protective Life | ||||||
Corporation Senior Notes, | |||||||
4.30%, 06/01/2013 | 988,629 | ||||||
1,400,000 | Regions Financing Trust II, | ||||||
6.625%, 05/15/2047 | |||||||
(Callable 05/15/2027) | 1,207,500 | ||||||
Royal Bank of Scotland | |||||||
Group PLC: f | |||||||
705,000 | 5.00%, 11/12/2013 | 696,216 | |||||
1,528,000 | 5.05%, 01/08/2015 | 1,470,069 | |||||
Santander Financial | |||||||
Issuances: f | |||||||
550,000 | 6.375%, 02/15/2011 | 552,743 | |||||
300,000 | 7.25%, 11/01/2015 | 318,283 | |||||
2,378,000 | Schwab Capital Trust I, | ||||||
7.50%, 11/15/2037 | |||||||
(Callable 11/15/2017) @ | 2,459,898 | ||||||
SLM Corporation: | |||||||
425,000 | 5.125%, 08/27/2012 | 433,820 | |||||
1,000,000 | 5.375%, 05/15/2014 | 1,004,928 | |||||
50,000 | 5.625%, 08/01/2033 | 39,233 | |||||
643,000 | Sovereign Bancorp, Inc., | ||||||
8.75%, 05/30/2018 | 701,156 | ||||||
1,000,000 | Susa Partnership LP, | ||||||
8.20%, 06/01/2017 | 1,179,139 | ||||||
380,000 | Symetra Financial | ||||||
Corporation, | |||||||
6.125%, 04/01/2016 | |||||||
(Acquired 10/12/2010 | |||||||
through 10/13/2010; | |||||||
Aggregate Cost $404,405)* | 383,244 | ||||||
1,000,000 | TD Ameritrade | ||||||
Holding Corporation, | |||||||
5.60%, 12/01/2019 | 1,047,208 | ||||||
500,000 | Travelers Companies, Inc., | ||||||
5.35%, 11/01/2040 @ | 492,630 | ||||||
945,000 | UFJ Finance Aruba A.E.C., | ||||||
6.75%, 07/15/2013 f @ | 1,053,773 | ||||||
1,000,000 | Unitrin, Inc. Senior | ||||||
Unsecured Notes, | |||||||
6.00%, 05/15/2017 | 988,024 | ||||||
150,000 | Westpac Banking | ||||||
Corporation, | |||||||
4.875%, 11/19/2019 f | 157,621 | ||||||
100,000 | Willis North America Inc., | ||||||
5.625%, 07/15/2015 | 105,079 | ||||||
99,871,911 | |||||||
Industrial – 17.0% | |||||||
700,000 | Acuity Brands | ||||||
Lighting Inc., | |||||||
6.00%, 12/15/2019 | 728,443 | ||||||
200,000 | Allied Waste | ||||||
North America, Inc., | |||||||
6.875%, 06/01/2017 | |||||||
(Callable 06/02/2012) | 220,000 |
The accompanying notes are an integral part of these financial statements.
Page 108
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Industrial – 17.0% (cont.) | |||||||
$ | 225,000 | Anadarko Petroleum | |||||
Corporation, | |||||||
5.95%, 09/15/2016 | $ | 241,715 | |||||
100,000 | AT&T Inc., | ||||||
5.625%, 06/15/2016 | 112,127 | ||||||
337,605 | Atlas Air, Inc. | ||||||
Pass-Thru Certificates, | |||||||
Series 2000-1, 8.707%, | |||||||
07/02/2021 | 328,321 | ||||||
1,500,000 | BP Capital Markets PLC, | ||||||
4.75%, 03/10/2019 f @ | 1,546,493 | ||||||
50,000 | British | ||||||
Telecommunications PLC, | |||||||
5.95%, 01/15/2018 f | 54,726 | ||||||
1,500,000 | Browning-Ferris | ||||||
Industries Inc., | |||||||
9.25%, 05/01/2021 | 1,886,402 | ||||||
Bunge Limited | |||||||
Finance Corporation: | |||||||
625,000 | 5.35%, 04/15/2014 | 656,946 | |||||
200,000 | 5.10%, 07/15/2015 | 206,299 | |||||
1,105,000 | 8.50%, 06/15/2019 | 1,295,641 | |||||
675,000 | Bunge NA Finance LP, | ||||||
5.90%, 04/01/2017 | 694,665 | ||||||
500,000 | Chevron Phillips | ||||||
Chemical Company LLC, | |||||||
7.00%, 06/15/2014 | |||||||
(Acquired 11/05/2010; | |||||||
Cost $575,139)* | 566,831 | ||||||
50,000 | Clear Channel | ||||||
Communications, | |||||||
5.50%, 12/15/2016 | 32,500 | ||||||
Comcast Cable Holdings: | |||||||
500,000 | 9.80%, 02/01/2012 | 544,217 | |||||
625,000 | 7.875%, 08/01/2013 | 714,649 | |||||
350,000 | Comcast Corporation, | ||||||
6.50%, 01/15/2017 | 403,470 | ||||||
875,000 | Comcast Holdings | ||||||
Corporation, | |||||||
10.625%, 07/15/2012 | 991,299 | ||||||
2,000,000 | Computer Sciences | ||||||
Corporation, | |||||||
5.50%, 03/15/2013 | 2,138,564 | ||||||
Continental Airlines, Inc. | |||||||
Pass-Thru Certificates: | |||||||
891,815 | Series 2000-2, Class C, | ||||||
8.312%, 04/02/2011 | 900,733 | ||||||
53,827 | Series 1997-4, Class A, | ||||||
6.90%, 01/02/2018 | 57,191 | ||||||
800,000 | COX | ||||||
Communications Inc., | |||||||
5.45%, 12/15/2014 | 880,701 | ||||||
CSX Corporation: | |||||||
750,000 | 6.25%, 04/01/2015 | 852,321 | |||||
175,000 | 6.22%, 04/30/2040 | 189,986 | |||||
425,000 | Deutsche Telekom | ||||||
International Finance BV, | |||||||
8.75%, 06/15/2030 f | 571,178 | ||||||
1,752,000 | DIRECTV | ||||||
Holdings/Financing, | |||||||
7.625%, 05/15/2016 | |||||||
(Callable 05/15/2012) | 1,942,530 | ||||||
Donnelley (R.R.) | |||||||
& Sons Co.: | |||||||
1,250,000 | 8.60%, 08/15/2016 | 1,435,809 | |||||
1,200,000 | 6.125%, 01/15/2017 | 1,226,683 | |||||
366,220 | Federal Express Corporation | ||||||
1995 Pass-Thru | |||||||
Certificates, Series B2, | |||||||
7.11%, 01/02/2014 | |||||||
(Callable 02/07/2011) | 367,502 |
The accompanying notes are an integral part of these financial statements.
Page 109
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Industrial – 17.0% (cont.) | |||||||
$ | 500,000 | First Data Corporation, | |||||
9.875%, 09/24/2015 | |||||||
(Callable 09/30/2011) | $ | 476,250 | |||||
576,000 | Fiserv, Inc., | ||||||
6.125%, 11/20/2012 | 622,931 | ||||||
2,000,000 | Freeport-McMoRan | ||||||
Copper & Gold Inc., | |||||||
8.375%, 04/01/2017 | |||||||
(Callable 04/01/2012) | 2,212,500 | ||||||
Georgia-Pacific LLC: | |||||||
350,000 | 9.50%, 12/01/2011 | 374,500 | |||||
1,000,000 | 5.40%, 11/01/2020 | ||||||
(Acquired 10/27/2010; | |||||||
Cost $994,130)* | 988,679 | ||||||
975,000 | GTE Corporation, | ||||||
8.75%, 11/01/2021 | 1,258,316 | ||||||
2,200,000 | Hanson Australia Funding, | ||||||
5.25%, 03/15/2013 f | 2,244,000 | ||||||
1,125,000 | Hanson PLC Notes, | ||||||
6.125%, 08/15/2016 f | 1,147,500 | ||||||
100,000 | Health Care Service | ||||||
Corporation Notes, | |||||||
7.75%, 06/15/2011 | |||||||
(Acquired 01/26/2005; | |||||||
Cost $101,230)* | 101,277 | ||||||
2,100,000 | Health Management | ||||||
Association, | |||||||
6.125%, 04/15/2016 | 2,121,000 | ||||||
425,000 | Highmark Inc. Notes, | ||||||
6.80%, 08/15/2013 | |||||||
(Acquired 10/28/2010 | |||||||
through 11/24/2010; | |||||||
Aggregate | |||||||
Cost $472,039)* | 477,704 | ||||||
800,000 | Humana Inc., | ||||||
7.20%, 06/15/2018 | 903,718 | ||||||
2,000,000 | Hutchison Whampoa | ||||||
International LTD, | |||||||
4.625%, 09/11/2015 | |||||||
(Acquired 08/19/2010; | |||||||
Cost $2,111,685)* f | 2,099,764 | ||||||
1,114,000 | International | ||||||
Paper Company, | |||||||
7.40%, 06/15/2014 @ | 1,263,875 | ||||||
100,000 | Johnson Controls Inc., | ||||||
5.50%, 01/15/2016 @ | 109,355 | ||||||
Lafarge SA: f | |||||||
1,000,000 | 6.15%, 07/15/2011 | 1,026,084 | |||||
1,125,000 | 6.50%, 07/15/2016 | 1,198,292 | |||||
725,000 | 7.125%, 07/15/2036 | 702,168 | |||||
Marathon Oil Corporation: | |||||||
737,000 | 6.50%, 02/15/2014 | 829,656 | |||||
1,000,000 | 7.50%, 02/15/2019 @ | 1,241,936 | |||||
Martin Marietta | |||||||
Materials, Inc.: | |||||||
200,000 | 6.60%, 04/15/2018 | 215,028 | |||||
450,000 | 6.25%, 05/01/2037 | 433,116 | |||||
Masco Corporation: | |||||||
1,725,000 | 6.125%, 10/03/2016 | 1,762,898 | |||||
1,000,000 | 7.125%, 03/15/2020 @ | 1,046,128 | |||||
2,534,000 | Mosaic Co., | ||||||
7.625%, 12/01/2016 | |||||||
(Callable 12/01/2011) | |||||||
(Acquired 11/10/2010; | |||||||
Cost $2,751,774)* | 2,726,634 |
The accompanying notes are an integral part of these financial statements.
Page 110
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Industrial – 17.0% (cont.) | |||||||
Nabors Industries, Inc.: | |||||||
$ | 2,000,000 | 0.94%, 05/15/2011 | |||||
(Convertible until | |||||||
05/15/2011) | $ | 1,987,500 | |||||
250,000 | 6.15%, 02/15/2018 | 266,839 | |||||
350,000 | New Cingular Wireless | ||||||
Services, Inc., | |||||||
8.75%, 03/01/2031 | 473,228 | ||||||
150,000 | Nextel Communications | ||||||
Senior Notes, Series E, | |||||||
6.875%, 10/31/2013 | |||||||
(Callable 01/18/2011) @ | 150,375 | ||||||
1,000,000 | NuStar Logistics L.P., | ||||||
4.80%, 09/01/2020 | 969,857 | ||||||
50,000 | Pactiv Corporation, | ||||||
7.95%, 12/15/2025 @ | 43,768 | ||||||
200,000 | PCCW-HKT Capital | ||||||
II Ltd., 6.00%, 07/15/2013 | |||||||
(Acquired 07/10/2003; | |||||||
Cost $199,066)* f | 215,471 | ||||||
775,000 | PCCW-HKT Capital III | ||||||
Ltd., 5.25%, 07/20/2015 | |||||||
(Acquired 09/29/2008 | |||||||
through 12/20/2010; | |||||||
Aggregate | |||||||
Cost $790,434)* f | 812,197 | ||||||
75,000 | Pearson Dollar | ||||||
Finance PLC, | |||||||
5.70%, 06/01/2014 | |||||||
(Acquired 09/29/2008; | |||||||
Cost $73,807)* f | 81,302 | ||||||
Plum Creek | |||||||
Timberlands L.P.: | |||||||
1,200,000 | 5.875%, 11/15/2015 | 1,291,802 | |||||
1,200,000 | 4.70%, 03/15/2021 | 1,142,053 | |||||
2,175,000 | POSCO, | ||||||
4.25%, 10/28/2020 | |||||||
(Acquired 10/21/2010; | |||||||
Cost $2,165,365)* f | 2,065,271 | ||||||
2,000,000 | Reliance Holdings USA | ||||||
Inc., 4.50%, 10/19/2020 | |||||||
(Acquired 10/14/2010 | |||||||
through 10/18/2010; | |||||||
Aggregate | |||||||
Cost $1,988,700)* @ | 1,908,306 | ||||||
1,077,000 | Rio Tinto Alcan, Inc., | ||||||
5.20%, 01/15/2014 f | 1,157,241 | ||||||
975,000 | Rio Tinto | ||||||
Financial USA Ltd., | |||||||
6.50%, 07/15/2018 f | 1,136,699 | ||||||
610,000 | SK Telecom, | ||||||
6.625%, 07/20/2027 | |||||||
(Acquired 07/13/2007 | |||||||
through 04/08/2009; | |||||||
Aggregate | |||||||
Cost $542,802)* f | 678,181 | ||||||
Sprint Capital Corporation: | |||||||
700,000 | 7.625%, 01/30/2011 @ | 701,750 | |||||
675,000 | 6.90%, 05/01/2019 | 666,563 | |||||
300,000 | 8.75%, 03/15/2032 | 303,000 | |||||
200,000 | Sprint Nextel Corporation, | ||||||
6.00%, 12/01/2016 @ | 193,250 | ||||||
225,000 | Sunoco, Inc. | ||||||
Senior Unsecured Notes, | |||||||
5.75%, 01/15/2017 @ | 234,947 | ||||||
565,000 | TCI Communications, Inc., | ||||||
8.75%, 08/01/2015 | 695,452 | ||||||
836,000 | Teck Resources Limited, | ||||||
10.25%, 05/15/2016 | |||||||
(Callable 05/15/2013) f @ | 1,034,550 |
The accompanying notes are an integral part of these financial statements.
Page 111
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Industrial – 17.0% (cont.) | |||||||
Telecom Italia Capital: f | |||||||
$ | 340,000 | 4.95%, 09/30/2014 | $ | 348,345 | |||
1,775,000 | 7.20%, 07/18/2036 | 1,666,835 | |||||
Telefonica Emisiones, | |||||||
S.A.U.: f | |||||||
600,000 | 6.421%, 06/20/2016 | 655,795 | |||||
750,000 | 6.221%, 07/03/2017 | 806,570 | |||||
100,000 | 7.045%, 06/20/2036 | 102,318 | |||||
Time Warner, Inc.: | |||||||
175,000 | 8.875%, 10/01/2012 | 196,681 | |||||
92,000 | 6.875%, 06/15/2018 | 107,764 | |||||
725,000 | 7.625%, 04/15/2031 @ | 881,370 | |||||
95,000 | 7.70%, 05/01/2032 | 115,966 | |||||
675,000 | Transocean, Inc., | ||||||
6.80%, 03/15/2038 f | 691,781 | ||||||
500,000 | Tyco Electronics Group | ||||||
S.A., 7.125%, 10/01/2037 f | 574,315 | ||||||
50,000 | Tyco International Finance, | ||||||
6.00%, 11/15/2013 f | 55,467 | ||||||
United AirLines, Inc. | |||||||
Pass-Thru Certificates: | |||||||
141,005 | Series 1991-A, Class A-2, | ||||||
10.02%, 03/22/2014 | 60,809 | ||||||
616,045 | Series 2000-2, Class C, | ||||||
7.762%, 04/29/2049 § | 399,659 | ||||||
1,000,000 | UnitedHealth Group, Inc., | ||||||
6.00%, 02/15/2018 @ | 1,135,146 | ||||||
590,114 | U.S. Airways Pass-Thru Trust, | ||||||
Series 1998-1, Class B, | |||||||
7.35%, 07/30/2019 | 546,593 | ||||||
322,000 | USX Corporation, | ||||||
9.125%, 01/15/2013 | 361,296 | ||||||
Vale Overseas Limited: f | |||||||
1,850,000 | 6.25%, 01/23/2017 | 2,062,944 | |||||
100,000 | 8.25%, 01/17/2034 | 124,371 | |||||
250,000 | 6.875%, 11/21/2036 | 274,996 | |||||
1,100,000 | Verizon New York | ||||||
Inc., Series A, | |||||||
6.875%, 04/01/2012 | 1,173,426 | ||||||
150,000 | Viacom Inc., | ||||||
6.25%, 04/30/2016 | 170,704 | ||||||
Vodafone Group PLC: f | |||||||
125,000 | 5.75%, 03/15/2016 | 139,940 | |||||
175,000 | 5.625%, 02/27/2017 | 195,361 | |||||
500,000 | 6.15%, 02/27/2037 @ | 535,250 | |||||
Vulcan Materials Co.: | |||||||
200,000 | 6.40%, 11/30/2017 | 206,438 | |||||
500,000 | 7.15%, 11/30/2037 @ | 473,823 | |||||
1,250,000 | Weatherford | ||||||
International Ltd., | |||||||
6.75%, 09/15/2040 f @ | 1,312,848 | ||||||
Wellpoint Inc.: | |||||||
100,000 | 5.25%, 01/15/2016 | 109,953 | |||||
75,000 | 5.95%, 12/15/2034 | 77,132 | |||||
505,000 | Westvaco Corporation, | ||||||
9.75%, 06/15/2020 | 617,058 | ||||||
1,000,000 | Weyerhaeuser Company, | ||||||
7.25%, 07/01/2013 | 1,056,050 | ||||||
500,000 | Williams Partners LP, | ||||||
6.30%, 04/15/2040 | 520,444 | ||||||
Woodside Finance Ltd.: f | |||||||
400,000 | 5.00%, 11/15/2013 | ||||||
(Acquired 11/26/2010; | |||||||
Cost $428,804)* | 429,786 | ||||||
1,000,000 | 8.125%, 03/01/2014 | ||||||
(Acquired 02/24/2009; | |||||||
Cost $999,690)* | 1,150,506 | ||||||
86,918,593 | |||||||
Other Government Related Securities – 0.6% | |||||||
150,000 | Corp Andina | ||||||
De Fomento Notes, | |||||||
7.375%, 01/18/2011 f @ | 150,388 |
The accompanying notes are an integral part of these financial statements.
Page 112
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Other Government Related Securities – 0.6% (cont.) | |||||||
$ | 1,000,000 | Export-Import | |||||
Bank Korea Notes, | |||||||
4.00%, 01/29/2021 f @ | $ | 934,189 | |||||
100,000 | Korea Development Bank, | ||||||
5.30%, 01/17/2013 f | 105,950 | ||||||
115,000 | Korea Electric | ||||||
Power Corporation, | |||||||
6.75%, 08/01/2027 f | 124,972 | ||||||
500,000 | Korea Hydro & Nuclear | ||||||
Power Co., Ltd., | |||||||
3.125%, 09/16/2015 | |||||||
(Acquired 09/09/2010; | |||||||
Cost $493,770)* f | 484,729 | ||||||
550,000 | Landesbank | ||||||
Baden-Wurttemberg | |||||||
Subordinated Notes, | |||||||
6.35%, 04/01/2012 f | 583,943 | ||||||
75,000 | National Bank of Hungary | ||||||
Yankee Debentures, | |||||||
8.875%, 11/01/2013 f | 82,769 | ||||||
100,000 | United Mexican States, | ||||||
6.75%, 09/27/2034 f | 112,500 | ||||||
607,000 | Westdeutsche Landesbank | ||||||
Subordinated Notes, | |||||||
4.796%, 07/15/2015 f | 645,785 | ||||||
3,225,225 | |||||||
Residential Mortgage Backed Securities – 29.0% | |||||||
Bank of America | |||||||
Alternative Loan Trust: | |||||||
103,858 | Series 2004-2, Class 5A1, | ||||||
5.50%, 03/25/2019 | 104,760 | ||||||
111,286 | Series 2005-2, Class 4A1, | ||||||
5.50%, 03/25/2020 | 110,925 | ||||||
252,904 | Series 2005-4, Class 3A1, | ||||||
5.50%, 05/25/2020 | 224,311 | ||||||
216,665 | Series 2005-8, Class 5A1, | ||||||
5.50%, 09/25/2020 | 197,872 | ||||||
431,996 | Series 2006-2, Class 6A1, | ||||||
5.50%, 03/25/2021 | 398,390 | ||||||
218,705 | Series 2007-1, Class 1A1, | ||||||
6.098%, 04/25/2022 | 180,879 | ||||||
7,226,565 | Series 2005-2, Class 1CB2, | ||||||
5.50%, 03/25/2035 | 6,699,062 | ||||||
448,924 | Series 2006-3, Class 6A1, | ||||||
6.00%, 04/25/2036 | 430,918 | ||||||
517,809 | Series 2006-5, Class CB7, | ||||||
6.00%, 06/25/2046 | 384,404 | ||||||
Chase Mortgage | |||||||
Finance Corporation: | |||||||
62,342 | Series 2003-S13, Class A11, | ||||||
5.50%, 11/25/2033 | 63,763 | ||||||
1,100,000 | Series 2006-A1, Class | ||||||
2A3, 6.00%, 09/25/2036 | |||||||
(Callable 09/25/2020) | 866,362 | ||||||
55,579 | Citicorp Mortgage | ||||||
Securities, Inc., | |||||||
Series 2004-4, Class A5, | |||||||
5.50%, 06/25/2034 | 55,685 | ||||||
Citigroup Mortgage | |||||||
Loan Trust, Inc.: | |||||||
130,948 | Series 2005-9, Class 2A2, | ||||||
5.50%, 11/25/2035 | |||||||
(Callable 02/25/2018) | 126,866 | ||||||
402,545 | Series 2005-9, Class 22A2, | ||||||
6.00%, 11/25/2035 | |||||||
(Callable 04/25/2022) | 317,521 | ||||||
Countrywide Alternative | |||||||
Loan Trust: | |||||||
876,334 | Series 2005-50CB, Class | ||||||
4A1, 5.00%, 11/25/2020 | 769,812 |
The accompanying notes are an integral part of these financial statements.
Page 113
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Residential Mortgage | |||||||
Backed Securities – 29.0% (cont.) | |||||||
$ | 1,234,183 | Series 2006-7CB, Class | |||||
3A1, 5.25%, 05/25/2021 | |||||||
(Callable 04/25/2018) | $ | 1,047,873 | |||||
725,798 | Series 2006-43CB, Class | ||||||
2A1, 6.00%, 02/25/2022 | 564,044 | ||||||
1,133,010 | Series 2005-10CB, Class | ||||||
1A6, 5.50%, 05/25/2035 | 1,112,841 | ||||||
325,728 | Series 2006-J2, Class A3, | ||||||
6.00%, 04/25/2036 | 281,891 | ||||||
1,632,730 | Series 2006-28CB, Class | ||||||
A17, 6.00%, 10/25/2036 | 1,144,548 | ||||||
47,695 | Credit Suisse First | ||||||
Boston Mortgage | |||||||
Securities Corporation, | |||||||
Series 2005-11, Class 5A1, | |||||||
5.25%, 12/25/2020 | 48,185 | ||||||
15,392 | Deutsche Alternative | ||||||
Securities Inc. Mortgage, | |||||||
Series 2005-4, Class A2, | |||||||
5.05%, 09/25/2035 | 15,360 | ||||||
302,383 | Deutsche Mortgage | ||||||
Securities Inc., | |||||||
Series 2006-AR5, Class | |||||||
21A, 6.00%, 10/25/2021 | 261,589 | ||||||
Federal Gold Loan | |||||||
Mortgage Corporation | |||||||
(FGLMC): | |||||||
277,214 | 5.00%, 12/01/2020 | 295,276 | |||||
499,705 | 5.00%, 05/01/2021 | 532,263 | |||||
95,503 | 6.00%, 06/01/2021 | 104,292 | |||||
88,541 | 6.50%, 12/01/2028 | 99,557 | |||||
42,179 | 6.50%, 06/01/2029 | 47,427 | |||||
1,990,223 | 5.50%, 04/01/2037 | 2,123,400 | |||||
1,235,609 | 5.50%, 04/01/2038 | 1,318,290 | |||||
Federal Home Loan | |||||||
Mortgage Corporation | |||||||
(FHLMC): | |||||||
255,614 | Series 3122, Class VA, | ||||||
6.00%, 01/15/2017 | 270,253 | ||||||
2,257,031 | Series R010, Class VA, | ||||||
5.50%, 04/15/2017 | 2,458,701 | ||||||
829,635 | Series R010, Class AB, | ||||||
5.50%, 12/15/2019 | 874,632 | ||||||
11,214 | Series 1053, Class G, | ||||||
7.00%, 03/15/2021 | |||||||
(Callable 01/15/2011) | 13,159 | ||||||
21,471 | Series 136, Class E, | ||||||
6.00%, 04/15/2021 | |||||||
(Callable 02/15/2011) | 23,632 | ||||||
213,954 | Series 2804, Class VC, | ||||||
5.00%, 07/15/2021 | 231,105 | ||||||
17,242 | Series 1122, Class G, | ||||||
7.00%, 08/15/2021 | |||||||
(Callable 01/15/2011) | 19,965 | ||||||
43,871 | Series 1186, Class I, | ||||||
7.00%, 12/15/2021 | |||||||
(Callable 01/15/2011) | 43,852 | ||||||
61,163 | Series 3132, Class MA, | ||||||
5.50%, 12/15/2023 | 63,967 | ||||||
1,915,376 | 5.50%, 05/01/2038 | 2,042,945 | |||||
26,859,895 | 4.50%, 08/01/2040 | 27,549,804 | |||||
Federal National Mortgage | |||||||
Association (FNMA): | |||||||
1,905,521 | 5.00%, 11/01/2021 | 2,040,396 | |||||
1,034,101 | 5.50%, 03/01/2023 | 1,119,705 | |||||
441,343 | 5.50%, 07/01/2023 | 477,878 | |||||
641,549 | 5.50%, 12/01/2023 | 694,016 | |||||
144,806 | 6.00%, 03/01/2026 | 158,087 | |||||
741,615 | 5.00%, 05/01/2028 | 780,430 | |||||
70,272 | 6.50%, 09/01/2028 | 79,015 |
The accompanying notes are an integral part of these financial statements.
Page 114
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Residential Mortgage | |||||||
Backed Securities – 29.0% (cont.) | |||||||
$ | 149,371 | 6.50%, 02/01/2029 | $ | 167,955 | |||
97,624 | 5.50%, 01/01/2032 | 105,107 | |||||
4,675,334 | 5.50%, 04/01/2034 | 5,039,534 | |||||
2,807,377 | 5.50%, 04/01/2034 | 3,014,501 | |||||
227,832 | 5.50%, 09/01/2034 | 245,223 | |||||
116,709 | 5.50%, 02/01/2035 | 125,618 | |||||
4,458,012 | 5.00%, 04/01/2035 | 4,709,450 | |||||
18,992,582 | 5.00%, 02/01/2036 | 20,051,915 | |||||
4,769,578 | 5.00%, 03/01/2036 | 5,035,607 | |||||
5,820,201 | 5.50%, 04/01/2036 | 6,259,034 | |||||
778,232 | 6.00%, 08/01/2037 | 842,467 | |||||
3,110,520 | 4.00%, 08/01/2040 | 3,097,445 | |||||
4,968,226 | 4.00%, 10/01/2040 | 4,947,341 | |||||
10,242 | Series 1989-94, Class G, | ||||||
7.50%, 12/25/2019 | 11,598 | ||||||
37,381 | Series 1990-15, Class J, | ||||||
7.00%, 02/25/2020 | 43,391 | ||||||
6,459 | Series 1991-21, Class J, | ||||||
7.00%, 03/25/2021 | 7,234 | ||||||
149,564 | Series 1991-43, Class J, | ||||||
7.00%, 05/25/2021 | 167,611 | ||||||
180,389 | Series 1991-65, Class Z, | ||||||
6.50%, 06/25/2021 | 197,876 | ||||||
277,211 | Series 1992-129, Class L, | ||||||
6.00%, 07/25/2022 | 305,452 | ||||||
528,934 | Series 2003-33, Class LD, | ||||||
4.25%, 09/25/2022 | 548,175 | ||||||
57,166 | Series 1993-32, Class H, | ||||||
6.00%, 03/25/2023 | 62,517 | ||||||
299,049 | Series 1993-58, Class H, | ||||||
5.50%, 04/25/2023 | 326,821 | ||||||
774,619 | Series 2002-85, Class PD, | ||||||
5.50%, 05/25/2031 | 799,725 | ||||||
21,093 | Series 2003-44, Class AB, | ||||||
3.75%, 05/25/2033 | 22,063 | ||||||
12,420,000 | Series 2004-90, Class LH, | ||||||
5.00%, 04/25/2034 | 13,279,899 | ||||||
597,082 | Series 2004-W6, Class | ||||||
1A4, 5.50%, 07/25/2034 | 644,756 | ||||||
596,054 | Series 2004-W6, Class | ||||||
1A6, 5.50%, 07/25/2034 | 643,645 | ||||||
1,500,000 | Series 2004-W10, Class | ||||||
A4, 5.75%, 08/25/2034 | 1,563,275 | ||||||
140,106 | Series 2004-W10, Class | ||||||
A24, 5.00%, 08/25/2034 | 140,011 | ||||||
First Horizon Alternative | |||||||
Mortgage Securities: | |||||||
650,743 | Series 2006-FA6, Class | ||||||
3A1, 5.75%, 11/25/2021 | 591,254 | ||||||
1,498,891 | Series 2006-FA8, Class | ||||||
2A1, 5.75%, 02/25/2037 | 1,381,629 | ||||||
J.P. Morgan Alternative | |||||||
Loan Trust: | |||||||
1,767,241 | Series 2005-S1, Class 3A1, | ||||||
5.50%, 10/25/2020 | 1,612,038 | ||||||
215,580 | Series 2006-A1, Class 2A1, | ||||||
5.799%, 03/25/2036 | 140,705 | ||||||
6,960,406 | Series 2006-S2, Class A2, | ||||||
5.81%, 05/25/2036 | 6,900,359 | ||||||
300,000 | Series 2006-S3, Class A3A, | ||||||
6.00%, 08/25/2036 | 262,660 | ||||||
J.P. Morgan Mortgage Trust: | |||||||
850,000 | Series 2006-A7, Class | ||||||
2A4R, 5.457%, 01/25/2037 | |||||||
(Callable 04/25/2018) | 632,095 | ||||||
1,250,000 | Series 2007-A2, Class 2A3, | ||||||
5.715%, 04/25/2037 | |||||||
(Callable 10/25/2018) | 990,393 | ||||||
Master Alternative Loans Trust: | |||||||
563,001 | Series 2004-1, Class 1A1, | ||||||
5.00%, 01/25/2019 | 570,685 |
The accompanying notes are an integral part of these financial statements.
Page 115
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Residential Mortgage | |||||||
Backed Securities – 29.0% (cont.) | |||||||
$ | 688,134 | Series 2005-3, Class 4A1, | |||||
5.50%, 03/25/2020 | $ | 680,389 | |||||
131,225 | Series 2003-5, Class 6A1, | ||||||
6.00%, 08/25/2033 | 135,564 | ||||||
1,164,386 | Master Asset Securitization | ||||||
Trust, Series 2005-2, Class | |||||||
1A1, 5.25%, 11/25/2035 | 1,109,646 | ||||||
165,676 | Merrill Lynch Mortgage | ||||||
Investors Trust, Series | |||||||
2005-A8, Class A1C1, | |||||||
5.25%, 08/25/2036 | 166,445 | ||||||
162,570 | Residential Accredit Loans, | ||||||
Inc., Series 2005-QS2, Class | |||||||
A-1, 5.50%, 02/25/2035 | |||||||
(Callable 01/25/2022) | 148,615 | ||||||
Washington Mutual, Inc. | |||||||
Pass-Thru Certificates: | |||||||
227,685 | Series 2004-CB1, Class 5A, | ||||||
5.00%, 06/25/2019 | 235,573 | ||||||
197,954 | Series 2004-CB2, Class 5A, | ||||||
5.00%, 07/25/2019 | 206,877 | ||||||
405,774 | Series 2004-CB2, Class 7A, | ||||||
5.50%, 08/25/2019 | 420,902 | ||||||
121,205 | Series 2004-CB3, Class 4A, | ||||||
6.00%, 10/25/2019 | 124,570 | ||||||
207,471 | Series 2004-CB4, Class | ||||||
22A, 6.00%, 12/25/2019 | 214,165 | ||||||
230,919 | Wells Fargo Alternative | ||||||
Loan Trust, | |||||||
Series 2007-PA1, Class A4, | |||||||
6.00%, 03/25/2037 | |||||||
(Callable 06/25/2023) | 158,987 | ||||||
147,958,705 | |||||||
Taxable Municipal Bonds – 3.8% | |||||||
California | |||||||
Qualified School | |||||||
Construction Bonds: | |||||||
1,500,000 | 5.041%, 07/01/2020 | 1,478,595 | |||||
1,700,000 | 7.155%, 03/01/2027 | 1,692,282 | |||||
2,000,000 | California State, | ||||||
5.50%, 03/01/2016 | 2,054,700 | ||||||
1,300,000 | Contra Costa | ||||||
County California | |||||||
Pension Obligation, | |||||||
5.14%, 06/01/2017 | 1,304,264 | ||||||
1,000,000 | Davie Florida Water | ||||||
& Sewer Revenue, | |||||||
6.599%, 10/01/2030 | |||||||
(Callable 10/01/2020) | 1,005,210 | ||||||
1,000,000 | Elgin Ohio LOC | ||||||
School District, | |||||||
5.499%, 08/31/2027 | |||||||
(Callable 12/01/2019) | 938,590 | ||||||
3,000,000 | North East Independent | ||||||
School District Texas, | |||||||
5.24%, 08/01/2027 | 2,831,699 | ||||||
1,515,000 | San Dieguito California | ||||||
Public Facilities, | |||||||
6.459%, 05/01/2027 | 1,510,137 | ||||||
2,000,000 | State Public | ||||||
School Building | |||||||
Authorities Revenue, | |||||||
5.00%, 09/15/2027 | 1,804,880 | ||||||
1,350,000 | Three Rivers Ohio | ||||||
LOC School District, | |||||||
5.209%, 09/15/2027 | |||||||
(Callable 12/01/2020) | 1,263,938 | ||||||
2,425,000 | Tobacco Settlement | ||||||
Authority Iowa, | |||||||
6.50%, 06/01/2023 | |||||||
(Callable 06/01/2015) | 2,225,107 |
The accompanying notes are an integral part of these financial statements.
Page 116
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Taxable Municipal Bonds – 3.8% (cont.) | |||||||
$ | 1,160,000 | Westlake Ohio | |||||
City School District, | |||||||
5.227%, 12/01/2026 | |||||||
(Callable 12/01/2020) | $ | 1,114,795 | |||||
19,224,197 | |||||||
Utilities – 7.3% | |||||||
500,000 | Allegheny Energy Supply | ||||||
Co. Senior Unsecured Notes, | |||||||
5.75%, 10/15/2019 | |||||||
(Acquired 09/22/2009; | |||||||
Cost $498,175)* @ | 503,271 | ||||||
1,342,000 | Ameren Corporation, | ||||||
8.875%, 05/15/2014 | 1,509,977 | ||||||
1,025,000 | Appalachian Power | ||||||
Company Senior | |||||||
Unsecured Notes, | |||||||
6.70%, 08/15/2037 | 1,112,347 | ||||||
1,150,000 | Arizona Pubic Service | ||||||
Senior Unsecured Notes, | |||||||
8.75%, 03/01/2019 | 1,439,936 | ||||||
1,000,000 | CMS Energy Corporation, | ||||||
4.25%, 09/30/2015 | 990,182 | ||||||
750,000 | Constellation | ||||||
Energy Group Inc., | |||||||
4.55%, 06/15/2015 | 778,040 | ||||||
2,500,000 | El Paso Pipeline Partners | ||||||
Operating Co LLC, | |||||||
7.50%, 11/15/2040 | 2,590,919 | ||||||
500,000 | Encana Corporation, | ||||||
6.50%, 05/15/2019 f @ | 592,631 | ||||||
500,000 | Enel Finance International, | ||||||
6.80%, 09/15/2037 | |||||||
(Acquired 09/13/2007 | |||||||
through 09/29/2008; | |||||||
Aggregate | |||||||
Cost $498,897)* f | 506,049 | ||||||
Energy Transfer Partners: | |||||||
875,000 | 5.65%, 08/01/2012 | 927,066 | |||||
125,000 | 6.125%, 02/15/2017 | 137,411 | |||||
223,000 | Entergy Arkansas, Inc., | ||||||
5.00%, 07/01/2018 | |||||||
(Callable 02/07/2011) | 223,419 | ||||||
Exelon Corporation: | |||||||
350,000 | 4.90%, 06/15/2015 | 373,251 | |||||
225,000 | 5.625%, 06/15/2035 | 214,216 | |||||
1,000,000 | FPL Group Capital, | ||||||
Inc., Series D, | |||||||
7.30%, 09/01/2067 | |||||||
(Callable 09/01/2017) @ | 1,032,500 | ||||||
396,080 | GG1C Funding | ||||||
Corporation, | |||||||
5.129%, 01/15/2014 | |||||||
(Callable 02/07/2011) | |||||||
(Acquired 11/21/2008; | |||||||
Cost $384,379)* | 408,913 | ||||||
Kinder Morgan Energy | |||||||
Partners Senior Notes: | |||||||
400,000 | 6.50%, 02/01/2037 | 412,760 | |||||
350,000 | 6.95%, 01/15/2038 | 380,310 | |||||
Kinder Morgan Finance: | |||||||
1,685,000 | 5.70%, 01/05/2016 | 1,706,063 | |||||
1,000,000 | 6.00%, 01/15/2018 | ||||||
(Acquired 12/06/2010; | |||||||
Cost $999,930)* | 982,500 | ||||||
39,919 | Kiowa Power Partners LLC, | ||||||
4.811%, 12/30/2013 | |||||||
(Acquired 11/19/2004; | |||||||
Cost $42,917)* | 41,090 | ||||||
2,225,000 | National Grid PLC | ||||||
Senior Unsecured Notes, | |||||||
6.30%, 08/01/2016 f | 2,540,144 |
The accompanying notes are an integral part of these financial statements.
Page 117
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Utilities – 7.3% (cont.) | |||||||
$ | 2,655,000 | National Oilwell Varco | |||||
Inc., Series B, | |||||||
6.125%, 08/15/2015 | |||||||
(Callable 02/01/2011) | $ | 2,741,916 | |||||
National Rural | |||||||
Utilities Corporation: | |||||||
1,725,000 | 10.375%, 11/01/2018 | 2,379,505 | |||||
125,000 | 8.00%, 03/01/2032 | 158,236 | |||||
Nisource Finance | |||||||
Corporation: | |||||||
886,000 | 6.15%, 03/01/2013 | 966,541 | |||||
1,583,000 | 5.40%, 07/15/2014 | 1,735,978 | |||||
800,000 | ONEOK Inc., | ||||||
7.125%, 04/15/2011 | 814,024 | ||||||
PPL Energy Supply, | |||||||
LLC Senior Notes: | |||||||
1,225,000 | Series A, 5.70%, | ||||||
10/15/2015 | 1,340,804 | ||||||
1,700,000 | 6.20%, 05/15/2016 | 1,871,787 | |||||
577,000 | PSE&G Power LLC, | ||||||
5.32%, 09/15/2016 | 631,354 | ||||||
500,000 | Public Service Company | ||||||
of New Mexico, | |||||||
7.95%, 05/15/2018 | 561,927 | ||||||
259,829 | RGS (I&M) Funding | ||||||
Corporation Debentures, | |||||||
9.82%, 12/07/2022 | 290,439 | ||||||
525,000 | Rockies Express Pipeline LLC, | ||||||
5.625%, 04/15/2020 | |||||||
(Acquired 12/10/2010; | |||||||
Cost $505,462)* | 507,478 | ||||||
300,000 | Southern Natural Gas, | ||||||
5.90%, 04/01/2017 | |||||||
(Acquired 03/14/2007; | |||||||
Cost $299,502)* | 321,709 | ||||||
1,395,000 | Spectra Energy Capital, | ||||||
5.668%, 08/15/2014 | 1,537,715 | ||||||
Williams Companies Inc.: | |||||||
1,511,000 | 7.875%, 09/01/2021 | 1,783,489 | |||||
59,000 | 7.50%, 01/15/2031 | 66,260 | |||||
75,000 | 7.75%, 06/15/2031 | 84,590 | |||||
37,196,747 | |||||||
U.S. Government Agency Issues – 2.0% | |||||||
Government National | |||||||
Mortgage Association | |||||||
(GNMA): | |||||||
87,913 | 6.00%, 12/20/2028 | 96,884 | |||||
34,101 | 6.50%, 01/20/2029 | 38,582 | |||||
314,548 | Series 2003-2, Class PB, | ||||||
5.50%, 03/20/2032 | 332,812 | ||||||
74,295 | 6.00%, 11/20/2033 | 82,019 | |||||
9,362,715 | 4.50%, 05/20/2040 | 9,733,259 | |||||
10,283,556 | |||||||
U.S. Treasury Obligations – 8.2% | |||||||
U.S. Treasury Bonds: | |||||||
4,850,000 | 2.375%, 03/31/2016 @ | 4,911,382 | |||||
11,900,000 | 6.25%, 08/15/2023 @ | 14,956,813 | |||||
9,375,000 | 5.25%, 11/15/2028 @ | 10,744,631 | |||||
11,175,000 | 4.375%, 02/15/2038 @ | 11,293,734 | |||||
41,906,560 | |||||||
Total Long-Term | |||||||
Investments | |||||||
(Cost $494,033,560) | 502,531,190 |
The accompanying notes are an integral part of these financial statements.
Page 118
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Shares | Value | ||||||
SHORT-TERM INVESTMENTS – 1.2% | |||||||
Money Market Mutual Fund – 1.2% | |||||||
6,090,706 | The AIM STIT – | ||||||
Liquid Assets | |||||||
Portfolio, 0.19% « | $ | 6,090,706 | |||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $6,090,706) | 6,090,706 | ||||||
Principal | |||||||
Amount | |||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 13.2% | |||||||
Commercial Paper – 0.0% | |||||||
$ | 316,471 | Atlantic East | |||||
Funding LLC, | |||||||
0.59%, 03/25/2011 †** | 214,739 | ||||||
Total Commercial Paper | |||||||
(Cost $316,471) | 214,739 | ||||||
Shares | |||||||
Investment Companies – 13.2% | |||||||
67,168,395 | Mount Vernon | ||||||
Securities Lending Trust | |||||||
Prime Portfolio, 0.29% « | 67,168,395 | ||||||
Total Investment | |||||||
Companies | |||||||
(Cost $67,168,395) | 67,168,395 | ||||||
Total Investments | |||||||
Purchased With Cash | |||||||
Proceeds From | |||||||
Securities Lending | |||||||
(Cost $67,484,866) | 67,383,134 | ||||||
Total Investments | |||||||
(Cost $567,609,132) | |||||||
– 112.8% | 576,005,030 | ||||||
Asset Relating to Securities | |||||||
Lending Investments – 0.0% | |||||||
Support Agreement** ^ a | 101,732 | ||||||
Total (Cost $0) | 101,732 | ||||||
Liabilities in Excess of | |||||||
Other Assets – (12.8)% | (65,334,957 | ) | |||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 510,771,805 |
Notes to Schedule of Investments
* | Restricted Security Deemed Liquid |
** | Illiquid Security |
@ | This security or portion of this security is out on loan at December 31, 2010. |
f | Foreign Security |
^ | Non-Income Producing |
« | 7-Day Yield |
§ | Security in Default |
† | 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 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. |
The accompanying notes are an integral part of these financial statements.
Page 119
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
Summary of Fair Value Exposure at December 31, 2010
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 standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Management has determined that these standards have no material impact on the Funds’ financial statements. The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability. These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized into three broad levels and described below:
Level 1 – | Unadjusted quoted prices in active markets for identical unrestricted 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 factors that market participants would use in valuing the security) based on the best information available. |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Page 120
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2010:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 18,285,557 | $ | — | $ | 18,285,557 | ||||||||
Commercial Mortgage Backed Securities | — | 37,660,139 | — | 37,660,139 | ||||||||||||
Corporate Debt Securities | — | 223,987,251 | — | 223,987,251 | ||||||||||||
Other Government Related Securities | — | 3,225,225 | — | 3,225,225 | ||||||||||||
Residential Mortgage Backed Securities | — | 147,958,705 | — | 147,958,705 | ||||||||||||
U.S. Government Agency Issues | — | 10,283,556 | — | 10,283,556 | ||||||||||||
Taxable Municipal Bonds | — | 19,224,197 | — | 19,224,197 | ||||||||||||
U.S. Treasury Obligations | — | 41,906,560 | — | 41,906,560 | ||||||||||||
Total Fixed Income | — | 502,531,190 | — | 502,531,190 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Fund | 6,090,706 | — | — | 6,090,706 | ||||||||||||
Total Short-Term Investments | 6,090,706 | — | — | 6,090,706 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 214,739 | — | 214,739 | ||||||||||||
Money Market Mutual Fund | 67,168,395 | — | — | 67,168,395 | ||||||||||||
Total Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | 67,168,395 | 214,739 | — | 67,383,134 | ||||||||||||
Total Investments | $ | 73,259,101 | $ | 502,745,929 | $ | — | $ | 576,005,030 | ||||||||
Asset Relating to Securities Lending Investments | $ | — | $ | 101,732 | $ | — | $ | 101,732 |
Changes in valuation techniques may result in transfers into or out of current assigned levels within the hierarchy. There were no significant transfers between Level 1 and Level 2 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.
Page 121
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2010 |
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, 2009 | $ | 812,848 | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | (166,758 | ) | ||
Change in unrealized appreciation (depreciation) | 45,325 | |||
Net purchases (sales) | (322,852 | ) | ||
Transfers in and/or out of Level 3* | (368,563 | ) | ||
Balance as of December 31, 2010 | $ | — |
* | The information used in the above reconciliation represents fiscal year 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 122
Baird Funds, Inc.
Additional Information on Fund Expenses December 31, 2010 |
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 (7/1/10 – 12/31/10).
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 123
Baird Funds, Inc.
Additional Information on Fund Expenses December 31, 2010 |
Actual vs. Hypothetical Returns
For the Six Months Ended December 31, 2010
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) | 7/1/10 | 12/31/10 | Period(1) | 12/31/10 | Period(1) | |
Baird Short-Term Bond Fund | ||||||
Institutional Class | 0.30% | $1,000.00 | $1,017.50 | $1.53 | $1,023.69 | $1.53 |
Baird Intermediate Bond Fund | ||||||
Institutional Class | 0.30% | $1,000.00 | $1,022.20 | $1.53 | $1,023.69 | $1.53 |
Investor Class | 0.55% | $1,000.00 | $1,021.00 | $2.80 | $1,022.43 | $2.80 |
Baird Intermediate Municipal | ||||||
Bond Fund | ||||||
Institutional Class | 0.30% | $1,000.00 | $1,000.50 | $1.51 | $1,023.69 | $1.53 |
Investor Class | 0.55% | $1,000.00 | $ 998.30 | $2.77 | $1,022.43 | $2.80 |
Baird Aggregate Bond Fund | ||||||
Institutional Class | 0.30% | $1,000.00 | $1,021.00 | $1.53 | $1,023.69 | $1.53 |
Investor Class | 0.55% | $1,000.00 | $1,021.00 | $2.80 | $1,022.43 | $2.80 |
Baird Core Plus Bond Fund | ||||||
Institutional Class | 0.30% | $1,000.00 | $1,031.70 | $1.54 | $1,023.69 | $1.53 |
Investor Class | 0.55% | $1,000.00 | $1,030.40 | $2.81 | $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 124
Baird Funds, Inc.
Statements of Assets and Liabilities December 31, 2010 |
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 (cost $1,042,876,490; | $ | 1,048,319,990 | $ | 776,261,281 | $ | 921,816,191 | $ | 1,992,297,888 | $ | 576,005,030 | ||||||||||
$765,530,164; $909,675,341; $1,971,686,909; | ||||||||||||||||||||
& $567,609,132, respectively)* | ||||||||||||||||||||
Support Agreement (Note 6) | 322,587 | 815,127 | — | 1,119,148 | 101,732 | |||||||||||||||
Interest receivable | 10,663,121 | 7,031,268 | 11,838,272 | 17,732,905 | 5,349,058 | |||||||||||||||
Receivable for investments sold or paid down | — | 15,031 | — | 15,573 | 3,159 | |||||||||||||||
Receivable for Fund shares sold | 767,136 | 585,578 | 10,654,120 | 3,320,627 | 1,815,246 | |||||||||||||||
Uninvested cash | 35,426 | 109,103 | — | 190,492 | 43,086 | |||||||||||||||
Total assets | 1,060,108,260 | 784,817,388 | 944,308,583 | 2,014,676,633 | 583,317,311 | |||||||||||||||
LIABILITIES: | ||||||||||||||||||||
Payable for collateral received | ||||||||||||||||||||
for securities loaned (Note 6) | 140,544,491 | 180,658,688 | — | 260,353,001 | 67,527,952 | |||||||||||||||
Payable for securities purchased | — | — | — | 56,010,426 | 4,522,100 | |||||||||||||||
Payable for Fund shares repurchased | 293,906 | 19,821 | 2,252,292 | 394,992 | 301,741 | |||||||||||||||
Payable to Advisor and Distributor | 232,723 | 157,331 | 301,277 | 437,954 | 151,210 | |||||||||||||||
Other liabilities | 10,975 | 77,902 | 1,120 | 145,503 | 42,503 | |||||||||||||||
Total liabilities | 141,082,095 | 180,913,742 | 2,554,689 | 317,341,876 | 72,545,506 | |||||||||||||||
NET ASSETS | $ | 919,026,165 | $ | 603,903,646 | $ | 941,753,894 | $ | 1,697,334,757 | $ | 510,771,805 | ||||||||||
NET ASSETS CONSIST OF: | ||||||||||||||||||||
Capital stock | $ | 912,391,607 | $ | 589,934,910 | $ | 930,376,216 | $ | 1,674,758,141 | $ | 502,921,729 | ||||||||||
Undistributed net investment income | — | 112,543 | — | 38,284 | 83,682 | |||||||||||||||
Accumulated net realized gain (loss) | ||||||||||||||||||||
on investments sold | 868,471 | 2,309,949 | (763,172 | ) | 808,205 | (731,236 | ) | |||||||||||||
Net unrealized appreciation on | ||||||||||||||||||||
investments and support agreement | 5,766,087 | 11,546,244 | 12,140,850 | 21,730,127 | 8,497,630 | |||||||||||||||
NET ASSETS | $ | 919,026,165 | $ | 603,903,646 | $ | 941,753,894 | $ | 1,697,334,757 | $ | 510,771,805 | ||||||||||
INSTITUTIONAL CLASS SHARES | ||||||||||||||||||||
Net Assets | $ | 919,026,165 | $ | 591,158,539 | $ | 738,957,721 | $ | 1,658,404,061 | $ | 452,419,012 | ||||||||||
Shares outstanding ($0.01 par value, | ||||||||||||||||||||
unlimited shares authorized) | 94,968,310 | 54,362,913 | 65,341,873 | 157,577,846 | 43,034,228 | |||||||||||||||
Net asset value, offering and | ||||||||||||||||||||
redemption price per share | $ | 9.68 | $ | 10.87 | $ | 11.31 | $ | 10.52 | $ | 10.51 | ||||||||||
INVESTOR CLASS SHARES | ||||||||||||||||||||
Net Assets | $ | 12,745,107 | $ | 202,796,173 | $ | 38,930,696 | $ | 58,352,793 | ||||||||||||
Shares outstanding ($0.01 par value, | ||||||||||||||||||||
unlimited shares authorized) | 1,131,702 | 17,581,407 | 3,605,112 | 5,376,773 | ||||||||||||||||
Net asset value, offering and | ||||||||||||||||||||
redemption price per share | $ | 11.26 | $ | 11.53 | $ | 10.80 | $ | 10.85 |
* | Includes securities out on loan to brokers with a market value of $137,806,927, $177,241,717, $0, $256,727,167 and $66,458,167, respectively. |
The accompanying notes are an integral part of these financial statements.
Page 125
Baird Funds, Inc.
Statements of Operations Year Ended December 31, 2010 |
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 | $ | 24,538,023 | $ | 26,053,103 | $ | 26,141,189 | $ | 72,427,558 | $ | 20,905,073 | ||||||||||
Income from securities lending (Note 6) | 79,042 | 130,147 | — | 137,655 | 35,535 | |||||||||||||||
Other income | 23,360 | 66,126 | 63,834 | 161,832 | 27,487 | |||||||||||||||
Total investment income | 24,640,425 | 26,249,376 | 26,205,023 | 72,727,045 | 20,968,095 | |||||||||||||||
EXPENSES: | ||||||||||||||||||||
Investment advisory fee | 1,914,668 | 1,510,028 | 2,157,130 | 3,835,670 | 894,344 | |||||||||||||||
Administration fee | 382,934 | 302,006 | 431,426 | 767,134 | 178,869 | |||||||||||||||
Distribution expense – | ||||||||||||||||||||
Investor Class Shares (Note 8) | — | 21,039 | 517,186 | 90,792 | 135,693 | |||||||||||||||
Interest Expense (Note 7) | 163 | — | 1,438 | — | 348 | |||||||||||||||
Total expenses | 2,297,765 | 1,833,073 | 3,107,180 | 4,693,596 | 1,209,254 | |||||||||||||||
NET INVESTMENT INCOME | 22,342,660 | 24,416,303 | 23,097,843 | 68,033,449 | 19,758,841 | |||||||||||||||
REALIZED AND UNREALIZED | ||||||||||||||||||||
GAIN (LOSS) ON INVESTMENTS: | ||||||||||||||||||||
Net realized gain on investments | 3,517,847 | 8,859,362 | 75,330 | 17,413,416 | 2,788,631 | |||||||||||||||
Change in unrealized | ||||||||||||||||||||
appreciation/depreciation on | ||||||||||||||||||||
investments and support agreement | 4,968,573 | 10,584,059 | (8,200,997 | ) | 32,470,647 | 4,481,630 | ||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gain (loss) on investments | 8,486,420 | 19,443,421 | (8,125,667 | ) | 49,884,063 | 7,270,261 | ||||||||||||||
NET INCREASE IN NET ASSETS | ||||||||||||||||||||
RESULTING FROM OPERATIONS | $ | 30,829,080 | $ | 43,859,724 | $ | 14,972,176 | $ | 117,917,512 | $ | 27,029,102 |
The accompanying notes are an integral part of these financial statements.
Page 126
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird Short-Term Bond Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 22,342,660 | $ | 17,136,484 | ||||
Net realized gain (loss) on investments | 3,517,847 | (319,472 | ) | |||||
Change in unrealized appreciation on investments, support | ||||||||
agreement and cash contribution from Transfer Agent/Administrator | 4,968,573 | 14,215,370 | ||||||
Net increase in net assets resulting from operations | 30,829,080 | 31,032,382 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 523,293,674 | 489,964,818 | ||||||
Proceeds from shares issued to holders in reinvestment of distributions | 22,945,673 | 15,743,300 | ||||||
Payment for shares redeemed | (239,674,038 | ) | (128,314,054 | ) | ||||
Other capital contribution (Note 3) | 24,793 | — | ||||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 306,590,102 | 377,394,064 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (22,712,303 | ) | (17,177,276 | ) | ||||
From net realized gains | (1,929,290 | ) | — | |||||
Total Distributions | (24,641,593 | ) | (17,177,276 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 312,777,589 | 391,249,170 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 606,248,576 | 214,999,406 | ||||||
End of year (including undistributed net | ||||||||
investment income of $0 and $51,213, respectively) | $ | 919,026,165 | $ | 606,248,576 |
The accompanying notes are an integral part of these financial statements.
Page 127
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird Intermediate Bond Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 24,416,303 | $ | 22,821,731 | ||||
Net realized gain (loss) on investments | 8,859,362 | (1,483,476 | ) | |||||
Change in unrealized appreciation on investments, support | ||||||||
agreement and cash contribution from Transfer Agent/Administrator | 10,584,059 | 29,816,507 | ||||||
Net increase in net assets resulting from operations | 43,859,724 | 51,154,762 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 163,307,410 | 178,123,812 | ||||||
Proceeds from shares issued to holders in reinvestment of distributions | 24,923,797 | 20,178,062 | ||||||
Payment for shares redeemed | (133,422,324 | ) | (97,091,409 | ) | ||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 54,808,883 | 101,210,465 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (24,028,156 | ) | (22,664,664 | ) | ||||
From net realized gains | (4,782,773 | ) | (920,310 | ) | ||||
Total Distributions | (28,810,929 | ) | (23,584,974 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (313,689 | ) | (243,629 | ) | ||||
From net realized gains | (98,191 | ) | (11,476 | ) | ||||
Total Distributions | (411,880 | ) | (255,105 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 69,445,798 | 128,525,148 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 534,457,848 | 405,932,700 | ||||||
End of year (including undistributed net investment income and distributions | ||||||||
in excess of net investment income of $112,543 and $(138,821), respectively) | $ | 603,903,646 | $ | 534,457,848 |
The accompanying notes are an integral part of these financial statements.
Page 128
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird Intermediate Municipal Bond Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 23,097,843 | $ | 14,095,873 | ||||
Net realized gain (loss) on investments | 75,330 | (222,538 | ) | |||||
Change in unrealized appreciation/depreciation on investments | (8,200,997 | ) | 12,959,957 | |||||
Net increase in net assets resulting from operations | 14,972,176 | 26,833,292 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 550,282,182 | 641,325,576 | ||||||
Proceeds from shares issued to holders in reinvestment of distributions | 20,938,691 | 12,682,064 | ||||||
Payment for shares redeemed | (351,297,595 | ) | (180,332,528 | ) | ||||
Other capital contribution (Note 3) | 2,094 | — | ||||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 219,925,372 | 473,675,112 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (18,087,492 | ) | (10,821,254 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (5,032,968 | ) | (3,273,926 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 211,777,088 | 486,413,224 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 729,976,806 | 243,563,582 | ||||||
End of year (including undistributed net | ||||||||
investment income of $0 and $693, respectively) | $ | 941,753,894 | $ | 729,976,806 |
The accompanying notes are an integral part of these financial statements.
Page 129
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird Aggregate Bond Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 68,033,449 | $ | 55,993,940 | ||||
Net realized gain (loss) on investments | 17,413,416 | (2,091,077 | ) | |||||
Change in unrealized appreciation on investments, support | ||||||||
agreement and cash contribution from Transfer Agent/Administrator | 32,470,647 | 53,582,372 | ||||||
Net increase in net assets resulting from operations | 117,917,512 | 107,485,235 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 624,236,049 | 699,713,940 | ||||||
Proceeds from shares issued to holders in reinvestment of distributions | 72,134,875 | 48,292,146 | ||||||
Payment for shares redeemed | (433,249,939 | ) | (272,921,659 | ) | ||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 263,120,985 | 475,084,427 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (69,717,831 | ) | (55,302,673 | ) | ||||
From net realized gains | (9,498,319 | ) | (228,095 | ) | ||||
Total Distributions | (79,216,150 | ) | (55,530,768 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (1,549,845 | ) | (1,622,760 | ) | ||||
From net realized gains | (218,924 | ) | (5,836 | ) | ||||
Total Distributions | (1,768,769 | ) | (1,628,596 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 300,053,578 | 525,410,298 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 1,397,281,179 | 871,870,881 | ||||||
End of year (including undistributed net investment income | ||||||||
and distributions in excess of net investment income of | ||||||||
$38,284 and $(259,285), respectively) | $ | 1,697,334,757 | $ | 1,397,281,179 |
The accompanying notes are an integral part of these financial statements.
Page 130
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird Core Plus Bond Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 19,758,841 | $ | 14,710,368 | ||||
Net realized gain (loss) on investments | 2,788,631 | (503,979 | ) | |||||
Change in unrealized appreciation on investments, support | ||||||||
agreement and cash contribution from Transfer Agent/Administrator | 4,481,630 | 17,693,160 | ||||||
Net increase in net assets resulting from operations | 27,029,102 | 31,899,549 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 294,817,715 | 102,894,269 | ||||||
Proceeds from shares issued to holders in reinvestment of distributions | 21,571,061 | 14,010,899 | ||||||
Payment for shares redeemed | (70,688,565 | ) | (61,466,420 | ) | ||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 245,700,211 | 55,438,748 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (17,444,760 | ) | (12,301,553 | ) | ||||
From net realized gains | (2,081,939 | ) | (387,585 | ) | ||||
Total Distributions | (19,526,699 | ) | (12,689,138 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (2,869,768 | ) | (2,433,595 | ) | ||||
From net realized gains | (262,999 | ) | (80,519 | ) | ||||
Total Distributions | (3,132,767 | ) | (2,514,114 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 250,069,847 | 72,135,045 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 260,701,958 | 188,566,913 | ||||||
End of year (including undistributed net investment income and distributions | ||||||||
in excess of net investment income of $83,682 and $(55,799), respectively) | $ | 510,771,805 | $ | 260,701,958 |
The accompanying notes are an integral part of these financial statements.
Page 131
Baird Funds, Inc.
Financial Highlights |
Baird Short-Term Bond Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 9.57 | $ | 9.25 | $ | 9.91 | $ | 9.81 | $ | 9.79 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.29 | 0.41 | 0.52 | 0.48 | 0.43 | |||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.13 | 0.32 | (0.67 | ) | 0.10 | 0.02 | ||||||||||||||
Total from investment operations | 0.42 | 0.73 | (0.15 | ) | 0.58 | 0.45 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.29 | ) | (0.41 | ) | (0.51 | ) | (0.48 | ) | (0.43 | ) | ||||||||||
Distributions from net realized gains | (0.02 | ) | — | — | — | — | ||||||||||||||
Total distributions | (0.31 | ) | (0.41 | ) | (0.51 | ) | (0.48 | ) | (0.43 | ) | ||||||||||
Net asset value, end of year | $ | 9.68 | $ | 9.57 | $ | 9.25 | $ | 9.91 | $ | 9.81 | ||||||||||
Total return | 4.39 | % | 8.14 | % | (1.79 | )% | 6.08 | % | 4.65 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 919,026,165 | $ | 606,248,576 | $ | 214,999,406 | $ | 199,090,483 | $ | 148,604,711 | ||||||||||
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 | 2.92 | % | 4.28 | % | 5.01 | % | 5.00 | % | 4.48 | % | ||||||||||
Portfolio turnover rate | 58.7 | % | 55.5 | % | 98.5 | % | 36.6 | % | 41.1 | % |
The accompanying notes are an integral part of these financial statements.
Page 132
Baird Funds, Inc.
Financial Highlights |
Baird Intermediate Bond Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 10.61 | $ | 10.00 | $ | 10.62 | $ | 10.52 | $ | 10.55 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.44 | (1) | 0.51 | (1) | 0.55 | 0.54 | 0.51 | |||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.35 | 0.63 | (0.64 | ) | 0.10 | (0.03 | ) | |||||||||||||
Total from investment operations | 0.79 | 1.14 | (0.09 | ) | 0.64 | 0.48 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.44 | ) | (0.51 | ) | (0.53 | ) | (0.54 | ) | (0.51 | ) | ||||||||||
Distributions from net realized gains | (0.09 | ) | (0.02 | ) | — | — | — | |||||||||||||
Total distributions | (0.53 | ) | (0.53 | ) | (0.53 | ) | (0.54 | ) | (0.51 | ) | ||||||||||
Net asset value, end of year | $ | 10.87 | $ | 10.61 | $ | 10.00 | $ | 10.62 | $ | 10.52 | ||||||||||
Total return | 7.54 | % | 11.76 | % | (0.91 | )% | 6.24 | % | 4.70 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 591,158,539 | $ | 527,750,216 | $ | 401,914,872 | $ | 398,321,566 | $ | 326,835,399 | ||||||||||
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 | 4.05 | % | 4.92 | % | 5.14 | % | 5.13 | % | 4.90 | % | ||||||||||
Portfolio turnover rate(2) | 38.7 | % | 38.6 | % | 32.9 | % | 42.5 | % | 44.8 | % |
(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 133
Baird Funds, Inc.
Financial Highlights |
Baird Intermediate Bond Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 10.97 | $ | 10.32 | $ | 10.96 | $ | 10.85 | $ | 10.86 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.43 | (1) | 0.50 | (1) | 0.52 | 0.52 | 0.50 | |||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.36 | 0.65 | (0.65 | ) | 0.10 | (0.03 | ) | |||||||||||||
Total from investment operations | 0.79 | 1.15 | (0.13 | ) | 0.62 | 0.47 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.41 | ) | (0.48 | ) | (0.51 | ) | (0.51 | ) | (0.48 | ) | ||||||||||
Distributions from net realized gains | (0.09 | ) | (0.02 | ) | — | — | — | |||||||||||||
Total distributions | (0.50 | ) | (0.50 | ) | (0.51 | ) | (0.51 | ) | (0.48 | ) | ||||||||||
Net asset value, end of year | $ | 11.26 | $ | 10.97 | $ | 10.32 | $ | 10.96 | $ | 10.85 | ||||||||||
Total return | 7.30 | % | 11.51 | % | (1.31 | )% | 5.89 | % | 4.47 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 12,745,107 | $ | 6,707,632 | $ | 4,017,828 | $ | 3,276,351 | $ | 1,207,214 | ||||||||||
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 | 3.80 | % | 4.67 | % | 4.89 | % | 4.88 | % | 4.65 | % | ||||||||||
Portfolio turnover rate(2) | 38.7 | % | 38.6 | % | 32.9 | % | 42.5 | % | 44.8 | % |
(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 134
Baird Funds, Inc.
Financial Highlights |
Baird Intermediate Municipal Bond Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.35 | $ | 10.98 | $ | 10.69 | $ | 10.55 | $ | 10.56 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.32 | 0.32 | (1) | 0.39 | (1) | 0.37 | (1) | 0.39 | (1) | |||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | (0.04 | ) | 0.36 | 0.28 | 0.14 | (0.01 | ) | |||||||||||||
Total from investment operations | 0.28 | 0.68 | 0.67 | 0.51 | 0.38 | |||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.32 | ) | (0.31 | ) | (0.38 | ) | (0.37 | ) | (0.39 | ) | ||||||||||
Net asset value, end of year | $ | 11.31 | $ | 11.35 | $ | 10.98 | $ | 10.69 | $ | 10.55 | ||||||||||
Total return | 2.42 | % | 6.22 | % | 6.37 | % | 4.93 | % | 3.69 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 738,957,721 | $ | 533,313,125 | $ | 226,148,164 | $ | 106,583,763 | $ | 64,932,629 | ||||||||||
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 | 2.74 | % | 2.83 | % | 3.58 | % | 3.44 | % | 3.72 | % | ||||||||||
Portfolio turnover rate(2) | 8.7 | % | 0.7 | % | 0.9 | % | 5.6 | % | 25.1 | % |
(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 135
Baird Funds, Inc.
Financial Highlights |
Baird Intermediate Municipal Bond Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.57 | $ | 11.19 | $ | 10.90 | $ | 10.75 | $ | 10.75 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.29 | 0.29 | (1) | 0.36 | (1) | 0.35 | (1) | 0.37 | (1) | |||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | (0.04 | ) | 0.37 | 0.28 | 0.14 | (0.01 | ) | |||||||||||||
Total from investment operations | 0.25 | 0.66 | 0.64 | 0.49 | 0.36 | |||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.29 | ) | (0.28 | ) | (0.35 | ) | (0.34 | ) | (0.36 | ) | ||||||||||
Net asset value, end of year | $ | 11.53 | $ | 11.57 | $ | 11.19 | $ | 10.90 | $ | 10.75 | ||||||||||
Total return | 2.11 | % | 5.95 | % | 6.02 | % | 4.68 | % | 3.44 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 202,796,173 | $ | 196,663,681 | $ | 17,415,418 | $ | 396,464 | $ | 544,878 | ||||||||||
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 | 2.49 | % | 2.58 | % | 3.33 | % | 3.19 | % | 3.47 | % | ||||||||||
Portfolio turnover rate(2) | 8.7 | % | 0.7 | % | 0.9 | % | 5.6 | % | 25.1 | % |
(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 136
Baird Funds, Inc.
Financial Highlights |
Baird Aggregate Bond Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 10.23 | $ | 9.74 | $ | 10.54 | $ | 10.51 | $ | 10.54 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.47 | (1) | 0.54 | 0.56 | 0.54 | 0.52 | ||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.37 | 0.49 | (0.81 | ) | 0.03 | (0.03 | ) | |||||||||||||
Total from investment operations | 0.84 | 1.03 | (0.25 | ) | 0.57 | 0.49 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.49 | ) | (0.54 | ) | (0.55 | ) | (0.54 | ) | (0.52 | ) | ||||||||||
Distributions from net realized gains | (0.06 | ) | (0.00 | )(2) | — | — | (0.00 | )(2) | ||||||||||||
Total distributions | (0.55 | ) | (0.54 | ) | (0.55 | ) | (0.54 | ) | (0.52 | ) | ||||||||||
Net asset value, end of year | $ | 10.52 | $ | 10.23 | $ | 9.74 | $ | 10.54 | $ | 10.51 | ||||||||||
Total return | 8.34 | % | 10.88 | % | (2.36 | )% | 5.61 | % | 4.88 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 1,658,404,061 | $ | 1,362,164,059 | $ | 842,724,670 | $ | 725,580,384 | $ | 334,907,855 | ||||||||||
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 | 4.44 | % | 5.37 | % | 5.46 | % | 5.37 | % | 5.11 | % | ||||||||||
Portfolio turnover rate(3) | 41.4 | % | 37.7 | % | 21.9 | % | 33.6 | % | 52.4 | % |
(1) | Net investment income per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences. |
(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 137
Baird Funds, Inc.
Financial Highlights |
Baird Aggregate Bond Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 10.48 | $ | 9.97 | $ | 10.78 | $ | 10.73 | $ | 10.75 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.46 | (1) | 0.52 | 0.52 | 0.53 | 0.50 | ||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.38 | 0.50 | (0.81 | ) | 0.04 | (0.02 | ) | |||||||||||||
Total from investment operations | 0.84 | 1.02 | (0.29 | ) | 0.57 | 0.48 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.46 | ) | (0.51 | ) | (0.52 | ) | (0.52 | ) | (0.50 | ) | ||||||||||
Distributions from net realized gains | (0.06 | ) | (0.00 | )(2) | — | — | (0.00 | )(2) | ||||||||||||
Total distributions | (0.52 | ) | (0.51 | ) | (0.52 | ) | (0.52 | ) | (0.50 | ) | ||||||||||
Net asset value, end of year | $ | 10.80 | $ | 10.48 | $ | 9.97 | $ | 10.78 | $ | 10.73 | ||||||||||
Total return | 8.16 | % | 10.55 | % | (2.63 | )% | 5.45 | % | 4.61 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 38,930,696 | $ | 35,117,120 | $ | 29,146,211 | $ | 14,363,416 | $ | 1,848,622 | ||||||||||
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 | 4.19 | % | 5.12 | % | 5.21 | % | 5.12 | % | 4.86 | % | ||||||||||
Portfolio turnover rate(3) | 41.4 | % | 37.7 | % | 21.9 | % | 33.6 | % | 52.4 | % |
(1) | Net investment income per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences. |
(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 138
Baird Funds, Inc.
Financial Highlights |
Baird Core Plus Bond Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 10.18 | $ | 9.46 | $ | 10.22 | $ | 10.16 | $ | 10.06 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.59 | (1) | 0.65 | (2) | 0.56 | (2) | 0.54 | (2) | 0.55 | (2) | ||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.39 | 0.74 | (0.73 | ) | 0.05 | 0.09 | ||||||||||||||
Total from investment operations | 0.98 | 1.39 | (0.17 | ) | 0.59 | 0.64 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.60 | ) | (0.65 | ) | (0.55 | ) | (0.53 | ) | (0.54 | ) | ||||||||||
Distributions from net realized gains | (0.05 | ) | (0.02 | ) | (0.04 | ) | — | — | ||||||||||||
Total distributions | (0.65 | ) | (0.67 | ) | (0.59 | ) | (0.53 | ) | (0.54 | ) | ||||||||||
Net asset value, end of year | $ | 10.51 | $ | 10.18 | $ | 9.46 | $ | 10.22 | $ | 10.16 | ||||||||||
Total return | 9.81 | % | 15.36 | % | (1.79 | )% | 5.99 | % | 6.58 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 452,419,012 | $ | 215,194,337 | $ | 158,983,325 | $ | 114,421,895 | $ | 51,551,017 | ||||||||||
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 | 5.56 | % | 6.67 | % | 5.61 | % | 5.41 | % | 5.49 | % | ||||||||||
Portfolio turnover rate(3) | 61.5 | % | 33.2 | % | 27.7 | % | 47.4 | % | 62.0 | % |
(1) | Net investment income per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences. |
(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 139
Baird Funds, Inc.
Financial Highlights |
Baird Core Plus Bond Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 10.49 | $ | 9.72 | $ | 10.50 | $ | 10.42 | $ | 10.30 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.57 | (1) | 0.64 | (2) | 0.53 | (2) | 0.53 | (2) | 0.54 | (2) | ||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.41 | 0.78 | (0.74 | ) | 0.06 | 0.09 | ||||||||||||||
Total from investment operations | 0.98 | 1.42 | (0.21 | ) | 0.59 | 0.63 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.57 | ) | (0.63 | ) | (0.53 | ) | (0.51 | ) | (0.51 | ) | ||||||||||
Distributions from net realized gains | (0.05 | ) | (0.02 | ) | (0.04 | ) | — | — | ||||||||||||
Total distributions | (0.62 | ) | (0.65 | ) | (0.57 | ) | (0.51 | ) | (0.51 | ) | ||||||||||
Net asset value, end of year | $ | 10.85 | $ | 10.49 | $ | 9.72 | $ | 10.50 | $ | 10.42 | ||||||||||
Total return | 9.53 | % | 15.06 | % | (2.07 | )% | 5.80 | % | 6.34 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 58,352,793 | $ | 45,507,621 | $ | 29,583,588 | $ | 2,473,660 | $ | 288,928 | ||||||||||
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 | 5.31 | % | 6.42 | % | 5.36 | % | 5.16 | % | 5.24 | % | ||||||||||
Portfolio turnover rate(3) | 61.5 | % | 33.2 | % | 27.7 | % | 47.4 | % | 62.0 | % |
(1) | Net investment income per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences. |
(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 140
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
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 seven series 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, U.S.-dollar denominated, fixed-rate taxable bonds, including Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities and commercial 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 141
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
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.
The Funds determine the fair value of their investments and compute their net asset value per share as of the close of regular trading of the New York Stock Exchange (4pm EST).
Consistent with Section 2(a)(41) of the 1940 Act, the Funds price their securities as follows: Debt securities are valued at their bid prices 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
Page 142
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
2. | SIGNIFICANT ACCOUNTING POLICIES (cont.) |
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. |
In January, 2010, FASB issued Accounting Standards Update No. 2010-06, Improving Disclosures about Fair Value Measurements (ASU 2010-06). ASU 2010-06 requires 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). The Funds have disclosed the applicable requirements of this accounting standard in their financial statements.
b) | Unregistered Securities – Four of the Funds own certain investment securities which are unregistered and thus restricted with respect to resale. The value of such securities for the Baird Short-Term Bond, Baird Intermediate Bond, Baird Aggregate Bond and Baird Core Plus Bond Funds were $166,759,596 (18.15% of net assets), $60,423,576 (10.01% of net assets), $137,367,364 (8.09% of net assets) and $36,841,987 (7.21% of net assets), respectively, at December 31, 2010. 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, 2010 consist of securities issued pursuant to Rule 144A under the Securities Act of 1933 and all have been deemed to be liquid. |
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) | Income Tax Status – 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, 2010, or for any other tax years which are open for exam. As of December 31, 2010, open tax years include the tax years ended December 31, 2007 through 2010. 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 and other expense, respectively, in the Statement of Operations. During the year, the Funds did not incur any interest or penalties.
Page 143
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
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. The book basis character of distributions may differ from their ultimate characterization for Federal income tax purposes. |
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) | Securities Transactions and Investment Income – 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. Paydown gains and losses are netted and recorded as interest income on the Statement of Operations for financial reporting purposes. 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 144
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
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, 2010 | December 31, 2009 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Institutional Class Shares | Shares | Amount | ||||||||||||
Shares sold | 53,941,581 | $ | 523,293,674 | Shares sold | 51,660,852 | $ | 489,964,818 | ||||||||||
Shares issued to | Shares issued to | ||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||
reinvestment of dividends | 2,370,167 | 22,945,673 | reinvestment of dividends | 2,122,851 | 15,743,300 | ||||||||||||
Shares redeemed | (24,719,978 | ) | (239,674,038 | ) | Shares redeemed | (13,654,484 | ) | (128,314,054 | ) | ||||||||
Other capital | Net increase | 40,129,219 | $ | 377,394,064 | |||||||||||||
contribution(1) | — | 24,793 | Shares Outstanding: | ||||||||||||||
Net increase | 31,591,770 | $ | 306,590,102 | Beginning of year | 23,247,321 | ||||||||||||
Shares Outstanding: | End of year | 63,376,540 | |||||||||||||||
Beginning of year | 63,376,540 | ||||||||||||||||
End of year | 94,968,310 |
(1) | Reimbursement from broker/dealer for trade error. |
BAIRD INTERMEDIATE BOND FUND
Year Ended | Year Ended | ||||||||||||||||
December 31, 2010 | December 31, 2010 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 14,049,678 | $ | 153,279,282 | Shares sold | 873,924 | $ | 10,028,128 | ||||||||||
Shares issued to | Shares issued to | ||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||
reinvestment of dividends | 2,246,787 | 24,530,527 | reinvestment of dividends | 34,799 | 393,270 | ||||||||||||
Shares redeemed | (11,685,367 | ) | (129,013,096 | ) | Shares redeemed | (388,645 | ) | (4,409,228 | ) | ||||||||
Net increase | 4,611,098 | $ | 48,796,713 | Net increase | 520,078 | $ | 6,012,170 | ||||||||||
Shares Outstanding: | Shares Outstanding: | ||||||||||||||||
Beginning of year | 49,751,815 | Beginning of year | 611,624 | ||||||||||||||
End of year | 54,362,913 | End of year | 1,131,702 |
Page 145
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
3.CAPITAL SHARE TRANSACTIONS (cont.)
BAIRD INTERMEDIATE BOND FUND (cont.)
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 |
BAIRD INTERMEDIATE MUNICIPAL BOND FUND
Year Ended | Year Ended | ||||||||||||||||
December 31, 2010 | December 31, 2010 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 38,588,699 | $ | 445,517,129 | Shares sold | 8,950,612 | $ | 104,765,053 | ||||||||||
Shares issued to | Shares issued to | ||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||
reinvestment of dividends | 1,397,612 | 16,069,118 | reinvestment of dividends | 415,616 | 4,869,573 | ||||||||||||
Shares redeemed | (21,627,081 | ) | (248,842,671 | ) | Shares redeemed | (8,780,560 | ) | (102,454,924 | ) | ||||||||
Other capital | Net increase | 585,668 | $ | 7,179,702 | |||||||||||||
contribution(2) | — | 2,094 | Shares Outstanding: | ||||||||||||||
Net increase | 18,359,230 | $ | 212,745,670 | Beginning of year | 16,995,739 | ||||||||||||
Shares Outstanding: | End of year | 17,581,407 | |||||||||||||||
Beginning of year | 46,982,643 | ||||||||||||||||
End of year | 65,341,873 |
(2) | Reimbursement from Distributor for trade error. |
Page 146
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
3.CAPITAL SHARE TRANSACTIONS (cont.)
BAIRD INTERMEDIATE MUNICIPAL BOND FUND (cont.)
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 | ||||||||||||||
BAIRD AGGREGATE BOND FUND | |||||||||||||||||
Year Ended | Year Ended | ||||||||||||||||
December 31, 2010 | December 31, 2010 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 58,009,539 | $ | 612,648,476 | Shares sold | 1,067,964 | $ | 11,587,573 | ||||||||||
Shares issued to | Shares issued to | ||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||
reinvestment of dividends | 6,665,390 | 70,415,189 | reinvestment of dividends | 158,898 | 1,719,686 | ||||||||||||
Shares redeemed | (40,243,021 | ) | (422,708,572 | ) | Shares redeemed | (971,470 | ) | (10,541,367 | ) | ||||||||
Net increase | 24,431,908 | $ | 260,355,093 | Net increase | 255,392 | $ | 2,765,892 | ||||||||||
Shares Outstanding: | Shares Outstanding: | ||||||||||||||||
Beginning of year | 133,145,938 | Beginning of year | 3,349,720 | ||||||||||||||
End of year | 157,577,846 | End of year | 3,605,112 |
Page 147
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
3.CAPITAL SHARE TRANSACTIONS (cont.)
BAIRD AGGREGATE BOND FUND (cont.)
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 | ||||||||||||||
BAIRD CORE PLUS BOND FUND | |||||||||||||||||
Year Ended | Year Ended | ||||||||||||||||
December 31, 2010 | December 31, 2010 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 25,148,651 | $ | 268,520,599 | Shares sold | 2,412,145 | $ | 26,297,116 | ||||||||||
Shares issued to | Shares issued to | ||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||
reinvestment of dividends | 1,773,718 | 18,680,311 | reinvestment of dividends | 266,407 | 2,890,750 | ||||||||||||
Shares redeemed | (5,023,697 | ) | (52,797,338 | ) | Shares redeemed | (1,639,473 | ) | (17,891,227 | ) | ||||||||
Net increase | 21,898,672 | $ | 234,403,572 | Net increase | 1,039,079 | $ | 11,296,639 | ||||||||||
Shares Outstanding: | Shares Outstanding: | ||||||||||||||||
Beginning of year | 21,135,556 | Beginning of year | 4,337,694 | ||||||||||||||
End of year | 43,034,228 | End of year | 5,376,773 |
Page 148
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
3.CAPITAL SHARE TRANSACTIONS (cont.)
BAIRD CORE PLUS BOND FUND (cont.)
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 |
4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION
During the year ended December 31, 2010, 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 | $ | 184,681,885 | $ | 105,901,013 | $ | — | $ | 400,360,225 | $ | 213,999,705 | ||||||||||
Other | $ | 594,827,567 | $ | 183,569,176 | $ | 334,309,290 | $ | 514,354,571 | $ | 240,282,423 | ||||||||||
Sales: | ||||||||||||||||||||
U.S. Government | $ | 79,084,142 | $ | 143,122,190 | $ | — | $ | 366,976,706 | $ | 101,211,860 | ||||||||||
Other | $ | 402,728,757 | $ | 91,414,675 | $ | 72,289,333 | $ | 268,063,900 | $ | 114,826,974 |
Page 149
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION (cont.)
At December 31, 2010, 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 | $ | 1,042,899,961 | $ | 765,590,993 | $ | 909,724,808 | $ | 1,971,936,262 | $ | 567,796,798 | ||||||||||
Gross unrealized appreciation | $ | 12,125,815 | $ | 20,416,571 | $ | 21,206,047 | $ | 54,096,512 | $ | 18,403,800 | ||||||||||
Gross unrealized depreciation | (6,383,199 | ) | (8,931,156 | ) | (9,114,664 | ) | (32,615,738 | ) | (10,093,836 | ) | ||||||||||
Net unrealized appreciation | $ | 5,742,616 | $ | 11,485,415 | $ | 12,091,383 | $ | 21,480,774 | $ | 8,309,964 | ||||||||||
Undistributed ordinary income | $ | 289,973 | $ | 844,305 | $ | — | $ | 38,283 | $ | 83,681 | ||||||||||
Undistributed long-term capital gain | 601,968 | 1,639,015 | — | 1,057,558 | — | |||||||||||||||
Total distributable earnings | $ | 891,941 | $ | 2,483,320 | $ | — | $ | 1,095,841 | $ | 83,681 | ||||||||||
Other accumulated losses | $ | — | $ | — | $ | (713,705 | ) | $ | — | $ | (543,570 | ) | ||||||||
Total accumulated earnings | $ | 6,634,557 | $ | 13,968,735 | $ | 11,377,678 | $ | 22,576,615 | $ | 7,850,075 |
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, 2010, the following table shows the reclassifications made:
Undistributed Net | Accumulated Net | Paid In | ||||||||||
Investment Income | Realized Gain (Loss) | Capital | ||||||||||
Baird Short-Term Bond Fund | 318,430 | (318,430 | ) | — | ||||||||
Baird Intermediate Bond Fund | 176,906 | (176,906 | ) | — | ||||||||
Baird Intermediate Municipal Bond Fund | 21,924 | — | (21,924 | ) | ||||||||
Baird Aggregate Bond Fund | 3,531,796 | (3,531,796 | ) | — | ||||||||
Baird Core Plus Bond Fund | 695,168 | (695,168 | ) | — |
Page 150
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
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, 2010 | December 31, 2009 | |||||||||||||||||||
Distribution | ||||||||||||||||||||
Ordinary | Long-Term | Ordinary | in Excess of | Long-Term | ||||||||||||||||
Income | Capital Gains | Income | Ordinary | Capital Gains | ||||||||||||||||
Distributions | Distributions | Distributions | Income | Distributions | ||||||||||||||||
Baird Short-Term Bond Fund | $ | 23,700,754 | $ | 940,839 | $ | 17,177,276 | $ | — | $ | — | ||||||||||
Baird Intermediate Bond Fund | $ | 25,148,629 | $ | 4,074,180 | $ | 22,785,368 | $ | 123,303 | $ | 931,408 | ||||||||||
Baird Intermediate Municipal Bond Fund | $ | 648,696 | $ | — | $ | 290,339 | $ | — | $ | — | ||||||||||
Baird Aggregate Bond Fund | $ | 71,267,676 | $ | 9,717,243 | $ | 57,128,006 | $ | 31,358 | $ | — | ||||||||||
Baird Core Plus Bond Fund | $ | 20,825,534 | $ | 1,833,932 | $ | 14,914,638 | $ | 14,375 | $ | 274,239 |
For the years ended December 31, 2010 and December 31, 2009, distributions of $22,471,764 and $13,804,841, 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, 2010, Baird Core Plus Bond Fund elected to defer capital losses occurring between November 1, 2010 and December 31, 2010 in the amount of $543,570.
At December 31, 2010, 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 Intermediate Municipal Bond Fund | $ | 92,727 | 2013 | ||||||
51,283 | 2014 | ||||||||
76,723 | 2015 | ||||||||
290,404 | 2016 | ||||||||
202,568 | 2017 |
To the extent this Fund realizes future net capital gains, those gains will be offset by any unused capital loss carryovers. During the year ended December 31, 2010, Baird Short-Term Bond Fund, Baird Intermediate Bond Fund, Baird Intermediate Municipal Bond Fund, Baird Aggregate Bond Fund and Baird Core Plus Bond Fund utilized capital loss carryovers of $352,061, $188,779, $98,559, $2,338,201 and $79,496, respectively.
On December 22, 2010, The Regulated Investment Company Modernization Act of 2010 (the “RIC Act”) was enacted. The RIC Act modernizes several of the federal income and excise tax provisions related to regulated investment companies (“RICs”). Under the RIC Act, new capital losses may be carried forward indefinitely, with the character of the original loss retained. The RIC Act also contains simplification provisions, which are aimed at preventing disqualification of a RIC for inadvertent failures to comply with asset diversification and/or qualifying income tests. The RIC Act exempts RICs from the preferential dividend rule and repealed the 60-day designation requirement for certain types of pay-through income and
Page 151
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION (cont.)
gains. In addition, the RIC Act contains provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31. Except for the simplification provisions related to RIC qualification, the RIC Act is effective for taxable years beginning after December 22, 2010. Management is currently evaluating the implications of the RIC Act and the impact on the Funds’ financial statements, if any, is currently being assessed.
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 U.S. Bank, N.A., the Fund’s custodian and an affiliate of the Funds’ 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, 2010, 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
Page 152
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
6.SECURITIES LENDING (cont.)
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.
As of December 31, 2010, 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 | $ | 137,806,927 | $ | 140,544,491 | ||||
Baird Intermediate Bond Fund | 177,241,717 | 180,658,688 | ||||||
Baird Aggregate Bond Fund | 256,727,167 | 260,353,001 | ||||||
Baird Core Plus Bond Fund | 66,458,167 | 67,527,952 |
The Funds receive cash as collateral in return for securities lent as part of a securities lending program. The collateral is invested in the Mount Vernon Securities Lending Prime Portfolio (a securities lending trust subject to Rule 2a-7 under the 1940 Act) and a legacy interest in Atlantic East Funding LLC. The schedules of investments for the Funds include the particular cash collateral holdings as of December 31, 2010.
The Funds’ interest in Atlantic East Funding LLC is 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, 2010, the fair value of the Funds’ interest in Atlantic East Funding LLC, plus the amounts payable under the support agreement, amounted to 100% of the outstanding par value of the Funds’ interest in Atlantic East Funding LLC.
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. Interest income earned on collateral investments and recognized by the Funds during the year ended December 31, 2010 for the Baird Short-Term Bond Fund, Baird Intermediate Bond Fund, Baird Aggregate Bond Fund, and Baird Core Plus Bond Fund were $79,042, $130,147, $137,655, and $35,535, respectively.
Page 153
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
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 2010). For the year ended December 31, 2010, the Baird Short-Term Bond Fund, Baird Intermediate Municipal Bond Fund, and Baird Core Plus Bond Fund incurred $163, $1,438 and $348 in interest charges, respectively, on average daily loan balances of $8,099, $61,241 and $15,674, respectively. The Baird Intermediate Bond Fund and Baird Aggregate Bond Fund did not borrow from 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 $21,039, $517,186, $90,792 and $135,693, respectively, in fees pursuant to the Plan during the year ending December 31, 2010.
9.SUBSEQUENT EVENT
In preparing these financial statements, the Corporation has evaluated events after December 31, 2010. There were no subsequent events since December 31, 2010 that would require adjustment to or additional disclosure in these financial statements.
Page 154
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 Short-Term Bond Fund, Baird Intermediate Bond Fund, Baird Intermediate Municipal Bond Fund, Baird Aggregate Bond Fund, and Baird Core Plus Bond Fund (five of the seven funds constituting Baird Funds, Inc.) (collectively, the “Funds”), including the schedules of investments, as of December 31, 2010, 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, 2010, 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, 2010, 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 25, 2011
Page 155
Baird Funds, Inc.
Directors & Officers as of December 31, 2010 |
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 | 7 | Director of Regal-Beloit | ||
c/o Robert W. Baird | Director and | Since September | 2005); Chairman and CEO, the Advisor (January 1998- | Corporation, a | |||
& Co. Incorporated | Chairman | 2000 | January 2000); President, Chairman and CEO, the | manufacturing | |||
777 East Wisconsin Avenue | Advisor (June 1983-January 1998); President, the Advisor | company | |||||
Milwaukee, WI 53202 | (January 1979-January 1983) | ||||||
Age: 71 | |||||||
John W. Feldt | Independent | Indefinite; | Retired; Senior Vice President-Finance, University of | 7 | 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: 68 | Funds, a mutual fund | ||||||
complex (1 portfolio) | |||||||
Frederick P. Stratton, Jr. | Independent | Indefinite; | Retired; Chairman Emeritus, Briggs & Stratton | 7 | 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: 71 | 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 | 7 | Management Trustee of | ||
c/o Robert W. Baird | Director | Since January | Pension Trust Fund, since July 1989; Investment Officer, | AFL-CIO Housing | |||
& Co. Incorporated | 2008 | Northwestern Mutual Financial Network (1988-1989); | Investment Trust, a | ||||
777 East Wisconsin Avenue | Assistant Vice-President, Firstar Trust Company | mutual fund complex | |||||
Milwaukee, WI 53202 | (1978-1987); Financial Analyst, Harco Holdings, Inc. | (1 portfolio) | |||||
Age: 57 | (1976-1978) | ||||||
Cory L. Nettles* | Interested | Indefinite; | Managing Director, Generation Growth Capital, Inc., | 7 | 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: 40 | 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 156
Baird Funds, Inc.
Directors & Officers as of December 31, 2010 |
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: 54 | 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: 57 | 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: 48 | Officer | August 2004 | |||
Heidi Schneider | Vice President | Re-elected by | Senior Vice President, the Advisor since September 2007; Controller, the Advisor (April 1997- | ||
777 East Wisconsin Avenue | Board annually; | September 2007) | |||
Milwaukee, WI 53202 | Since | ||||
Age: 39 | August 2010 | ||||
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: 64 | 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: 47 | 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: 41 | August 2007 | ||||
John McVoy | AML | Re-elected by | AML Compliance Officer and Privacy Officer, the Advisor since June 2010; AML Compliance | ||
777 East Wisconsin Avenue | Compliance | Board annually; | Officer - Trust & Securities, U.S. Bancorp (August 2008-May 2010); Law Clerk, First American | ||
Milwaukee, WI 53202 | Officer | Since | Fund Advisors (May 2007-September 2007) | ||
Age: 26 | August 2010 | ||||
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: 41 | August 2006 | ||||
Page 157
Baird Funds, Inc.
DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD FIXED INCOME FUNDS
The Board of Directors of Baird Funds, Inc. (the “Corporation”) met on August 9, 2010 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, Aggregate Bond, Intermediate Municipal Bond, Core Plus Bond and Short-Term Bond Funds (collectively, the “Funds”), which are mutual fund series or portfolios of the Corporation. 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 requests 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 and financial statements), a profitability analysis, comparative information about the Funds’ performance for periods ended June 30, 2010, management fees and expense ratios, and other pertinent information. The Board also discussed relevant case law, including the Supreme Court’s recent 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. 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
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Baird Funds, Inc.
DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD FIXED INCOME FUNDS (cont.)
transactions, ensuring adherence to the Fund’s investment policies and restrictions, compliance, risk management 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, 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 respective 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, 2010 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 peer group average in certain 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.
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 continued management by the Advisor.
Costs of Services Provided and Profits Realized by the Advisor
The Board examined the fee and expense information for each of the 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. The Board noted and discussed the extent of the significant additional services provided to the Funds that the Advisor did
Page 159
Baird Funds, Inc.
DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD FIXED INCOME FUNDS (cont.)
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. The Advisor informed the Board that the 0.05% administration fee payable to the Advisor by each Fund was considerably less than the Fund’s expenses paid by the Advisor.
The Board concluded that the profits realized by the Advisor from its relationship with the Funds were appropriate. The Board noted that the Advisor’s 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 160
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 Short-Term Bond Fund, Baird Intermediate Bond Fund and Baird Core Plus Bond Fund were 4.17%, 3.21% and 2.45%, respectively.
Other Information Applicable to Foreign Shareholders Only
The Baird Short-Term Bond Fund hereby designates 99.98% of its ordinary income distributions for the fiscal year as interest-related dividends under Internal Revenue Code Section 871(k)(1)(C).
Page 161
(This Page Intentionally Left Blank.)
BAIRD FUNDS, INC.
PRIVACY POLICY
Protecting the privacy of Fund shareholders is important to us. The following is a description of the practices and policies through which Baird Funds, Inc. protects the privacy and security of your non-public personal information.
What Information We Collect
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.
What Information We Disclose
We do not sell any non-public personal information about our current or former shareholders to third parties. We do not disclose any non-public personal information about our current or former shareholders to anyone, except as permitted or required by law. We are permitted by law to share any of the information we collect, as described above, with our affiliates. In addition, we may share such information with nonaffiliated third parties to the extent necessary to effect, process, administer or enforce a transaction that the shareholder requests or authorizes, in connection with maintaining or servicing the shareholder’s 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.
How We Protect Your Information
We restrict access to your non-public 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 protect the confidentiality, integrity and security of your non-public personal information.
We will continue to adhere to the privacy policies and practices in this notice even after your account is closed or becomes inactive.
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 non-public 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
Cory L. Nettles
Marlyn J. Spear
Frederick P. Stratton, Jr.
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 - Baird Funds
Baird LargeCap Fund
Baird MidCap Fund
TABLE OF CONTENTS
Page | |
Letter to Shareholders | 1 |
2010 Economic and Stock Market Commentary | 2 |
Baird LargeCap Fund | 4 |
Baird MidCap Fund | 14 |
Additional Information on Fund Expenses | 24 |
Statements of Assets and Liabilities | 26 |
Statements of Operations | 27 |
Statements of Changes in Net Assets | 28 |
Financial Highlights | 30 |
Notes to the Financial Statements | 34 |
Report of Independent Registered Public Accounting Firm | 44 |
Directors and Officers | 45 |
Disclosure Regarding the Board of Directors’ Approval | |
of the Investment Advisory Agreement for Baird Equity Funds | 47 |
Additional Information | 50 |
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 25, 2011
Dear Shareholder,
We are pleased to present this annual report. Overall, 2010 was a good year for equity investors. We are pleased with the performance of the funds in 2010 and the value the portfolio management team has added with its quality conscious investment management approach.
The net assets of the seven mutual funds in our family have grown to more than $4.7 billion as of the end of 2010, an increase of more than 30% compared to the prior year end. We expanded our reputation for consistent, competitive returns and continued to provide excellent stewardship of shareholder assets.
The Baird Funds marked a significant milestone in 2010. Five of the seven Baird Funds celebrated their 10th anniversary during the year and received excellent recognition by Morningstar, The Wall Street Journal, Kiplinger’s, US News, and others for their leadership in investment management.
On the following pages, we review the equity market in 2010 and the performance and composition of each of the Baird Equity Funds.
Thank you again for choosing Baird Funds. We appreciate the confidence and trust that you have placed in our experienced investment team to help you achieve your financial goals.
Sincerely,
Mary Ellen Stanek, CFA
President
Baird Funds
2010 Economic and Stock Market Commentary
Equities produced a strong rally late in the fourth quarter of 2010, which helped propel stock market averages to back-to-back positive years. The broad-based S&P 500® Index rose a very solid 15.1% in 2010 while the Dow Jones Industrial Average advanced 14.1%. Growth stocks again outpaced the broader indices in 2010, with the Russell 1000® Growth Index increasing 16.7% and the Russell Midcap® Growth Index leading the way, up 26.4%.
The favorable market returns experienced by investors in 2010 were not a sure thing as we reached mid-year. A robust first quarter quickly faded as economic indicators slowed, and real concern emerged about the potential for a double-dip recession. As a result, broad market returns fell into negative territory as of June 30. The temporary pause in economic activity was short-lived, and the combination of solid corporate earnings and a second round of quantitative easing by the Federal Reserve were enough to change the direction of equities in the second half of the year.
The strong market performance in the year’s final quarter was tied to a general lift in U.S. economic indicators, more certainty on tax policy, and a growing belief that the economy was transitioning from recovery to sustainable growth. One significant development we saw during the course of 2010 was a significant step up in the pace of mergers and acquisitions. We are encouraged by the return of this activity as it typically reflects an overall increase in business confidence, which is a key factor in corporate hiring.
Gains in 2010 equity prices were broad-based with all S&P 500 sectors showing positive returns. With confidence in an economic recovery building, more cyclical sectors of the economy outpaced the slower growing, defensive areas during the year. The recipe was very similar to 2009 as sector returns from consumer discretionary, industrials, materials and energy led the market. The common denominator among these sectors was the direct and positive impact the economic recovery imparted on underlying business fundamentals.
The overall performance from health care stocks remained subdued as the sector’s defensive nature and a lingering hangover from reform legislation proved too much to overcome. Financial services, while benefitting from a cyclical improvement in credit quality, lagged under the weight of financial reform. The challenging performance from these two sectors reinforces the thought that operating under the political spotlight can exact a price. The technology sector, which represents a large component of the broad indices, occupied the middle ground with respect to performance as there was quite a divergence in returns within the sector.
Economic Outlook
Expectations of GDP growth have steadily ticked up on the heels of higher production and leading economic indicators. Corporate profits continue to grow nicely, driving business purchases of more efficient equipment. Increased business confidence is supporting the restocking of recession depleted inventories and acquisition activity has returned. Improved consumer confidence in turn caused spending and purchases of big ticket items such as automobiles to be better than initially forecast.
Page 2
2010 Economic and Stock Market Commentary
The environment is not without its challenges as employment has yet to meaningfully improve, housing prices remain under pressure, and government finances are strained domestically and abroad. Ultimately, the path of economic growth will determine how impactful these risks become. With markets and the outlook for economic growth improving, we believe these issues are manageable over the near term.
To conclude, we are quite pleased with back-to-back double digit yearly gains for stocks. The backdrop of solid corporate earnings growth, improved consumer and business spending and more normal lending activity leads us to the view that the environment is supportive for further equity gains. We continue to hold firm to our belief in operating with discipline and focusing on finding very strong businesses with good long-term fundamentals.
Page 3
Baird LargeCap Fund
Portfolio Managers’ Commentary
For the year ended December 31, 2010, the Baird LargeCap Fund Institutional Class posted a total return of 18.1% (17.9% for the Investor Class), as compared to a return of 16.7% for the Russell 1000® Growth Index, the LargeCap Fund’s primary benchmark. We were pleased with the Fund’s returns as our positioning for economic recovery and good stock selection proved beneficial.
As we analyze broad sector performance for the year we see leadership from capital spending related and consumer discretionary areas of the economy. On the other hand, the more defensive areas of the economy, including health care and consumer staples, continued their performance struggle.
The highlight of the year was the broad-based strength from the Fund’s technology holdings, which produced very strong relative outperformance. The market continued to reward strong revenue and earnings growth, which was widely displayed in the sector. Corporate technology spending and favorable product cycles are providing good end-market growth for many companies. Since the market bottom in the first half of 2009, technology stocks have been among the better performing groups.
The Fund’s industrial holdings also tracked well ahead of the market’s solid performance. Of note was the broad-based strength from this sector as double-digit price gains were the norm. We are seeing continued improvement in the revenue growth for many of these businesses which in turn is driving better margins and earnings. We realize that at some point we will have to manage for a slowdown in the industrial outlook. However, we continue to have confidence in our positive view for this sector based on how the economic recovery is progressing.
The year’s most challenging sectors for the Fund from a relative performance standpoint were energy, financial services, and consumer discretionary. Energy suffered from difficult stock selection, while the Fund’s discretionary holdings generally advanced, but fell short of the very strong benchmark performance. Consumer stocks have consistently resided among the better performing groups the past two years.
The legislative reform train rolled from health care to the financial services sector during the first half of the year with debate coming to a head during the second quarter. Uncertainty during the law-making process proved to be a significant headwind for financials, which combined with the Fund’s overweight caused the sector to hurt performance. Most of our holdings were impacted negatively by potential new regulations, which reached further than we expected. We still hold to our belief that attractive valuations and benefits from an economic recovery outweigh reform risk as was the case following the last two recessions.
Page 4
Baird LargeCap Fund
The health care sector continues to present challenges, and detracted from overall performance. A meaningful slowdown in medical procedures and pressure on overall utilization of services continued during the balance of the year, hurting earnings multiples and share prices. Market volatility may present opportunities in the sector, which we will weigh carefully given the overhang that remains as the economy gradually recovers and the coming reform of the health care system.
The LargeCap Fund remained 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
Kenneth M. Hemauer, CFA
Page 5
Baird LargeCap Fund
A December 31, 2010 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** | ||
Apple Inc. | 4.9% | ||
Emerson Electric Company | 3.6% | ||
Occidental Petroleum Corporation | 3.6% | ||
EMC Corporation | 3.5% | ||
Danaher Corporation | 3.2% | ||
Target Corporation | 3.1% | ||
C.H. Robinson Worldwide, Inc. | 2.9% | ||
Express Scripts, Inc. | 2.7% | ||
Praxair, Inc. | 2.6% | ||
Johnson Controls, Inc. | 2.5% | ||
Net Assets: | $23,540,164 | ||
Portfolio Turnover Rate: | 52.0% | ||
Number of Equity Holdings: | 56 | ||
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, 2010. |
** | Percentages shown in parentheses relate to the Fund’s total market value of investments as of December 31, 2010, 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, 2012. |
**** | 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
Since | ||||
For the Periods Ended December 31, 2010 | One Year | Five Years | Ten Years | Inception(1) |
Institutional Class Shares | 18.06% | 1.76% | -0.30% | -0.71% |
Investor Class Shares | 17.86% | 1.52% | -0.55% | -0.95% |
Russell 1000® Growth Index(2) | 16.71% | 3.75% | 0.02% | -2.30% |
(1) | For the period from September 29, 2000 (commencement of operations) through December 31, 2010. |
(2) | The Russell 1000® Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes 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, 2010 |
Shares | Value | ||||||
COMMON STOCKS – 96.4% | |||||||
Aerospace & Defense – 1.3% | |||||||
2,191 | Precision | ||||||
Castparts Corp.@ | $ | 305,009 | |||||
Air Freight & Logistics – 2.9% | |||||||
8,607 | C.H. Robinson | ||||||
Worldwide, Inc. | 690,195 | ||||||
Auto Components – 2.5% | |||||||
15,440 | Johnson Controls, Inc. | 589,808 | |||||
Capital Markets – 3.7% | |||||||
1,038 | The Goldman | ||||||
Sachs Group, Inc. | 174,550 | ||||||
7,841 | State Street Corporation | 363,351 | |||||
5,264 | T. Rowe Price Group, Inc. | 339,739 | |||||
877,640 | |||||||
Chemicals – 3.9% | |||||||
5,955 | Ecolab, Inc. | 300,251 | |||||
6,338 | Praxair, Inc. | 605,089 | |||||
905,340 | |||||||
Commercial Banks – 0.8% | |||||||
3,100 | PNC Financial Services | ||||||
Group, Inc. | 188,232 | ||||||
Commercial Services & Supplies – 1.2% | |||||||
3,500 | Stericycle, Inc.*@ | 283,220 | |||||
Communications Equipment – 3.2% | |||||||
12,000 | Juniper Networks, Inc.* | 443,040 | |||||
6,325 | QUALCOMM | ||||||
Incorporated | 313,024 | ||||||
756,064 | |||||||
Computers & Peripherals – 9.6% | |||||||
3,547 | Apple Inc.* | 1,144,119 | |||||
35,481 | EMC Corporation*@ | 812,515 | |||||
7,200 | Hewlett-Packard Company | 303,120 | |||||
2,259,754 | |||||||
Electrical Equipment – 5.5% | |||||||
9,525 | ABB Limited – ADR f | 213,836 | |||||
14,832 | Emerson Electric | ||||||
Company@ | 847,946 | ||||||
3,075 | Roper Industries, Inc. | 235,022 | |||||
1,296,804 | |||||||
Electronic Equipment, Instruments | |||||||
& Components – 4.8% | |||||||
8,225 | Agilent Technologies, Inc.* | 340,761 | |||||
26,648 | Corning Incorporated | 514,840 | |||||
3,925 | Dolby Laboratories, | ||||||
Inc. – Class A* | 261,798 | ||||||
1,117,399 | |||||||
Energy Equipment & Services – 4.0% | |||||||
4,475 | Core Laboratories N.V. f@ | 398,499 | |||||
6,462 | Schlumberger Limited f | 539,577 | |||||
938,076 | |||||||
Food & Staples Retailing – 1.1% | |||||||
5,000 | Whole Foods Market, Inc.* | 252,950 | |||||
Food Products – 1.3% | |||||||
4,650 | The J.M. | ||||||
Smucker Company | 305,272 | ||||||
Health Care Providers & Services – 3.6% | |||||||
11,625 | Express Scripts, Inc.*@ | 628,331 | |||||
6,300 | UnitedHealth Group | ||||||
Incorporated | 227,493 | ||||||
855,824 | |||||||
Hotels, Restaurants & Leisure – 0.8% | |||||||
11,225 | International | ||||||
Game Technology | 198,570 | ||||||
Household Products – 1.1% | |||||||
3,775 | Church & Dwight | ||||||
Co., Inc.@ | 260,551 | ||||||
Insurance – 2.0% | |||||||
8,150 | Aflac, Inc. | 459,905 |
The accompanying notes are an integral part of these financial statements.
Page 9
Baird LargeCap Fund
Schedule of Investments December 31, 2010 |
Shares | Value | ||||||
COMMON STOCKS – 96.4% (cont.) | |||||||
Internet & Catalog Retail – 2.3% | |||||||
2,308 | Amazon.com, Inc.* | $ | 415,440 | ||||
732 | Netflix Inc.*@ | 128,612 | |||||
544,052 | |||||||
Internet Software & Services – 4.3% | |||||||
11,000 | Akamai Technologies, Inc.* | 517,550 | |||||
850 | Google, Inc. – Class A* | 504,875 | |||||
1,022,425 | |||||||
IT Services – 2.9% | |||||||
6,525 | Cognizant Technology | ||||||
Solutions Corporation – | |||||||
Class A* | 478,217 | ||||||
945 | MasterCard, Inc. – Class A | 211,784 | |||||
690,001 | |||||||
Life Sciences Tools & Services – 1.6% | |||||||
6,646 | Thermo Fisher | ||||||
Scientific, Inc.* | 367,923 | ||||||
Machinery – 4.8% | |||||||
15,734 | Danaher Corporation | 742,173 | |||||
2,375 | Joy Global Inc. | 206,031 | |||||
3,300 | PACCAR Inc. | 189,486 | |||||
1,137,690 | |||||||
Media – 2.6% | |||||||
2,675 | DIRECTV* | 106,813 | |||||
9,875 | Scripps Networks | ||||||
Interactive – Class A | 511,031 | ||||||
617,844 | |||||||
Metals & Mining – 0.7% | |||||||
1,400 | Freeport-McMoRan | ||||||
Copper & Gold Inc. | 168,126 | ||||||
Multiline Retail – 3.1% | |||||||
11,995 | Target Corporation | 721,260 | |||||
Oil, Gas & Consumable Fuels – 8.3% | |||||||
5,050 | Cenovus Energy Inc. f | 167,862 | |||||
2,274 | EOG Resources, Inc. | 207,866 | |||||
2,825 | Noble Energy, Inc. | 243,176 | |||||
8,625 | Occidental Petroleum | ||||||
Corporation | 846,113 | ||||||
13,200 | Southwestern | ||||||
Energy Company* | 494,076 | ||||||
1,959,093 | |||||||
Pharmaceuticals – 1.9% | |||||||
6,625 | Allergan, Inc. | 454,939 | |||||
Semiconductors & Semiconductor Equipment – 3.3% | |||||||
13,440 | Altera Corporation | 478,195 | |||||
6,582 | Broadcom Corporation – | ||||||
Class A | 286,646 | ||||||
764,841 | |||||||
Software – 2.9% | |||||||
3,100 | Red Hat, Inc.* | 141,515 | |||||
4,003 | Salesforce.com, Inc.*@ | 528,396 | |||||
669,911 | |||||||
Specialty Retail – 2.5% | |||||||
9,650 | O’Reilly Automotive, Inc.* | 583,053 | |||||
Trading Companies & Distributors – 1.9% | |||||||
7,472 | Fastenal Company@ | 447,648 | |||||
Total Common Stocks | |||||||
(Cost $16,290,760) | 22,689,419 | ||||||
SHORT-TERM INVESTMENTS – 3.5% | |||||||
Money Market Mutual Funds – 3.5% | |||||||
389,231 | Dreyfus Institutional | ||||||
Cash Advantage | |||||||
Fund, 0.18% « | 389,231 | ||||||
423,789 | The AIM STIT – Liquid | ||||||
Assets Portfolio, 0.19%« | 423,789 | ||||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $813,020) | 813,020 |
The accompanying notes are an integral part of these financial statements.
Page 10
Baird LargeCap Fund
Schedule of Investments December 31, 2010 |
Principal | ||||||||
Amount | Value | |||||||
INVESTMENTS PURCHASED | ||||||||
WITH CASH PROCEEDS FROM | ||||||||
SECURITIES LENDING – 15.6% | ||||||||
Commercial Paper – 0.5% | ||||||||
$ | 183,396 | Atlantic East | ||||||
Funding LLC, | ||||||||
0.59%, 03/25/2011†** | $ | 124,442 | ||||||
Total Commercial Paper | ||||||||
(Cost $183,396) | 124,442 | |||||||
Shares | ||||||||
Investment Companies – 15.1% | ||||||||
3,564,103 | Mount Vernon Securities | |||||||
Lending Trust Prime | ||||||||
Portfolio, 0.29%« | 3,564,103 | |||||||
Total Investment | ||||||||
Companies | ||||||||
(Cost $3,564,103) | 3,564,103 | |||||||
Total Investments Purchased | ||||||||
With Cash Proceeds From | ||||||||
Securities Lending | ||||||||
(Cost $3,747,499) | 3,688,545 | |||||||
Total Investments | ||||||||
(Cost $20,851,279) | ||||||||
– 115.5% | 27,190,984 | |||||||
Asset Relating to Securities | ||||||||
Lending Investments – 0.3% | ||||||||
Support Agreement*a** | 58,954 | |||||||
Total (Cost $0) | 58,954 | |||||||
Liabilities in Excess of | ||||||||
Other Assets – (15.8)% | (3,709,774 | ) | ||||||
TOTAL NET | ||||||||
ASSETS – 100.0% | $ | 23,540,164 |
Notes to Schedule of Investments
* | Non-Income Producing |
** | Illiquid Security |
@ | This security or portion of this security is out on loan at December 31, 2010. |
f | Foreign Security |
« | 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 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. |
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
Page 11
Baird LargeCap Fund
Summary of Fair Value Exposure at December 31, 2010 |
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 standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Management has determined that these standards have no material impact on the Funds’ financial statements. The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability. These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized into three broad levels and described below:
Level 1 – | Unadjusted quoted prices in active markets for identical unrestricted 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 factors that market participants would use in valuing the security) based on the best information available. |
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, 2010:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity | ||||||||||||||||
Common Stocks | $ | 22,689,419 | $ | — | $ | — | $ | 22,689,419 | ||||||||
Total Equity | 22,689,419 | — | — | 22,689,419 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 813,020 | — | — | 813,020 | ||||||||||||
Total Short-Term Investments | 813,020 | — | — | 813,020 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 124,442 | — | 124,442 | ||||||||||||
Money Market Mutual Fund | 3,564,103 | — | — | 3,564,103 | ||||||||||||
Total Investments Purchased with | ||||||||||||||||
Cash Proceeds from Securities Lending | 3,564,103 | 124,442 | — | 3,688,545 | ||||||||||||
Total Investments* | $ | 27,066,542 | $ | 124,442 | $ | — | $ | 27,190,984 | ||||||||
Asset Relating to Securities Lending Investments | $ | — | $ | 58,954 | $ | — | $ | 58,954 |
* | Additional information regarding the industry classifications of these investments is disclosed in the Schedule of Investments. |
Page 12
Baird LargeCap Fund
Summary of Fair Value Exposure at December 31, 2010 |
Changes in valuation techniques may result in transfers into or out of current assigned levels within the hierarchy. There were no significant transfers between Level 1 and Level 2 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.
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, 2009 | $ | 37,834 | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | (4,850 | ) | ||
Change in unrealized appreciation (depreciation) | 7,021 | |||
Net purchases (sales) | (40,005 | ) | ||
Transfers in and/or out of Level 3* | — | |||
Balance as of December 31, 2010 | $ | — |
* | The information used in the above reconciliation represents fiscal year 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 13
Baird MidCap Fund
Portfolio Managers’ Commentary
For the year ended December 31, 2010, the Baird MidCap Fund Institutional Class posted a total return of 27.1% (26.9% for the Investor Class), as compared to a return of 26.4% for the Russell MidCap® Growth Index, the MidCap Fund’s primary benchmark.
As we look at broad sector returns for the year we see leadership from capital spending related and consumer discretionary areas of the economy. The more defensive areas of the economy, including health care, consumer staples, and utilities continued their performance struggle.
The Fund’s holdings in the industrial, consumer discretionary, and technology sectors enjoyed the strongest returns during the year. Of particular note was the broad-based strength from the Fund’s technology holdings, which led the Fund’s performance for the year despite slowing in the fourth quarter as some of the more speculative areas in the sector rallied. The market continued to reward prospects for improving revenue and earnings growth, which was widely displayed in the technology sector.
The industrial companies also drove a meaningful positive performance contribution. Revenue growth for many of these businesses continues to improve, and is driving better margins and earnings. Overall performance from the consumer discretionary sector was also very strong. Since the market bottom in the first half of 2009, consumer stocks have been consistently among the Fund’s best performing groups.
The positive impact of a general rise in commodity prices was evident in the materials sector. While we tend to shy away from businesses tied more directly to commodity prices such as chemical, building material, and fertilizer companies, our more conservative holdings benefitted nicely from the pick-up in economic activity.
The more defensive nature of health care businesses and a meaningful slowdown in medical procedures as well as pressure on overall utilization of services was a prevalent theme during 2010. These issues negatively impacted earnings multiples and share prices. The Fund’s underweight position in the sector was the right call, but it did not offset difficult stock performance.
The legislative reform train rolled from the health care sector to the financial services sector with debate coming to a head in the first half of the year. Uncertainty during the law making process proved to be a headwind for the sector. Financials showed some life late in the year, with several commercial banks raising capital to pay back TARP money. The Fund’s positioning was off during most of the year as areas under-represented in the portfolio, such as insurance and REITs, performed quite well while our positioning, which was intended to benefit from credit improvement proved premature.
Page 14
Baird MidCap Fund
There was a noticeable rise in merger and acquisition activity during 2010. This change had a direct and positive impact on the portfolio as performance was boosted by the announced acquisitions of McAfee, Baldor Electric, J. Crew Group, and Bucyrus International. We were certainly pleased to see these transactions announced as all included substantial premiums relative to where each stock had been trading previously. We are encouraged by the return of acquisition activity given its correlation with business confidence. These specific transactions reinforced our own view about the underlying quality and value of the businesses we own.
The MidCap Fund remained consistently positioned in favor of high-quality names that deliver attractive returns with lower volatility for the Fund than for our target index. We have positioned the Fund for the continued economic growth we expect in 2011, with attention to particular businesses that should demonstrate better profitability and stronger growth than peers. We will continue to operate with a fundamental focus and dedication to our investment process.
Portfolio Managers:
Kenneth M. Hemauer, CFA
Charles F. Severson, CFA
Page 15
Baird MidCap Fund
A December 31, 2010 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** | ||
Oceaneering International, Inc. | 2.7% | ||
MicroChip Technology Incorporated | 2.5% | ||
WABCO Holdings Inc. | 2.4% | ||
AptarGroup, Inc. | 2.4% | ||
Stericycle, Inc. | 2.4% | ||
Cabot Oil & Gas Corporation | 2.3% | ||
Church & Dwight Co., Inc. | 2.3% | ||
Scripps Networks Interactive | 2.3% | ||
Invesco Limited | 2.3% | ||
Manpower Inc. | 2.3% | ||
Net Assets: | $34,551,123 | ||
Portfolio Turnover Rate: | 62.7% | ||
Number of Equity Holdings: | 57 | ||
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, 2010. |
** | Percentages shown in parentheses relate to the Fund’s total market value of investments as of December 31, 2010, 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, 2012. |
**** | Includes 0.25% 12b-1 fee. |
Page 16
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 17
Baird MidCap Fund
Average Annual Total Returns
Since | ||||
For the Periods Ended December 31, 2010 | One Year | Five Years | Ten Years | Inception(1) |
Institutional Class Shares | 27.09% | 5.64% | 4.58% | 4.26% |
Investor Class Shares | 26.92% | 5.40% | 4.34% | 4.02% |
Russell Midcap® Growth Index(2) | 26.38% | 4.88% | 3.12% | 2.85% |
(1) | For the period from December 29, 2000 (commencement of operations) through December 31, 2010. |
(2) | The Russell Midcap® Growth Index measures the performance of the mid-cap growth segment of the U.S. equity universe. It includes 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 18
Baird MidCap Fund
Schedule of Investments December 31, 2010 |
Shares | Value | ||||||
COMMON STOCKS – 97.4% | |||||||
Air Freight & Logistics – 1.7% | |||||||
10,269 | Expeditors International | ||||||
of Washington, Inc. | $ | 560,687 | |||||
Auto Components – 4.3% | |||||||
22,225 | Gentex Corporation | 656,971 | |||||
13,625 | WABCO Holdings Inc.* | 830,171 | |||||
1,487,142 | |||||||
Capital Markets – 4.6% | |||||||
12,566 | Eaton Vance Corporation | 379,870 | |||||
5,353 | Greenhill & Co., Inc.@ | 437,233 | |||||
32,550 | Invesco Limited f@ | 783,153 | |||||
1,600,256 | |||||||
Chemicals – 2.4% | |||||||
5,250 | Airgas, Inc. | 327,915 | |||||
10,069 | Ecolab, Inc. | 507,679 | |||||
835,594 | |||||||
Commercial Services & Supplies – 2.4% | |||||||
10,065 | Stericycle, Inc.*@ | 814,460 | |||||
Communications Equipment – 1.8% | |||||||
16,485 | Plantronics, Inc. | 613,572 | |||||
Computers & Peripherals – 1.1% | |||||||
6,874 | NetApp, Inc.*@ | 377,795 | |||||
Containers & Packaging – 2.4% | |||||||
17,202 | AptarGroup, Inc. | 818,299 | |||||
Distributors – 2.2% | |||||||
34,075 | LKQ Corporation* | 774,184 | |||||
Diversified Consumer Services – 1.0% | |||||||
5,135 | Capella Education | ||||||
Company*@ | 341,888 | ||||||
Electrical Equipment – 2.2% | |||||||
10,192 | Roper Industries, Inc. | 778,975 | |||||
Electronic Equipment, Instruments | |||||||
& Components – 7.0% | |||||||
13,815 | Agilent Technologies, Inc.* | 572,355 | |||||
10,945 | Dolby Laboratories, | ||||||
Inc. – Class A* | 730,032 | ||||||
24,495 | Plexus Corp.* | 757,875 | |||||
8,700 | Trimble Navigation | ||||||
Limited* | 347,391 | ||||||
2,407,653 | |||||||
Energy Equipment & Services – 4.9% | |||||||
18,070 | Dresser-Rand Group, Inc.* | 769,601 | |||||
12,643 | Oceaneering | ||||||
International, Inc.*@ | 930,904 | ||||||
1,700,505 | |||||||
Food Products – 1.9% | |||||||
14,102 | McCormick & | ||||||
Co, Incorporated | 656,166 | ||||||
Health Care Equipment & Supplies – 3.8% | |||||||
15,655 | ResMed Inc.*@ | 542,290 | |||||
14,970 | Thoratec Corporation* | 423,950 | |||||
5,155 | Varian Medical | ||||||
Systems, Inc.* | 357,138 | ||||||
1,323,378 | |||||||
Hotels Restaurants & Leisure – 1.6% | |||||||
12,693 | Buffalo Wild | ||||||
Wings Inc.*@ | 556,588 | ||||||
Household Products – 2.3% | |||||||
11,513 | Church & Dwight | ||||||
Co., Inc. | 794,627 | ||||||
Internet Software & Services – 1.3% | |||||||
9,325 | Akamai Technologies, Inc.* | 438,741 | |||||
IT Services – 3.3% | |||||||
10,994 | Alliance Data Systems | ||||||
Corporation*@ | 780,904 | ||||||
7,406 | Global Payments Inc. | 342,231 | |||||
1,123,135 |
The accompanying notes are an integral part of these financial statements.
Page 19
Baird MidCap Fund
Schedule of Investments December 31, 2010 |
Shares | Value | ||||||
COMMON STOCKS – 97.4% (cont.) | |||||||
Life Sciences Tools & Services – 5.1% | |||||||
20,056 | ICON PLC – ADR*f | $ | 439,226 | ||||
12,194 | Life Technologies | ||||||
Corporation* | 676,767 | ||||||
4,250 | Mettler-Toledo | ||||||
International Inc.*@ | 642,643 | ||||||
1,758,636 | |||||||
Machinery – 5.2% | |||||||
13,300 | Actuant Corporation | 354,046 | |||||
6,820 | Bucyrus International, | ||||||
Inc. – Class A | 609,708 | ||||||
4,850 | Rockwell Automation, Inc. | 347,794 | |||||
13,130 | Zebra Technologies | ||||||
Corporation* | 498,809 | ||||||
1,810,357 | |||||||
Media – 2.3% | |||||||
15,295 | Scripps Networks | ||||||
Interactive – Class A | 791,516 | ||||||
Multiline Retail – 2.0% | |||||||
43,065 | 99 Cents Only Stores* | 686,456 | |||||
Oil, Gas & Consumable Fuels – 2.3% | |||||||
21,370 | Cabot Oil & Gas | ||||||
Corporation | 808,855 | ||||||
Pharmaceuticals – 1.5% | |||||||
8,355 | Perrigo Company@ | 529,122 | |||||
Professional Services – 2.3% | |||||||
12,515 | Manpower Inc. | 785,441 | |||||
Real Estate Investment Trust (REIT) – 1.2% | |||||||
7,980 | Digital Realty Trust, Inc.@ | 411,289 | |||||
Road & Rail – 2.2% | |||||||
18,645 | J.B. Hunt Transport | ||||||
Services, Inc. | 760,902 | ||||||
Semiconductors & Semiconductor Equipment – 4.4% | |||||||
24,843 | Microchip Technology | ||||||
Incorporated@ | 849,879 | ||||||
17,647 | Varian Semiconductor | ||||||
Equipment Associates, | |||||||
Inc.*@ | 652,410 | ||||||
1,502,289 | |||||||
Software – 4.2% | |||||||
14,885 | ANSYS, Inc.* | 775,062 | |||||
5,100 | Citrix Systems, Inc.*@ | 348,891 | |||||
2,551 | Salesforce.com, Inc.*@ | 336,732 | |||||
1,460,685 | |||||||
Specialty Retail – 8.4% | |||||||
19,886 | Dick’s Sporting | ||||||
Goods, Inc.*@ | 745,725 | ||||||
8,675 | O’Reilly Automotive, Inc.* | 524,144 | |||||
9,321 | Tractor Supply Company@ | 451,975 | |||||
17,545 | Ulta Salon, Cosmetics & | ||||||
Fragrance, Inc.*@ | 596,530 | ||||||
16,364 | Urban Outfitters, Inc.*@ | 585,995 | |||||
2,904,369 | |||||||
Textiles, Apparel & Luxury Goods – 0.6% | |||||||
4,020 | Under Armour, Inc. – | ||||||
Class A*@ | 220,457 | ||||||
Trading Companies & Distributors – 3.5% | |||||||
12,011 | Fastenal Company@ | 719,580 | |||||
8,015 | Watsco, Inc.@ | 505,586 | |||||
1,225,166 | |||||||
Total Common Stocks | |||||||
(Cost $24,290,748) | 33,659,185 |
The accompanying notes are an integral part of these financial statements.
Page 20
Baird MidCap Fund
Schedule of Investments December 31, 2010 |
Shares | Value | ||||||
SHORT-TERM INVESTMENTS – 2.5% | |||||||
Money Market Mutual Funds – 2.5% | |||||||
230,536 | Dreyfus Institutional | ||||||
Cash Advantage | |||||||
Fund, 0.18%« | $ | 230,536 | |||||
645,613 | The AIM STIT – Liquid | ||||||
Assets Portfolio, 0.19%« | 645,613 | ||||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $876,149) | 876,149 | ||||||
Principal | |||||||
Amount | |||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 25.5% | |||||||
Commercial Paper – 0.5% | |||||||
$ | 258,168 | Atlantic East Funding LLC, | |||||
0.59%, 03/25/2011†** | 175,178 | ||||||
Total Commercial Paper | |||||||
(Cost $258,168) | 175,178 | ||||||
Shares | |||||||
Investment Companies – 25.0% | |||||||
8,631,059 | Mount Vernon Securities | ||||||
Lending Trust Prime | |||||||
Portfolio, 0.29%« | 8,631,059 | ||||||
Total Investment | |||||||
Companies | |||||||
(Cost $8,631,059) | 8,631,059 | ||||||
Total Investments Purchased | |||||||
With Cash Proceeds From | |||||||
Securities Lending | |||||||
(Cost $8,889,227) | 8,806,237 | ||||||
Total Investments | |||||||
(Cost $34,056,124) | |||||||
– 125.4% | 43,341,571 | ||||||
Asset Relating to Securities | |||||||
Lending Investments – 0.3% | |||||||
Support Agreement*a** | 82,990 | ||||||
Total (Cost $0) | 82,990 | ||||||
Liabilities in Excess of | |||||||
Other Assets – (25.7)% | (8,873,438 | ) | |||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 34,551,123 |
Notes to Schedule of Investments
* | Non-Income Producing |
** | Illiquid Security |
@ | This security or portion of this security is out on loan at December 31, 2010. |
f | Foreign Security |
« | 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 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. |
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
Page 21
Baird MidCap Fund
Summary of Fair Value Exposure at December 31, 2010 |
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 standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Management has determined that these standards have no material impact on the Funds’ financial statements. The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability. These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized into three broad levels and described below:
Level 1 – | Unadjusted quoted prices in active markets for identical unrestricted 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 factors that market participants would use in valuing the security) based on the best information available. |
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, 2010:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity | ||||||||||||||||
Common Stocks | $ | 33,659,185 | $ | — | $ | — | $ | 33,659,185 | ||||||||
Total Equity | 33,659,185 | — | — | 33,659,185 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 876,149 | — | — | 876,149 | ||||||||||||
Total Short-Term Investments | 876,149 | — | — | 876,149 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 175,178 | — | 175,178 | ||||||||||||
Money Market Mutual Fund | 8,631,059 | — | — | 8,631,059 | ||||||||||||
Total Investments Purchased with | ||||||||||||||||
Cash Proceeds from Securities Lending | 8,631,059 | 175,178 | — | 8,806,237 | ||||||||||||
Total Investments* | $ | 43,166,393 | $ | 175,178 | $ | — | $ | 43,341,571 | ||||||||
Asset Relating to Securities Lending Investments | $ | — | $ | 82,990 | $ | — | $ | 82,990 |
* | Additional information regarding the industry classifications of these investments is disclosed in the Schedule of Investments. |
Page 22
Baird MidCap Fund
Summary of Fair Value Exposure at December 31, 2010 |
Changes in valuation techniques may result in transfers into or out of current assigned levels within the hierarchy. There were no significant transfers between Level 1 and Level 2 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.
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, 2009 | $ | 45,716 | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | (5,860 | ) | ||
Change in unrealized appreciation (depreciation) | 8,482 | |||
Net purchases (sales) | (48,338 | ) | ||
Transfers in and/or out of Level 3* | — | |||
Balance as of December 31, 2010 | $ | — |
* | The information used in the above reconciliation represents fiscal year 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
Baird Funds, Inc.
Additional Information on Fund Expenses December 31, 2010 |
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 (7/1/10 – 12/31/10).
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 24
Baird Funds, Inc.
Additional Information on Fund Expenses December 31, 2010 |
Actual vs. Hypothetical Returns
For the Six Months Ended December 31, 2010
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) | 7/1/10 | 12/31/10 | Period(1) | 12/31/10 | Period(1) | |
Baird LargeCap Fund | ||||||
Institutional Class | 0.75% | $1,000.00 | $1,285.90 | $4.32 | $1,021.42 | $3.82 |
Investor Class | 1.00% | $1,000.00 | $1,283.90 | $5.76 | $1,020.16 | $5.09 |
Baird MidCap Fund | ||||||
Institutional Class | 0.85% | $1,000.00 | $1,248.80 | $4.82 | $1,020.92 | $4.33 |
Investor Class | 1.10% | $1,000.00 | $1,248.10 | $6.23 | $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 25
Baird Funds, Inc.
Statements of Assets and Liabilities December 31, 2010 |
Baird LargeCap | Baird MidCap | |||||||
Fund | Fund | |||||||
ASSETS: | ||||||||
Investments, at value (cost $20,851,279 and $34,056,124, respectively)* | $ | 27,190,984 | $ | 43,341,571 | ||||
Support Agreement (Note 6) | 58,954 | 82,990 | ||||||
Dividends receivable | 11,775 | 8,164 | ||||||
Interest receivable | 59 | 173 | ||||||
Receivable for fund shares sold | 51,079 | 45,545 | ||||||
Uninvested cash | 6,338 | 7,373 | ||||||
Prepaid expenses | 7,691 | 6,735 | ||||||
Total assets | 27,326,880 | 43,492,551 | ||||||
LIABILITIES: | ||||||||
Payable for collateral received for securities loaned (Note 6) | 3,752,974 | 8,896,600 | ||||||
Payable to Advisor and Distributor | 863 | 10,118 | ||||||
Accrued expenses and other liabilities | 32,879 | 34,710 | ||||||
Total liabilities | 3,786,716 | 8,941,428 | ||||||
NET ASSETS | $ | 23,540,164 | $ | 34,551,123 | ||||
NET ASSETS CONSIST OF: | ||||||||
Capital stock | $ | 22,157,363 | $ | 26,483,168 | ||||
Accumulated undistributed net investment income | 27 | — | ||||||
Accumulated net realized loss on investments sold | (5,015,890 | ) | (1,300,482 | ) | ||||
Net unrealized appreciation on investments, | ||||||||
currency, and support agreement | 6,398,664 | 9,368,437 | ||||||
NET ASSETS | $ | 23,540,164 | $ | 34,551,123 | ||||
INSTITUTIONAL CLASS SHARES | ||||||||
Net Assets | $ | 23,399,325 | $ | 33,432,268 | ||||
Shares outstanding ($0.01 par value, unlimited shares authorized) | 2,619,105 | 3,328,281 | ||||||
Net asset value, offering and redemption price per share | $ | 8.93 | $ | 10.04 | ||||
INVESTOR CLASS SHARES | ||||||||
Net Assets | $ | 140,839 | $ | 1,118,855 | ||||
Shares outstanding ($0.01 par value, unlimited shares authorized) | 15,801 | 114,617 | ||||||
Net asset value, offering and redemption price per share | $ | 8.91 | $ | 9.76 |
* | Includes securities out on loan to brokers with a market value of $3,620,659 and $8,583,387, respectively. |
The accompanying notes are an integral part of these financial statements.
Page 26
Baird Funds, Inc.
Statements of Operations Year Ended December 31, 2010 |
Baird | Baird | |||||||
LargeCap Fund | MidCap Fund | |||||||
INVESTMENT INCOME: | ||||||||
Dividends (net of foreign taxes withheld of $1,023 and $0, respectively) | $ | 177,245 | $ | 200,836 | ||||
Income from securities lending (Note 6) | 4,157 | 13,540 | ||||||
Other income | 4,185 | 5,454 | ||||||
Interest | 617 | 1,956 | ||||||
Total investment income | 186,204 | 221,786 | ||||||
EXPENSES: | ||||||||
Investment advisory fees | 136,716 | 221,088 | ||||||
Administration fees | 3,985 | 5,472 | ||||||
Shareholder servicing fees | 15,359 | 15,528 | ||||||
Fund accounting fees | 22,273 | 23,372 | ||||||
Professional fees | 33,409 | 33,403 | ||||||
Federal and state registration | 31,850 | 31,157 | ||||||
Directors fees | 39,625 | 39,643 | ||||||
Custody fees | 5,395 | 6,971 | ||||||
Reports to shareholders | 5,367 | 6,422 | ||||||
Distribution fees – Investor Class Shares (Note 8) | 613 | 3,396 | ||||||
Miscellaneous expenses | 709 | 812 | ||||||
Interest expense (Note 7) | 8 | — | ||||||
Total expenses | 295,309 | 387,264 | ||||||
Expense reimbursement by Advisor (Note 5) | (136,939 | ) | (133,302 | ) | ||||
Total expenses | 158,370 | 253,962 | ||||||
NET INVESTMENT INCOME (LOSS) | 27,834 | (32,176 | ) | |||||
REALIZED AND UNREALIZED GAIN ON INVESTMENTS: | ||||||||
Net realized gain on investments | 541,152 | 2,878,157 | ||||||
Change in unrealized appreciation/depreciation on | ||||||||
investments, currency and support agreement | 3,040,877 | 4,470,072 | ||||||
Net realized and unrealized gain on investments | 3,582,029 | 7,348,229 | ||||||
NET INCREASE IN NET ASSETS | ||||||||
RESULTING FROM OPERATIONS | $ | 3,609,863 | $ | 7,316,053 |
The accompanying notes are an integral part of these financial statements.
Page 27
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird LargeCap Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 27,834 | $ | 84,473 | ||||
Net realized gain (loss) on investments | 541,152 | (1,409,994 | ) | |||||
Change in unrealized appreciation/depreciation on | ||||||||
investments, currency, and support agreement | 3,040,877 | 7,065,081 | ||||||
Net increase in net assets resulting from operations | 3,609,863 | 5,739,560 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 1,834,410 | 1,781,312 | ||||||
Proceeds from shares issued to holders in reinvestment of dividends | 19,011 | 92,400 | ||||||
Payments for shares redeemed | (2,992,605 | ) | (3,040,863 | ) | ||||
Net decrease in net assets resulting | ||||||||
from capital share transactions | (1,139,184 | ) | (1,167,151 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (19,202 | ) | (93,147 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | — | (798 | ) | |||||
TOTAL INCREASE IN NET ASSETS | 2,451,477 | 4,478,464 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 21,088,687 | 16,610,223 | ||||||
End of year (including undistributed net | ||||||||
investment income and distributions in excess of | ||||||||
net investment income of $27 and $(8,619), respectively) | $ | 23,540,164 | $ | 21,088,687 |
The accompanying notes are an integral part of these financial statements.
Page 28
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird MidCap Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
OPERATIONS: | ||||||||
Net investment income (loss) | $ | (32,176 | ) | $ | 52,963 | |||
Net realized gain (loss) on investments | 2,878,157 | (909,792 | ) | |||||
Change in unrealized appreciation/depreciation on | ||||||||
investments and support agreement | 4,470,072 | 8,807,651 | ||||||
Net increase in net assets resulting from operations | 7,316,053 | 7,950,822 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 4,145,696 | 2,089,157 | ||||||
Proceeds from shares issued to holders in reinvestment of dividends | — | 62,353 | ||||||
Payments for shares redeemed | (4,001,060 | ) | (2,675,075 | ) | ||||
Net increase (decrease) in net assets resulting | ||||||||
from capital share transactions | 144,636 | (523,565 | ) | |||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | — | (61,225 | ) | |||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | — | (2,418 | ) | |||||
TOTAL INCREASE IN NET ASSETS | 7,460,689 | 7,363,614 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 27,090,434 | 19,726,820 | ||||||
End of year (including undistributed net investment | ||||||||
income and distributions in excess of net | ||||||||
investment income of $0 and $(10,443), respectively) | $ | 34,551,123 | $ | 27,090,434 |
The accompanying notes are an integral part of these financial statements.
Page 29
Baird Funds, Inc.
Financial Highlights |
Baird LargeCap Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 7.57 | $ | 5.59 | $ | 9.33 | $ | 8.53 | $ | 8.33 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.01 | 0.03 | 0.03 | 0.02 | 0.04 | |||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 1.36 | 1.98 | (3.74 | ) | 0.80 | 0.20 | ||||||||||||||
Total from investment operations | 1.37 | 2.01 | (3.71 | ) | 0.82 | 0.24 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.01 | ) | (0.03 | ) | (0.03 | ) | (0.02 | ) | (0.04 | ) | ||||||||||
Net asset value, end of year | $ | 8.93 | $ | 7.57 | $ | 5.59 | $ | 9.33 | $ | 8.53 | ||||||||||
Total return | 18.06 | % | 36.27 | % | (39.88 | %) | 9.63 | % | 2.89 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 23,399,325 | $ | 20,741,302 | $ | 16,349,025 | $ | 27,644,009 | $ | 27,442,329 | ||||||||||
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) | 1.40 | % | 1.39 | % | 1.17 | % | 1.10 | % | 1.12 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets | 0.14 | % | 0.46 | % | 0.32 | % | 0.25 | % | 0.44 | % | ||||||||||
Ratio of net investment income (loss) | ||||||||||||||||||||
to average net assets (before waivers) | (0.51 | %) | (0.18 | %) | (0.10 | %) | (0.10 | %) | 0.07 | % | ||||||||||
Portfolio turnover rate(1) | 52.0 | % | 58.7 | % | 43.0 | % | 72.2 | % | 63.9 | % |
(1) | 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 30
Baird Funds, Inc.
Financial Highlights |
Baird LargeCap Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 7.56 | $ | 5.59 | $ | 9.29 | $ | 8.50 | $ | 8.29 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.02 | ) | 0.02 | 0.00 | (1) | 0.00 | (1) | 0.01 | ||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 1.37 | 1.97 | (3.70 | ) | 0.79 | 0.21 | ||||||||||||||
Total from investment operations | 1.35 | 1.99 | (3.70 | ) | 0.79 | 0.22 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | — | (0.02 | ) | — | — | (0.01 | ) | |||||||||||||
Net asset value, end of year | $ | 8.91 | $ | 7.56 | $ | 5.59 | $ | 9.29 | $ | 8.50 | ||||||||||
Total return | 17.86 | % | 35.79 | % | (39.94 | %) | 9.29 | % | 2.64 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 140,839 | $ | 347,385 | $ | 261,198 | $ | 740,779 | $ | 1,087,948 | ||||||||||
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) | 1.65 | % | 1.64 | % | 1.42 | % | 1.35 | % | 1.37 | % | ||||||||||
Ratio of net investment income (loss) | ||||||||||||||||||||
to average net assets | (0.11 | %) | 0.21 | % | 0.07 | % | 0.00 | % | 0.19 | % | ||||||||||
Ratio of net investment loss | ||||||||||||||||||||
to average net assets (before waivers) | (0.76 | %) | (0.43 | %) | (0.35 | %) | (0.35 | %) | (0.18 | %) | ||||||||||
Portfolio turnover rate(2) | 52.0 | % | 58.7 | % | 43.0 | % | 72.2 | % | 63.9 | % |
(1) | Amount is less than $0.005. |
(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 31
Baird Funds, Inc.
Financial Highlights |
Baird MidCap Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 7.90 | $ | 5.63 | $ | 9.62 | $ | 9.33 | $ | 11.12 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss)(1) | (0.01 | ) | 0.02 | 0.01 | (0.01 | ) | (0.02 | ) | ||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 2.15 | 2.27 | (3.99 | ) | 1.99 | 0.46 | ||||||||||||||
Total from investment operations | 2.14 | 2.29 | (3.98 | ) | 1.98 | 0.44 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | — | (0.02 | ) | (0.01 | ) | — | — | |||||||||||||
Distributions from net realized gains | — | — | — | (1.69 | ) | (2.23 | ) | |||||||||||||
Total distributions | — | (0.02 | ) | (0.01 | ) | (1.69 | ) | (2.23 | ) | |||||||||||
Net asset value, end of year | $ | 10.04 | $ | 7.90 | $ | 5.63 | $ | 9.62 | $ | 9.33 | ||||||||||
Total return | 27.09 | % | 40.90 | % | (41.53 | %) | 20.89 | % | 3.93 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 33,432,268 | $ | 25,513,554 | $ | 18,163,034 | $ | 36,616,547 | $ | 32,057,214 | ||||||||||
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) | 1.30 | % | 1.34 | % | 1.19 | % | 1.11 | % | 1.01 | % | ||||||||||
Ratio of net investment income (loss) | ||||||||||||||||||||
to average net assets | (0.10 | %) | 0.25 | % | 0.06 | % | (0.06 | %) | (0.17 | %) | ||||||||||
Ratio of net investment loss | ||||||||||||||||||||
to average net assets (before waivers) | (0.55 | %) | (0.24 | %) | (0.28 | %) | (0.32 | %) | (0.33 | %) | ||||||||||
Portfolio turnover rate(2) | 62.7 | % | 61.3 | % | 74.0 | % | 72.3 | % | 78.6 | % |
(1) | Calculated using average shares outstanding during the period. |
(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 MidCap Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 7.69 | $ | 5.49 | $ | 9.40 | $ | 9.17 | $ | 10.99 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss)(1) | (0.03 | ) | 0.00 | (2) | (0.02 | ) | (0.04 | ) | (0.04 | ) | ||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 2.10 | 2.21 | (3.89 | ) | 1.96 | 0.45 | ||||||||||||||
Total from investment operations | 2.07 | 2.21 | (3.91 | ) | 1.92 | 0.41 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | — | (0.01 | ) | — | — | — | ||||||||||||||
Distributions from net realized gains | — | — | — | (1.69 | ) | (2.23 | ) | |||||||||||||
Total distributions | — | (0.01 | ) | — | (1.69 | ) | (2.23 | ) | ||||||||||||
Net asset value, end of year | $ | 9.76 | $ | 7.69 | $ | 5.49 | $ | 9.40 | $ | 9.17 | ||||||||||
Total return | 26.92 | % | 40.52 | % | (41.70 | %) | 20.61 | % | 3.73 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 1,118,855 | $ | 1,576,880 | $ | 1,563,786 | $ | 4,783,844 | $ | 5,023,621 | ||||||||||
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) | 1.55 | % | 1.59 | % | 1.44 | % | 1.36 | % | 1.26 | % | ||||||||||
Ratio of net investment income (loss) | ||||||||||||||||||||
to average net assets | (0.35 | %) | 0.00 | % | (0.19 | %) | (0.31 | %) | (0.42 | %) | ||||||||||
Ratio of net investment loss | ||||||||||||||||||||
to average net assets (before waivers) | (0.80 | %) | (0.49 | %) | (0.53 | %) | (0.57 | %) | (0.58 | %) | ||||||||||
Portfolio turnover rate(3) | 62.7 | % | 61.3 | % | 74.0 | % | 72.3 | % | 78.6 | % |
(1) | Calculated using average shares outstanding during the period. |
(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 33
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
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 seven series 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, 2010, shareholders affiliated with the Advisor held 82% of the Institutional Class shares of the Baird LargeCap Fund and 35% 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.
The Funds determine the fair value of their investments and compute their net asset value per share as of the close of regular trading of the New York Stock Exchange (4pm EST).
Page 34
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
2.SIGNIFICANT ACCOUNTING POLICIES (cont.)
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 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 at their bid prices 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 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’ 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 requires 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 impact of ASU 2010-06 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, 2010 are traded on the New York Stock Exchange or NASDAQ.
Page 35
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
2.SIGNIFICANT ACCOUNTING POLICIES (cont.)
c)Income Tax Status – 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, 2010, or for any other tax years which are open for exam. As of December 31, 2010, open tax years include the tax years ended December 31, 2007 through 2010. 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 and other expense, respectively, in the Statement of Operations. During the year, the Funds did not incur any interest or penalties.
d)Distributions to Shareholders – Distributions 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. The book basis character of distributions may differ from their ultimate characterization for Federal income tax purposes.
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)Securities Transactions and Investment Income – 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 36
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
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, 2010 | December 31, 2010 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 231,994 | $ | 1,795,760 | Shares sold | 5,115 | $ | 38,650 | ||||||||||
Shares issued to | Shares issued to | ||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||
reinvestment of dividends | 2,124 | 19,011 | reinvestment of dividends | — | — | ||||||||||||
Shares redeemed | (355,005 | ) | (2,730,847 | ) | Shares redeemed | (35,252 | ) | (261,758 | ) | ||||||||
Net decrease | (120,887 | ) | $ | (916,076 | ) | Net decrease | (30,137 | ) | $ | (223,108 | ) | ||||||
Shares Outstanding: | Shares Outstanding: | ||||||||||||||||
Beginning of year | 2,739,992 | Beginning of year | 45,938 | ||||||||||||||
End of year | 2,619,105 | End of year | 15,801 | ||||||||||||||
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 |
Page 37
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
3.CAPITAL SHARE TRANSACTIONS (cont.)
BAIRD MIDCAP FUND
Year Ended | Year Ended | ||||||||||||||||
December 31, 2010 | December 31, 2010 | ||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||
Shares sold | 455,890 | $ | 3,935,728 | Shares sold | 24,937 | $ | 209,968 | ||||||||||
Shares redeemed | (358,437 | ) | (3,077,251 | ) | Shares redeemed | (115,309 | ) | (923,809 | ) | ||||||||
Net increase | 97,453 | $ | 858,477 | Net decrease | (90,372 | ) | $ | (713,841 | ) | ||||||||
Shares Outstanding: | Shares Outstanding: | ||||||||||||||||
Beginning of year | 3,230,828 | Beginning of year | 204,989 | ||||||||||||||
End of year | 3,328,281 | End of year | 114,617 | ||||||||||||||
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 distributions | 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 |
Page 38
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION
During the year ended December 31, 2010, purchases and sales of investment securities (excluding short-term investments) were as follows:
Baird | Baird | |
LargeCap Fund | MidCap Fund | |
Purchases: | $10,644,616 | $17,675,246 |
Sales: | $12,329,840 | $17,694,038 |
The Baird LargeCap Fund and Baird MidCap Fund did not purchase or sell U.S. Government securities during the year ended December 31, 2010.
At December 31, 2010, accumulated earnings/losses on a tax basis were as follows:
Baird | Baird | |||||||
LargeCap | MidCap | |||||||
Fund | Fund | |||||||
Cost of Investments | $ | 20,903,718 | $ | 34,091,664 | ||||
Gross unrealized appreciation | $ | 6,510,519 | $ | 9,585,473 | ||||
Gross unrealized depreciation | (164,299 | ) | (252,576 | ) | ||||
Net unrealized appreciation | $ | 6,346,220 | $ | 9,332,897 | ||||
Undistributed ordinary income | $ | 27 | $ | — | ||||
Undistributed long-term capital gain | — | — | ||||||
Total distributable earnings | $ | 27 | $ | — | ||||
Other accumulated losses | $ | (4,963,446 | ) | $ | (1,264,942 | ) | ||
Total accumulated earnings | $ | 1,382,801 | $ | 8,067,955 |
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, 2010, the following table shows the reclassification made:
Undistributed | Accumulated | ||
Net Investment | Net Realized | ||
Income/(Loss) | Gain/(Loss) | Paid In Capital | |
Baird LargeCap Fund | $ 14 | $(14) | $ — |
Baird MidCap Fund | 42,619 | — | (42,619) |
Page 39
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION (cont.)
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, 2010, the Baird LargeCap Fund and Baird MidCap Fund did not defer any capital losses occurring between November 1, 2010 and December 31, 2010.
At December 31, 2010, 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 | $1,016,997 | 2012 | ||||
$ 929,167 | 2016 | |||||
$3,017,282 | 2017 | |||||
Baird MidCap Fund | $1,264,942 | 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, 2010, the Baird LargeCap Fund and the Baird MidCap Fund utilized capital loss carryovers of $365,884 and $2,698,070, respectively.
RIC Modernization Act
On December 22, 2010, The Regulated Investment Company Modernization Act of 2010 (the “RIC Act”) was enacted. The RIC Act modernizes several of the federal income and excise tax provisions related to regulated investment companies (“RICs”). Under the RIC Act, new capital losses may be carried forward indefinitely, with the character of the original loss retained. The RIC Act also contains simplification provisions, which are aimed at preventing disqualification of a RIC for inadvertent failures to comply with asset diversification and/or qualifying income tests. The RIC Act exempts RICs from the preferential dividend rule and repealed the 60-day designation requirement for certain types of pay-through income and gains. In addition, the RIC Act contains provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31. Except for the simplification provisions related to RIC qualification, the RIC Act is effective for taxable years beginning after December 22, 2010. Management is currently evaluating the implications of the RIC Act and the impact on the Funds’ financial statements, if any, is currently being assessed.
During the year ended December 31, 2010, the Funds paid the following dividends:
Ordinary Income Dividends | ||
Baird LargeCap Fund | $ 19,202 | |
Baird MidCap Fund | — |
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 |
Page 40
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
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, 2010 and through April 30, 2012, 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% |
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, | |||||
2010 | 2009 | 2008 | |||
Reimbursed / Absorbed Expenses Subject | |||||
to Recovery by Advisor Until: | 2013 | 2012 | 2011 | ||
Baird LargeCap Fund | $136,939 | $118,040 | $ 99,829 | ||
Baird MidCap Fund | $133,302 | $110,382 | $101,968 |
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, 2010.
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 U.S Bank N.A., the Funds’ custodian and an affiliate of the Funds’ 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.
Page 41
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
6.SECURITIES LENDING (cont.)
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, 2010, 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.
As of December 31, 2010, 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 | $3,620,659 | $3,752,974 | |
Baird MidCap Fund | $8,583,387 | $8,896,600 |
The Funds receive cash as collateral in return for securities lent as part of a securities lending program. The collateral is invested in the Mount Vernon Securities Lending Prime Portfolio (a securities lending trust subject to Rule 2a-7 under the 1940 Act), other than a legacy interest in Atlantic East Funding LLC. The schedules of investments for the Funds include the particular cash collateral holdings as of December 31, 2010.
The Funds’ interest in Atlantic East Funding LLC is 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, 2010, the fair value of the Funds’ interest in Atlantic East Funding LLC, plus the amounts payable under the support agreement, amounted to 100% of the outstanding par value of the Funds’ interest in Atlantic East Funding LLC.
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. Interest income earned on collateral investments and recognized by the Funds during the year ended December 31, 2010 for the Baird LargeCap Fund and Baird MidCap Fund was $4,157 and $13,540, respectively.
Page 42
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2010 |
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 2010). For the year ended December 31, 2010, the Baird LargeCap Fund incurred $8 in interest charges on an average daily loan balance of $353. The 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 $613 and $3,396, respectively, in fees pursuant to the Plan during the year ended December 31, 2010.
9.SUBSEQUENT EVENT
In preparing these financial statements, the Corporation has evaluated subsequent events after December 31, 2010. There were no subsequent events since December 31, 2010 that would require adjustment to or additional disclosure in these financial statements.
Page 43
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 seven funds constituting Baird Funds, Inc.) (collectively, the “Funds”), including the schedules of investments, as of December 31, 2010, 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, 2010, 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, 2010, 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 25, 2011
Page 44
Baird Funds, Inc.
Directors & Officers as of December 31, 2010 |
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 | 7 | Director of Regal-Beloit | ||
c/o Robert W. Baird | Director and | Since September | 2005); Chairman and CEO, the Advisor (January 1998- | Corporation, a | |||
& Co. Incorporated | Chairman | 2000 | January 2000); President, Chairman and CEO, the | manufacturing | |||
777 East Wisconsin Avenue | Advisor (June 1983-January 1998); President, the Advisor | company | |||||
Milwaukee, WI 53202 | (January 1979-January 1983) | ||||||
Age: 71 | |||||||
John W. Feldt | Independent | Indefinite; | Retired; Senior Vice President-Finance, University of | 7 | 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: 68 | Funds, a mutual fund | ||||||
complex (1 portfolio) | |||||||
Frederick P. Stratton, Jr. | Independent | Indefinite; | Retired; Chairman Emeritus, Briggs & Stratton | 7 | 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: 71 | 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 | 7 | Management Trustee of | ||
c/o Robert W. Baird | Director | Since January | Pension Trust Fund, since July 1989; Investment Officer, | AFL-CIO Housing | |||
& Co. Incorporated | 2008 | Northwestern Mutual Financial Network (1988-1989); | Investment Trust, a | ||||
777 East Wisconsin Avenue | Assistant Vice-President, Firstar Trust Company | mutual fund complex | |||||
Milwaukee, WI 53202 | (1978-1987); Financial Analyst, Harco Holdings, Inc. | (1 portfolio) | |||||
Age: 57 | (1976-1978) | ||||||
Cory L. Nettles* | Interested | Indefinite; | Managing Director, Generation Growth Capital, Inc., | 7 | 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: 40 | 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 45
Baird Funds, Inc.
Directors & Officers as of December 31, 2010 |
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: 54 | 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: 57 | 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: 48 | Officer | August 2004 | |||
Heidi Schneider | Vice President | Re-elected by | Senior Vice President, the Advisor since September 2007; Controller, the Advisor (April 1997- | ||
777 East Wisconsin Avenue | Board annually; | September 2007) | |||
Milwaukee, WI 53202 | Since | ||||
Age: 39 | August 2010 | ||||
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: 64 | 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: 47 | 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: 41 | August 2007 | ||||
John McVoy | AML | Re-elected by | AML Compliance Officer and Privacy Officer, the Advisor since June 2010; AML Compliance | ||
777 East Wisconsin Avenue | Compliance | Board annually; | Officer - Trust & Securities, U.S. Bancorp (August 2008-May 2010); Law Clerk, First American | ||
Milwaukee, WI 53202 | Officer | Since | Fund Advisors (May 2007-September 2007) | ||
Age: 26 | August 2010 | ||||
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: 41 | August 2006 | ||||
Page 46
Baird Funds, Inc.
DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD EQUITY FUNDS
The Board of Directors (the “Board”) of Baird Funds, Inc. (the “Corporation”) met on August 9, 2010 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 (the “Funds”), which are mutual fund series or portfolios of the Corporation. 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 requests from the Board, including the directors who are not “interested persons” of the Company 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 and financial statements), a profitability analysis, comparative information about the Funds’ performance for periods ended June 30, 2010, management fees and expense ratios, and other pertinent information. The Board also discussed relevant case law, including the Supreme Court’s recent 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. 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.
Page 47
Baird Funds, Inc.
DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD EQUITY FUNDS (cont.)
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 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, 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 respective investment advisory agreement.
Investment Performance of the Advisor and the Funds
In considering the investment performance of each of the Equity Funds, the Board reviewed information as of June 30, 2010 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 and its benchmark for the since inception period, but lagged the Lipper peer group average and index for the one-year, three-year and five-year periods. The Board also considered the effect of the challenging market environment and Advisor’s quarterly commentary and discussion of the reasons for the LargeCap Fund’s underperformance during such 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, five-year and since inception 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 continued management by the Advisor.
Costs of Services Provided and Profits Realized by the Advisor
The Board examined the fee and expense information for each of the 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 comparable to the average and median for 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 48
Baird Funds, Inc.
DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD EQUITY 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 Advisor’s 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 investment decision-making process. The Board believed that the Funds generally benefit from its 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 its 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 49
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, 2010, 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% |
For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends received deduction for the fiscal year ended December 31, 2010 was as follows:
Baird LargeCap 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, 2010.
Page 50
(This Page Intentionally Left Blank.)
BAIRD FUNDS, INC.
PRIVACY POLICY
Protecting the privacy of Fund shareholders is important to us. The following is a description of the practices and policies through which Baird Funds, Inc. protects the privacy and security of your non-public personal information.
What Information We Collect
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.
What Information We Disclose
We do not sell any non-public personal information about our current or former shareholders to third parties. We do not disclose any non-public personal information about our current or former shareholders to anyone, except as permitted or required by law. We are permitted by law to share any of the information we collect, as described above, with our affiliates. In addition, we may share such information with nonaffiliated third parties to the extent necessary to effect, process, administer or enforce a transaction that the shareholder requests or authorizes, in connection with maintaining or servicing the shareholder’s 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.
How We Protect Your Information
We restrict access to your non-public 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 protect the confidentiality, integrity and security of your non-public personal information.
We will continue to adhere to the privacy policies and practices in this notice even after your account is closed or becomes inactive.
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 non-public 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
Cory L. Nettles
Marlyn J. Spear
Frederick P. Stratton, Jr.
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
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 12/31/2010 | FYE 12/31/2009 | |
Audit Fees | $92,500 | $104,660 |
Audit-Related Fees | - | - |
Tax Fees | $23,100 | $26,400 |
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 2010. 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 2010 and 2009 consisted of a review of state and federal tax returns, tax and general consulting services and tax services for RWB associates working overseas. GT charged the following amounts for such non-audit services to RWB: $503,487 for 2010 and $341,564 for 2009. None of the non-audit services provided by GT to RWB 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, and advice and consulting services for RWB affiliates. The Audit Committee has concluded that the provision of these audit and non-audit services to RWB and RWB affiliates is compatible with GT’s independence.
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: March 9, 2011
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, PresidentDate: March 9, 2011
By: /s/Leonard M. Rush
Leonard M. Rush, Treasurer
Date: March 9, 2011