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, 2011
Date of reporting period: December 31, 2011
Item 1. Reports to Stockholders.
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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 |
2011 Bond Market Overview | 2 |
Baird Short-Term Bond Fund | 6 |
Baird Intermediate Bond Fund | 27 |
Baird Intermediate Municipal Bond Fund | 49 |
Baird Aggregate Bond Fund | 73 |
Baird Core Plus Bond Fund | 97 |
Additional Information on Fund Expenses | 125 |
Statements of Assets and Liabilities | 127 |
Statements of Operations | 128 |
Statements of Changes in Net Assets | 129 |
Financial Highlights | 134 |
Notes to the Financial Statements | 143 |
Report of Independent Registered Public Accounting Firm | 157 |
Directors and Officers | 158 |
Disclosure Regarding the Board of Directors’ Approval | |
of the Investment Advisory Agreement for Baird Bond Funds | 160 |
Additional Information | 163 |
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.
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Baird Funds
1-866-442-2473
www.bairdfunds.com
February 28, 2012
Dear Shareholder,
Overall, 2011 was another strong year for bond investors. We are pleased with the absolute and relative performance of the Baird Bond Funds in 2011. Our disciplined, duration neutral strategy we employ against benchmarks coupled with our opportunistic ability to add value through yield curve positioning, sector allocation, and individual security selection were critical elements to our success in 2011.
We thank you for your continued investment in Baird Funds. Steady inflows into the Baird Funds family have increased total net assets to $5.5 billion at the end of 2011, an increase of more than 15% over the prior year-end. We’ve built our reputation on employing a risk controlled process in our approach to investment decision making and portfolio management. Our long-term success is a testament to this.
On the following pages, we review the bond market in 2011 and the performance and composition of each of the Baird Bond Funds.
We appreciate the confidence and trust that you have placed in our experienced investment team to help you achieve your financial goals and we welcome the opportunity to continue to serve you.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000898531-12-000157/mestanek-signature.jpg)
Mary Ellen Stanek, CFA
President
Baird Funds
Page 1
2011 Bond Market Overview
Treasury Yields Fall, Curve Flattens in 2011
Continued concerns about the European debt crisis, disappointing economic growth (e.g. U.S. GDP < 2%) and the Fed’s Operation Twist caused Treasury yields to fall sharply in 2011. Most of the declines came in the third quarter, but yields continued to drift lower in the fourth quarter as well. The decline in yields in 2011 came as a surprise to many investors as consensus expectations had been for stronger U.S. economic growth (3-4%) and rising rates. For the year, long-term yields plunged nearly 1½% and the yield curve flattened significantly as the spread between 2- and 30-year Treasury yields declined to 265 bps at year-end from 374 bps on December 31, 2010 (see chart and table below).
Treasury Yields (Source: Bloomberg) | ||||||
![]() | Dec 31, | Sep 30, | Dec 31, | Q4 | 2011 | |
Maturity | 2010 | 2011 | 2011 | Change | Change | |
1 | 0.26% | 0.10% | 0.10% | 0.00 | -0.16 | |
2 | 0.59% | 0.24% | 0.24% | 0.00 | -0.35 | |
3 | 0.99% | 0.40% | 0.35% | -0.05 | -0.64 | |
5 | 2.01% | 0.95% | 0.83% | -0.12 | -1.18 | |
7 | 2.70% | 1.43% | 1.34% | -0.09 | -1.36 | |
10 | 3.29% | 1.92% | 1.88% | -0.04 | -1.41 | |
30 | 4.33% | 2.91% | 2.89% | -0.02 | -1.44 | |
Taxable Yield Spreads Widen
In addition to taking the wind out of the sails of the equity markets in 2011, the escalating turmoil in Europe and slower than expected economic growth also caused yield spreads in the bond market to widen dramatically in the third quarter (see table following page, left). In particular, spreads on high yield bonds, investment grade corporate bonds and commercial mortgage-backed securities (CMBS) widened sharply as heightened concerns of a double-dip recession reignited investors’ sensitivity to risk (aka risk-off). While spreads on most sectors did narrow during the fourth quarter as investors saw value and returned to the market, spreads in the finance sector continued to edge slightly wider on concerns that large, global financial institutions will not be completely immune from the debt crisis in Europe.
Risk-On in Municipals
Municipal investors embraced risk in 2011 despite continued challenging credit dynamics in that market. As a result, lower quality issues outperformed higher rated issues by significant margins (BBBs and As returned +11.84% and +12.53% respectively vs. AAAs at +8.75%, see table following page, right). Lower quality returns have varied greatly in recent years and have reflected investors’ appetite for risk. While state and local municipal revenues have increased in each of the last eight quarters, they are still well below peak levels prior to 2008 and budgetary stress is still prevalent at all levels of municipal government as evidenced by pervasive downgrades (Moody’s downgrades outnumbered upgrades 5 to 1 in Q3). The dearth of new issue supply (32% below 2010) was the key driver of strong municipal performance in 2011 and supply/demand technicals appear to have prevailed over credit fundamentals.
Page 2
2011 Bond Market Overview
Option-Adjusted Spreads (in bps) | ||||
12/31/2010 | 6/30/2011 | 9/30/2011 | 12/31/2011 | |
U.S. Aggregate Index | 56 | 54 | 90 | 87 |
U.S. Agency (non-mortgage) Sector | 20 | 21 | 31 | 33 |
Mortgage and ABS Sectors | ||||
US Agency Pass-Throughs | 42 | 37 | 80 | 75 |
Asset-Backed Securities | 82 | 81 | 77 | 99 |
CMBS | 254 | 219 | 351 | 308 |
Credit Sectors | ||||
U.S. Investment Grade | 156 | 153 | 238 | 234 |
Industrial | 134 | 135 | 190 | 184 |
Utility | 147 | 143 | 192 | 186 |
Financial Institutions | 191 | 187 | 332 | 337 |
U.S. High Yield | 526 | 525 | 807 | 699 |
Source: Barclays Capital
Municipal Returns by Quality (%) | ||||||
Muni Index | AAA | AA | A | BBB | ||
2011 | 10.70 | 8.75 | 10.28 | 12.53 | 11.84 | |
2010 | 2.38 | 2.03 | 2.05 | 2.23 | 3.75 | |
2009 | 12.91 | 9.06 | 11.72 | 15.87 | 26.09 | |
2008 | -2.47 | 1.61 | -0.76 | -5.97 | -21.33 | |
2007 | 3.36 | 3.84 | 3.52 | 2.67 | -2.73 | |
5-year | ||||||
annualized | 5.22% | 5.01% | 5.25% | 5.17% | 2.28% |
Source: Barclays Capital
Strong Fourth Quarter Caps off Exceptional Year
Strong returns in the fourth quarter capped off an exceptional year overall for the bond market (see table below). With the decline in yields, Treasuries produced a 9.81% return which provided a solid base for very strong market returns in 2011, but the widening of yield spreads resulted in varied returns across other sectors. Benefitting from weak supply, municipals bounced back after a weak 2010 and returned an amazing 10.70% in 2011. Investment grade corporates had a great December (+2.14%) and, despite the widening of yield spreads in the second half, still managed to deliver an attractive 8.15% return for the year. High yield bonds had an impressive bounce in tandem with equities in the fourth quarter (+6.46%) that brought the sector back into positive territory, but still finished in the cellar for the year (+4.98%). After an eye-popping 2010, CMBS also had a strong fourth quarter (+3.11%) and finished this year with a respectable 6.02% return, as did Agency MBS (+6.23%) and ABS (+5.14%). In spite of considerable concern in the market that the odds of a double dip recession were growing, possibly the biggest surprise of 2011 was increasing demand for inflation protection that propelled Treasury Inflation-Protected Securities (TIPS) to a staggering 13.56% return. Bond investors again had to endure pesky (historically high) volatility in 2011, but patience was rewarded in the end with very strong returns overall.
Total Returns of Selected Barclays Capital (BC) Sectors and Indices
Sector/Index | 4th Quarter | 2011 | 2010 | |
U.S. Treasury Sector | 0.89% | 9.81% | 5.87% | |
Gov’t Agency Sector | 0.48% | 4.86% | 4.56% | |
Corporate Sector | 1.93% | 8.15% | 9.00% | |
MBS Sector | 0.88% | 6.23% | 5.37% | |
CMBS Sector | 3.11% | 6.02% | 20.40% | |
ABS Sector | 0.23% | 5.14% | 5.85% | |
Municipal Sector | 2.12% | 10.70% | 2.38% | |
TIPS | 2.69% | 13.56% | 6.31% | |
High Yield Sector | 6.46% | 4.98% | 15.12% | |
BC Aggregate Index | 1.12% | 7.84% | 6.54% | |
BC Gov’t/Credit Index | 1.18% | 8.74% | 6.59% | |
BC Int. Gov’t/Credit Index | 0.84% | 5.80% | 5.89% | |
BC 1-3 yr. Gov’t/Credit Index | 0.25% | 1.59% | 2.80% |
Page 3
2011 Bond Market Overview
Gold and the Dollar
Gold has been on the rise for the past several years (see chart below left) and its ascent has largely been viewed as (1) a proxy for investors’ inflation expectations and/or (2) a measure of investors’ concern about the overall health and stability of the global financial system and currencies. While the price of gold did rise 10% in 2011 ($1,564 at year end vs. $1,421 at the end of 2010), it is worth noting that it ended the year 21.5% off its peak of $1,900 (on 9/5/11). The sharp decline in gold late in the year could be an indication that investors’ inflation concerns are easing and/or that concerns about another imminent global financial meltdown are cooling. In contrast to gold, the U.S. Dollar has been on a volatile, yet generally downward trend over the past several years. The U.S. Dollar Index, which indicates the general international value of the Dollar by averaging exchange rates between the Dollar and other major world currencies, appears in the chart, below right. This descent has reflected (1) the impact of the Fed’s zero-rate policy on exchange rates with other countries with higher target rates and (2) concern that global investors will shy away from U.S. assets because of fears that current U.S. fiscal and monetary policies will ultimately lead to a substantial devaluation of the Dollar. While the Dollar essentially finished 2011 right where it started the year, it managed to stay above the lows of 2007 and jumped 9.9% from its 2011 low in late April. The Dollar’s rise in the second half of 2011 is encouraging and could be an indication that, despite a zero-rate policy in place through 2012, investors’ appetite for Dollar-denominated assets may be rebounding as risks in other parts of the world grow.
![]() | ![]() |
Outlook
Interest rates –The sharp decline in long-term Treasury yields in 2011 was surprising and we believe that the Fed has been successful in driving (and holding) Treasury yields artificially low. We believe that wider yields spreads are as much the market’s acknowledgement that Treasury yields are artificially low as they are a reflection of genuine concern about relative risks in non-Treasury sectors. We would not be surprised if Treasury yields rebounded somewhat in 2012, but with wages and employment still soft, we do not believe inflation will be a major concern in the near future and, accordingly, are not looking for market yields overall to rise significantly over the next 12 months.
Sectors – We see limited relative return potential for Treasuries and Agencies in 2012 and, with the widening of yield spreads in 2011, believe spread sectors offer better value. Investment grade corporates look particularly attractive given strong underlying credit fundamentals, but we caution that sluggish economic growth could present challenges for many issues in
Page 4
2011 Bond Market Overview
the high-yield sector. We believe CMBS structures with superior credit enhancement will perform well, and, although residential mortgages should benefit from a strong commitment from the Fed to keep mortgage rates low, a wide range of potential developments on the government policy front poses significant uncertainty to that sector. With an expected 20% increase in new issue supply in 2012, municipal returns will likely be softer in 2012, but continued demand should be able to absorb additional supply and keep yields from rising sharply. We again caution investors against going too far out the yield curve or too far down in quality given the high level of global uncertainty and broad spectrum of potential outcomes.
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 converted that advantage into strong absolute and relative returns in 2011. Our long-term commitment to duration neutrality was critically important as well. The primary factors for the Fund’s outperformance over its benchmark were:
• | The Fund’s overweight position to the corporate credit sector was a positive for relative performance. |
• | Corporate bond spreads (the additional yield that investors demand above Treasury bonds for owning the presumed higher risk corporate debt) widened during the year. This is typically a negative for the corporate bondholder as the higher (wider) yield indicates a decline in value (price) for the bond. The Fund’s overweight to shorter credit, particularly BBB-rated industrial and utility issuers, mitigated the impact of widening spreads. |
• | Modest exposure to commercial mortgage-backed securities (CMBS) was a positive for the year. As part of our risk management for the exposure to this sector, we hold shorter maturity issues with significant credit enhancement. |
Again, the Fund maintained its duration-neutral positioning relative to its benchmark index and held a very broadly diversified portfolio at year end.
We are pleased with the Fund’s performance in 2011 and are confident in the individual issues and the overall structure of the Fund. The Fund’s significant yield advantage over the benchmark is meaningful and we are optimistic regarding the Fund’s relative performance as we head into 2012.
Portfolio Characteristics
Quality Distribution* | Sector Weightings* |
![]() | ![]() |
Net Assets: | $1,017,230,087 | Annualized Expense Ratio: | |||
SEC 30-Day Yield:** | Institutional Class: | 0.30 | % | ||
Institutional Class: | 2.41% | Portfolio Turnover Rate: | 61.1 | % | |
Average Effective Duration: | 1.88 years | Total Number of Holdings: | 324 | ||
Average Effective Maturity: | 2.20 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, 2011. |
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
Total Returns
Average Annual | |||
Since | |||
For the Periods Ended December 31, 2011 | One Year | Five Years | Inception(1) |
Institutional Class | 2.08% | 3.73% | 3.43% |
Barclays Capital 1-3 Year U.S. Government/Credit Bond Index(2) | 1.59% | 3.99% | 3.54% |
(1) | For the period from August 31, 2004 (commencement of operations) to December 31, 2011. |
(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, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% | |||||||
Asset Backed Securities – 0.7% | |||||||
$ | 26,807 | Bombardier Capital | |||||
Mortgage Securitization, | |||||||
Series 1998-A, Class A3, | |||||||
6.23%, 04/15/2028 | $ | 26,433 | |||||
1,473,902 | Citigroup Mortgage | ||||||
Loan Trust Inc., | |||||||
Series 2006-WFH3, | |||||||
Class A3, 0.444%, | |||||||
10/25/2036 | 1,334,701 | ||||||
Countrywide Asset- | |||||||
Backed Certificates: | |||||||
876,919 | Series 2006-13, | ||||||
Class 1AF2, | |||||||
5.884%, 01/25/2037 § | 822,238 | ||||||
2,370,498 | Series 2006-13, | ||||||
Class 1AF3, | |||||||
5.944%, 01/25/2037 § | 1,423,669 | ||||||
1,500,000 | Series 2006-9, | ||||||
Class 1AF3, 5.859%, | |||||||
10/25/2046 | 768,188 | ||||||
382,792 | Credit Based Asset | ||||||
Servicing and | |||||||
Securitization LLC, | |||||||
Series 2005-CB8, | |||||||
Class AF2, 5.303%, | |||||||
12/25/2035 | 345,960 | ||||||
Green Tree Financial | |||||||
Corporation: | |||||||
54,409 | Series 1996-3, Class A5, | ||||||
7.35%, 05/15/2027 | 56,811 | ||||||
37,331 | Series 1998-2, Class A5, | ||||||
6.24%, 12/01/2028 | 39,098 | ||||||
932,907 | Series 1997-5, Class A6, | ||||||
6.82%, 05/15/2029 | 979,107 | ||||||
443,627 | Series 1998-3, Class A5, | ||||||
6.22%, 03/01/2030 | 480,948 | ||||||
2,000,000 | Renaissance Home | ||||||
Equity Loan Trust, | |||||||
Series 2007-2, | |||||||
Class AF2, 5.675%, | |||||||
06/25/2037 | 822,020 | ||||||
138,347 | Residential Asset | ||||||
Mortgage Products, Inc., | |||||||
Series 2003-RS7, | |||||||
Class AI6, 5.34%, | |||||||
08/25/2033 | 135,970 | ||||||
7,235,143 | |||||||
Commercial Mortgage Backed Securities – 5.8% | |||||||
10,000,000 | Bear Stearns Commercial | ||||||
Mortgage Securities, | |||||||
Series 2005-PWR9, | |||||||
Class A4A, 4.871%, | |||||||
09/11/2042 | 10,845,840 | ||||||
5,808,250 | Credit Suisse First | ||||||
Boston Mortgage | |||||||
Securities Corporation, | |||||||
Series 2005-C5, Class A4, | |||||||
5.10%, 08/15/2038 @ | 6,358,367 | ||||||
GE Capital Commercial | |||||||
Mortgage Corporation: | |||||||
276,201 | Series 2004-C3, Class A3, | ||||||
4.865%, 07/10/2039 | 276,766 | ||||||
7,180,000 | Series 2004-C3, Class A4, | ||||||
5.189%, 07/10/2039 | 7,681,200 | ||||||
21,148 | Government National | ||||||
Mortgage Association | |||||||
(GNMA), | |||||||
Series 2006-15, Class A, | |||||||
3.727%, 03/16/2027 | 21,126 |
The accompanying notes are an integral part of these financial statements.
Page 9
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Commercial Mortgage | |||||||
Backed Securities – 5.8% (cont.) | |||||||
J.P. Morgan Chase | |||||||
Commercial Mortgage | |||||||
Securities Corp.: | |||||||
$ | 8,774,000 | Series 2005-CB12, | |||||
Class A4, 4.895%, | |||||||
09/12/2037 | $ | 9,570,855 | |||||
11,494,564 | Series 2003-CB7, | ||||||
Class A4, 4.879%, | |||||||
01/12/2038 | 12,055,556 | ||||||
3,372,469 | RBSCF Trust, | ||||||
Series 2010-MB1, | |||||||
2.367%, 04/15/2024 | |||||||
(Acquired 04/09/2010; | |||||||
Cost $3,372,399)* | 3,435,069 | ||||||
8,592,492 | Wachovia Bank | ||||||
Commercial Mortgage | |||||||
Trust, Series 2003-C3, | |||||||
Class A2, 4.867%, | |||||||
02/15/2035 | 8,804,056 | ||||||
59,048,835 | |||||||
Financial – 34.8% | |||||||
1,000,000 | Abbey National | ||||||
Treasury Services PLC, | |||||||
3.875%, 11/10/2014 | |||||||
(Acquired 12/29/2011; | |||||||
Cost $938,680)* f | 938,507 | ||||||
5,650,000 | ABN AMRO Bank N.V., | ||||||
3.00%, 01/31/2014 | |||||||
(Acquired 01/27/2011 | |||||||
through 04/28/2011; | |||||||
Aggregate Cost | |||||||
$5,654,693)* f @ | 5,609,303 | ||||||
6,172,000 | Aegon NV, | ||||||
4.75%, 06/01/2013 f | 6,315,320 | ||||||
Allstate Corporation: | |||||||
3,920,000 | 7.50%, 06/15/2013 | 4,225,329 | |||||
1,080,000 | 5.00%, 08/15/2014 | 1,165,476 | |||||
4,095,000 | American Express Credit | ||||||
Corporation, Series C, | |||||||
7.30%, 08/20/2013 | 4,444,136 | ||||||
1,100,000 | Amsouth Bank NA, | ||||||
4.85%, 04/01/2013 | 1,064,250 | ||||||
7,678,000 | ANZ National | ||||||
International, | |||||||
6.20%, 07/19/2013 | |||||||
(Acquired 05/25/2010 | |||||||
through 06/09/2011; | |||||||
Aggregate Cost | |||||||
$8,127,421)* f | 8,146,842 | ||||||
3,600,000 | AON Corporation, | ||||||
7.375%, 12/14/2012 @ | 3,795,210 | ||||||
5,165,000 | ASIF Global | ||||||
Financing XIX, | |||||||
4.90%, 01/17/2013 | |||||||
(Acquired 05/26/2011 | |||||||
through 09/28/2011; | |||||||
Aggregate Cost | |||||||
$5,323,061)* | 5,208,138 | ||||||
3,500,000 | Bank of Ireland, | ||||||
2.75%, 03/02/2012 | |||||||
(Acquired 06/01/2010; | |||||||
Cost $3,493,284)* f | 3,469,588 | ||||||
2,277,000 | BankAmerica Institutional, | ||||||
8.07%, 12/31/2026 | |||||||
(Acquired 07/22/2010; | |||||||
Cost $2,254,230)* | 2,049,300 | ||||||
Barclays Bank PLC Senior | |||||||
Unsecured Notes: f | |||||||
2,600,000 | 2.50%, 01/23/2013 | 2,588,911 | |||||
2,605,000 | 5.20%, 07/10/2014 | 2,685,286 |
The accompanying notes are an integral part of these financial statements.
Page 10
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Financial – 34.8% (cont.) | |||||||
$ | 2,000,000 | BB&T Corporation, | |||||
2.05%, 04/28/2014 @ | $ | 2,019,572 | |||||
1,354,000 | Capital One Bank | ||||||
USA NA, | |||||||
6.50%, 06/13/2013 | 1,428,198 | ||||||
4,900,000 | Capital One Financial | ||||||
Corporation, | |||||||
7.375%, 05/23/2014 | 5,383,689 | ||||||
2,790,000 | CDP Financial Inc., | ||||||
3.00%, 11/25/2014 | |||||||
(Acquired 11/20/2009 | |||||||
through 06/25/2010; | |||||||
Aggregate Cost | |||||||
$2,790,739)* f | 2,901,366 | ||||||
5,500,000 | Cie de | ||||||
Financement Foncier, | |||||||
2.25%, 03/07/2014 | |||||||
(Acquired 03/01/2011 | |||||||
through 12/14/2011; | |||||||
Aggregate Cost | |||||||
$5,491,706)* f | 5,406,461 | ||||||
CIT Group, Inc.: | |||||||
50 | 7.00%, 05/01/2015 | 50 | |||||
287,000 | 7.00%, 05/04/2015 | ||||||
(Acquired 04/29/2008 | |||||||
through 06/09/2008; | |||||||
Aggregate Cost | |||||||
$287,000)* @ | 287,359 | ||||||
417 | 7.00%, 05/01/2016 | 417 | |||||
478,000 | 7.00%, 05/02/2016 | ||||||
(Acquired 04/29/2008 | |||||||
through 06/09/2008; | |||||||
Aggregate Cost | |||||||
$478,000)* @ | 477,402 | ||||||
783 | 7.00%, 05/01/2017 | 783 | |||||
669,000 | 7.00%, 05/02/2017 | ||||||
(Acquired 04/29/2008 | |||||||
through 06/09/2008; | |||||||
Aggregate Cost | |||||||
$667,058)* @ | 668,164 | ||||||
Citigroup, Inc.: | |||||||
2,900,000 | 6.50%, 08/19/2013 @ | 3,018,793 | |||||
7,000,000 | 6.01%, 01/15/2015 | 7,312,935 | |||||
CNA Financial | |||||||
Corporation: | |||||||
2,125,000 | 5.85%, 12/15/2014 | 2,239,142 | |||||
525,000 | 6.50%, 08/15/2016 | 567,869 | |||||
4,100,000 | Comerica Bank, | ||||||
5.70%, 06/01/2014 | 4,419,574 | ||||||
4,000,000 | Commonwealth | ||||||
Bank of Australia, | |||||||
3.50%, 03/19/2015 | |||||||
(Acquired 08/30/2010; | |||||||
Cost $4,121,658)* f | 4,084,240 | ||||||
Countrywide Financial | |||||||
Corporation: | |||||||
990,000 | 5.80%, 06/07/2012 @ | 992,083 | |||||
800,000 | 6.25%, 05/15/2016 @ | 753,707 | |||||
5,871,000 | Credit Suisse New York, | ||||||
5.00%, 05/15/2013 f | 6,022,513 | ||||||
4,050,000 | The Dai-ichi Mutual | ||||||
Life Insurance Company, | |||||||
5.73%, 03/17/2014 | |||||||
(Acquired 03/02/2011; | |||||||
Cost $4,252,260)* f | 4,247,361 | ||||||
5,000,000 | Deutsche Bank | ||||||
Aktiengesellschaft, | |||||||
4.875%, 05/20/2013 f | 5,111,020 | ||||||
640,000 | Dresdner Bank-New York | ||||||
Subordinated Debentures, | |||||||
7.25%, 09/15/2015 f @ | 536,778 |
The accompanying notes are an integral part of these financial statements.
Page 11
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Financial – 34.8% (cont.) | |||||||
Fifth Third Bancorp: | |||||||
$ | 3,752,000 | 6.25%, 05/01/2013 | $ | 3,944,117 | |||
4,955,000 | 0.479%, 05/17/2013 | 4,862,332 | |||||
550,000 | 3.625%, 01/25/2016 @ | 558,026 | |||||
1,000,000 | First Empire | ||||||
Capital Trust I, | |||||||
8.234%, 02/01/2027 | 1,003,613 | ||||||
1,500,000 | First Hawaiian Capital | ||||||
Trust I, Series B, | |||||||
8.343%, 07/01/2027 | 1,357,500 | ||||||
7,915,000 | FMR LLC, | ||||||
4.75%, 03/01/2013 | |||||||
(Acquired 10/04/2010 | |||||||
through 04/06/2011; | |||||||
Aggregate Cost | |||||||
$8,175,105)* | 8,115,827 | ||||||
General Electric | |||||||
Capital Corporation: | |||||||
5,000,000 | 2.10%, 01/07/2014 | 5,074,850 | |||||
2,000,000 | 5.90%, 05/13/2014 | 2,190,304 | |||||
800,000 | 4.75%, 09/15/2014 @ | 862,677 | |||||
5,000,000 | 4.875%, 03/04/2015 | 5,424,720 | |||||
4,980,000 | Genworth Life | ||||||
Institutional Funding | |||||||
Trust, 5.875%, | |||||||
05/03/2013 (Acquired | |||||||
04/07/2010 through | |||||||
03/22/2011; Aggregate | |||||||
Cost $5,153,388)* | 5,061,259 | ||||||
787,000 | GMAC Inc., | ||||||
7.50%, 12/31/2013 | 808,642 | ||||||
225,000 | The Goldman | ||||||
Sachs Group Inc., | |||||||
3.70%, 08/01/2015 @ | 220,433 | ||||||
5,200,000 | Goldman Sachs | ||||||
Group LP, 8.00%, | |||||||
03/01/2013 (Acquired | |||||||
04/16/2009 through | |||||||
10/12/2011; Aggregate | |||||||
Cost $5,440,182)* | 5,432,658 | ||||||
3,000,000 | Hartford Financial | ||||||
Services Group, Inc., | |||||||
5.50%, 10/15/2016 | 3,116,028 | ||||||
1,000,000 | Hartford Life | ||||||
Global Funding, | |||||||
0.609%, 01/17/2012 | 999,848 | ||||||
HSBC Finance | |||||||
Corporation: | |||||||
2,000,000 | 5.90%, 06/19/2012 | 2,029,836 | |||||
4,200,000 | 6.375%, 11/27/2012 | 4,319,868 | |||||
1,451,000 | 4.75%, 07/15/2013 | 1,481,678 | |||||
221,000 | 6.676%, 01/15/2021 | 228,602 | |||||
1,500,000 | HSBC USA Capital | ||||||
Trust II, 8.38%, | |||||||
05/15/2027 (Acquired | |||||||
11/06/2007; Cost | |||||||
$1,538,226)* @ | 1,486,730 | ||||||
ING Bank N.V.: f | |||||||
205,000 | 2.65%, 01/14/2013 | ||||||
(Acquired 04/12/2011; | |||||||
Cost $206,550)* | 204,394 | ||||||
5,000,000 | 2.00%, 10/18/2013 | ||||||
(Acquired 10/13/2010 | |||||||
through 10/28/2010; | |||||||
Aggregate Cost | |||||||
$4,993,282)* | 4,883,555 | ||||||
5,675,000 | Invesco Ltd., | ||||||
5.375%, 02/27/2013 f | 5,898,192 |
The accompanying notes are an integral part of these financial statements.
Page 12
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Financial – 34.8% (cont.) | |||||||
$ | 5,050,000 | Irish Life & Permanent | |||||
Group Holdings PLC, | |||||||
3.60%, 01/14/2013 | |||||||
(Acquired 01/07/2010 | |||||||
through 08/05/2010; | |||||||
Aggregate Cost | |||||||
$5,052,950)* f | $ | 4,416,609 | |||||
1,150,000 | Jefferies Group, Inc., | ||||||
7.75%, 03/15/2012 @ | 1,167,250 | ||||||
1,446,000 | Jefferson-Pilot Corp., | ||||||
4.75%, 01/30/2014 | 1,495,825 | ||||||
J.P. Morgan Chase & Co.: | |||||||
2,025,000 | 5.75%, 01/02/2013 | 2,100,613 | |||||
723,000 | 5.125%, 09/15/2014 | 762,260 | |||||
4,050,000 | 3.45%, 03/01/2016 | 4,114,610 | |||||
1,000,000 | Key Bank NA, | ||||||
5.80%, 07/01/2014 | 1,067,682 | ||||||
3,374,000 | KeyCorp, | ||||||
6.50%, 05/14/2013 | 3,569,675 | ||||||
5,000,000 | Kookmin Bank, | ||||||
7.25%, 05/14/2014 | |||||||
(Acquired 05/26/2009 | |||||||
through 12/15/2011; | |||||||
Aggregate Cost | |||||||
$5,340,643)* f | 5,522,705 | ||||||
Liberty Mutual | |||||||
Group Inc.: | |||||||
3,992,000 | 7.25%, 09/01/2012 | ||||||
(Acquired 03/31/2010 | |||||||
through 09/21/2011; | |||||||
Aggregate Cost | |||||||
$4,101,081)* | 4,114,826 | ||||||
3,188,000 | 5.75%, 03/15/2014 | ||||||
(Acquired 09/03/2009 | |||||||
through 10/05/2010; | |||||||
Aggregate Cost | |||||||
$3,040,393)*@ | 3,324,437 | ||||||
1,700,000 | Lincoln National | ||||||
Corporation, | |||||||
5.65%, 08/27/2012 | 1,734,250 | ||||||
1,110,000 | Lloyds TSB Bank PLC, | ||||||
4.375%, 01/12/2015 | |||||||
(Acquired 01/05/2010 | |||||||
through 10/31/2011; | |||||||
Aggregate Cost | |||||||
$1,110,247)* f | 1,068,548 | ||||||
M&I Marshall & | |||||||
Ilsley Bank: | |||||||
787,000 | 5.25%, 09/04/2012 | 808,643 | |||||
5,357,000 | 4.85%, 06/16/2015 | 5,654,587 | |||||
620,000 | Manufacturers & | ||||||
Traders Trust Co., | |||||||
1.751%, 04/01/2013 | 613,832 | ||||||
5,035,000 | Manulife Financial Corp., | ||||||
3.40%, 09/17/2015 f | 5,063,080 | ||||||
Marsh & McLennan | |||||||
Companies, Inc.: | |||||||
2,512,000 | 6.25%, 03/15/2012 | 2,535,567 | |||||
4,490,000 | 4.85%, 02/15/2013 | 4,632,643 | |||||
Massmutual Global | |||||||
Funding II: | |||||||
2,550,000 | 2.875%, 04/21/2014 | ||||||
(Acquired 10/24/2011; | |||||||
Cost $2,616,048)* | 2,613,253 | ||||||
3,000,000 | 2.30%, 09/28/2015 | ||||||
(Acquired 11/22/2011; | |||||||
Cost $2,996,460)* | 3,011,937 | ||||||
2,671,000 | MBNA Capital, Series A, | ||||||
8.278%, 12/01/2026 | 2,477,353 |
The accompanying notes are an integral part of these financial statements.
Page 13
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Financial – 34.8% (cont.) | |||||||
$ | 3,166,000 | Mercantile Bankshares | |||||
Corporation Subordinated | |||||||
Notes, Series B, | |||||||
4.625%, 04/15/2013 | $ | 3,299,159 | |||||
300,000 | Merrill Lynch | ||||||
& Company, | |||||||
6.05%, 08/15/2012 @ | 304,332 | ||||||
Metropolitan Life | |||||||
Global Funding I: | |||||||
3,242,000 | 5.125%, 04/10/2013 | ||||||
(Acquired 10/25/2010 | |||||||
through 03/17/2011; | |||||||
Aggregate Cost | |||||||
$3,390,617)* | 3,386,700 | ||||||
3,173,000 | 5.20%, 09/18/2013 | ||||||
(Acquired 10/21/2010 | |||||||
through 09/23/2011; | |||||||
Aggregate Cost | |||||||
$3,365,245)* | 3,364,300 | ||||||
1,800,000 | 3.125%, 01/11/2016 | ||||||
(Acquired 01/04/2011; | |||||||
Cost $1,797,444)* | 1,847,070 | ||||||
Monumental Global | |||||||
Funding III: | |||||||
350,000 | 0.588%, 1/25/2013 | ||||||
(Acquired 07/28/2009; | |||||||
Cost 335,098)* | 344,905 | ||||||
1,265,000 | 5.50%, 04/22/2013 | ||||||
(Acquired 09/23/2009 | |||||||
through 03/16/2010; | |||||||
Aggregate Cost | |||||||
$1,292,462)* | 1,317,319 | ||||||
Morgan Stanley: | |||||||
2,600,000 | 2.875%, 01/24/2014 | 2,490,259 | |||||
1,000,000 | 4.00%, 07/24/2015 | 937,752 | |||||
3,516,000 | Morgan Stanley | ||||||
Dean Witter & Co., | |||||||
6.75%, 10/15/2013 @ | 3,651,370 | ||||||
475,000 | National City | ||||||
Bank of Cleveland | |||||||
Subordinated Notes, | |||||||
4.625%, 05/01/2013 | 493,110 | ||||||
350,000 | Nationwide Financial | ||||||
Services Inc., | |||||||
5.90%, 07/01/2012 | 354,038 | ||||||
2,273,000 | NB Capital Trust IV, | ||||||
8.25%, 04/15/2027 | 2,091,160 | ||||||
1,000,000 | Nomura Holdings Inc., | ||||||
5.00%, 03/04/2015 f | 1,006,971 | ||||||
1,000,000 | North Fork | ||||||
Capital Trust II, | |||||||
8.00%, 12/15/2027 | 950,000 | ||||||
925,000 | PNC Funding Corp., | ||||||
5.50%, 09/28/2012 | 950,296 | ||||||
4,525,000 | Principal Life Global, | ||||||
6.25%, 02/15/2012 | |||||||
(Acquired 08/18/2009 | |||||||
through 04/06/2010; | |||||||
Aggregate Cost | |||||||
$4,541,369)* @ | 4,553,679 | ||||||
Principal Life Income | |||||||
Funding Trusts: | |||||||
1,180,000 | 5.30%, 12/14/2012 | 1,228,137 | |||||
2,000,000 | 5.10%, 04/15/2014 | 2,112,612 | |||||
2,221,000 | Protective Life | ||||||
Secured Trust, | |||||||
5.45%, 09/28/2012 | 2,280,554 | ||||||
Prudential Financial Inc.: | |||||||
3,900,000 | 2.75%, 01/14/2013 | 3,933,602 | |||||
2,428,000 | 5.15%, 01/15/2013 | 2,513,699 | |||||
1,370,000 | 4.50%, 07/15/2013 @ | 1,420,291 | |||||
2,455,000 | 6.20%, 01/15/2015 | 2,682,714 |
The accompanying notes are an integral part of these financial statements.
Page 14
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Financial – 34.8% (cont.) | |||||||
$ | 1,000,000 | Rabobank Nederland | |||||
Global Senior | |||||||
Unsecured Notes, | |||||||
4.20%, 05/13/2014 | |||||||
(Acquired 05/06/2009; | |||||||
Cost $998,170)* f | $ | 1,047,768 | |||||
Royal Bank of | |||||||
Scotland PLC: f | |||||||
1,000,000 | 3.40%, 08/23/2013 | 972,862 | |||||
3,000,000 | 4.875%, 08/25/2014 | ||||||
(Acquired 08/18/2009 | |||||||
through 01/27/2011; | |||||||
Aggregate Cost | |||||||
$3,014,287)* | 2,935,437 | ||||||
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 $1,595,863)* f | 1,529,621 | ||||||
SLM Corporation: | |||||||
135,000 | 5.125%, 08/27/2012 | 135,689 | |||||
1,000,000 | 5.375%, 01/15/2013 | 1,006,899 | |||||
4,765,000 | 5.00%, 10/01/2013 @ | 4,765,000 | |||||
5,000,000 | Societe Generale SA, | ||||||
2.20%, 09/14/2013 | |||||||
(Acquired 09/07/2010; | |||||||
Cost $4,994,350)* f | 4,697,890 | ||||||
1,875,000 | SouthTrust Corporation, | ||||||
5.80%, 06/15/2014 | 1,998,407 | ||||||
3,000,000 | Sovereign Bancorp, Inc., | ||||||
5.125%, 03/15/2013 | 3,008,124 | ||||||
4,000,000 | Sumitomo Mitsui | ||||||
Banking Corporation, | |||||||
2.15%, 07/22/2013 | |||||||
(Acquired 07/14/2010; | |||||||
Cost $3,998,480)* f | 4,061,204 | ||||||
5,435,000 | SunTrust Banks, Inc., | ||||||
5.25%, 11/05/2012 | 5,570,000 | ||||||
4,850,000 | Svenska Handelsbanken | ||||||
AB, 4.875%, 06/10/2014 | |||||||
(Acquired 09/20/2011 | |||||||
through 12/13/2011; | |||||||
Aggregate Cost | |||||||
$5,123,773)* f | 5,046,478 | ||||||
5,000,000 | UBS AG, | ||||||
2.25%, 01/28/2014 f | 4,865,590 | ||||||
5,575,000 | UFJ Finance | ||||||
Aruba A.E.C., | |||||||
6.75%, 07/15/2013 f | 5,957,205 | ||||||
750,000 | UnitedHealth | ||||||
Group, Inc., | |||||||
4.75%, 02/10/2014 | 803,620 | ||||||
1,000,000 | U.S. Bancorp, | ||||||
1.125%, 10/30/2013 | 1,001,870 | ||||||
1,600,000 | WEA Finance LLC, | ||||||
7.50%, 06/02/2014 | |||||||
(Acquired 12/14/2011; | |||||||
Cost $1,754,105)* | 1,753,987 | ||||||
5,260,000 | Wellpoint, Inc., | ||||||
6.80%, 08/01/2012 | 5,439,066 | ||||||
5,250,000 | Wells Fargo Bank NA, | ||||||
4.75%, 02/09/2015 | 5,477,267 | ||||||
2,500,000 | Westpac Banking | ||||||
Corporation, | |||||||
1.90%, 12/14/2012 | |||||||
(Acquired 12/07/2009; | |||||||
Cost $2,498,700)* f | 2,523,013 |
The accompanying notes are an integral part of these financial statements.
Page 15
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Financial – 34.8% (cont.) | |||||||
$ | 710,000 | Westpac Securities NZ | |||||
Ltd., 2.50%, 05/25/2012 | |||||||
(Acquired 03/05/2010; | |||||||
Cost $712,713)* f | $ | 714,342 | |||||
353,846,314 | |||||||
Industrial – 25.5% | |||||||
2,775,000 | Amgen Inc., | ||||||
1.875%, 11/15/2014 @ | 2,810,917 | ||||||
5,000,000 | Anadarko Petroleum | ||||||
Corporation, | |||||||
5.75%, 06/15/2014 | 5,380,925 | ||||||
4,900,000 | Anglo American Capital | ||||||
PLC, 2.15%, 09/27/2013 | |||||||
(Acquired 09/20/2010 | |||||||
through 10/13/2011; | |||||||
Aggregate Cost | |||||||
$4,892,744)* f | 4,908,139 | ||||||
2,854,000 | Anheuser Busch | ||||||
Inbev Worldwide, | |||||||
3.00%, 10/15/2012 | 2,898,671 | ||||||
ArcelorMittal: f | |||||||
2,500,000 | 5.375%, 06/01/2013 | 2,559,245 | |||||
341,000 | 9.00%, 02/15/2015 | 377,005 | |||||
1,275,000 | 3.75%, 08/05/2015 @ | 1,218,871 | |||||
3,000,000 | Barrick Gold Corp., | ||||||
1.75%, 05/30/2014 f | 3,029,577 | ||||||
600,000 | The Black & | ||||||
Decker Corporation, | |||||||
8.95%, 04/15/2014 | 692,915 | ||||||
5,000,000 | BP Capital Markets PLC, | ||||||
5.25%, 11/07/2013 f | 5,362,820 | ||||||
5,000,000 | British | ||||||
Telecommunications PLC, | |||||||
5.15%, 01/15/2013 f | 5,176,730 | ||||||
Bunge Limited Finance | |||||||
Corporation: | |||||||
3,658,000 | 5.875%, 05/15/2013 | 3,807,301 | |||||
3,000,000 | 5.35%, 04/15/2014 | 3,146,559 | |||||
1,273,000 | Cadbury Schweppes | ||||||
U.S. Finance LLC, | |||||||
5.125%, 10/01/2013 | |||||||
(Acquired 09/03/2010 | |||||||
through 06/22/2011; | |||||||
Aggregate Cost | |||||||
$1,345,704)* | 1,356,536 | ||||||
4,725,000 | CBS Corporation, | ||||||
8.20%, 05/15/2014 | 5,357,219 | ||||||
5,176,000 | Chevron Phillips | ||||||
Chemical Company LLC, | |||||||
7.00%, 06/15/2014 | |||||||
(Acquired 07/20/2010 | |||||||
through 05/25/2011; | |||||||
Aggregate Cost | |||||||
$5,690,717)* @ | 5,776,250 | ||||||
2,191,000 | Comcast Holdings | ||||||
Corporation, | |||||||
10.625%, 07/15/2012 | 2,284,805 | ||||||
7,367,000 | Computer Sciences | ||||||
Corporation, | |||||||
5.50%, 03/15/2013 @ | 7,330,165 | ||||||
COX | |||||||
Communications Inc.: | |||||||
4,052,000 | 7.125%, 10/01/2012 | 4,242,659 | |||||
1,224,000 | 5.45%, 12/15/2014 | 1,358,673 | |||||
1,750,000 | Daimler Finance | ||||||
North America LLC, | |||||||
6.50%, 11/15/2013 | 1,906,095 | ||||||
550,000 | Deutsche Telekom | ||||||
International Finance B.V., | |||||||
5.25%, 07/22/2013 f | 577,997 |
The accompanying notes are an integral part of these financial statements.
Page 16
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Industrial – 25.5% (cont.) | |||||||
$ | 6,195,000 | DIRECTV | |||||
Holdings/Financing, | |||||||
7.625%, 05/15/2016 | $ | 6,574,444 | |||||
2,525,000 | EnCana Holdings | ||||||
Finance Corp., | |||||||
5.80%, 05/01/2014 f | 2,742,317 | ||||||
6,000,000 | EOG Resources | ||||||
Canada Inc., | |||||||
4.75%, 03/15/2014 | |||||||
(Acquired 03/07/2011 | |||||||
through 11/04/2011; | |||||||
Aggregate Cost | |||||||
$6,399,985)* f | 6,457,980 | ||||||
5,000,000 | Express Scripts, Inc., | ||||||
6.25%, 06/15/2014 | 5,449,680 | ||||||
FedEx Corporation: | |||||||
450,000 | 9.65%, 06/15/2012 | 467,425 | |||||
2,460,000 | 7.375%, 01/15/2014 | 2,748,435 | |||||
4,900,000 | Freeport-McMoRan | ||||||
Copper & Gold Inc., | |||||||
8.375%, 04/01/2017 | 5,206,250 | ||||||
5,000,000 | Georgia-Pacific LLC, | ||||||
8.25%, 05/01/2016 | |||||||
(Acquired 04/27/2011; | |||||||
Cost $5,537,379)* | 5,554,800 | ||||||
1,000,000 | Gilead Sciences, Inc., | ||||||
2.40%, 12/01/2014 | 1,018,008 | ||||||
5,845,000 | Glencore Funding LLC, | ||||||
6.00%, 04/15/2014 | |||||||
(Acquired 01/12/2010 | |||||||
through 08/22/2011; | |||||||
Aggregate Cost | |||||||
$6,040,876)* | 6,037,412 | ||||||
5,305,000 | HP Enterprise Services | ||||||
LLC, Series B, | |||||||
6.00%, 08/01/2013 | 5,623,693 | ||||||
6,212,000 | Hutchison Whampoa | ||||||
International Ltd., | |||||||
6.50%, 02/13/2013 | |||||||
(Acquired 01/20/2010 | |||||||
through 10/18/2011; | |||||||
Aggregate Cost | |||||||
$6,477,349)* f | 6,492,143 | ||||||
5,115,000 | Kraft Foods Inc. | ||||||
Senior Unsecured Notes, | |||||||
2.625%, 05/08/2013 | 5,225,622 | ||||||
6,025,000 | Laboratory Corporation | ||||||
of America Holdings, | |||||||
5.50%, 02/01/2013 | 6,284,208 | ||||||
5,000,000 | Lafarge North | ||||||
America Inc., | |||||||
6.875%, 07/15/2013 | 5,107,700 | ||||||
6,030,000 | Motiva Enterprises LLC | ||||||
Senior Unsecured Notes, | |||||||
5.20%, 09/15/2012 | |||||||
(Acquired 05/13/2009 | |||||||
through 10/22/2010; | |||||||
Aggregate Cost | |||||||
$6,117,293)* | 6,155,593 | ||||||
4,325,000 | Nabors Industries, Inc., | ||||||
5.375%, 08/15/2012 | 4,420,595 | ||||||
4,700,000 | National Oilwell | ||||||
Varco Inc., Series B, | |||||||
6.125%, 08/15/2015 | 4,811,545 | ||||||
482,000 | Pearson Dollar | ||||||
Finance PLC, | |||||||
5.70%, 06/01/2014 | |||||||
(Acquired 06/20/2011; | |||||||
Cost $521,156)* f | 526,089 |
The accompanying notes are an integral part of these financial statements.
Page 17
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Industrial – 25.5% (cont.) | |||||||
$ | 4,426,000 | Pearson Dollar Finance | |||||
Two PLC, 5.50%, | |||||||
05/06/2013 (Acquired | |||||||
05/31/2011 through | |||||||
06/15/2011; Aggregate | |||||||
Cost $4,653,860)* f | $ | 4,653,585 | |||||
5,000,000 | Petrohawk Energy | ||||||
Corporation, | |||||||
7.875%, 06/01/2015 | 5,325,000 | ||||||
2,075,000 | Plum Creek | ||||||
Timberlands, L.P., | |||||||
5.875%, 11/15/2015 | 2,303,196 | ||||||
7,300,000 | POSCO, | ||||||
8.75%, 03/26/2014 | |||||||
(Acquired 03/19/2009 | |||||||
through 04/28/2011; | |||||||
Aggregate | |||||||
Cost $7,975,057)* f | 8,201,083 | ||||||
5,000,000 | Potash Corporation of | ||||||
Saskatchewan Inc., | |||||||
5.25%, 05/15/2014 f | 5,487,490 | ||||||
4,000,000 | Reed Elsevier | ||||||
Capital Inc., | |||||||
7.75%, 01/15/2014 | 4,462,880 | ||||||
2,332,000 | Rio Tinto Alcan, Inc., | ||||||
5.20%, 01/15/2014 f @ | 2,491,217 | ||||||
425,000 | Southwestern Bell | ||||||
Telephone, L.P., | |||||||
7.00%, 07/01/2015 | 496,510 | ||||||
1,672,000 | Teck Resources Limited, | ||||||
9.75%, 05/15/2014 f | 1,964,883 | ||||||
Telecom Italia Capital: f | |||||||
120,000 | 5.25%, 11/15/2013 | 115,270 | |||||
4,875,000 | 4.95%, 09/30/2014 | 4,524,995 | |||||
175,000 | 5.25%, 10/01/2015 @ | 160,533 | |||||
Telefonica | |||||||
Emisiones S.A.U.: f | |||||||
2,535,000 | 5.855%, | ||||||
02/04/2013 @ | 2,577,502 | ||||||
2,000,000 | 2.582%, 04/26/2013 | 1,951,594 | |||||
1,000,000 | Telefonica Moviles | ||||||
Chile SA, | |||||||
2.875%, 11/09/2015 | |||||||
(Acquired 11/03/2010; | |||||||
Cost $997,270)* f | 986,944 | ||||||
Time Warner, Inc.: | |||||||
4,359,000 | 8.875%, 10/01/2012 | 4,593,671 | |||||
3,600,000 | 3.15%, 07/15/2015 @ | 3,744,432 | |||||
Tyco Electronics | |||||||
Group S.A.: f | |||||||
1,645,000 | 6.00%, 10/01/2012 | 1,702,721 | |||||
1,655,000 | 5.95%, 01/15/2014 | 1,763,547 | |||||
265,000 | Tyco International | ||||||
Finance S.A., | |||||||
6.00%, 11/15/2013 f | 287,083 | ||||||
5,714,000 | Union Pacific Railroad | ||||||
Co. 2004 Pass Through | |||||||
Trust, 5.214%, | |||||||
09/30/2014 (Acquired | |||||||
10/22/2010 through | |||||||
08/17/2011; Aggregate | |||||||
Cost $6,165,948)* | 6,159,635 | ||||||
1,500,000 | USX Corporation, | ||||||
9.125%, 01/15/2013 | 1,601,851 | ||||||
5,901,000 | Vale Inco Limited, | ||||||
7.75%, 05/15/2012 f | 6,022,136 | ||||||
Valero Energy | |||||||
Corporation: | |||||||
3,935,000 | 6.875%, 04/15/2012 | 3,998,963 | |||||
1,100,000 | 4.75%, 04/01/2014 | 1,170,497 |
The accompanying notes are an integral part of these financial statements.
Page 18
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Industrial – 25.5% (cont.) | |||||||
Volkswagen International | |||||||
Finance N.V.: f | |||||||
$ | 3,000,000 | 1.625%, 08/12/2013 | |||||
(Acquired 08/05/2010; | |||||||
Cost $2,991,000)* | $ | 3,008,241 | |||||
2,260,000 | 0.982%, 04/01/2014 | ||||||
(Acquired 03/23/2011 | |||||||
through 12/15/2011; | |||||||
Aggregate Cost | |||||||
$2,254,566)* | 2,214,601 | ||||||
341,000 | Vulcan Materials Co., | ||||||
5.60%, 11/30/2012 | 353,787 | ||||||
Waste Management, Inc.: | |||||||
2,094,000 | 6.375%, 11/15/2012 | 2,189,107 | |||||
3,700,000 | 5.00%, 03/15/2014 | 3,965,301 | |||||
2,025,000 | Whirlpool Corp., | ||||||
8.00%, 05/01/2012 | 2,070,186 | ||||||
6,100,000 | Xerox Corporation, | ||||||
8.25%, 05/15/2014 | 6,883,124 | ||||||
3,515,000 | Xstrata Canada | ||||||
Corp., 7.25%, | |||||||
07/15/2012 f @ | 3,620,903 | ||||||
259,516,481 | |||||||
Other Government Related Securities – 1.5% | |||||||
2,500,000 | Corp Andina de Fomento, | ||||||
5.20%, 05/21/2013 f | 2,615,300 | ||||||
2,000,000 | Export-Import | ||||||
Bank of Korea Notes, | |||||||
5.50%, 10/17/2012 f | 2,046,320 | ||||||
350,000 | Korea Development Bank, | ||||||
5.30%, 01/17/2013 f | 359,955 | ||||||
1,545,000 | Korea Electric | ||||||
Power Corporation, | |||||||
7.75%, 04/01/2013 f | 1,643,450 | ||||||
3,805,000 | Korea Southern | ||||||
Power Co., Ltd., | |||||||
5.375%, 04/18/2013 | |||||||
(Acquired 02/22/2011; | |||||||
Cost $3,950,740)* f | 3,940,806 | ||||||
4,400,000 | Landesbank | ||||||
Baden-Wurttemgerg | |||||||
Subordinated Notes, | |||||||
6.35%, 04/01/2012 f | 4,446,218 | ||||||
15,052,049 | |||||||
Residential Mortgage Backed Securities – 1.1% | |||||||
Bank of America | |||||||
Alternative Loan Trust: | |||||||
389,533 | Series 2003-4, Class 2A1, | ||||||
5.00%, 06/25/2018 | 402,105 | ||||||
1,523,859 | Series 2004-2, Class 5A1, | ||||||
5.50%, 03/25/2019 | 1,587,940 | ||||||
Countrywide Alternative | |||||||
Loan Trust: | |||||||
651,813 | Series 2005-50CB, | ||||||
Class 4A1, | |||||||
5.00%, 11/25/2020 § | 560,256 | ||||||
432,294 | Series 2005-34CB, | ||||||
Class 1A6, | |||||||
5.50%, 09/25/2035 | 431,097 | ||||||
269,034 | Series 2005-73CB, Class | ||||||
1A7, 5.50%, 01/25/2036 | 244,850 | ||||||
1,706,671 | Series 2006-28CB, Class | ||||||
A17, 6.00%, 10/25/2036 § | 1,059,199 | ||||||
36,222 | Credit Suisse First | ||||||
Boston Mortgage | |||||||
Securities Corporation, | |||||||
Series 2005-11, Class | |||||||
5A1, 5.25%, 12/25/2020 | 36,105 |
The accompanying notes are an integral part of these financial statements.
Page 19
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Residential Mortgage Backed Securities – 1.1% (cont.) | |||||||
Federal Home Loan | |||||||
Mortgage Corporation | |||||||
(FHLMC): | |||||||
$ | 226,429 | Series 3033, Class LU, | |||||
5.50%, 03/15/2013 | $ | 227,956 | |||||
1,026,962 | Series 3124, Class VP, | ||||||
6.00%, 06/15/2014 | 1,060,697 | ||||||
29,672 | Series R001, Class AE, | ||||||
4.375%, 04/15/2015 | 29,664 | ||||||
825,593 | Series 2857, Class VA, | ||||||
5.00%, 09/15/2015 | 842,574 | ||||||
266,279 | Series 2910, Class BD, | ||||||
4.50%, 11/15/2018 | 272,402 | ||||||
21,800 | Series 5, Class B, | ||||||
1.013%, 05/15/2019 | 21,811 | ||||||
66,428 | Series 2970, Class DA, | ||||||
5.50%, 01/15/2023 | 67,186 | ||||||
Federal National | |||||||
Mortgage Association | |||||||
(FNMA): | |||||||
150,776 | 5.50%, 07/01/2015 | 163,842 | |||||
47,465 | Series 2006-B1, Class AB, | ||||||
6.00%, 06/25/2016 | 47,500 | ||||||
1,771,963 | Series 2004-W6, Class | ||||||
1A4, 5.50%, 07/25/2034 | 1,826,027 | ||||||
802,277 | Series 2004-W6, Class | ||||||
1A6, 5.50%, 07/25/2034 | 839,606 | ||||||
299,656 | Series 2004-W10, Class | ||||||
A24, 5.00%, 08/25/2034 | 298,959 | ||||||
233,399 | J.P. Morgan | ||||||
Alternative Loan Trust, | |||||||
Series 2006-S2, Class A2, | |||||||
5.81%, 05/25/2036 | 232,375 | ||||||
209,739 | Merrill Lynch Mortgage | ||||||
Investors Trust, Series | |||||||
2005-A8, Class A1C1, | |||||||
5.25%, 08/25/2036 | 208,245 | ||||||
Washington Mutual, Inc. | |||||||
Pass-Thru Certificates: | |||||||
287,917 | Series 2004-CB4, Class | ||||||
21A, 5.50%, 12/25/2019 | 294,377 | ||||||
284,735 | Series 2004-CB4, | ||||||
Class 22A, 6.00%, | |||||||
12/25/2019 | 294,970 | ||||||
11,049,743 | |||||||
Taxable Municipal Bonds – 6.1% | |||||||
Alaska Municipal | |||||||
Bond Bank Authority: | |||||||
1,000,000 | 1.422%, 08/01/2012 | 1,003,600 | |||||
1,000,000 | 1.918%, 08/01/2013 | 1,014,910 | |||||
1,170,000 | City of Arlington TX, | ||||||
4.68%, 08/15/2013 | 1,230,711 | ||||||
City of Des Moines IA: | |||||||
1,000,000 | 2.082%, 06/01/2012 | 1,001,650 | |||||
1,240,000 | 2.587%, 06/01/2013 | 1,254,843 | |||||
3,000,000 | City of Frederick MD, | ||||||
4.52%, 03/01/2013 | 3,120,630 | ||||||
8,240,000 | Delaware State Economic | ||||||
Development Authority, | |||||||
2.30%, 07/01/2028 | 8,274,031 | ||||||
281,679 | Educational Enhancement | ||||||
Funding Corporation, | |||||||
6.72%, 06/01/2025 | 263,953 | ||||||
6,450,000 | Government Development | ||||||
Bank for Puerto Rico, | |||||||
3.67%, 05/01/2014 | 6,519,982 | ||||||
Illinois State: | |||||||
7,200,000 | 2.186%, 02/01/2012 | 7,206,408 | |||||
445,000 | 4.071%, 01/01/2014 | 456,908 | |||||
2,030,000 | 4.422%, 04/01/2015 | 2,103,121 |
The accompanying notes are an integral part of these financial statements.
Page 20
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Taxable Municipal Bonds – 6.1% (cont.) | |||||||
$ | 5,000,000 | Michigan Strategic | |||||
Fund, 4.50%, | |||||||
12/01/2013 | $ | 5,265,200 | |||||
7,000,000 | New Hampshire | ||||||
Business Finance | |||||||
Authority, 7.125%, | |||||||
07/01/2027 | 7,028,560 | ||||||
8,000,000 | Port Freeport TX, | ||||||
6.25%, 05/15/2033 | 8,160,000 | ||||||
1,690,000 | Puerto Rico Public | ||||||
Finance Corp., | |||||||
6.10%, 08/01/2017 | |||||||
(Callable 02/13/2012) | 1,811,832 | ||||||
5,000,000 | Regional Transportation | ||||||
Authority Illinois, | |||||||
2.843%, 07/01/2012 | 5,052,200 | ||||||
1,000,000 | San Francisco | ||||||
California City & | |||||||
County Revenue Bonds, | |||||||
1.869%, 05/01/2012 | 1,003,910 | ||||||
175,000 | Tobacco Settlement | ||||||
Authority Iowa, | |||||||
6.50%, 06/01/2023 | |||||||
(Callable 06/01/2015) | 163,503 | ||||||
61,935,952 | |||||||
Utilities – 14.9% | |||||||
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 $4,047,202)* @ | 4,056,953 | ||||||
4,239,000 | Ameren Corporation, | ||||||
8.875%, 05/15/2014 | 4,750,079 | ||||||
2,200,000 | Appalachian Power | ||||||
Co., Series O, | |||||||
5.65%, 08/15/2012 | 2,261,721 | ||||||
2,650,000 | Arizona Public Service | ||||||
Co., 6.50%, 03/01/2012 | 2,673,863 | ||||||
1,000,000 | Baltimore Gas & | ||||||
Electric Co. Senior | |||||||
Unsecured Notes, | |||||||
6.125%, 07/01/2013 | 1,074,126 | ||||||
3,358,000 | Beaver Valley Funding | ||||||
Corporation Debentures, | |||||||
9.00%, 06/01/2017 | 3,532,851 | ||||||
1,000,000 | Consolidated Edison | ||||||
Company of New York, | |||||||
Inc., 4.70%, 02/01/2014 | 1,074,460 | ||||||
4,889,000 | Consolidated Natural | ||||||
Gas, Series A, | |||||||
5.00%, 03/01/2014 | 5,255,093 | ||||||
3,340,000 | DCP Midstream LLC, | ||||||
9.70%, 12/01/2013 | |||||||
(Acquired 07/29/2010 | |||||||
through 09/17/2010; | |||||||
Aggregate Cost | |||||||
$3,801,860)* | 3,768,462 | ||||||
500,000 | Duke Energy Corp., | ||||||
6.30%, 02/01/2014 | 551,642 | ||||||
3,160,000 | Duquesne Light Co., | ||||||
Series O, | |||||||
6.70%, 04/15/2012 | 3,207,523 | ||||||
5,000,000 | El Paso Pipeline Partners | ||||||
Operating Co LLC, | |||||||
4.10%, 11/15/2015 | 5,118,640 |
The accompanying notes are an integral part of these financial statements.
Page 21
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Utilities – 14.9% (cont.) | |||||||
$ | 4,000,000 | Enel Finance International, | |||||
5.70%, 01/15/2013 | |||||||
(Acquired 03/10/2010 | |||||||
through 03/31/2010; | |||||||
Aggregate Cost | |||||||
$4,128,229)* f @ | $ | 4,015,080 | |||||
Energy Transfer Partners: | |||||||
2,500,000 | 5.65%, 08/01/2012 | 2,554,177 | |||||
1,495,000 | 8.50%, 04/15/2014 | 1,676,169 | |||||
2,500,000 | 5.95%, 02/01/2015 | 2,702,183 | |||||
1,000,000 | 9.70%, 03/15/2019 | 1,225,150 | |||||
Enterprise Products | |||||||
Operating LLC: | |||||||
2,630,000 | 6.125%, 02/01/2013 | 2,744,965 | |||||
1,701,000 | Series O, 9.75%, | ||||||
01/31/2014 | 1,964,900 | ||||||
1,130,000 | Exelon Corporation, | ||||||
4.90%, 06/15/2015 | 1,217,551 | ||||||
4,750,000 | Exelon Generation | ||||||
Company, LLC, | |||||||
5.35%, 01/15/2014 @ | 5,073,694 | ||||||
3,662,819 | GG1C Funding | ||||||
Corporation, 5.129%, | |||||||
01/15/2014 (Acquired | |||||||
04/02/2009 through | |||||||
07/28/2011; Aggregate | |||||||
Cost $3,649,253)* | 3,739,152 | ||||||
6,600,000 | Gulf South Pipeline | ||||||
Company, L.P., 5.75%, | |||||||
08/15/2012 (Acquired | |||||||
03/25/2011 through | |||||||
04/12/2011; Aggregate | |||||||
Cost $6,779,727)* | 6,745,325 | ||||||
4,895,000 | Indiana Michigan | ||||||
Power, Series E, | |||||||
6.375%, 11/01/2012 | 5,095,969 | ||||||
1,750,000 | KeySpan Corporation, | ||||||
4.65%, 04/01/2013 | 1,809,806 | ||||||
2,895,000 | Kinder Morgan Energy | ||||||
Partners Senior Notes, | |||||||
5.85%, 09/15/2012 | 2,988,335 | ||||||
1,169,145 | Kiowa Power Partners | ||||||
LLC, 4.811%, | |||||||
12/30/2013 (Acquired | |||||||
05/31/2011 through | |||||||
12/29/2011; Aggregate | |||||||
Cost $1,169,145)* | 1,142,997 | ||||||
3,180,000 | Midamerican Energy | ||||||
Holdings Co., | |||||||
5.875%, 10/01/2012 | 3,291,857 | ||||||
2,750,000 | Nevada Power | ||||||
Company, | |||||||
7.375%, 01/15/2014 | 3,036,168 | ||||||
Nisource Finance Corp.: | |||||||
80,000 | 6.15%, 03/01/2013 | 84,016 | |||||
5,775,000 | 5.40%, 07/15/2014 | 6,265,771 | |||||
2,500,000 | Northeast Utilities, | ||||||
7.25%, 04/01/2012 | 2,535,375 | ||||||
3,745,000 | Pacific Gas and | ||||||
Electric Company, | |||||||
6.25%, 12/01/2013 | 4,093,161 | ||||||
1,100,000 | Pennsylvania Electric Co., | ||||||
5.125%, 04/01/2014 | 1,174,654 | ||||||
2,745,000 | PG&E Corporation, | ||||||
5.75%, 04/01/2014 | 2,990,839 | ||||||
Plains All | |||||||
American Pipeline: | |||||||
525,000 | 4.25%, 09/01/2012 | 535,534 | |||||
4,635,000 | 5.625%, 12/15/2013 | 4,952,326 |
The accompanying notes are an integral part of these financial statements.
Page 22
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.4% (cont.) | |||||||
Utilities – 14.9% (cont.) | |||||||
PPL Energy | |||||||
Supply, LLC: | |||||||
$ | 738,000 | 6.30%, 07/15/2013 | $ | 788,477 | |||
200,000 | Series A, 5.70%, | ||||||
10/15/2015 | 217,007 | ||||||
4,739,000 | Progress Energy Inc. | ||||||
Senior Notes, | |||||||
6.85%, 04/15/2012 | 4,819,222 | ||||||
Rockies Express | |||||||
Pipeline LLC: | |||||||
4,000,000 | 6.25%, 07/15/2013 | ||||||
(Acquired 05/06/2011 | |||||||
through 05/13/2011; | |||||||
Aggregate Cost | |||||||
$4,259,040)* | 4,221,292 | ||||||
2,000,000 | 3.90%, 04/15/2015 | ||||||
(Acquired 02/17/2011; | |||||||
Cost $2,000,250)* | 1,976,384 | ||||||
2,100,000 | Sempra Energy, | ||||||
2.00%, 03/15/2014 | 2,126,605 | ||||||
Spectra Energy | |||||||
Capital LLC: | |||||||
1,000,000 | 5.50%, 03/01/2014 | 1,067,801 | |||||
5,814,000 | 5.668%, 08/15/2014 | 6,363,377 | |||||
5,000,000 | System Energy | ||||||
Resources, Inc., | |||||||
6.20%, 10/01/2012 | 5,185,795 | ||||||
2,810,000 | Trans-Allegheny Interstate | ||||||
Line Company, 4.00%, | |||||||
01/15/2015 (Acquired | |||||||
01/19/2010 through | |||||||
07/15/2010; Aggregate | |||||||
Cost $2,808,281)* | 2,929,088 | ||||||
650,000 | Vectren Utility | ||||||
Holdings, Inc., | |||||||
5.25%, 08/01/2013 | 690,407 | ||||||
3,249,000 | Veolia Environnement, | ||||||
5.25%, 06/03/2013 f | 3,418,728 | ||||||
6,000,000 | Williams Partners L.P., | ||||||
3.80%, 02/15/2015 | 6,298,758 | ||||||
151,083,508 | |||||||
U.S. Treasury Obligations – 8.0% | |||||||
76,250,000 | U.S. Treasury Bonds, | ||||||
2.375%, 03/31/2016 @ | 81,652,999 | ||||||
81,652,999 | |||||||
Total Long-Term | |||||||
Investments | |||||||
(Cost $1,003,912,683) | 1,000,421,024 | ||||||
Shares | |||||||
SHORT-TERM INVESTMENTS – 0.9% | |||||||
Money Market Mutual Fund – 0.9% | |||||||
9,177,207 | Short-Term Investments | ||||||
Trust – Liquid Assets | |||||||
Portfolio, 0.16% « | 9,177,207 | ||||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $9,177,207) | 9,177,207 | ||||||
Principal | |||||||
Amount | |||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 9.2% | |||||||
Commercial Paper – 0.0% | |||||||
$ | 872,492 | Atlantic East | |||||
Funding LLC, | |||||||
0.610%, | |||||||
03/25/2012 †** | 544,878 | ||||||
Total Commercial Paper | |||||||
(Cost $872,492) | 544,878 |
The accompanying notes are an integral part of these financial statements.
Page 23
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2011 |
Shares | Value | ||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 9.2% (cont.) | |||||||
Investment Companies – 9.2% | |||||||
93,682,575 | Mount Vernon Securities | ||||||
Lending Trust Prime | |||||||
Portfolio, 0.23% « | $ | 93,682,575 | |||||
Total Investment | |||||||
Companies | |||||||
(Cost $93,682,575) | 93,682,575 | ||||||
Total Investments | |||||||
Purchased With Cash | |||||||
Proceeds From | |||||||
Securities Lending | |||||||
(Cost $94,555,067) | 94,227,453 | ||||||
Total Investments | |||||||
(Cost $1,107,644,957) | |||||||
– 108.5% | 1,103,825,684 | ||||||
Asset Relating to Securities | |||||||
Lending Investments – 0.0% | |||||||
Support | |||||||
Agreement** ^ a † | 327,614 | ||||||
Total (Cost $0) | 327,614 | ||||||
Liabilities in Excess of | |||||||
Other Assets – (8.5)% | (86,923,211 | ) | |||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 1,017,230,087 |
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, 2011. |
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 24
Baird Short-Term Bond Fund
Schedule of Investments December 31, 2011 |
Summary of Fair Value Exposure at December 31, 2011
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, 2011 |
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2011:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 7,235,143 | $ | — | $ | 7,235,143 | ||||||||
Commercial Mortgage Backed Securities | — | 59,048,835 | — | 59,048,835 | ||||||||||||
Corporate Debt Securities | — | 764,446,303 | — | 764,446,303 | ||||||||||||
Other Government Related Securities | — | 15,052,049 | — | 15,052,049 | ||||||||||||
Residential Mortgage Backed Securities | — | 11,049,743 | — | 11,049,743 | ||||||||||||
Taxable Municipal Bonds | — | 61,935,952 | — | 61,935,952 | ||||||||||||
U.S. Treasury Obligations | — | 81,652,999 | — | 81,652,999 | ||||||||||||
Total Fixed Income | — | 1,000,421,024 | — | 1,000,421,024 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Fund | 9,177,207 | — | — | 9,177,207 | ||||||||||||
Total Short-Term Investments | 9,177,207 | — | — | 9,177,207 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 544,878 | — | 544,878 | ||||||||||||
Money Market Mutual Fund | 93,682,575 | — | — | 93,682,575 | ||||||||||||
Total Investments Purchased with | ||||||||||||||||
Cash Proceeds from Securities Lending | 93,682,575 | 544,878 | — | 94,227,453 | ||||||||||||
Total Investments | $ | 102,859,782 | $ | 1,000,965,902 | $ | — | $ | 1,103,825,684 | ||||||||
Asset Relating to Securities Lending Investments | $ | — | $ | 327,614 | $ | — | $ | 327,614 |
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, Level 2 and Level 3 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.
Page 26
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 converted that advantage into strong absolute and relative returns in 2011. Our long-term commitment to duration neutrality was critically important as well. The primary factors for the Fund’s outperformance over its benchmark were:
• | The Fund’s overweight position to the corporate credit sector was a positive for relative performance. Corporate bond spreads (the additional yield that investors demand above Treasury bonds for owning the presumed higher risk corporate debt) widened during the year. This is typically a negative for the corporate bondholder as the higher (wider) yield indicates a decline in value (price) for the bond. The Fund’s overweight to shorter credit, particularly BBB-rated industrial and utility issuers, mitigated the impact of widening spreads. |
• | Modest exposure to commercial mortgage-backed securities (CMBS) was a positive for the year. As part of our risk management for the exposure to this sector, we hold shorter maturing issues with significant credit enhancement. |
• | The Fund’s modest exposure to non-Agency mortgages was a positive contributor as pricing remained stable and the Fund benefited from relatively high coupon payments, an important consideration in this low-rate environment. |
• | Our underweight to U.S. Treasuries was an overall detractor to the Fund’s performance (Treasuries outperformed other high quality “spread sectors” of the bond market in 2011). However, our underweight to short maturity Treasuries and an emphasis on longer Treasury maturities minimized the impact. |
• | Our overweight to corporate issues in the financial sector also detracted from relative performance but a focus on intermediate maturities lessened the effect. |
Again, the Fund maintained its duration-neutral positioning relative to its benchmark index and held a very broadly diversified portfolio at year end.
We are pleased with the Fund’s performance in 2011 and are confident in the individual issues and the overall structure of the Fund. The Fund’s yield advantage over the benchmark index is meaningful and we are optimistic regarding the Fund’s relative performance as we head into 2012.
Page 27
Baird Intermediate Bond Fund
Portfolio Characteristics
Quality Distribution* | Sector Weightings* |
![]() | ![]() |
Net Assets: | $717,945,143 | Annualized Expense Ratio: | |||
SEC 30-Day Yield:** | Institutional Class: | 0.30 | % | ||
Institutional Class: | 2.70% | Investor Class: | 0.55 | %*** | |
Investor Class: | 2.45% | Portfolio Turnover Rate: | 24.1 | % | |
Average Effective Duration: | 3.97 years | Total Number of Holdings: | 334 | ||
Average Effective Maturity: | 4.75 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, 2011. |
*** | 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
Total Returns
Average Annual | ||||
Since | ||||
For the Periods Ended December 31, 2011 | One Year | Five Years | Ten Years | Inception(1) |
Institutional Class Shares | 6.14% | 6.07% | 5.46% | 6.04% |
Investor Class Shares | 5.84% | 5.77% | 5.18% | 5.77% |
Barclays Capital Intermediate | ||||
U.S. Government/Credit Bond Index(2) | 5.80% | 5.88% | 5.20% | 5.75% |
(1) | For the period from September 29, 2000 (commencement of operations) through December 31, 2011. |
(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
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% | |||||||
Asset Backed Securities – 1.4% | |||||||
$ | 51,327 | Amresco Residential | |||||
Securities Mortgage | |||||||
Loan Trust, | |||||||
Series 1998-1, Class A6, | |||||||
6.51%, 08/25/2027 | $ | 51,657 | |||||
3,923 | Cityscape Home | ||||||
Equity Loan Trust, | |||||||
Series 1997-C, Class A4, | |||||||
7.00%, 07/25/2028 | 3,817 | ||||||
Countrywide Asset- | |||||||
Backed Certificates: | |||||||
1,332,919 | Series 2006-S3, Class A2, | ||||||
6.085%, 06/25/2021 § | 904,535 | ||||||
3,124 | Series 2006-S2, Class A2, | ||||||
5.627%, 07/25/2027 § | 3,114 | ||||||
96,902 | Series 2004-12, Class AF6, | ||||||
4.634%, 03/25/2035 | 94,766 | ||||||
3,963,654 | Series 2005-1, Class AF6, | ||||||
5.03%, 07/25/2035 | 3,795,833 | ||||||
1,753,839 | Series 2006-13, Class 1AF2, | ||||||
5.884%, 01/25/2037 § | 1,644,477 | ||||||
356,287 | Series 2006-13, Class 1AF3, | ||||||
5.944%, 01/25/2037 § | 213,978 | ||||||
1,380,000 | Series 2006-9, Class 1AF3, | ||||||
5.859%, 10/25/2046 | 706,732 | ||||||
Delta Funding Home | |||||||
Equity Loan Trust: | |||||||
22,050 | Series 1997-2, Class A6, | ||||||
7.04%, 06/25/2027 | 22,678 | ||||||
6,172 | Series 1999-1, Class A6F, | ||||||
6.34%, 12/15/2028 | 6,111 | ||||||
538,268 | Series 1999-2, Class A7F, | ||||||
7.03%, 08/15/2030 | 521,836 | ||||||
8,661 | Equivantage Home | ||||||
Equity Loan Trust, | |||||||
Series 1996-3, Class A3, | |||||||
7.70%, 09/25/2027 | 8,581 | ||||||
Green Tree Financial | |||||||
Corporation: | |||||||
60,109 | Series 1993-4, Class A5, | ||||||
7.05%, 01/15/2019 | 60,584 | ||||||
581,360 | Series 1998-2, Class A5, | ||||||
6.24%, 12/01/2028 | 608,871 | ||||||
810,358 | Series 1998-3, Class A5, | ||||||
6.22%, 03/01/2030 | 878,531 | ||||||
310,356 | Series 1998-4, Class A5, | ||||||
6.18%, 04/01/2030 | 317,239 | ||||||
20,084 | IMC Home | ||||||
Equity Loan Trust, | |||||||
Series 1998-1, Class A6, | |||||||
7.02%, 06/20/2029 | 19,968 | ||||||
135,354 | Oakwood Mortgage | ||||||
Investors, Inc., | |||||||
Series 1999-B, Class A3, | |||||||
6.45%, 11/15/2017 | 116,203 | ||||||
42,179 | Residential Asset | ||||||
Mortgage Products, Inc., | |||||||
Series 2003-RS7, Class AI6, | |||||||
5.34%, 08/25/2033 | 41,454 | ||||||
10,020,965 | |||||||
Commercial Mortgage Backed Securities – 3.3% | |||||||
5,600,000 | Citigroup Deutsche Bank, | ||||||
Series 2005-CD1, Class A4, | |||||||
5.399%, 07/15/2044 | 6,189,031 | ||||||
4,000,000 | Credit Suisse First | ||||||
Boston Mortgage | |||||||
Securities Corporation, | |||||||
Series 2005-C5, Class A4, | |||||||
5.10%, 08/15/2038 | 4,378,852 |
The accompanying notes are an integral part of these financial statements.
Page 31
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Commercial Mortgage | |||||||
Backed Securities – 3.3% (cont.) | |||||||
J.P. Morgan Chase | |||||||
Commercial Mortgage | |||||||
Securities Corp.: | |||||||
$ | 5,000,000 | Series 2005-CB12, Class | |||||
A4, 4.895%, 09/12/2037 | $ | 5,454,100 | |||||
1,915,761 | Series 2003-CB7, Class | ||||||
A4, 4.879%, 01/12/2038 | 2,009,259 | ||||||
5,000,000 | Wachovia Bank | ||||||
Commercial | |||||||
Mortgage Trust, | |||||||
Series 2005-C22, Class A4, | |||||||
5.444%, 12/15/2044 | 5,501,895 | ||||||
23,533,137 | |||||||
Financial – 21.5% | |||||||
3,257,000 | American Express Credit | ||||||
Corporation, Series C, | |||||||
7.30%, 08/20/2013 | 3,534,689 | ||||||
630,000 | AmSouth Bancorp, | ||||||
6.75%, 11/01/2025 | 510,747 | ||||||
1,850,000 | ANZ National (Int’l) LTD, | ||||||
2.375%, 12/21/2012 | |||||||
(Acquired 12/15/2009 | |||||||
through 05/18/2011; | |||||||
Cost $1,851,721)* f | 1,881,935 | ||||||
425,000 | AON Corporation, | ||||||
3.50%, 09/30/2015 | 436,118 | ||||||
1,700,000 | Australia and New Zealand | ||||||
Banking Group Limited, | |||||||
3.25%, 03/01/2016 | |||||||
(Acquired 02/22/2011; | |||||||
Cost $1,693,081)* f @ | 1,717,252 | ||||||
600,000 | Banco Santander Chile, | ||||||
7.375%, 07/18/2012 f | 614,077 | ||||||
835,000 | Bank of America | ||||||
Corporation | |||||||
Subordinated Notes, | |||||||
10.20%, 07/15/2015 | 894,505 | ||||||
2,390,000 | Bank of Ireland, | ||||||
2.75%, 03/02/2012 | |||||||
(Acquired 06/01/2010 | |||||||
through 07/23/2010; | |||||||
Cost $2,385,422)* f | 2,369,233 | ||||||
2,695,000 | BankAmerica Institutional, | ||||||
8.07%, 12/31/2026 | |||||||
(Acquired 01/04/2006 | |||||||
through 11/06/2007; | |||||||
Cost $2,749,342)* | 2,425,500 | ||||||
2,500,000 | Banponce Trust I, Series A, | ||||||
8.327%, 02/01/2027 | 1,700,000 | ||||||
2,390,000 | Barclays Bank PLC, | ||||||
5.00%, 09/22/2016 f | 2,475,237 | ||||||
2,322,000 | BB&T Corporation, | ||||||
6.85%, 04/30/2019 @ | 2,833,388 | ||||||
1,150,000 | Bear Stearns Cos., Inc., | ||||||
6.40%, 10/02/2017 | 1,284,813 | ||||||
Capital One | |||||||
Financial Corporation: | |||||||
1,000,000 | 7.375%, 05/23/2014 | 1,098,712 | |||||
2,000,000 | 3.15%, 07/15/2016 @ | 2,008,558 | |||||
1,000,000 | CDP Financial Inc., | ||||||
4.40%, 11/25/2019 | |||||||
(Acquired 11/20/2009; | |||||||
Cost $997,520)* f | 1,085,037 | ||||||
3,500,000 | Cie de Financement Foncier, | ||||||
2.25%, 03/07/2014 | |||||||
(Acquired 07/26/2011; | |||||||
Cost $3,531,373)* f | 3,440,475 |
The accompanying notes are an integral part of these financial statements.
Page 32
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Financial – 21.5% (cont.) | |||||||
CIT Group, Inc.: | |||||||
$ | 302 | 7.00%, 05/01/2015 | $ | 303 | |||
29,000 | 7.00%, 05/04/2015 | ||||||
(Acquired 01/23/2009 | |||||||
through 01/28/2009; | |||||||
Cost $29,000)* | 29,036 | ||||||
839 | 7.00%, 05/01/2016 | 839 | |||||
48,000 | 7.00%, 05/02/2016 | ||||||
(Acquired 01/23/2009 | |||||||
through 01/28/2009; | |||||||
Cost $48,000)* @ | 47,940 | ||||||
374 | 7.00%, 05/01/2017 | 374 | |||||
68,000 | 7.00%, 05/02/2017 | ||||||
(Acquired 01/23/2009 | |||||||
through 01/28/2009; | |||||||
Cost $68,000)* | 67,915 | ||||||
Citigroup, Inc.: | |||||||
1,000,000 | 5.50%, 04/11/2013 | 1,020,923 | |||||
200,000 | 5.50%, 10/15/2014 | 205,609 | |||||
2,100,000 | 6.01%, 01/15/2015 | 2,193,881 | |||||
2,000,000 | CNA Financial | ||||||
Corporation, | |||||||
6.50%, 08/15/2016 | 2,163,308 | ||||||
1,900,000 | Countrywide | ||||||
Financial Corporation, | |||||||
6.25%, 05/15/2016 | 1,790,055 | ||||||
2,425,000 | Credit Suisse New York, | ||||||
5.30%, 08/13/2019 f @ | 2,500,927 | ||||||
1,577,000 | Dresdner Bank-New York | ||||||
Subordinated Debentures, | |||||||
7.25%, 09/15/2015 f @ | 1,322,655 | ||||||
1,495,000 | Fifth Third Bancorp, | ||||||
6.25%, 05/01/2013 | 1,571,550 | ||||||
1,800,000 | Fifth Third Bank, | ||||||
4.75%, 02/01/2015 | 1,864,584 | ||||||
368,577 | First National | ||||||
Bank of Chicago | |||||||
Pass-Thru Certificates, | |||||||
Series 1993-A, | |||||||
8.08%, 01/05/2018 | 416,971 | ||||||
1,546,000 | FMR LLC, | ||||||
4.75%, 03/01/2013 | |||||||
(Acquired 02/26/2003 | |||||||
through 12/01/2009; | |||||||
Cost $1,553,439)* | 1,585,227 | ||||||
General Electric | |||||||
Capital Corporation: | |||||||
2,000,000 | 5.625%, 09/15/2017 | 2,213,550 | |||||
1,600,000 | 6.00%, 08/07/2019 | 1,837,805 | |||||
2,300,000 | 5.50%, 01/08/2020 | 2,530,671 | |||||
1,150,000 | Genworth Financials Inc., | ||||||
5.75%, 06/15/2014 @ | 1,137,064 | ||||||
2,620,000 | Genworth Life | ||||||
Institutional Funding Trust, | |||||||
5.875%, 05/03/2013 | |||||||
(Acquired 03/22/2011; | |||||||
Cost $2,730,041)* | 2,662,751 | ||||||
GMAC Inc.: | |||||||
80,000 | 7.50%, 12/31/2013 | 82,200 | |||||
96,000 | 8.00%, 12/31/2018 | 94,320 | |||||
200,000 | GMAC LLC, | ||||||
6.75%, 12/01/2014 | 201,745 | ||||||
The Goldman | |||||||
Sachs Group, Inc.: | |||||||
2,125,000 | 5.15%, 01/15/2014 | 2,165,445 | |||||
700,000 | 5.95%, 01/18/2018 | 716,955 | |||||
2,000,000 | 6.15%, 04/01/2018 | 2,064,178 |
The accompanying notes are an integral part of these financial statements.
Page 33
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Financial – 21.5% (cont.) | |||||||
$ | 1,800,000 | Great West Life & | |||||
Annuity Insurance, | |||||||
7.153%, 05/16/2046 | |||||||
(Acquired 05/16/2006 | |||||||
through 11/08/2007; | |||||||
Cost $1,792,736)* | $ | 1,755,000 | |||||
1,000,000 | Hartford Financial | ||||||
Services Group, Inc. | |||||||
4.00%, 03/30/2015 | 1,004,843 | ||||||
1,758,000 | HSBC Finance | ||||||
Corporation, | |||||||
6.676%, 01/15/2021 | 1,818,470 | ||||||
1,000,000 | HSBC Holdings PLC, | ||||||
5.25%, 12/12/2012 f @ | 1,019,510 | ||||||
2,000,000 | Humana Inc., | ||||||
7.20%, 06/15/2018 | 2,332,928 | ||||||
ING Bank N.V.: f | |||||||
2,000,000 | 2.00%, 10/18/2013 | ||||||
(Acquired 10/28/2010; | |||||||
Cost $2,001,364)* | 1,953,422 | ||||||
1,000,000 | 3.00%, 09/01/2015 | ||||||
(Acquired 08/17/2010; | |||||||
Cost $997,320)* | 945,425 | ||||||
1,417,000 | Invesco Ltd., | ||||||
5.375%, 02/27/2013 f | 1,472,729 | ||||||
2,075,000 | Irish Life & Permanent | ||||||
Group Holdings PLC, | |||||||
3.60%, 01/14/2013 | |||||||
(Acquired 01/07/2010; | |||||||
Cost $2,073,880)* f | 1,814,745 | ||||||
Istar Financial, Inc.: | |||||||
1,050,000 | 5.95%, 10/15/2013 | 900,375 | |||||
75,000 | 5.85%, 03/15/2017 | 59,438 | |||||
2,000,000 | Jefferies Group Inc., | ||||||
6.875%, 04/15/2021 | 1,800,000 | ||||||
J.P. Morgan | |||||||
Chase & Co.: | |||||||
575,000 | 5.75%, 01/02/2013 | 596,470 | |||||
1,725,000 | 3.45%, 03/01/2016 | 1,752,519 | |||||
Key Bank NA: | |||||||
1,000,000 | 5.80%, 07/01/2014 | 1,067,682 | |||||
2,000,000 | 7.413%, 05/06/2015 | 2,173,338 | |||||
2,600,000 | Kookmin Bank, | ||||||
7.25%, 05/14/2014 | |||||||
(Acquired 06/12/2009; | |||||||
Cost $2,623,037)* f | 2,871,807 | ||||||
Liberty Mutual | |||||||
Group, Inc.: | |||||||
1,550,000 | 7.25%, 09/01/2012 | ||||||
(Acquired 08/03/2004 | |||||||
through 08/24/2011; | |||||||
Cost $1,579,688)* | 1,597,690 | ||||||
1,000,000 | 5.75%, 03/15/2014 | ||||||
(Acquired 09/03/2009 | |||||||
through 10/15/2010; | |||||||
Cost $985,086)* | 1,042,797 | ||||||
1,650,000 | Lloyds TSB Bank PLC, | ||||||
5.80%, 01/13/2020 | |||||||
(Acquired 02/09/2010; | |||||||
Cost $1,612,801)* f @ | 1,566,474 | ||||||
1,925,000 | M&I Marshall | ||||||
& Ilsley Bank, | |||||||
4.85%, 06/16/2015 | 2,031,936 | ||||||
1,650,000 | Manulife Financial Corp., | ||||||
4.90%, 09/17/2020 f | 1,682,333 | ||||||
Marsh & McLennan | |||||||
Companies, Inc.: | |||||||
1,825,000 | 6.25%, 03/15/2012 | 1,842,122 | |||||
700,000 | 4.85%, 02/15/2013 | 722,238 |
The accompanying notes are an integral part of these financial statements.
Page 34
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Financial – 21.5% (cont.) | |||||||
$ | 500,000 | MBIA Insurance Corp., | |||||
14.00%, 01/15/2033 | |||||||
(Acquired 01/11/2008; | |||||||
Cost $500,000)* | $ | 280,000 | |||||
Merrill Lynch & Company: | |||||||
1,000,000 | 5.70%, 05/02/2017 @ | 918,387 | |||||
1,000,000 | 6.875%, 04/25/2018 | 985,939 | |||||
3,000,000 | MetLife Institutional | ||||||
Funding II, | |||||||
1.201%, 04/04/2014 | |||||||
(Acquired 03/29/2011; | |||||||
Cost $3,000,000)* | 2,993,358 | ||||||
1,735,000 | Monumental Global | ||||||
Funding III, | |||||||
5.25%, 01/15/2014 | |||||||
(Acquired 04/05/2011 | |||||||
through 12/05/2011; | |||||||
Cost $1,826,099)* | 1,823,266 | ||||||
Morgan Stanley: | |||||||
100,000 | 4.75%, 04/01/2014 | 98,509 | |||||
1,400,000 | 6.625%, 04/01/2018 | 1,382,420 | |||||
750,000 | Morgan Stanley | ||||||
Dean Witter & Co., | |||||||
6.75%, 10/15/2013 | 778,876 | ||||||
1,725,000 | National Australia | ||||||
Bank Ltd., | |||||||
3.00%, 07/27/2016 | |||||||
(Acquired 07/20/2011; | |||||||
Cost $1,720,239)* f | 1,718,562 | ||||||
2,320,000 | Navigators Group Inc. | ||||||
Senior Unsecured Notes, | |||||||
7.00%, 05/01/2016 | 2,393,799 | ||||||
1,260,000 | NB Capital Trust IV, | ||||||
8.25%, 04/15/2027 | 1,159,200 | ||||||
2,500,000 | Nomura Holdings Inc., | ||||||
5.00%, 03/04/2015 f | 2,517,427 | ||||||
1,000,000 | North Fork Capital | ||||||
Trust II, | |||||||
8.00%, 12/15/2027 | 950,000 | ||||||
Protective Life | |||||||
Secured Trust: | |||||||
3,091,000 | 5.45%, 09/28/2012 | 3,173,882 | |||||
1,225,000 | 4.30%, 06/01/2013 | 1,259,582 | |||||
3,125,000 | Prudential Financial Inc., | ||||||
5.15%, 01/15/2013 | 3,235,300 | ||||||
2,000,000 | Rabobank Nederland | ||||||
Global Senior | |||||||
Unsecured Notes, | |||||||
4.20%, 05/13/2014 | |||||||
(Acquired 05/06/2009; | |||||||
Cost $1,996,340)* f | 2,095,536 | ||||||
1,650,000 | Regions Bank, | ||||||
7.50%, 05/15/2018 @ | 1,633,500 | ||||||
3,100,000 | Royal Bank of | ||||||
Scotland Group PLC, | |||||||
5.625%, 08/24/2020 f | 2,973,291 | ||||||
1,300,000 | Schwab Capital Trust I, | ||||||
7.50%, 11/15/2037 @ | 1,300,429 | ||||||
250,000 | SLM Corporation, | ||||||
5.375%, 05/15/2014 | 250,175 | ||||||
2,880,000 | Sovereign Bancorp, Inc., | ||||||
8.75%, 05/30/2018 | 3,211,168 | ||||||
1,000,000 | St. Paul Travelers, Inc., | ||||||
6.25%, 06/20/2016 | 1,165,262 | ||||||
2,100,000 | SunTrust Banks, Inc., | ||||||
3.60%, 04/15/2016 @ | 2,138,508 | ||||||
2,800,000 | Susa Partnership LP, | ||||||
8.20%, 06/01/2017 | 3,360,969 | ||||||
1,000,000 | Symetra Financial | ||||||
Corporation, | |||||||
6.125%, 04/01/2016 | |||||||
(Acquired 08/12/2011; | |||||||
Cost $1,070,921)* | 1,010,537 |
The accompanying notes are an integral part of these financial statements.
Page 35
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Financial – 21.5% (cont.) | |||||||
$ | 850,000 | UFJ Finance | |||||
Aruba A.E.C., | |||||||
6.75%, 07/15/2013 f | $ | 908,273 | |||||
665,000 | Union Bank NA, | ||||||
2.125%, 12/16/2013 | 672,558 | ||||||
650,000 | Unionbancal Corporation, | ||||||
5.25%, 12/16/2013 | 668,761 | ||||||
1,450,000 | Wellpoint, Inc., | ||||||
6.80%, 08/01/2012 | 1,499,362 | ||||||
1,015,000 | Wells Fargo Bank NA, | ||||||
4.75%, 02/09/2015 | 1,058,938 | ||||||
3,000,000 | Westpac Banking | ||||||
Corporation, | |||||||
3.00%, 08/04/2015 f @ | 3,034,806 | ||||||
3,000,000 | Willis Group | ||||||
Holdings Limited, | |||||||
5.75%, 03/15/2021 f | 3,181,500 | ||||||
154,455,428 | |||||||
Industrial – 15.9% | |||||||
Ameritech Capital | |||||||
Funding Debentures: | |||||||
817,800 | 9.10%, 06/01/2016 | 968,879 | |||||
1,008,000 | 6.45%, 01/15/2018 | 1,161,116 | |||||
Anadarko Petroleum | |||||||
Corporation: | |||||||
1,000,000 | 6.375%, 09/15/2017 | 1,159,134 | |||||
1,000,000 | 6.95%, 06/15/2019 | 1,193,820 | |||||
2,500,000 | BP Capital Markets PLC, | ||||||
4.75%, 03/10/2019 f | 2,776,805 | ||||||
2,000,000 | British | ||||||
Telecommunications PLC, | |||||||
5.95%, 01/15/2018 f | 2,210,158 | ||||||
Bunge Limited | |||||||
Finance Corporation: | |||||||
1,925,000 | 5.35%, 04/15/2014 | 2,019,042 | |||||
1,085,000 | 5.10%, 07/15/2015 | 1,135,634 | |||||
2,900,000 | Chevron Phillips | ||||||
Chemical Company LLC, | |||||||
7.00%, 06/15/2014 | |||||||
(Acquired 04/16/2010; | |||||||
Cost $3,131,245)* | 3,236,307 | ||||||
1,250,000 | Clear Channel | ||||||
Communications, | |||||||
5.50%, 12/15/2016 | 578,125 | ||||||
125,000 | Comcast Cable Holdings, | ||||||
8.375%, 03/15/2013 | 135,939 | ||||||
525,000 | Comcast Corporation, | ||||||
6.50%, 01/15/2017 | 617,493 | ||||||
75,000 | Comcast Holdings | ||||||
Corporation, | |||||||
10.625%, 07/15/2012 | 78,211 | ||||||
3,636,000 | Computer Sciences | ||||||
Corporation, | |||||||
5.50%, 03/15/2013 | 3,617,820 | ||||||
3,650,000 | ConAgra Foods, Inc., | ||||||
5.875%, 04/15/2014 | 4,005,568 | ||||||
1,281,000 | COX | ||||||
Communications Inc., | |||||||
7.125%, 10/01/2012 | 1,341,275 | ||||||
CSX Corporation: | |||||||
1,875,000 | 5.75%, 03/15/2013 | 1,973,738 | |||||
450,000 | 6.25%, 04/01/2015 | 514,174 | |||||
Deutsche Telekom | |||||||
International Finance BV: f | |||||||
2,200,000 | 3.125%, 04/11/2016 | ||||||
(Acquired 04/04/2011; | |||||||
Cost $2,197,778)* | 2,216,333 | ||||||
1,300,000 | 6.00%, 07/08/2019 @ | 1,492,400 |
The accompanying notes are an integral part of these financial statements.
Page 36
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Industrial – 15.9% (cont.) | |||||||
$ | 3,000,000 | DIRECTV | |||||
Holdings/Financing, | |||||||
7.625%, 05/15/2016 | $ | 3,183,750 | |||||
Donnelley (R.R.) | |||||||
& Sons Co.: | |||||||
1,000,000 | 8.60%, 08/15/2016 | 1,001,250 | |||||
875,000 | 6.125%, 01/15/2017 | 813,750 | |||||
1,000,000 | 7.625%, 06/15/2020 | 935,000 | |||||
1,000,000 | D.R. Horton Inc. | ||||||
Unsubordinated Notes, | |||||||
6.50%, 04/15/2016 @ | 1,036,250 | ||||||
656,895 | Federal Express | ||||||
Corporation 1995 | |||||||
Pass-Thru Certificates, | |||||||
Series B2, 7.11%, | |||||||
01/02/2014 | 693,024 | ||||||
2,250,000 | FedEx Corporation, | ||||||
7.375%, 01/15/2014 | 2,513,813 | ||||||
3,000,000 | Freeport-McMoRan | ||||||
Copper & Gold Inc., | |||||||
8.375%, 04/01/2017 | 3,187,500 | ||||||
2,000,000 | Georgia-Pacific LLC, | ||||||
8.25%, 05/01/2016 | |||||||
(Acquired 10/13/2011; | |||||||
Cost $2,193,472)* | 2,221,920 | ||||||
3,456,000 | Glencore Funding LLC, | ||||||
6.00%, 04/15/2014 | |||||||
(Acquired 03/31/2004 | |||||||
through 02/02/2010; | |||||||
Cost $3,476,285)* | 3,569,768 | ||||||
1,460,000 | GTE Corporation, | ||||||
6.84%, 04/15/2018 | 1,748,813 | ||||||
1,375,000 | Hanson Australia Funding, | ||||||
5.25%, 03/15/2013 f | 1,381,875 | ||||||
650,000 | Hanson PLC Notes, | ||||||
6.125%, 08/15/2016 f | 659,750 | ||||||
2,500,000 | Hewlett-Packard Co., | ||||||
3.30%, 12/09/2016 @ | 2,552,760 | ||||||
620,000 | Highmark Inc. Notes, | ||||||
6.80%, 08/15/2013 | |||||||
(Acquired 08/14/2003 | |||||||
through 06/16/2010; | |||||||
Cost $628,310)* | 661,880 | ||||||
250,000 | Historic Time Warner Inc., | ||||||
6.875%, 06/15/2018 | 297,949 | ||||||
2,800,000 | Hutchison Whampoa | ||||||
International Ltd., | |||||||
7.625%, 04/09/2019 | |||||||
(Acquired 10/16/2009 | |||||||
through 09/19/2011; | |||||||
Cost $3,159,007)* f | 3,449,421 | ||||||
1,000,000 | Ingersoll-Rand | ||||||
Company Debentures, | |||||||
6.391%, 11/15/2027 f | 1,223,759 | ||||||
1,625,000 | Johnson Controls Inc., | ||||||
5.50%, 01/15/2016 @ | 1,818,211 | ||||||
1,675,000 | Laboratory Corporation | ||||||
of America Holdings, | |||||||
5.50%, 02/01/2013 | 1,747,062 | ||||||
Lafarge SA: f | |||||||
1,000,000 | 5.50%, 07/09/2015 | ||||||
(Acquired 07/06/2010; | |||||||
Cost $999,140)* | 1,017,679 | ||||||
625,000 | 6.50%, 07/15/2016 | 637,506 | |||||
180,000 | Limited Brands, Inc., | ||||||
5.25%, 11/01/2014 | 187,200 | ||||||
75,000 | Martin Marietta | ||||||
Materials, Inc., | |||||||
6.60%, 04/15/2018 | 79,027 | ||||||
1,625,000 | Masco Corporation, | ||||||
6.125%, 10/03/2016 | 1,667,580 | ||||||
825,000 | Nabors Industries, Inc., | ||||||
6.15%, 02/15/2018 | 921,598 |
The accompanying notes are an integral part of these financial statements.
Page 37
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Industrial – 15.9% (cont.) | |||||||
$ | 2,307,000 | Nextel Communications | |||||
Senior Notes, Series E, | |||||||
6.875%, 10/31/2013 | $ | 2,295,465 | |||||
700,000 | PCCW-HKT | ||||||
Capital II Ltd., | |||||||
6.00%, 07/15/2013 | |||||||
(Acquired 07/10/2003; | |||||||
Cost $696,731)* f | 734,390 | ||||||
925,000 | Pearson Dollar Finance PLC, | ||||||
5.70%, 06/01/2014 | |||||||
(Acquired 09/28/2005 | |||||||
through 12/14/2007; | |||||||
Cost $927,116)* f | 1,009,612 | ||||||
2,045,000 | Plum Creek | ||||||
Timberlands, L.P., | |||||||
5.875%, 11/15/2015 | 2,269,897 | ||||||
3,000,000 | POSCO, | ||||||
5.25%, 04/14/2021 | |||||||
(Acquired 04/08/2011 | |||||||
through 09/22/2011; | |||||||
Cost $2,978,301)* f @ | 3,129,807 | ||||||
2,093,000 | Reed Elsevier | ||||||
Capital Inc. Notes, | |||||||
4.625%, 06/15/2012 | 2,127,210 | ||||||
450,000 | Rio Tinto Alcan, Inc., | ||||||
5.00%, 06/01/2015 f | 488,428 | ||||||
Rio Tinto Financial | |||||||
USA Ltd.: f | |||||||
1,800,000 | 6.50%, 07/15/2018 @ | 2,169,553 | |||||
500,000 | 3.50%, 11/02/2020 @ | 511,052 | |||||
500,000 | Sprint Nextel Corporation, | ||||||
6.00%, 12/01/2016 @ | 415,000 | ||||||
1,175,000 | Sunoco, Inc. Senior | ||||||
Unsecured Notes, | |||||||
5.75%, 01/15/2017 | 1,180,668 | ||||||
TCI | |||||||
Communications, Inc.: | |||||||
550,000 | 7.875%, 08/01/2013 | 605,266 | |||||
2,583,000 | 8.75%, 08/01/2015 | 3,137,867 | |||||
Teck Resources Limited: f | |||||||
1,045,000 | 10.25%, 05/15/2016 | 1,201,750 | |||||
1,000,000 | 3.15%, 01/15/2017 | 1,021,596 | |||||
Telecom Italia Capital SA: f | |||||||
1,360,000 | 4.95%, 09/30/2014 | 1,262,358 | |||||
2,225,000 | 5.25%, 10/01/2015 @ | 2,041,059 | |||||
Telefonica Emisiones, | |||||||
S.A.U.: f | |||||||
2,725,000 | 6.421%, 06/20/2016 | 2,851,696 | |||||
1,000,000 | 6.221%, 07/03/2017 | 1,024,860 | |||||
1,000,000 | Time Warner Cable, Inc., | ||||||
5.85%, 05/01/2017 | 1,138,828 | ||||||
Time Warner, Inc.: | |||||||
1,000,000 | 4.70%, 01/15/2021 | 1,076,720 | |||||
2,000,000 | 4.75%, 03/29/2021 @ | 2,168,950 | |||||
500,000 | Tyco Electronics | ||||||
Group S.A., | |||||||
6.55%, 10/01/2017 f | 577,599 | ||||||
650,000 | Tyco International | ||||||
Finance S.A., | |||||||
6.00%, 11/15/2013 f | 704,166 | ||||||
United AirLines, Inc. | |||||||
Pass-Thru Certificates: | |||||||
149,529 | Series 1991-A, Class A-2, | ||||||
10.02%, 03/22/2014 | 56,821 | ||||||
48,704 | Series 2000-2, Class C, | ||||||
7.762%, 04/29/2049 § † ** | 1,461 | ||||||
1,500,000 | Vale Overseas Limited, | ||||||
6.25%, 01/23/2017 f | 1,690,376 | ||||||
Verizon | |||||||
Communications, Inc.: | |||||||
1,000,000 | 5.55%, 02/15/2016 | 1,144,272 | |||||
375,000 | 5.50%, 04/01/2017 @ | 434,164 |
The accompanying notes are an integral part of these financial statements.
Page 38
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Industrial – 15.9% (cont.) | |||||||
$ | 500,000 | Viacom Inc., | |||||
6.25%, 04/30/2016 | $ | 580,394 | |||||
Vulcan Materials Co.: | |||||||
69,000 | 5.60%, 11/30/2012 | 71,587 | |||||
2,000,000 | 7.00%, 06/15/2018 | 2,060,000 | |||||
125,000 | Waste Management, Inc., | ||||||
5.00%, 03/15/2014 | 133,963 | ||||||
500,000 | Willamette Industries, | ||||||
Inc. Notes, | |||||||
6.60%, 06/05/2012 | 506,894 | ||||||
412,000 | Xstrata Canada Corp., | ||||||
6.00%, 10/15/2015 f | 443,792 | ||||||
113,907,587 | |||||||
Other Government Related Securities – 2.0% | |||||||
3,000,000 | KFW, | ||||||
4.875%, 06/17/2019 f | 3,565,380 | ||||||
2,000,000 | Korea Development Bank, | ||||||
3.875%, 05/04/2017 f @ | 1,974,968 | ||||||
300,000 | Korea Electric | ||||||
Power Corporation, | |||||||
6.75%, 08/01/2027 f | 357,629 | ||||||
1,000,000 | Korea Hydro & | ||||||
Nuclear Power Co., Ltd., | |||||||
6.25%, 06/17/2014 | |||||||
(Acquired 06/10/2009; | |||||||
Cost $989,350)* f | 1,078,720 | ||||||
350,000 | National Bank of Hungary | ||||||
Yankee Debentures, | |||||||
8.875%, 11/01/2013 f | 377,345 | ||||||
2,500,000 | Petrobras International | ||||||
Finance Company, | |||||||
3.875%, 01/27/2016 f @ | 2,575,527 | ||||||
2,650,000 | United Mexican States, | ||||||
5.125%, 01/15/2020 f | 3,027,625 | ||||||
1,495,000 | Westdeutsche Landesbank | ||||||
Subordinated Notes, | |||||||
4.796%, 07/15/2015 f | 1,552,465 | ||||||
14,509,659 | |||||||
Residential Mortgage Backed Securities – 3.8% | |||||||
Bank of America | |||||||
Alternative Loan Trust: | |||||||
253,459 | Series 2003-11, Class 4A1, | ||||||
4.75%, 01/25/2019 | 257,185 | ||||||
755,008 | Series 2004-2, Class 5A1, | ||||||
5.50%, 03/25/2019 | 786,758 | ||||||
907,276 | Series 2004-11, Class 4A1, | ||||||
5.50%, 12/25/2019 | 935,810 | ||||||
41,739 | Series 2005-6, Class 7A1, | ||||||
5.50%, 07/25/2020 | 38,956 | ||||||
509,802 | Series 2006-2, Class 7A1, | ||||||
6.00%, 03/25/2021 | 465,217 | ||||||
720,615 | Series 2006-3, Class 6A1, | ||||||
6.00%, 04/25/2036 | 698,414 | ||||||
808,759 | Series 2006-4, Class 3CB4, | ||||||
6.00%, 05/25/2046 | 654,983 | ||||||
542,362 | Bank of America | ||||||
Funding Corporation, | |||||||
Series 2003-3, Class 1A41, | |||||||
5.50%, 10/25/2033 | 554,092 | ||||||
708,853 | Citicorp Mortgage | ||||||
Securities, Inc., | |||||||
Series 2004-5, Class 1A25, | |||||||
5.50%, 10/25/2014 | 717,003 | ||||||
Countrywide Alternative | |||||||
Loan Trust: | |||||||
141,625 | Series 2005-5R, Class A2, | ||||||
4.75%, 12/25/2018 | 142,825 | ||||||
749,585 | Series 2005-50CB, Class | ||||||
4A1, 5.00%, 11/25/2020 § | 644,295 |
The accompanying notes are an integral part of these financial statements.
Page 39
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Residential Mortgage Backed Securities – 3.8% (cont.) | |||||||
$ | 668,941 | Series 2005-85CB, Class | |||||
3A1, 5.25%, 02/25/2021 | |||||||
(Acquired 09/26/2007 | |||||||
through 01/28/2009; | |||||||
Cost $648,085)* § | $ | 611,098 | |||||
1,158,470 | Series 2006-7CB, Class | ||||||
3A1, 5.25%, 05/25/2021 § | 996,753 | ||||||
87,672 | Series 2005-10CB, Class | ||||||
1A6, 5.50%, 05/25/2035 | 84,262 | ||||||
110,839 | Series 2005-11CB, Class | ||||||
2A1, 5.50%, 06/25/2035 | 93,452 | ||||||
213,479 | Series 2005-34CB, Class | ||||||
1A6, 5.50%, 09/25/2035 | 212,887 | ||||||
Credit Suisse First | |||||||
Boston Mortgage | |||||||
Securities Corporation: | |||||||
16,903 | Series 2005-11, Class 5A1, | ||||||
5.25%, 12/25/2020 | 16,849 | ||||||
78,832 | Series 2005-3, Class 3A27, | ||||||
5.50%, 07/25/2035 | 81,355 | ||||||
Federal Gold Loan | |||||||
Mortgage Corporation | |||||||
(FGLMC) Pass-Thru | |||||||
Certificates: | |||||||
378,129 | 6.00%, 06/01/2021 | 411,970 | |||||
23,088 | 6.00%, 07/01/2028 | 25,719 | |||||
Federal Home Loan | |||||||
Mortgage Corporation | |||||||
(FHLMC): | |||||||
394,810 | Series 3033, Class LU, | ||||||
5.50%, 03/15/2013 | 397,473 | ||||||
1,261,357 | Series R003, Class VA, | ||||||
5.50%, 08/15/2016 | 1,318,710 | ||||||
1,660,913 | Series 3122, Class VA, | ||||||
6.00%, 01/15/2017 | 1,691,323 | ||||||
1,179,941 | Series R010, Class VA, | ||||||
5.50%, 04/15/2017 | 1,251,384 | ||||||
616,655 | Series R009, Class AJ, | ||||||
5.75%, 12/15/2018 | 629,688 | ||||||
3,025 | Series 74, Class F, | ||||||
6.00%, 10/15/2020 | 3,284 | ||||||
220 | Series 2673, Class NC, | ||||||
5.50%, 05/15/2021 | 220 | ||||||
22,862 | Series 1395, Class G, | ||||||
6.00%, 10/15/2022 | 25,505 | ||||||
514,817 | Series 2970, Class DA, | ||||||
5.50%, 01/15/2023 | 520,692 | ||||||
Federal National Mortgage | |||||||
Association (FNMA): | |||||||
48,147 | Series 2005-6, Class VE, | ||||||
5.50%, 04/25/2016 | 48,479 | ||||||
68,049 | Series 2006-B1, Class AB, | ||||||
6.00%, 06/25/2016 | 68,100 | ||||||
13,864 | Series 1989-2, Class D, | ||||||
8.80%, 01/25/2019 | 15,830 | ||||||
1,087 | Series G-29, Class O, | ||||||
8.50%, 09/25/2021 | 1,228 | ||||||
75,699 | Series 1991-137, Class H, | ||||||
7.00%, 10/25/2021 | 85,108 | ||||||
58,574 | Series 1992-136, Class PK, | ||||||
6.00%, 08/25/2022 | 64,088 | ||||||
39,543 | Series 1993-32, Class H, | ||||||
6.00%, 03/25/2023 | 42,954 | ||||||
417,039 | Series 2002-85, Class PD, | ||||||
5.50%, 05/25/2031 | 418,767 | ||||||
21,897 | Series 2004-90, Class YB, | ||||||
4.00%, 07/25/2032 | 22,185 | ||||||
1,419,413 | Series 2004-W6, Class 1A6, | ||||||
5.50%, 07/25/2034 | 1,485,456 | ||||||
269,690 | Series 2004-W10, Class | ||||||
A24, 5.00%, 08/25/2034 | 269,063 |
The accompanying notes are an integral part of these financial statements.
Page 40
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Residential Mortgage Backed Securities – 3.8% (cont.) | |||||||
$ | 221,809 | Government National | |||||
Mortgage Association | |||||||
(GNMA), | |||||||
Series 1999-4, Class ZB, | |||||||
6.00%, 02/20/2029 | $ | 251,135 | |||||
J.P. Morgan Alternative | |||||||
Loan Trust: | |||||||
1,932,282 | Series 2005-S1, Class 3A1, | ||||||
5.50%, 10/25/2020 | 1,831,351 | ||||||
976,455 | Series 2006-A1, Class 2A1, | ||||||
2.661%, 03/25/2036 | 507,476 | ||||||
350,098 | Series 2006-S2, Class A2, | ||||||
5.81%, 05/25/2036 | 348,563 | ||||||
338,426 | Lehman Mortgage Trust, | ||||||
Series 2006-4, Class 3A1, | |||||||
5.00%, 08/25/2021 | 303,170 | ||||||
Master Alternative | |||||||
Loans Trust: | |||||||
1,057,823 | Series 2004-1, Class 1A1, | ||||||
5.00%, 01/25/2019 | 1,081,057 | ||||||
258,412 | Series 2004-3, Class 1A1, | ||||||
5.00%, 03/25/2019 | 261,306 | ||||||
215,671 | Series 2005-3, Class 4A1, | ||||||
5.50%, 03/25/2020 | 212,273 | ||||||
31,461 | Merrill Lynch Mortgage | ||||||
Investors Trust, | |||||||
Series 2005-A8, Class | |||||||
A1C1, 5.25%, 08/25/2036 | 31,237 | ||||||
101,623 | Residential Accredit Loans, | ||||||
Inc., Series 2004-QS6, | |||||||
Class A1, 5.00%, | |||||||
05/25/2019 | 100,956 | ||||||
187,059 | Salomon Brothers | ||||||
Mortgage Securities VII, | |||||||
Series 2003-UP2, Class A2, | |||||||
4.00%, 06/25/2033 | 193,627 | ||||||
37,721 | Structured Asset | ||||||
Securities Corporation, | |||||||
Series 2005-2XS, Class | |||||||
1A2A, 4.51%, | |||||||
02/25/2035 | 37,620 | ||||||
Washington Mutual, Inc. | |||||||
Pass-Thru Certificates: | |||||||
1,342,489 | Series 2004-CB1, Class 5A, | ||||||
5.00%, 06/25/2019 | 1,377,895 | ||||||
1,744,550 | Series 2004-CB3, Class 3A, | ||||||
5.50%, 10/25/2019 | 1,784,960 | ||||||
601,967 | Series 2004-CB3, Class 4A, | ||||||
6.00%, 10/25/2019 | 623,658 | ||||||
691,000 | Series 2004-CB4, Class | ||||||
21A, 5.50%, 12/25/2019 | 706,505 | ||||||
569,469 | Series 2004-CB4, Class | ||||||
22A, 6.00%, 12/25/2019 | 589,940 | ||||||
27,032,149 | |||||||
Taxable Municipal Bonds – 4.1% | |||||||
Alaska Municipal Bond | |||||||
Bank Authority: | |||||||
1,000,000 | 4.309%, 08/01/2018 | 1,092,760 | |||||
1,340,000 | 4.459%, 08/01/2019 | 1,462,597 | |||||
3,375,000 | California Qualified | ||||||
School Construction Bonds, | |||||||
5.955%, 03/01/2019 | 3,701,430 | ||||||
2,500,000 | California School | ||||||
Finance Authority, | |||||||
4.426%, 07/01/2020 | 2,668,125 | ||||||
California State: | |||||||
900,000 | 5.45%, 04/01/2015 | 981,783 | |||||
500,000 | 5.50%, 03/01/2016 | 553,955 | |||||
2,000,000 | Central Valley Support | ||||||
Joint Powers Agency, | |||||||
5.326%, 09/01/2022 | 2,034,660 |
The accompanying notes are an integral part of these financial statements.
Page 41
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Taxable Municipal Bonds – 4.1% (cont.) | |||||||
$ | 2,500,000 | Contra Costa | |||||
County California | |||||||
Pension Obligation, | |||||||
5.14%, 06/01/2017 | $ | 2,745,550 | |||||
1,465,000 | Dallas Independent | ||||||
School District, | |||||||
4.95%, 02/15/2022 | |||||||
(Callable 02/15/2021) | 1,685,966 | ||||||
1,000,000 | Davie Florida Water | ||||||
& Sewer Revenue, | |||||||
6.062%, 10/01/2025 | |||||||
(Callable 10/01/2020) | 1,098,620 | ||||||
3,000,000 | Government Development | ||||||
Bank for Puerto Rico, | |||||||
4.704%, 05/01/2016 | 3,107,640 | ||||||
5,000,000 | Illinois State, | ||||||
3.636%, 02/01/2014 | 5,095,650 | ||||||
2,100,000 | North East Independent | ||||||
School District Texas, | |||||||
5.24%, 08/01/2027 | 2,345,616 | ||||||
1,260,000 | Tobacco Settlement | ||||||
Authority Iowa, | |||||||
6.50%, 06/01/2023 | |||||||
(Callable 06/01/2015) | 1,177,218 | ||||||
29,751,570 | |||||||
Utilities – 7.9% | |||||||
3,000,000 | Ameren Corporation, | ||||||
8.875%, 05/15/2014 | 3,361,698 | ||||||
2,765,000 | Baltimore Gas & | ||||||
Electric Co. Senior | |||||||
Unsecured Notes, | |||||||
6.125%, 07/01/2013 | 2,969,958 | ||||||
1,150,000 | Centrais Eletricas | ||||||
Brasileiras SA, | |||||||
5.75%, 10/27/2021 | |||||||
(Acquired 10/20/2011 | |||||||
through 10/25/2011; | |||||||
Cost $1,152,442)* f @ | 1,194,850 | ||||||
Dominion Resources Inc.: | |||||||
1,000,000 | Series C, 5.15%, | ||||||
07/15/2015 | 1,114,527 | ||||||
800,000 | 6.00%, 11/30/2017 | 943,772 | |||||
1,250,000 | DTE Energy Company, | ||||||
7.625%, 05/15/2014 | 1,420,479 | ||||||
3,000,000 | El Paso Pipeline Partners | ||||||
Operating Co LLC, | |||||||
4.10%, 11/15/2015 | 3,071,184 | ||||||
2,000,000 | Enel Finance International, | ||||||
5.70%, 01/15/2013 | |||||||
(Acquired 03/31/2010; | |||||||
Cost $2,063,644)* f | 2,007,540 | ||||||
Energy Transfer Partners: | |||||||
600,000 | 5.65%, 08/01/2012 | 613,003 | |||||
1,336,000 | 5.95%, 02/01/2015 | 1,444,046 | |||||
515,000 | 9.70%, 03/15/2019 | 630,952 | |||||
1,000,000 | Exelon Corporation, | ||||||
4.90%, 06/15/2015 | 1,077,479 | ||||||
2,585,000 | Exelon Generation | ||||||
Company, LLC, | |||||||
5.35%, 01/15/2014 | 2,761,158 | ||||||
2,500,000 | Kinder Morgan Finance, | ||||||
5.70%, 01/05/2016 f | 2,556,250 | ||||||
134,339 | Kiowa Power Partners LLC, | ||||||
4.811%, 12/30/2013 | |||||||
(Acquired 11/19/2004; | �� | ||||||
Cost $134,339)* | 134,333 | ||||||
3,139,000 | Midamerican Energy | ||||||
Holdings Co., | |||||||
5.875%, 10/01/2012 | 3,249,414 |
The accompanying notes are an integral part of these financial statements.
Page 42
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
Utilities – 7.9% (cont.) | |||||||
$ | 2,475,000 | National Grid PLC | |||||
Senior Unsecured Notes, | |||||||
6.30%, 08/01/2016 f | $ | 2,840,134 | |||||
2,000,000 | National Rural | ||||||
Utilities Corporation, | |||||||
10.375%, 11/01/2018 | 2,877,508 | ||||||
2,000,000 | Nisource Finance Corp., | ||||||
4.45%, 12/01/2021 @ | 2,043,644 | ||||||
1,775,000 | PPL Energy Supply, | ||||||
LLC, Series A, | |||||||
5.70%, 10/15/2015 | 1,925,937 | ||||||
PSE&G Power LLC: | |||||||
425,000 | 5.00%, 04/01/2014 @ | 455,106 | |||||
144,000 | 5.32%, 09/15/2016 | 160,614 | |||||
220,000 | 5.125%, 04/15/2020 | 246,789 | |||||
662,179 | RGS (I&M) Funding | ||||||
Corporation Debentures, | |||||||
9.82%, 12/07/2022 | 802,713 | ||||||
Rockies Express | |||||||
Pipeline LLC: | |||||||
3,000,000 | 3.90%, 04/15/2015 | ||||||
(Acquired 02/17/2011; | |||||||
Cost $3,000,375)* | 2,964,576 | ||||||
1,000,000 | 5.625%, 04/15/2020 | ||||||
(Acquired 03/17/2010; | |||||||
Cost $999,110)* | 952,336 | ||||||
2,000,000 | Sempra Energy, | ||||||
2.00%, 03/15/2014 | 2,025,338 | ||||||
Spectra Energy | |||||||
Capital LLC: | |||||||
1,500,000 | 5.50%, 03/01/2014 | 1,601,702 | |||||
2,700,000 | 5.668%, 08/15/2014 | 2,955,128 | |||||
2,500,000 | Trans-Allegheny Interstate | ||||||
Line Company, | |||||||
4.00%, 01/15/2015 | |||||||
(Acquired 01/19/2010; | |||||||
Cost $2,490,650)* | 2,605,950 | ||||||
575,000 | Vectren Utility | ||||||
Holdings, Inc., | |||||||
5.25%, 08/01/2013 | 610,745 | ||||||
2,000,000 | West Penn Power | ||||||
Company, | |||||||
5.875%, 08/15/2016 | |||||||
(Acquired 10/25/2010; | |||||||
Cost $2,236,801)* | 2,288,794 | ||||||
1,000,000 | Williams Partners LP, | ||||||
5.25%, 03/15/2020 | 1,106,968 | ||||||
57,014,625 | |||||||
U.S. Government Agency Issues – 9.3% | |||||||
7,000,000 | Federal Farm Credit Bank, | ||||||
3.00%, 09/22/2014 | 7,446,474 | ||||||
6,800,000 | Federal Home Loan | ||||||
Mortgage Corporation | |||||||
(FHLMC), | |||||||
2.50%, 05/27/2016 | 7,201,710 | ||||||
Federal National Mortgage | |||||||
Association (FNMA): | |||||||
32,125,000 | 2.75%, 03/13/2014 | 33,662,695 | |||||
7,500,000 | 2.625%, 11/20/2014 | 7,935,180 | |||||
3,325,000 | 2.375%, 04/11/2016 | 3,513,039 | |||||
6,700,000 | 1.375%, 11/15/2016 @ | 6,759,174 | |||||
66,518,272 | |||||||
U.S. Treasury Obligations – 29.0% | |||||||
U.S. Treasury Bonds: | |||||||
52,725,000 | 2.375%, 03/31/2016 @ | 56,461,041 | |||||
58,200,000 | 2.375%, 07/31/2017 @ | 62,551,381 | |||||
30,400,000 | 3.875%, 05/15/2018 | 35,458,743 | |||||
12,375,000 | 9.125%, 05/15/2018 @ | 18,462,918 |
The accompanying notes are an integral part of these financial statements.
Page 43
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 98.2% (cont.) | |||||||
U.S. Treasury Obligations – 29.0% (cont.) | |||||||
$ | 5,000,000 | 2.625%, 08/15/2020 @ | $ | 5,392,580 | |||
10,000,000 | 7.875%, 02/15/2021 @ | 15,260,160 | |||||
10,000,000 | 6.25%, 08/15/2023 @ | 14,312,500 | |||||
207,899,323 | |||||||
Total Long-Term | |||||||
Investments | |||||||
(Cost $680,641,371) | 704,642,715 | ||||||
Shares | |||||||
SHORT-TERM INVESTMENTS – 1.8% | |||||||
Money Market Mutual Fund – 1.8% | |||||||
12,942,689 | Short-Term Investments | ||||||
Trust – Liquid Assets | |||||||
Portfolio, 0.16% « | 12,942,689 | ||||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $12,942,689) | 12,942,689 | ||||||
Principal | |||||||
Amount | |||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 19.4% | |||||||
Commercial Paper – 0.2% | |||||||
$ | 2,204,655 | Atlantic East | |||||
Funding LLC, | |||||||
0.610%, 03/25/2012 † ** | 1,376,824 | ||||||
Total Commercial Paper | |||||||
(Cost $2,204,655) | 1,376,824 | ||||||
Shares | |||||||
Investment Companies – 19.2% | |||||||
138,206,906 | Mount Vernon Securities | ||||||
Lending Trust Prime | |||||||
Portfolio, 0.23% « | 138,206,906 | ||||||
Total Investment | |||||||
Companies | |||||||
(Cost $138,206,906) | 138,206,906 | ||||||
Total Investments | |||||||
Purchased With Cash | |||||||
Proceeds From | |||||||
Securities Lending | |||||||
(Cost $140,411,561) | 139,583,730 | ||||||
Total Investments | |||||||
(Cost $833,995,621) | |||||||
– 119.4% | 857,169,134 | ||||||
Asset Relating to Securities | |||||||
Lending Investments – 0.1% | |||||||
Support | |||||||
Agreement** ^ a † | 827,831 | ||||||
Total (Cost $0) | 827,831 | ||||||
Liabilities in Excess of | |||||||
Other Assets – (19.5)% | (140,051,822 | ) | |||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 717,945,143 |
The accompanying notes are an integral part of these financial statements.
Page 44
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2011 |
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, 2011. |
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, 2011 |
Summary of Fair Value Exposure at December 31, 2011
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, 2011 |
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2011:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 10,020,965 | $ | — | $ | 10,020,965 | ||||||||
Commercial Mortgage Backed Securities | — | 23,533,137 | — | 23,533,137 | ||||||||||||
Corporate Debt Securities | — | 325,376,179 | 1,461 | 325,377,640 | ||||||||||||
Other Government Related Securities | — | 14,509,659 | — | 14,509,659 | ||||||||||||
Residential Mortgage Backed Securities | — | 27,032,149 | — | 27,032,149 | ||||||||||||
Taxable Municipal Bonds | — | 29,751,570 | — | 29,751,570 | ||||||||||||
U.S. Government Agency Issues | — | 66,518,272 | — | 66,518,272 | ||||||||||||
U.S. Treasury Obligations | — | 207,899,323 | — | 207,899,323 | ||||||||||||
Total Fixed Income | — | 704,641,254 | 1,461 | 704,642,715 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Fund | 12,942,689 | — | — | 12,942,689 | ||||||||||||
Total Short-Term Investments | 12,942,689 | — | — | 12,942,689 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 1,376,824 | — | 1,376,824 | ||||||||||||
Money Market Mutual Fund | 138,206,906 | — | — | 138,206,906 | ||||||||||||
Total Investments Purchased with | ||||||||||||||||
Cash Proceeds from Securities Lending | 138,206,906 | 1,376,824 | — | 139,583,730 | ||||||||||||
Total Investments | $ | 151,149,595 | $ | 706,018,078 | $ | 1,461 | $ | 857,169,134 | ||||||||
Asset Relating to Securities Lending Investments | $ | — | $ | 827,831 | $ | — | $ | 827,831 |
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. Transfers were made out of Level 2 into Level 3 due to a security being priced at fair value by the Valuation Committee instead of the Fund’s pricing vendor.
Page 47
Baird Intermediate Bond Fund
Schedule of Investments December 31, 2011 |
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, 2010 | $ | — | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | — | |||
Change in unrealized appreciation (depreciation) | — | |||
Purchases | — | |||
Sales | — | |||
Transfers in and/or out of Level 3* | 1,461 | |||
Balance as of December 31, 2011 | $ | 1,461 |
*Transfers between levels are recognized at the end of the reporting 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 strives to achieve an annual rate of return, before Fund expenses, greater than the annual rate of the total return of the Barclays Capital 7-Year General Obligation Bond Index. The Barclays Capital 7-Year General Obligation Bond Index is an unmanaged, market value weighted index consisting of investment grade state and local general obligation bonds that have been issued as part of an offering of at least $50 million; have a minimum amount outstanding of at least $5 million; have been issued within the last five years; and have a maturity of six to eight years.
The Fund delivered very solid absolute returns in 2011. The Fund’s long-term focus on high quality issues detracted from relative performance for the year as lower quality issues significantly outperformed higher quality issues.
In 2011, low new issue supply was a key driver of returns. Downgrades out-paced upgrades 5 to 1. We remain concerned that declining credit fundamentals in many municipalities could result in continued downgrades and price declines in 2012. We continue to emphasize high quality, intermediate holdings.
The Fund was comprised of a very broadly diversified portfolio at year end, with 58% of its investments in pre-refunded bonds. A pre-refunded municipal bond is one whose interest and principal payments are paid from an escrow account which typically holds U.S. Treasury and/or U.S. Agency securities. As a result, pre-refunded municipal bonds are regarded as among the safest municipal bonds available.
With its focus on high quality holdings and intermediate duration, we believe the Fund is well-positioned for 2012.
Portfolio Characteristics
Quality Distribution* | Sector Weightings* |
![]() | ![]() |
Net Assets: | $1,094,067,902 | Annualized Expense Ratio: | |||
SEC 30-Day Yield:*** | Institutional Class: | 0.30 | % | ||
Institutional Class: | 1.69% | Investor Class: | 0.55 | %**** | |
Investor Class: | 1.45% | Portfolio Turnover Rate: | 8.0 | % | |
Average Effective Duration: | 5.00 years | Total Number of Holdings: | 291 | ||
Average Effective Maturity: | 6.16 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, 2011. |
**** | 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
Total Returns
Average Annual | ||||
Since | ||||
For the Periods Ended December 31, 2011 | One Year | Five Years | Ten Years | Inception(1) |
Institutional Class Shares | 8.55% | 5.68% | 5.15% | 5.25% |
Investor Class Shares | 8.30% | 5.39% | 4.88% | 4.98% |
Barclays Capital 7-Year | ||||
General Obligation Bond Index(2) | 10.58% | 6.43% | 5.69% | 5.51% |
(1) | For the period from March 30, 2001 (commencement of operations) through December 31, 2011. |
(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, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% | |||||||
Alabama – 2.1% | |||||||
$ | 1,000,000 | Alabama State | |||||
Public School & | |||||||
College Authority, | |||||||
5.00%, 05/01/2019 | $ | 1,232,470 | |||||
1,000,000 | Camden Alabama | ||||||
Industrial Development | |||||||
Board Revenue, | |||||||
6.125%, 12/01/2024 | |||||||
(Pre-refunded to | |||||||
12/01/2013) | 1,104,320 | ||||||
1,080,000 | Gulf Shores Alabama, | ||||||
5.00%, 12/15/2018 | |||||||
(Callable 12/15/2017) | 1,218,726 | ||||||
Montgomery Alabama | |||||||
Special Care | |||||||
Facility Revenue: | |||||||
1,540,000 | 5.00%, 11/15/2015 | ||||||
(Pre-refunded to | |||||||
11/15/2014) | 1,724,446 | ||||||
11,385,000 | 5.00%, 11/15/2021 | ||||||
(Pre-refunded to | |||||||
11/15/2014) | 12,783,078 | ||||||
3,985,000 | 5.25%, 11/15/2029 | ||||||
(Pre-refunded to | |||||||
11/15/2014) | 4,502,532 | ||||||
22,565,572 | |||||||
Alaska – 0.1% | |||||||
1,000,000 | Alaska State Housing | ||||||
Finance Corporation, | |||||||
5.00%, 06/01/2017 | |||||||
(Callable 06/01/2015) | |||||||
(Insured by NPFGC) | 1,052,990 | ||||||
Arizona – 1.5% | |||||||
1,415,000 | Arizona Health | ||||||
Facilities Authority | |||||||
Hospital Revenue, | |||||||
6.375%, 12/01/2037 | |||||||
(Pre-refunded | |||||||
to 12/01/2012) | 1,504,088 | ||||||
2,375,000 | Arizona School Facilities | ||||||
Board Revenue, | |||||||
5.75%, 07/01/2018 | |||||||
(Pre-refunded to | |||||||
07/01/2014) | 2,676,079 | ||||||
1,000,000 | Gila County Arizona | ||||||
Unified School | |||||||
District Bonds, | |||||||
5.25%, 07/01/2027 | |||||||
(Callable 07/01/2017) | 1,084,620 | ||||||
1,860,000 | Maricopa County | ||||||
Arizona University | |||||||
School District | |||||||
No. 48 Scottsdale, | |||||||
4.00%, 07/01/2026 | |||||||
(Pre-refunded to | |||||||
07/01/2016) | 2,118,391 | ||||||
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) | 1,669,222 | ||||||
Pima County Arizona | |||||||
Industrial Development | |||||||
Authority: | |||||||
1,000,000 | 7.125%, 07/01/2024 | ||||||
(Pre-refunded to | |||||||
07/01/2014) | 1,144,590 |
The accompanying notes are an integral part of these financial statements.
Page 52
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
Arizona – 1.5% (cont.) | |||||||
$ | 2,870,000 | 7.50%, 07/01/2034 | |||||
(Pre-refunded to | |||||||
07/01/2014) | $ | 3,194,195 | |||||
2,675,000 | 7.50%, 07/01/2034 | ||||||
(Pre-refunded to | |||||||
07/01/2014) | 3,086,308 | ||||||
16,477,493 | |||||||
California – 6.4% | |||||||
4,260,000 | Bakersfield California | ||||||
Certificates Participation, | |||||||
0.00%, 04/15/2021 | |||||||
(ETM) ^ | 3,464,615 | ||||||
2,480,000 | Coalinga California | ||||||
Regional Medical Center, | |||||||
5.125%, 03/01/2032 | |||||||
(Pre-refunded to | |||||||
03/01/2015) | 2,757,611 | ||||||
3,000,000 | Contra Costa County | ||||||
California Certificate | |||||||
Participation, 0.00%, | |||||||
11/01/2014 (ETM) ^ | 2,936,460 | ||||||
3,620,000 | Golden State Tobacco | ||||||
Securitization | |||||||
Corporation Asset | |||||||
Backed Bonds, | |||||||
5.50%, 06/01/2043 | |||||||
(Pre-refunded to | |||||||
06/01/2013) | 3,873,183 | ||||||
Golden State Tobacco | |||||||
Securitization Corporation | |||||||
Revenue Bonds: | |||||||
7,320,000 | 6.25%, 06/01/2033 | ||||||
(Callable 06/01/2013) | |||||||
(Pre-refunded to | |||||||
various dates) | 7,787,748 | ||||||
875,000 | 5.00%, 06/01/2038 | ||||||
(Pre-refunded to | |||||||
06/01/2013) | 930,081 | ||||||
6,950,000 | 5.625%, 06/01/2038 | ||||||
(Pre-refunded to | |||||||
06/01/2013) | 7,448,246 | ||||||
820,000 | Mount Diablo | ||||||
California Hospital | |||||||
District Revenue, | |||||||
5.00%, 12/01/2013 | |||||||
(ETM) | 864,707 | ||||||
3,725,000 | Pittsburg California | ||||||
Redevelopment Agency | |||||||
Residential Mortgage | |||||||
Revenue, 9.60%, | |||||||
06/01/2016 (ETM) | 5,075,238 | ||||||
1,800,000 | Port Oakland | ||||||
California Revenue, | |||||||
5.00%, 11/01/2017 | |||||||
(Insured by NPFGC) | 2,043,396 | ||||||
San Joaquin Hills | |||||||
California Transportation | |||||||
Corridor Agency Toll | |||||||
Road Revenue: (ETM) ^ | |||||||
6,865,000 | 0.00%, 01/01/2020 | 5,907,882 | |||||
14,000,000 | 0.00%, 01/01/2023 | 10,660,720 | |||||
17,295,000 | San Marcos California | ||||||
Public Facilities | |||||||
Authority Revenue, | |||||||
0.00%, 09/01/2019 | |||||||
(ETM) ^ | 15,032,295 |
The accompanying notes are an integral part of these financial statements.
Page 53
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
California – 6.4% (cont.) | |||||||
$ | 1,130,000 | Woodside California | |||||
Elementary School | |||||||
District Government | |||||||
School Bonds, | |||||||
5.00%, 10/01/2023 | |||||||
(Pre-refunded to | |||||||
10/01/2016) | $ | 1,324,936 | |||||
70,107,118 | |||||||
Colorado – 5.2% | |||||||
795,000 | Colorado Educational | ||||||
& Cultural Facilities | |||||||
Authority, 7.625%, | |||||||
03/15/2032 (Pre-refunded | |||||||
to 03/15/2013) | 854,466 | ||||||
8,640,000 | Colorado Springs | ||||||
Colorado Utilities | |||||||
Revenue Bonds, 5.875%, | |||||||
11/15/2017 (ETM) | 9,582,969 | ||||||
1,000,000 | Conservatory | ||||||
Metropolitan | |||||||
District Colorado, | |||||||
6.75%, 12/01/2034 | |||||||
(Pre-refunded to | |||||||
12/01/2013) | 1,117,400 | ||||||
1,330,000 | County of El Paso | ||||||
Colorado Mortgage | |||||||
Revenue Bonds, | |||||||
0.00%, 09/01/2015 | |||||||
(ETM) ^ | 1,281,907 | ||||||
Dawson Ridge | |||||||
Metropolitan District | |||||||
No. 1 Colorado: (ETM) ^ | |||||||
7,830,000 | 0.00%, 10/01/2022 | 5,964,659 | |||||
12,745,000 | 0.00%, 10/01/2022 | 9,708,759 | |||||
Denver Colorado | |||||||
Convention Center & | |||||||
Hotel Authority | |||||||
Revenue Bonds: | |||||||
1,000,000 | 5.00%, 12/01/2021 | ||||||
(Pre-refunded to | |||||||
12/01/2013) | 1,082,040 | ||||||
2,950,000 | 5.00%, 12/01/2022 | ||||||
(Pre-refunded to | |||||||
12/01/2013) | 3,192,018 | ||||||
1,500,000 | 5.00%, 12/01/2023 | ||||||
(Pre-refunded to | |||||||
12/01/2013) | 1,623,060 | ||||||
5,065,000 | 5.00%, 12/01/2024 | ||||||
(Pre-refunded to | |||||||
12/01/2013) | 5,480,533 | ||||||
7,975,000 | Denver Colorado Health | ||||||
& Hospital Authority | |||||||
Healthcare Revenue, | |||||||
6.25%, 12/01/2033 | |||||||
(Pre-refunded to | |||||||
12/01/2014) | 9,250,761 | ||||||
6,750,000 | Regional Transportation | ||||||
District Colorado | |||||||
Sales Tax Revenue, | |||||||
5.00%, 11/01/2036 | |||||||
(Pre-refunded to | |||||||
11/01/2016) | 8,074,215 | ||||||
57,212,787 | |||||||
Delaware – 0.1% | |||||||
650,000 | Delaware State | ||||||
Economic Development | |||||||
Authority Revenue, | |||||||
6.75%, 01/01/2013 | |||||||
(ETM) | 668,525 |
The accompanying notes are an integral part of these financial statements.
Page 54
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
Florida – 11.9% | |||||||
$ | 4,040,000 | Bartram Springs | |||||
Community Development | |||||||
District Special Assessment, | |||||||
6.65%, 05/01/2034 | |||||||
(Pre-refunded to | |||||||
05/01/2013) | $ | 4,417,659 | |||||
1,925,000 | Brevard County Florida | ||||||
School Board, | |||||||
5.00%, 07/01/2020 | |||||||
(Callable 07/01/2017) | |||||||
(Insured by AMBAC) | 2,140,119 | ||||||
Broward County | |||||||
Florida School Board: | |||||||
8,000,000 | 5.25%, 07/01/2022 | ||||||
(Callable 07/01/2021) | 9,212,720 | ||||||
4,865,000 | 5.25%, 07/01/2023 | ||||||
(Callable 07/01/2021) | 5,517,932 | ||||||
2,265,000 | County of St. Lucie | ||||||
Florida, 6.00%, | |||||||
10/01/2020 (ETM) | 2,923,390 | ||||||
1,980,000 | Dade County Florida | ||||||
Health Facility Authority | |||||||
Hospital Revenue, 5.75%, | |||||||
05/01/2021 (ETM) | 2,395,107 | ||||||
3,000,000 | Escambia County | ||||||
Florida Housing Finance | |||||||
Authority Multifamily | |||||||
Housing Revenue, | |||||||
0.00%, 10/15/2018 | |||||||
(ETM) ^ | 2,664,030 | ||||||
13,800,000 | Florida State | ||||||
Board of Education, | |||||||
5.00%, 06/01/2022 | |||||||
(Callable 06/01/2019) | 16,385,568 | ||||||
2,500,000 | Florida State | ||||||
Department of | |||||||
Management Services, | |||||||
5.00%, 08/01/2018 | 2,936,150 | ||||||
Florida State Mid-Bay | |||||||
Bridge Authority | |||||||
Revenue: (ETM) | |||||||
4,675,000 | 6.875%, 10/01/2022 | 6,511,013 | |||||
3,175,000 | 6.875%, 10/01/2022 | 4,421,918 | |||||
1,385,000 | Florida State Municipal | ||||||
Power Agency Revenue, | |||||||
5.00%, 10/01/2017 | |||||||
(Callable 02/13/2012) | |||||||
(ETM) | 1,696,680 | ||||||
1,500,000 | Gulf Environmental | ||||||
Services Inc. Florida | |||||||
Revenue Bonds, 5.00%, | |||||||
10/01/2018 (ETM) | 1,705,875 | ||||||
Highlands County | |||||||
Florida Health | |||||||
Facilities Revenue: | |||||||
9,650,000 | 5.875%, 11/15/2029 | ||||||
(Pre-refunded to | |||||||
11/15/2013) | 10,571,672 | ||||||
5,000,000 | 5.375%, 11/15/2035 | ||||||
(Pre-refunded to | |||||||
11/15/2013) | 5,431,400 | ||||||
2,000,000 | Hillsborough County | ||||||
Florida School Board | |||||||
Master Lease Program, | |||||||
5.50%, 07/01/2018 | |||||||
(Insured by NPFGC) | 2,349,480 |
The accompanying notes are an integral part of these financial statements.
Page 55
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
Florida – 11.9% (cont.) | |||||||
Hillsborough County | |||||||
Industrial Development | |||||||
Authority: | |||||||
$ | 1,855,000 | 5.625%, 08/15/2029 | |||||
(Pre-refunded to | |||||||
08/15/2018) | $ | 2,380,614 | |||||
1,500,000 | 8.00%, 08/15/2032 | ||||||
(Pre-refunded to | |||||||
08/15/2019) | 2,166,450 | ||||||
2,000,000 | Islands At Doral | ||||||
(SW) Community | |||||||
Development District, | |||||||
6.375%, 05/01/2035 | |||||||
(Pre-refunded to | |||||||
05/01/2013) | 2,153,860 | ||||||
300,000 | Jacksonville Florida | ||||||
Health Facility Authority | |||||||
Hospital Revenue, | |||||||
11.50%, 10/01/2012 | |||||||
(Callable 02/13/2012) | |||||||
(ETM) | 324,825 | ||||||
2,195,000 | Laguna Lakes | ||||||
Community Development | |||||||
District Special Assessment | |||||||
Revenue Bonds, | |||||||
6.40%, 05/01/2033 | |||||||
(Pre-refunded to | |||||||
05/01/2013) | 2,358,154 | ||||||
1,470,000 | Miami Beach Florida | ||||||
Resort Tax Revenue, | |||||||
6.25%, 10/01/2022 (ETM) | 1,942,502 | ||||||
7,100,000 | Miami-Dade | ||||||
County Florida, | |||||||
4.50%, 10/01/2020 | 8,148,244 | ||||||
3,000,000 | Miami Dade County | ||||||
Florida Entitlement | |||||||
Revenue Bonds, | |||||||
5.00%, 08/01/2015 | |||||||
(Insured by NPFGC) | 3,303,300 | ||||||
3,000,000 | Miami-Dade County | ||||||
Florida School Board, | |||||||
5.00%, 05/01/2016 | |||||||
(Insured by NPFGC) | 3,324,840 | ||||||
2,420,000 | Miami-Dade County | ||||||
Florida Water & | |||||||
Sewer Revenue, | |||||||
5.00%, 10/01/2013 | |||||||
(Insured by NPFGC) | 2,582,067 | ||||||
4,220,000 | Orange County Florida | ||||||
Health Facilities Authority | |||||||
Revenue Bond, 6.25%, | |||||||
10/01/2013 (ETM) | 4,643,435 | ||||||
880,000 | Orlando Florida Utilities | ||||||
Commission Water & | |||||||
Electric Revenue, 6.75%, | |||||||
10/01/2017 (ETM) | 1,038,638 | ||||||
1,000,000 | Palm Beach County | ||||||
Florida Revenue, | |||||||
5.00%, 11/01/2018 | |||||||
(Callable 11/01/2017) | 1,149,250 | ||||||
2,460,000 | Pinellas County Housing | ||||||
Finance Authority, | |||||||
4.25%, 03/01/2027 | |||||||
(Callable 09/01/2019) | 2,613,258 | ||||||
1,000,000 | Sarasota County | ||||||
Florida School Board, | |||||||
5.00%, 07/01/2015 | |||||||
(Insured by NPFGC) | 1,107,740 |
The accompanying notes are an integral part of these financial statements.
Page 56
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
Florida – 11.9% (cont.) | |||||||
$ | 5,200,000 | Seminole County | |||||
Florida Water & | |||||||
Sewage Revenue, | |||||||
6.00%, 10/01/2019 | |||||||
(ETM) | $ | 6,386,692 | |||||
3,000,000 | Sunrise Florida Utility | ||||||
System Revenue, 5.50%, | |||||||
10/01/2018 (ETM) | 3,583,020 | ||||||
130,487,602 | |||||||
Georgia – 3.8% | |||||||
8,445,000 | Atlanta Georgia Water | ||||||
& Wastewater Revenue, | |||||||
5.50%, 11/01/2017 | |||||||
(Insured by AGM) | 10,143,881 | ||||||
7,745,000 | Forsyth County Georgia | ||||||
Hospital Authority | |||||||
Revenue Anticipation | |||||||
Certificates, 6.375%, | |||||||
10/01/2028 (Callable | |||||||
02/13/2012) (ETM) | 10,130,537 | ||||||
470,000 | Fulton County Georgia | ||||||
Hospital Authority | |||||||
Revenue, 7.875%, | |||||||
10/01/2013 (Callable | |||||||
02/13/2012) (ETM) | 510,021 | ||||||
Georgia Municipal | |||||||
Electric Authority | |||||||
Power Revenue: | |||||||
120,000 | 6.50%, 01/01/2017 | ||||||
(Insured by AGM) | 137,632 | ||||||
7,350,000 | 6.50%, 01/01/2017 | ||||||
(Insured by AGM) | 8,936,350 | ||||||
7,400,000 | Gwinnett County | ||||||
Georgia School District, | |||||||
5.00%, 02/01/2026 | |||||||
(Pre-refunded to | |||||||
02/01/2018) | 9,100,446 | ||||||
2,555,000 | Northwestern Gwinnett | ||||||
County Georgia | |||||||
Facilities Corporation I | |||||||
Certificate Participation, | |||||||
5.75%, 06/15/2019 | |||||||
(Callable 06/15/2014) | |||||||
(Pre-refunded to | |||||||
06/15/2015) | 2,810,679 | ||||||
41,769,546 | |||||||
Illinois – 10.4% | |||||||
2,360,000 | Chicago Illinois, | ||||||
5.00%, 01/01/2017 | |||||||
(Callable 01/01/2016) | |||||||
(Insured by AGM) | 2,632,061 | ||||||
Chicago Illinois | |||||||
Board of Education: | |||||||
2,100,000 | 5.00%, 12/01/2017 | ||||||
(Insured by AMBAC) | 2,431,485 | ||||||
4,345,000 | 5.00%, 12/01/2017 | ||||||
(Callable 12/01/2016) | |||||||
(Insured by AGM) | 4,953,300 | ||||||
1,000,000 | 6.00%, 01/01/2020 | ||||||
(Insured by NPFGC) | 1,152,300 | ||||||
Chicago Illinois Public | |||||||
Building Community | |||||||
Building Revenue: (ETM) | |||||||
3,725,000 | 7.00%, 01/01/2015 | 4,052,502 | |||||
1,555,000 | 7.00%, 01/01/2020 | 2,088,318 |
The accompanying notes are an integral part of these financial statements.
Page 57
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
Illinois – 10.4% (cont.) | |||||||
$ | 2,605,000 | Cook County Illinois | |||||
School District No. 097, | |||||||
9.00%, 12/01/2015 | |||||||
(Insured by NPFGC) | $ | 3,251,066 | |||||
1,430,000 | Cook County Illinois | ||||||
School District No. 100, | |||||||
8.10%, 12/01/2016 | |||||||
(ETM) | 1,919,718 | ||||||
2,000,000 | Cook County Illinois | ||||||
School District No. 159, | |||||||
0.00%, 12/01/2022 | |||||||
(ETM) ^ | 1,492,820 | ||||||
1,095,000 | Dupage County Illinois | ||||||
Stormwater Project, | |||||||
5.60%, 01/01/2021 | 1,337,575 | ||||||
12,285,000 | Illinois Development | ||||||
Financial Authority, | |||||||
0.00%, 07/15/2023 | |||||||
(ETM) ^ | 8,987,215 | ||||||
2,330,000 | Illinois Finance | ||||||
Authority Revenue, | |||||||
5.50%, 08/15/2043 | |||||||
(Pre-refunded to | |||||||
08/15/2014) | 2,618,198 | ||||||
1,000,000 | Illinois Municipal | ||||||
Electric Agency Power | |||||||
Supply Revenue Bonds, | |||||||
5.25%, 02/01/2016 | |||||||
(Insured by NPFGC) | 1,130,660 | ||||||
Illinois State: | |||||||
1,000,000 | 5.00%, 01/01/2019 | ||||||
(Insured by AGM) | 1,142,860 | ||||||
5,000,000 | 4.00%, 09/01/2019 | ||||||
(Callable 09/01/2018) | |||||||
(Insured by AGM) | 5,318,100 | ||||||
3,000,000 | 6.00%, 11/01/2026 | ||||||
(Insured by NPFGC) | 3,420,450 | ||||||
2,100,000 | Illinois State Toll | ||||||
Highway Authority | |||||||
Priority Revenue Bonds, | |||||||
5.50%, 01/01/2016 | |||||||
(Insured by AGM) | 2,398,641 | ||||||
Illinois State Toll | |||||||
Highway Authority | |||||||
Revenue Bonds: | |||||||
1,065,000 | 5.00%, 01/01/2026 | ||||||
(Pre-refunded to | |||||||
07/01/2016) | 1,262,355 | ||||||
2,055,000 | 5.00%, 01/01/2031 | ||||||
(Pre-refunded to | |||||||
07/01/2016) | 2,435,812 | ||||||
6,750,000 | Kane Cook & Dupage | ||||||
Counties Illinois | |||||||
Community United | |||||||
School District No. 303, | |||||||
5.00%, 01/01/2014 | |||||||
(Insured by AGM) | 7,230,465 | ||||||
2,130,000 | Kane Cook & Dupage | ||||||
Counties Illinois School | |||||||
District No. 46 Elgin, | |||||||
0.00%, 01/01/2013 | |||||||
(Insured by AGM) ^ | 2,099,988 | ||||||
Kane McHenry Cook & | |||||||
De Kalb Counties Illinois | |||||||
School District No. 300: | |||||||
1,000,000 | 9.00%, 01/01/2015 | ||||||
(Insured by AMBAC) | 1,191,810 | ||||||
6,140,000 | 7.00%, 01/01/2018 | ||||||
(Insured by AMBAC) | 7,567,980 |
The accompanying notes are an integral part of these financial statements.
Page 58
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
Illinois – 10.4% (cont.) | |||||||
$ | 13,625,000 | Kendall Kane & Will | |||||
Counties Community | |||||||
Unit School District | |||||||
No. 308, | |||||||
0.00%, 02/01/2021 ^ | $ | 9,752,503 | |||||
Lake County Illinois | |||||||
Community Consolidated | |||||||
School District: | |||||||
(Insured by NPFGC) ^ | |||||||
1,755,000 | 0.00%, 12/01/2012 | 1,715,495 | |||||
1,920,000 | 0.00%, 12/01/2013 | 1,832,256 | |||||
1,875,000 | 0.00%, 12/01/2014 | 1,729,481 | |||||
1,025,000 | Lake County Illinois | ||||||
Community High School | |||||||
District No. 124 Grant, | |||||||
5.00%, 12/01/2017 | 1,218,715 | ||||||
1,000,000 | Lake County Illinois | ||||||
Community High School | |||||||
District No. 128, | |||||||
5.00%, 01/01/2013 | 1,043,220 | ||||||
McHenry & Kane | |||||||
Counties Illinois | |||||||
Community School | |||||||
District No. 158: | |||||||
(Insured by NPFGC) ^ | |||||||
1,870,000 | 0.00%, 01/01/2013 | 1,813,788 | |||||
1,970,000 | 0.00%, 01/01/2016 | 1,726,843 | |||||
Metropolitan Pier & | |||||||
Exposition Authority | |||||||
Illinois: (ETM) | |||||||
1,805,000 | 5.50%, 06/15/2016 | 2,158,094 | |||||
2,000,000 | 5.50%, 12/15/2023 | 2,542,000 | |||||
2,000,000 | Northwest Suburban | ||||||
Illinois Municipal Joint | |||||||
Action Revenue, 5.00%, | |||||||
05/01/2014 (ETM) | 2,209,000 | ||||||
4,705,000 | Regional Transportation | ||||||
Authority Illinois, | |||||||
6.00%, 07/01/2022 | |||||||
(Insured by NPFGC) | 6,055,335 | ||||||
2,742,000 | Round Lake Illinois, | ||||||
6.70%, 03/01/2033 | |||||||
(Pre-refunded to | |||||||
03/01/2013) | 2,959,029 | ||||||
Southern Illinois | |||||||
University Revenue: | |||||||
(Insured by NPFGC) | |||||||
1,000,000 | 5.25%, 04/01/2018 | 1,154,160 | |||||
1,390,000 | 5.25%, 04/01/2019 | 1,621,588 | |||||
950,000 | Winnebago & Boone | ||||||
Counties Illinois School | |||||||
District No. 205, | |||||||
5.00%, 02/01/2013 | |||||||
(Insured by AMBAC) | 989,482 | ||||||
Winnebago County | |||||||
Illinois School District | |||||||
No. 122 Harlam-Loves | |||||||
Park: ^ | |||||||
155,000 | 0.00%, 01/01/2018 | ||||||
(ETM) | 143,170 | ||||||
1,205,000 | 0.00%, 01/01/2018 | ||||||
(Insured by AGM) | 1,007,585 | ||||||
113,787,423 | |||||||
Indiana – 1.6% | |||||||
1,990,000 | Franklin Community | ||||||
Multi-School | |||||||
Building Corp, | |||||||
5.00%, 07/15/2020 | 2,359,861 |
The accompanying notes are an integral part of these financial statements.
Page 59
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
Indiana – 1.6% (cont.) | |||||||
Hammond Indiana | |||||||
Multi-School | |||||||
Building Corporation | |||||||
Revenue Bonds: | |||||||
$ | 1,000,000 | 6.00%, 01/15/2018 | |||||
(ETM) | $ | 1,172,350 | |||||
1,330,000 | 5.00%, 07/15/2018 | ||||||
(Insured by NPFGC) | 1,570,358 | ||||||
1,115,000 | Indiana State Office | ||||||
Building Commissions | |||||||
Facilities Revenue Bonds, | |||||||
5.25%, 07/01/2017 | 1,305,654 | ||||||
820,000 | Indiana Toll Road | ||||||
Commission, 9.00%, | |||||||
01/01/2015 (ETM) | 925,960 | ||||||
1,155,000 | Indianapolis Local Public | ||||||
Improvement Bond Bank, | |||||||
5.50%, 01/01/2019 | |||||||
(Insured by NPFGC) | 1,409,862 | ||||||
3,460,000 | Indianapolis Local | ||||||
Public Improvement | |||||||
Bond Waterworks Project, | |||||||
5.50%, 07/01/2018 | |||||||
(Insured by NPFGC) | 4,214,661 | ||||||
1,000,000 | Perry Township | ||||||
Multi School | |||||||
Building Corporation, | |||||||
5.00%, 07/10/2018 | |||||||
(Callable 07/10/2015) | 1,083,600 | ||||||
1,650,000 | Purdue University | ||||||
Indiana Revenue, | |||||||
5.00%, 07/01/2015 | 1,881,842 | ||||||
1,000,000 | South Bend Indiana | ||||||
Community School | |||||||
Building Corporation, | |||||||
5.00%, 07/15/2017 | |||||||
(Insured by NPFGC) | 1,160,800 | ||||||
17,084,948 | |||||||
Iowa – 0.3% | |||||||
1,010,000 | Des Moines Iowa | ||||||
Metropolitan Wastewater | |||||||
Reclamation Authority, | |||||||
5.00%, 06/01/2015 | |||||||
(Callable 06/01/2014) | |||||||
(Insured by NPFGC) | 1,116,999 | ||||||
180,000 | Muscatine Iowa Electric | ||||||
Revenue, 6.70%, | |||||||
01/01/2013 (Callable | |||||||
07/01/2012) (ETM) | 185,143 | ||||||
2,000,000 | Wapello County Iowa | ||||||
Hospital Revenue, | |||||||
6.25%, 10/01/2022 | |||||||
(Pre-refunded to | |||||||
10/01/2012) | 2,083,460 | ||||||
3,385,602 | |||||||
Kansas – 0.2% | |||||||
1,865,000 | Wyandotte County | ||||||
Kansas Revenue, | |||||||
5.00%, 09/01/2019 | |||||||
(Callable 03/01/2019) | |||||||
(Insured by BHAC) | 2,252,827 | ||||||
Kentucky – 0.5% | |||||||
3,340,000 | Jefferson County | ||||||
Kentucky School District | |||||||
Financial School Building | |||||||
Revenue Bonds, | |||||||
5.50%, 01/01/2018 | |||||||
(Insured by AGM) | 4,081,079 |
The accompanying notes are an integral part of these financial statements.
Page 60
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
Kentucky – 0.5% (cont.) | |||||||
$ | 1,035,000 | Kentucky Economic | |||||
Development Finance | |||||||
Authority Health System | |||||||
Revenue, 5.80%, | |||||||
10/01/2014 | |||||||
(Pre-refunded | |||||||
to 10/01/2013) | $ | 1,140,104 | |||||
5,221,183 | |||||||
Louisiana – 2.7% | |||||||
Louisiana Public Facilities | |||||||
Authority Revenue: | |||||||
710,000 | 5.50%, 05/15/2027 | ||||||
(Pre-refunded to | |||||||
05/15/2026) | 894,991 | ||||||
12,935,000 | 5.50%, 05/15/2032 | ||||||
(Pre-refunded to | |||||||
05/15/2026) | 16,562,750 | ||||||
10,000,000 | State of Louisiana, | ||||||
5.00%, 11/15/2020 | |||||||
(Callable 05/15/2020) | 12,377,200 | ||||||
29,834,941 | |||||||
Maine – 0.5% | |||||||
4,340,000 | Maine Health & Higher | ||||||
Education Facilities | |||||||
Authority, 5.00%, | |||||||
07/01/2035 | |||||||
(Pre-refunded | |||||||
to 07/01/2015) | 4,972,381 | ||||||
Massachusetts – 3.2% | |||||||
Massachusetts State: | |||||||
5,820,000 | 5.00%, 08/01/2020 | ||||||
(Pre-refunded to | |||||||
08/01/2016) | 6,903,742 | ||||||
15,000,000 | 4.00%, 12/01/2022 | ||||||
(Callable 12/01/2019) | 16,879,650 | ||||||
Massachusetts State | |||||||
Obligations Tax Revenue: | |||||||
1,000,000 | 5.25%, 01/01/2026 | ||||||
(Pre-refunded to | |||||||
01/01/2014) | 1,093,470 | ||||||
1,845,000 | 5.75%, 01/01/2032 | ||||||
(Pre-refunded to | |||||||
01/01/2014) | 2,035,681 | ||||||
Massachusetts State | |||||||
Water Resources | |||||||
Authority: (ETM) | |||||||
4,105,000 | 5.25%, 12/01/2015 | 4,527,363 | |||||
3,200,000 | 6.50%, 07/15/2019 | 3,897,760 | |||||
35,337,666 | |||||||
Michigan – 2.2% | |||||||
1,550,000 | Clarkston Michigan | ||||||
Community Schools, | |||||||
5.00%, 05/01/2013 | |||||||
(Insured by AGM) | 1,640,939 | ||||||
1,000,000 | Detroit Michigan | ||||||
City School District, | |||||||
5.00%, 05/01/2016 | |||||||
(Callable 05/01/2015) | |||||||
(Insured by AGM) | 1,071,260 | ||||||
2,185,000 | Detroit Michigan | ||||||
Sewer Disposal Revenue, | |||||||
5.00%, 07/01/2030 | |||||||
(Pre-refunded to | |||||||
07/01/2015) | 2,503,376 | ||||||
1,550,000 | Harper Creek | ||||||
Michigan Community | |||||||
School District, | |||||||
5.00%, 05/01/2016 | |||||||
(Callable 05/01/2015) | |||||||
(Insured by AGM) | 1,718,749 |
The accompanying notes are an integral part of these financial statements.
Page 61
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
Michigan – 2.2% (cont.) | |||||||
$ | 1,390,000 | Jenison Michigan | |||||
Public Schools, | |||||||
5.25%, 05/01/2015 | |||||||
(Insured by NPFGC) | $ | 1,523,190 | |||||
2,275,000 | Lakeview Public | ||||||
School District, | |||||||
5.00%, 05/01/2017 | |||||||
(Insured by NPFGC) | 2,598,118 | ||||||
Livonia Michigan Public | |||||||
Schools School District: | |||||||
4,295,000 | 5.00%, 05/01/2017 | ||||||
(Callable 05/01/2014) | |||||||
(Insured by NPFGC) | 4,609,179 | ||||||
3,000,000 | 5.00%, 05/01/2022 | ||||||
(Callable 05/01/2014) | |||||||
(Insured by NPFGC) | 3,163,920 | ||||||
4,000,000 | Michigan State Housing | ||||||
Development Authority, | |||||||
4.75%, 06/01/2016 | 4,264,640 | ||||||
2,000,000 | State of Michigan, | ||||||
0.00%, 06/01/2022 | |||||||
(ETM) ^ | 1,512,980 | ||||||
24,606,351 | |||||||
Minnesota – 1.3% | |||||||
1,040,000 | Centennial Independent | ||||||
School District No. 12 | |||||||
Minnesota, 5.00%, | |||||||
02/01/2014 (Pre-refunded | |||||||
to 02/01/2012) (Insured | |||||||
by AGM) | 1,043,442 | ||||||
Minnesota State Housing | |||||||
Finance Agency | |||||||
Homeownership | |||||||
Finance Bond: | |||||||
1,115,000 | 4.25%, 07/01/2028 | ||||||
(Callable 01/01/2020) | 1,183,450 | ||||||
2,000,000 | 4.50%, 07/01/2034 | ||||||
(Callable 07/01/2021) | 2,149,280 | ||||||
1,215,000 | Robbinsdale Independent | ||||||
School District No. 281, | |||||||
5.00%, 07/01/2020 | |||||||
(Pre-refunded to | |||||||
02/01/2012) (Insured | |||||||
by AGM) | 1,219,022 | ||||||
5,000,000 | University of Minnesota, | ||||||
5.50%, 07/01/2021 | |||||||
(ETM) | 6,111,650 | ||||||
1,895,000 | Western Minnesota | ||||||
Municipal Power Agency, | |||||||
6.375%, 01/01/2016 | |||||||
(ETM) | 2,103,147 | ||||||
13,809,991 | |||||||
Mississippi – 0.3% | |||||||
1,110,000 | Mississippi Development | ||||||
Bank Special Obligations, | |||||||
5.25%, 10/01/2030 | |||||||
(Pre-refunded to | |||||||
10/01/2015) | 1,284,459 | ||||||
1,050,000 | Mississippi Housing | ||||||
Financial Corporation, | |||||||
0.00%, 06/01/2015 | |||||||
(ETM) ^ | 1,012,179 |
The accompanying notes are an integral part of these financial statements.
Page 62
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
Mississippi – 0.3% (cont.) | |||||||
$ | 1,000,000 | Mississippi State, | |||||
5.00%, 11/01/2021 | |||||||
(Pre-refunded to | |||||||
11/01/2012) | $ | 1,037,040 | |||||
3,333,678 | |||||||
Missouri – 0.3% | |||||||
1,000,000 | St. Charles County | ||||||
Missouri Francis Howell | |||||||
School District, | |||||||
4.50%, 03/01/2018 | 1,186,100 | ||||||
2,000,000 | St. Louis County | ||||||
Industrial Development | |||||||
Authority, 6.625%, | |||||||
11/15/2035 | |||||||
(Pre-refunded | |||||||
to 11/15/2013) | 2,228,620 | ||||||
3,414,720 | |||||||
Nebraska – 1.1% | |||||||
1,640,000 | Nebraska Public Power | ||||||
District Revenue, | |||||||
5.00%, 01/01/2015 | |||||||
(Insured by NPFGC) | 1,826,517 | ||||||
9,150,000 | Omaha Nebraska Public | ||||||
Electric Power District | |||||||
Revenue, 6.20%, | |||||||
02/01/2017 (ETM) | 10,479,312 | ||||||
12,305,829 | |||||||
Nevada – 0.2% | |||||||
2,080,000 | Las Vegas Clark County | ||||||
Nevada Library District, | |||||||
5.00%, 01/01/2017 | 2,365,334 | ||||||
New Hampshire – 0.6% | |||||||
5,340,000 | New Hampshire Housing | ||||||
Finance Authority | |||||||
Revenue Bonds, | |||||||
5.25%, 07/01/2028 | |||||||
(Callable 01/01/2021) | 5,813,925 | ||||||
1,000,000 | State of | ||||||
New Hampshire, | |||||||
5.00%, 07/01/2021 | |||||||
(Callable 07/01/2020) | 1,250,860 | ||||||
7,064,785 | |||||||
New Jersey – 2.9% | |||||||
New Jersey Economic | |||||||
Development Authority | |||||||
Revenue Bonds: | |||||||
2,250,000 | 6.375%, 04/01/2018 | ||||||
(Pre-refunded to | |||||||
05/15/2014) | 2,553,030 | ||||||
6,000,000 | 6.375%, 04/01/2031 | ||||||
(Pre-refunded to | |||||||
05/15/2014) | 6,808,080 | ||||||
895,000 | New Jersey Sports & | ||||||
Exposition Authority | |||||||
State Contract Bonds, | |||||||
6.50%, 03/01/2013 | |||||||
(ETM) | 928,428 | ||||||
10,000,000 | New Jersey State | ||||||
Housing & Mortgage | |||||||
Finance Agency Bonds, | |||||||
4.50%, 10/01/2029 | |||||||
(Callable 04/01/2021) | 10,507,100 |
The accompanying notes are an integral part of these financial statements.
Page 63
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
New Jersey – 2.9% (cont.) | |||||||
New Jersey State | |||||||
Transportation Trust | |||||||
Fund Authority: | |||||||
$ | 2,595,000 | 5.50%, 12/15/2015 | |||||
(Insured by AMBAC) | $ | 2,981,421 | |||||
5,000,000 | 5.25%, 12/15/2020 | 5,993,900 | |||||
New Jersey | |||||||
State Turnpike | |||||||
Authority: (ETM) | |||||||
1,500,000 | 6.50%, 01/01/2016 | 1,662,345 | |||||
130,000 | 6.50%, 01/01/2016 | 143,913 | |||||
31,578,217 | |||||||
New Mexico – 0.4% | |||||||
New Mexico Mortgage | |||||||
Financial Authority: | |||||||
1,610,000 | 4.625%, 09/01/2025 | ||||||
(Callable 03/01/2020) | 1,731,104 | ||||||
1,170,000 | 4.50%, 09/01/2028 | ||||||
(Callable 03/01/2020) | 1,250,321 | ||||||
1,000,000 | New Mexico State | ||||||
Hospital Equipment | |||||||
Loan Council Hospital | |||||||
Revenue, 5.25%, | |||||||
07/01/2025 (Pre-refunded | |||||||
to 07/01/2015) | 1,146,850 | ||||||
4,128,275 | |||||||
New York – 6.5% | |||||||
2,000,000 | Long Island Power | ||||||
Authority and Electric | |||||||
System Revenue, | |||||||
5.00%, 12/01/2017 | |||||||
(Callable 12/01/2016) | |||||||
(Insured by NPFGC) | 2,319,560 | ||||||
13,230,000 | Metropolitan Transit | ||||||
Authority New York, | |||||||
6.00%, 04/01/2020 | |||||||
(ETM) | 17,133,644 | ||||||
4,730,000 | New York City, New | ||||||
York Transitional | |||||||
Financial Authority | |||||||
Building Aid | |||||||
Revenue Bonds, | |||||||
5.00%, 01/15/2015 | |||||||
(Insured by AGM) | 5,300,390 | ||||||
New York, New York: | |||||||
1,000,000 | 5.00%, 03/01/2016 | ||||||
(Callable 03/01/2015) | |||||||
(Insured by FGIC-TCRS) | 1,125,260 | ||||||
5,000,000 | 5.00%, 08/01/2017 | 5,979,350 | |||||
1,125,000 | 5.25%, 08/15/2021 | ||||||
(Callable 08/15/2018) | 1,343,419 | ||||||
2,000,000 | New York State | ||||||
Dormitory Authority | |||||||
and Personal Income | |||||||
Tax Revenue, | |||||||
5.00%, 12/15/2017 | 2,428,360 | ||||||
4,040,000 | New York State | ||||||
Thruway Authority, | |||||||
5.00%, 03/15/2022 | |||||||
(Callable 03/15/2019) | 4,899,510 | ||||||
New York State | |||||||
University Dormitory | |||||||
Authority Revenues: | |||||||
1,800,000 | 5.50%, 05/15/2013 | ||||||
(Insured by NPFGC) | 1,860,660 | ||||||
5,290,000 | 5.25%, 05/15/2015 | 5,823,814 | |||||
4,715,000 | Suffolk County Water | ||||||
Authority, 6.00%, | |||||||
06/01/2017 (ETM) | 5,590,151 |
The accompanying notes are an integral part of these financial statements.
Page 64
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
New York – 6.5% (cont.) | |||||||
$ | 180,000 | TSASC Inc. New York, | |||||
4.75%, 06/01/2022 | |||||||
(Callable 06/01/2016) | $ | 176,805 | |||||
13,075,000 | Westchester Tobacco | ||||||
Asset Securitization | |||||||
Corp. New York, 6.95%, | |||||||
07/15/2039 | |||||||
(Pre-refunded | |||||||
to 07/15/2017) | 17,322,414 | ||||||
71,303,337 | |||||||
North Carolina – 2.7% | |||||||
North Carolina Eastern | |||||||
Municipal Power Agency | |||||||
Power Systems Revenue: | |||||||
(ETM) | |||||||
3,310,000 | 5.00%, 01/01/2017 | 3,801,370 | |||||
5,700,000 | 6.40%, 01/01/2021 | 7,152,930 | |||||
6,235,000 | 4.50%, 01/01/2024 | ||||||
(Pre-refunded to | |||||||
01/01/2022) | 7,709,889 | ||||||
1,735,000 | 6.00%, 01/01/2026 | ||||||
(Pre-refunded to | |||||||
01/01/2022) | 2,369,958 | ||||||
6,495,000 | North Carolina Medical | ||||||
Care Community | |||||||
Hospital Revenue, 5.25%, | |||||||
11/01/2029 (Pre-refunded | |||||||
to 11/01/2014) | 7,307,654 | ||||||
1,180,000 | North Carolina | ||||||
Municipal Power Agency | |||||||
No. 1 Catawba Electric | |||||||
Revenue, 5.50%, | |||||||
01/01/2013 (ETM) | 1,208,108 | ||||||
29,549,909 | |||||||
Ohio – 1.4% | |||||||
1,000,000 | Akron Ohio Community | ||||||
Learning Center Income | |||||||
Tax Revenue, | |||||||
5.25%, 12/01/2016 | |||||||
(Callable 12/01/2013) | |||||||
(Insured by NPFGC) | 1,083,180 | ||||||
2,000,000 | Cincinnati Ohio City | ||||||
School District, | |||||||
5.00%, 12/01/2016 | |||||||
(Insured by AGM) | 2,351,600 | ||||||
Cleveland Municipal | |||||||
School District: | |||||||
1,790,000 | 4.00%, 12/01/2017 | 1,969,573 | |||||
1,865,000 | 4.00%, 12/01/2018 | 2,056,312 | |||||
1,940,000 | 4.00%, 12/01/2019 | 2,124,203 | |||||
2,015,000 | 5.00%, 12/01/2020 | 2,338,105 | |||||
90,000 | Miamisburg Ohio Water | ||||||
Revenue, 7.00%, | |||||||
11/15/2016 (Callable | |||||||
02/13/2012) (ETM) | 96,278 | ||||||
2,835,000 | Ohio Housing | ||||||
Finance Agency, | |||||||
5.00%, 11/01/2028 | |||||||
(Callable 05/01/2020) | 3,075,125 | ||||||
15,094,376 | |||||||
Pennsylvania – 3.6% | |||||||
1,275,000 | Central Dauphin | ||||||
Pennsylvania School | |||||||
District, 6.75%, | |||||||
02/01/2024 (Pre-refunded | |||||||
to 02/01/2016) | 1,576,614 | ||||||
1,380,000 | Erie Pennsylvania Sewer | ||||||
Authority Revenue, | |||||||
5.125%, 06/01/2020 | |||||||
(ETM) | 1,682,151 |
The accompanying notes are an integral part of these financial statements.
Page 65
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
Pennsylvania – 3.6% (cont.) | |||||||
$ | 6,830,000 | Pennsylvania Convention | |||||
Center Authority Revenue | |||||||
Bonds, 6.00%, | |||||||
09/01/2019 (ETM) | $ | 8,645,004 | |||||
Pennsylvania Housing | |||||||
Finance Agency: | |||||||
2,130,000 | 3.70%, 04/01/2018 | 2,190,939 | |||||
1,760,000 | 3.75%, 10/01/2018 | 1,819,277 | |||||
1,025,000 | 3.90%, 04/01/2019 | 1,058,261 | |||||
1,675,000 | 3.90%, 10/01/2019 | ||||||
(Callable 04/01/2019) | 1,736,992 | ||||||
3,390,000 | Pennsylvania State Higher | ||||||
Education Facilities | |||||||
Authority Revenue, 5.00%, | |||||||
01/01/2029 (Pre-refunded | |||||||
to 01/01/2013) | 3,546,855 | ||||||
3,000,000 | Pennsylvania State Public | ||||||
School Building Authority | |||||||
Lease Revenue, 5.00%, | |||||||
11/15/2034 (Pre-refunded | |||||||
to 11/15/2014) | 3,359,310 | ||||||
1,790,000 | Philadelphia Pennsylvania | ||||||
Authority For Industrial | |||||||
Development Revenue, | |||||||
5.25%, 01/01/2027 | |||||||
(Pre-refunded to | |||||||
01/01/2017) | 2,158,346 | ||||||
2,905,000 | Philadelphia Pennsylvania | ||||||
Gas Works, 7.00%, | |||||||
05/15/2020 (ETM) | 3,575,648 | ||||||
Pittsburgh Pennsylvania | |||||||
Water & Sewer Authority | |||||||
Revenue Bonds: | |||||||
870,000 | 7.25%, 09/01/2014 | ||||||
(Callable 01/27/2012) | |||||||
(ETM) | 961,777 | ||||||
4,500,000 | 5.00%, 09/01/2029 | ||||||
(Pre-refunded to | |||||||
09/01/2015) | 5,160,195 | ||||||
1,500,000 | St. Mary Hospital | ||||||
Authority Pennsylvania | |||||||
Health Revenue, 5.375%, | |||||||
11/15/2034 (Pre-refunded | |||||||
to 11/15/2014) | 1,690,980 | ||||||
39,162,349 | |||||||
Puerto Rico – 0.3% | |||||||
1,625,000 | Puerto Rico Public | ||||||
Building Authority, 5.50%, | |||||||
07/01/2022 (Pre-refunded | |||||||
to 07/01/2014) | 1,816,685 | ||||||
1,080,000 | Puerto Rico Public | ||||||
Finance Corp., | |||||||
6.00%, 08/01/2026 | |||||||
(ETM) | 1,472,472 | ||||||
3,289,157 | |||||||
South Carolina – 1.3% | |||||||
6,375,000 | Piedmont Municipal | ||||||
Power Agency South | |||||||
Carolina Electric | |||||||
Revenue, 6.75%, | |||||||
01/01/2020 (ETM) | 8,839,511 | ||||||
South Carolina Jobs | |||||||
Economic Development | |||||||
Authority Hospital | |||||||
Facilities Revenue: | |||||||
2,575,000 | 7.00%, 08/01/2030 | ||||||
(Pre-refunded to | |||||||
08/01/2013) | 2,834,637 | ||||||
2,430,000 | 6.375%, 08/01/2034 | ||||||
(Pre-refunded to | |||||||
08/01/2013) | 2,651,276 | ||||||
14,325,424 |
The accompanying notes are an integral part of these financial statements.
Page 66
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
South Dakota – 0.1% | |||||||
$ | 1,030,000 | Heartland Consumers | |||||
Power District, 7.00%, | |||||||
01/01/2016 (ETM) | $ | 1,158,204 | |||||
Tennessee – 1.1% | |||||||
1,000,000 | Metropolitan | ||||||
Government Nashville | |||||||
& Davidson County | |||||||
Tennessee H&E, 0.00%, | |||||||
06/01/2021 (ETM) ^ | 813,250 | ||||||
5,000,000 | Shelby County Tennessee | ||||||
Health Educational & | |||||||
Housing Facilities | |||||||
Revenue, 5.50%, | |||||||
08/15/2019 (ETM) | 5,762,650 | ||||||
4,965,000 | Tennessee Housing | ||||||
Development Agency, | |||||||
4.50%, 07/01/2028 | |||||||
(Callable 01/01/2020) | 5,320,494 | ||||||
11,896,394 | |||||||
Texas – 13.2% | |||||||
2,125,000 | Barbers Hill Texas | ||||||
Independent School | |||||||
District General Obligation, | |||||||
5.00%, 02/15/2017 | |||||||
(Callable 02/15/2015) | |||||||
(PSF Guaranteed) | 2,403,587 | ||||||
6,060,000 | Capital Area Housing | ||||||
Finance Corporation | |||||||
Texas, 0.00%, | |||||||
01/01/2016 (ETM) ^ | 5,782,149 | ||||||
1,500,000 | Central Texas Housing | ||||||
Finance Corporation, | |||||||
0.00%, 09/01/2016 | |||||||
(ETM) ^ | 1,419,390 | ||||||
1,500,000 | Cypress-Fairbanks | ||||||
Texas Independent | |||||||
School District, | |||||||
5.00%, 02/15/2017 | |||||||
(Callable 02/15/2016) | |||||||
(PSF Guaranteed) | 1,745,670 | ||||||
2,410,000 | Dallas Texas Independent | ||||||
School District, | |||||||
5.00%, 02/15/2020 | |||||||
(PSF Guaranteed) | 3,028,864 | ||||||
1,355,000 | El Paso Texas Waterworks | ||||||
& Sewer Revenue, | |||||||
5.00%, 08/15/2018 | 1,651,447 | ||||||
1,625,000 | Frisco Texas Independent | ||||||
School District, | |||||||
6.00%, 08/15/2018 | |||||||
(Callable 08/15/2016) | |||||||
(PSF Guaranteed) | 1,976,309 | ||||||
1,000,000 | Georgetown Texas | ||||||
Independent | |||||||
School District, | |||||||
5.00%, 02/15/2016 | |||||||
(Callable 02/15/2015) | |||||||
(PSF Guaranteed) | 1,124,840 | ||||||
Harris County Texas: | |||||||
1,500,000 | 5.00%, 10/01/2019 | 1,869,795 | |||||
4,700,000 | 5.75%, 10/01/2028 | ||||||
(Pre-refunded to | |||||||
10/01/2018) | 6,059,193 | ||||||
Harris County Texas | |||||||
Health Facilities | |||||||
Development | |||||||
Corporation Hospital | |||||||
Revenue: (ETM) | |||||||
5,475,000 | 5.50%, 10/01/2013 | 5,760,466 | |||||
4,280,000 | 5.50%, 10/01/2019 | 5,224,853 |
The accompanying notes are an integral part of these financial statements.
Page 67
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
Texas – 13.2% (cont.) | |||||||
$ | 10,960,000 | Houston Texas Health | |||||
Facilities Corporate | |||||||
Facilities Revenue, | |||||||
7.125%, 02/15/2034 | |||||||
(Pre-refunded to | |||||||
02/15/2014) | $ | 12,535,938 | |||||
825,000 | Houston Texas Sewer | ||||||
System Revenue, 9.375%, | |||||||
10/01/2013 (Callable | |||||||
04/01/2012) (ETM) | 912,491 | ||||||
3,000,000 | Houston Texas Utility | ||||||
System Revenue, | |||||||
5.25%, 05/15/2015 | |||||||
(Callable 05/15/2014) | |||||||
(Insured by NPFGC) | 3,298,980 | ||||||
16,050,000 | Houston Texas Water & | ||||||
Sewer System Revenue | |||||||
Bonds, 5.50%, | |||||||
12/01/2029 (ETM) | 21,272,028 | ||||||
1,500,000 | Humble Texas | ||||||
Independent | |||||||
School District, | |||||||
5.00%, 02/15/2021 | 1,888,740 | ||||||
1,315,000 | La Porte Texas | ||||||
Independent School | |||||||
District, | |||||||
5.00%, 02/15/2018 | |||||||
(Callable 02/15/2015) | |||||||
(Insured by NPFGC) | 1,445,514 | ||||||
3,425,000 | Lubbock Texas, | ||||||
5.00%, 02/15/2021 | |||||||
(Callable 02/15/2018) | |||||||
(Insured by AGM) | 4,013,209 | ||||||
1,730,000 | Lubbock Texas Housing | ||||||
Finance Corp., 8.00%, | |||||||
10/01/2021 (ETM) | 2,564,898 | ||||||
1,000,000 | Lubbock Texas | ||||||
Independent | |||||||
School District, | |||||||
4.00%, 02/15/2022 | |||||||
(Callable 02/15/2020) | 1,129,070 | ||||||
1,735,000 | Lufkin Texas | ||||||
Independent | |||||||
School District, | |||||||
5.00%, 08/15/2015 | |||||||
(Callable 08/15/2014) | |||||||
(PSF Guaranteed) | 1,927,689 | ||||||
1,050,000 | Magnolia Texas | ||||||
Independent | |||||||
School District, | |||||||
5.00%, 08/15/2016 | |||||||
(PSF Guaranteed) | 1,239,840 | ||||||
1,265,000 | Mission Consolidation | ||||||
Independent | |||||||
School District, | |||||||
5.00%, 02/15/2019 | |||||||
(Callable 02/15/2015) | |||||||
(PSF Guaranteed) | 1,427,919 | ||||||
1,125,000 | North Central Texas | ||||||
Health Facilities Revenue, | |||||||
5.75%, 02/15/2015 | |||||||
(ETM) | 1,277,505 | ||||||
1,210,000 | Pearland Texas | ||||||
Waterworks & Sewage, | |||||||
5.25%, 03/01/2023 | |||||||
(Pre-refunded to | |||||||
03/01/2014) | 1,333,892 | ||||||
2,035,000 | Retama Texas | ||||||
Development | |||||||
Corporation Special | |||||||
Facilities Revenue, 8.75%, | |||||||
12/15/2018 (ETM) | 3,014,690 |
The accompanying notes are an integral part of these financial statements.
Page 68
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
Texas – 13.2% (cont.) | |||||||
$ | 1,295,000 | Rockwall Texas | |||||
Independent | |||||||
School District, | |||||||
5.00%, 02/15/2015 | |||||||
(PSF Guaranteed) | $ | 1,462,638 | |||||
11,565,000 | San Antonio Texas | ||||||
Electric & Gas Revenue, | |||||||
5.65%, 02/01/2019 | |||||||
(ETM) | 14,313,191 | ||||||
2,100,000 | San Antonio Texas Hotel | ||||||
Occupancy Tax Revenue | |||||||
Bonds, 0.00%, | |||||||
08/15/2015 (ETM) ^ | 2,021,334 | ||||||
2,000,000 | San Antonio Texas | ||||||
Independent | |||||||
School District, | |||||||
5.00%, 08/15/2017 | |||||||
(Callable 08/15/2015) | |||||||
(PSF Guaranteed) | 2,299,940 | ||||||
1,020,000 | Spring Texas Independent | ||||||
School District, | |||||||
5.00%, 08/15/2019 | |||||||
(Callable 08/15/2018) | |||||||
(PSF Guaranteed) | 1,251,081 | ||||||
7,990,000 | Tarrant County Texas | ||||||
Health Facilities | |||||||
Revenue, 6.00%, | |||||||
09/01/2024 (ETM) | 10,407,934 | ||||||
1,800,000 | Tarrant County Texas | ||||||
Housing Finance | |||||||
Corporation Revenue | |||||||
Bonds, 0.00%, | |||||||
09/15/2016 (ETM) ^ | 1,698,516 | ||||||
Texas State: | |||||||
6,285,000 | 5.00%, 10/01/2018 | 7,780,641 | |||||
3,965,000 | 5.00%, 04/01/2020 | ||||||
(Callable 04/01/2016) | 4,614,388 | ||||||
1,225,000 | University of Texas | ||||||
Revenue Bonds, 5.00%, | |||||||
08/15/2018 (Pre-refunded | |||||||
to 08/15/2016) | 1,448,905 | ||||||
144,627,534 | |||||||
Utah – 0.7% | |||||||
Granite School District | |||||||
Board of Education: | |||||||
3,900,000 | 5.00%, 06/01/2022 | ||||||
(Callable 06/01/2021) | 4,841,850 | ||||||
1,750,000 | 5.00%, 06/01/2023 | ||||||
(Callable 06/01/2021) | 2,134,318 | ||||||
395,000 | Salt Lake City Utah | ||||||
Hospital Revenue, | |||||||
8.125%, 05/15/2015 | |||||||
(Callable 02/13/2012) | |||||||
(ETM) | 426,592 | ||||||
7,402,760 | |||||||
Virginia – 0.6% | |||||||
1,095,000 | Bristol Virginia Utility | ||||||
Systems General | |||||||
Obligations, 5.50%, | |||||||
11/01/2018 (ETM) | 1,338,024 | ||||||
4,210,000 | Tobacco Settlement | ||||||
Financing Corporation | |||||||
Revenue, 5.625%, | |||||||
06/01/2037 (Pre-refunded | |||||||
to 06/01/2015) | 4,866,423 | ||||||
6,204,447 |
The accompanying notes are an integral part of these financial statements.
Page 69
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
MUNICIPAL BONDS – 96.5% (cont.) | |||||||
Washington – 3.0% | |||||||
$ | 1,005,000 | City of Ocean Shores WA, | |||||
5.50%, 12/01/2021 | |||||||
(Callable 06/01/2012) | |||||||
(Insured by NPFGC) | $ | 1,020,799 | |||||
4,500,000 | Snohomish County | ||||||
School District No. 201, | |||||||
4.00%, 12/01/2021 | |||||||
(Callable 12/01/2020) | 5,175,315 | ||||||
3,605,000 | Snohomish County | ||||||
Washington Public | |||||||
Utilities Revenue, | |||||||
6.80%, 01/01/2020 | |||||||
(Callable 02/13/2012) | |||||||
(ETM) | 4,696,017 | ||||||
2,755,000 | Thurston & Pierce | ||||||
Counties Washington | |||||||
Community Schools, | |||||||
4.25%, 12/01/2021 | |||||||
(Callable 12/01/2020) | 3,163,814 | ||||||
Washington State: | |||||||
1,500,000 | 5.00%, 07/01/2018 | ||||||
(Callable 07/01/2013) | 1,602,555 | ||||||
10,000,000 | 5.00%, 01/01/2021 | 12,513,000 | |||||
3,970,000 | 5.50%, 07/01/2023 | 5,104,110 | |||||
33,275,610 | |||||||
West Virginia – 1.5% | |||||||
7,365,000 | Berkeley Brooke Fayette | ||||||
Counties West Virginia | |||||||
Single Family Mortgage | |||||||
Revenue, 0.00%, | |||||||
12/01/2014 (ETM) ^ | 7,179,476 | ||||||
8,390,000 | West Virginia State | ||||||
Building Community | |||||||
Lease Revenue Bonds, | |||||||
7.00%, 07/01/2013 | |||||||
(ETM) | 9,217,841 | ||||||
16,397,317 | |||||||
Wisconsin – 0.7% | |||||||
960,000 | Badger Tobacco Asset | ||||||
Securitization Corporation | |||||||
Wisconsin, 5.75%, | |||||||
06/01/2012 (ETM) | 981,466 | ||||||
3,000,000 | Ladysmith-Hawkins | ||||||
Wisconsin School District | |||||||
General Obligation, | |||||||
5.20%, 04/01/2018 | |||||||
(Callable 04/01/2016) | |||||||
(Insured by NPFGC) | 3,202,800 | ||||||
3,320,000 | Wisconsin State | ||||||
Health & Educational | |||||||
Facilities Revenue, | |||||||
5.00%, 12/01/2019 | |||||||
(Callable 12/01/2014) | |||||||
(Insured by NPFGC) | 3,496,724 | ||||||
7,680,990 | |||||||
Total Municipal Bonds | |||||||
(Cost $992,692,536) | 1,056,193,592 |
The accompanying notes are an integral part of these financial statements.
Page 70
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Shares | Value | ||||||
SHORT-TERM INVESTMENTS – 4.2% | |||||||
Money Market Mutual Fund – 4.2% | |||||||
45,532,199 | Goldman Sachs | ||||||
Financial Square | |||||||
Funds, 0.01% « | $ | 45,532,199 | |||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $45,532,199) | 45,532,199 | ||||||
Total Investments | |||||||
(Cost $1,038,224,735) | |||||||
– 100.7% | 1,101,725,791 | ||||||
Liabilities in Excess of | |||||||
Other Assets – (0.7)% | (7,657,889 | ) | |||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 1,094,067,902 |
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-TCRS – 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 71
Baird Intermediate Municipal Bond Fund
Schedule of Investments December 31, 2011 |
Summary of Fair Value Exposure at December 31, 2011
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, 2011:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
Municipal Bonds | $ | — | $ | 1,056,193,591 | $ | — | $ | 1,056,193,591 | ||||||||
Total Fixed Income | — | 1,056,193,591 | — | 1,056,193,591 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Fund | 45,532,199 | — | — | 45,532,199 | ||||||||||||
Total Short-Term Investments | 45,532,199 | — | — | 45,532,199 | ||||||||||||
Total Investments | $ | 45,532,199 | $ | 1,056,193,591 | $ | — | $ | 1,101,725,790 |
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, Level 2 and Level 3 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.
Page 72
Baird Aggregate Bond Fund
The Baird Aggregate Bond Fund seeks an annual rate of total return, before Fund expenses, greater than the annual rate of total return of the Barclays Capital U.S. Aggregate Bond Index. The Barclays Capital U.S. Aggregate Bond Index is an unmanaged, market value weighted index of investment grade, fixed-rate debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of at least one year.
The Fund entered the year with a significant yield advantage over its benchmark. The Fund closed the year with strong absolute returns and slightly ahead of the benchmark. Our long-term commitment to duration neutrality was critically important. The primary factors for the Fund’s performance over its benchmark index were:
• | The Fund’s overweight position to the corporate credit sector was a positive for relative performance. Corporate bond spreads (the additional yield that investors demand above Treasury bonds for owning the presumed higher risk corporate debt) widened during the year. This is typically a negative for the corporate bondholder as the higher (wider) yield indicates a decline in value (price) for the bond. The Fund’s overweight to shorter credit, particularly BBB-rated industrial and utility issuers, mitigated the impact of widening spreads. |
• | An overweight position to commercial mortgage-backed securities (CMBS) through primarily seasoned, super-senior CMBS, was a positive for the year. |
• | Our underweight to U.S. Treasuries was an overall detractor to the Fund’s performance (Treasuries outperformed other high quality “spread sectors” of the bond market in 2011). However, our underweight to short maturity Treasuries and an emphasis on longer Treasury maturities minimized the impact. |
• | Our overweight to corporate issues in the financial sector also detracted from relative performance but a focus on intermediate maturities lessened the effect. |
Again, the Fund maintained its duration-neutral positioning relative to its benchmark index and held a very broadly diversified portfolio at year end.
We are pleased with the Fund’s performance in 2011 and are confident in the individual issues and the overall structure of the Fund. The Fund’s significant yield advantage over the benchmark is meaningful and we are optimistic regarding the Fund’s relative performance as we head into 2012.
Portfolio Characteristics
Quality Distribution* | Sector Weightings* |
![]() | ![]() |
Net Assets: | $1,506,393,540 | Annualized Expense Ratio: | |||
SEC 30-Day Yield:** | Institutional Class: | 0.30 | % | ||
Institutional Class: | 4.02% | Investor Class: | 0.55 | %*** | |
Investor Class: | 3.77% | Portfolio Turnover Rate: | 45.9 | % | |
Average Effective Duration: | 4.95 years | Total Number of Holdings: | 433 | ||
Average Effective Maturity: | 7.46 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, 2011. |
*** | Includes 0.25% 12b-1 fee. |
Page 73
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 74
Baird Aggregate Bond Fund
Total Returns
Average Annual | ||||
For the Periods Ended December 31, 2011 | One Year | Five Years | Ten Years | Since Inception(1) |
Institutional Class Shares | 7.85% | 5.97% | 5.83% | 6.44% |
Investor Class Shares | 7.46% | 5.70% | 5.58% | 6.19% |
Barclays Capital | ||||
U.S. Aggregate Bond Index(2) | 7.84% | 6.50% | 5.78% | 6.26% |
(1) | For the period from September 29, 2000 (commencement of operations) through December 31, 2011. |
(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 75
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.1% | |||||||
Asset Backed Securities – 4.0% | |||||||
$ | 1,004 | Amresco Residential | |||||
Securities Mortgage | |||||||
Loan Trust, | |||||||
Series 1997-3, Class A9, | |||||||
6.96%, 03/25/2027 | $ | 1,004 | |||||
Bayview Financial | |||||||
Acquisition Trust: | |||||||
1,122,368 | Series 2006-A, Class 1A2, | ||||||
5.483%, 02/28/2041 | 1,111,285 | ||||||
2,500,000 | Series 2007-B, Class 1A2, | ||||||
6.831%, 08/28/2047 | 1,012,683 | ||||||
246 | Contimortgage Home | ||||||
Equity Trust, | |||||||
Series 1997-2, Class A9, | |||||||
7.09%, 04/15/2028 | 245 | ||||||
Countrywide Asset- | |||||||
Backed Certificates: | |||||||
85,397 | Series 2006-S2, Class A2, | ||||||
5.627%, 07/25/2027 § | 85,121 | ||||||
1,030,086 | Series 2005-17, | ||||||
Class 1AF2, 5.363%, | |||||||
03/25/2030 § | 791,581 | ||||||
3,775,804 | Series 2004-13, | ||||||
Class AF4, 4.583%, | |||||||
01/25/2033 | 3,662,983 | ||||||
2,703,311 | Series 2004-S1, Class A3, | ||||||
4.615%, 02/25/2035 | 2,548,016 | ||||||
6,566,105 | Series 2004-15, Class AF6, | ||||||
4.613%, 04/25/2035 | 6,171,587 | ||||||
9,552,406 | Series 2005-1, Class AF6, | ||||||
5.03%, 07/25/2035 | 9,147,957 | ||||||
10,994,762 | Series 2005-11, | ||||||
Class AF3, 4.778%, | |||||||
02/25/2036 | 8,252,097 | ||||||
4,387,363 | Series 2005-10, | ||||||
Class AF6, 4.915%, | |||||||
02/25/2036 | 3,790,887 | ||||||
4,823,456 | Series 2005-13, Class | ||||||
AF3, 5.43%, 04/25/2036 | 3,723,008 | ||||||
1,844,159 | Series 2005-17, | ||||||
Class 1AF5, 5.564%, | |||||||
05/25/2036 § | 1,075,077 | ||||||
1,609,433 | Series 2007-S1, Class A6, | ||||||
5.693%, 11/25/2036 | 1,272,814 | ||||||
3,069,218 | Series 2006-13, | ||||||
Class 1AF2, 5.884%, | |||||||
01/25/2037 § | 2,877,834 | ||||||
1,500,000 | Series 2006-10, | ||||||
Class 1AF3, 5.812%, | |||||||
09/25/2046 | 776,934 | ||||||
408,311 | Credit Based Asset | ||||||
Servicing and | |||||||
Securitization LLC, | |||||||
Series 2005-CB8, | |||||||
Class AF2, 5.303%, | |||||||
12/25/2035 | 369,025 | ||||||
70,812 | Equivantage Home | ||||||
Equity Loan Trust, | |||||||
Series 1996-3, Class A3, | |||||||
7.70%, 09/25/2027 | 70,159 | ||||||
2,944,783 | FedEx Corporation | ||||||
Pass-Thru Certificates, | |||||||
Series 1998-1, Class B, | |||||||
6.845%, 01/15/2019 | 3,239,261 | ||||||
GE Capital Mortgage | |||||||
Services, Inc.: | |||||||
689 | Series 1997-HE4, Class | ||||||
A7, 6.735%, 12/25/2028 | 685 | ||||||
13,613 | Series 1999-HE1, Class | ||||||
A7, 6.265%, 04/25/2029 | 13,281 |
The accompanying notes are an integral part of these financial statements.
Page 76
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.1% (cont.) | |||||||
Asset Backed Securities – 4.0% (cont.) | |||||||
Green Tree Financial | |||||||
Corporation: | |||||||
$ | 452,839 | Series 1993-3, Class A7, | |||||
6.40%, 10/15/2018 | $ | 463,026 | |||||
321,354 | Series 1993-4, Class A5, | ||||||
7.05%, 01/15/2019 | 323,892 | ||||||
30,996 | Series 1997-1, Class A5, | ||||||
6.86%, 03/15/2028 | 32,609 | ||||||
1,301,979 | Series 1998-2, Class A5, | ||||||
6.24%, 12/01/2028 | 1,363,590 | ||||||
52,649 | Series 1997-6, Class A8, | ||||||
7.07%, 01/15/2029 | 54,853 | ||||||
1,134,206 | Series 1998-3, Class A5, | ||||||
6.22%, 03/01/2030 | 1,229,622 | ||||||
699,078 | Series 1998-4, Class A5, | ||||||
6.18%, 04/01/2030 | 714,582 | ||||||
34,823 | IMC Home Equity | ||||||
Loan Trust, | |||||||
Series 1997-5, Class A10, | |||||||
5.749%, 11/20/2028 | 34,385 | ||||||
67,677 | Oakwood Mortgage | ||||||
Investors, Inc., | |||||||
Series 1999-B, Class A3, | |||||||
6.45%, 11/15/2017 | 58,101 | ||||||
3,000,000 | Renaissance Home | ||||||
Equity Loan Trust, | |||||||
Series 2007-1, Class AF3, | |||||||
5.612%, 04/25/2037 | 1,043,094 | ||||||
Residential Asset | |||||||
Mortgage Products, Inc.: | |||||||
2,225,369 | Series 2003-RS7, Class | ||||||
AI6, 5.34%, 08/25/2033 | 2,187,128 | ||||||
661,507 | Series 2005-RS1, Class | ||||||
AI6, 4.713%, 01/25/2035 | 599,289 | ||||||
Residential Asset | |||||||
Securities Corporation: | |||||||
1,656,932 | Series 2003-KS2, | ||||||
Class AI6, 3.99%, | |||||||
04/25/2033 | 1,577,373 | ||||||
128,586 | Series 2003-KS5, Class | ||||||
AI6, 3.62%, 07/25/2033 | 111,099 | ||||||
173,557 | Series 2004-KS2, Class | ||||||
AI6, 4.30%, 03/25/2034 | 166,690 | ||||||
59,952,857 | |||||||
Commercial Mortgage Backed Securities – 7.7% | |||||||
15,639,000 | Bear Stearns Commercial | ||||||
Mortgage Securities, | |||||||
Series 2005-PWR9, | |||||||
Class A4A, 4.871%, | |||||||
09/11/2042 | 16,961,809 | ||||||
15,850,000 | Citigroup Deutsche | ||||||
Bank, Series 2005-CD1, | |||||||
Class A4, | |||||||
5.399%, 07/15/2044 | 17,517,166 | ||||||
15,000,000 | Commercial Mortgage | ||||||
Pass-Through Certificates, | |||||||
Series 2005-C6, | |||||||
Class A5A, 5.116%, | |||||||
06/10/2044 | 16,445,565 | ||||||
8,974,000 | Credit Suisse First | ||||||
Boston Mortgage | |||||||
Securities Corporation, | |||||||
Series 2005-C5, Class A4, | |||||||
5.10%, 08/15/2038 | 9,823,955 | ||||||
10,750,000 | GE Capital Commercial | ||||||
Mortgage Corporation, | |||||||
Series 2005-C4, Class A4, | |||||||
5.486%, 11/10/2045 | 11,872,418 |
The accompanying notes are an integral part of these financial statements.
Page 77
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.1% (cont.) | |||||||
Commercial Mortgage | |||||||
Backed Securities – 7.7% (cont.) | |||||||
$ | 4,625,000 | J.P. Morgan Chase | |||||
Commercial Mortgage | |||||||
Securities Corp., Series | |||||||
2011-C5, Class A3, | |||||||
4.171%, 08/15/2046 | $ | 4,952,492 | |||||
15,355,000 | J.P. Morgan Chase | ||||||
Commercial Mortgage | |||||||
Trust, Series 2005-CB12, | |||||||
Class A4, 4.895%, | |||||||
09/12/2037 | 16,749,541 | ||||||
9,825,000 | Morgan Stanley Capital I, | ||||||
Series 2005-HQ7, Class | |||||||
A4, 5.202%, 11/14/2042 | 10,802,499 | ||||||
10,000,000 | Wachovia Bank | ||||||
Commercial Mortgage | |||||||
Trust, Series 2005-C22, | |||||||
Class A4, 5.444%, | |||||||
12/15/2044 | 11,003,790 | ||||||
116,129,235 | |||||||
Financial – 16.6% | |||||||
3,725,000 | Aegon NV, | ||||||
4.75%, 06/01/2013 f | 3,811,498 | ||||||
2,700,000 | American Express Credit | ||||||
Corporation, Series C, | |||||||
7.30%, 08/20/2013 | 2,930,199 | ||||||
American General | |||||||
Finance Corporation: | |||||||
1,000,000 | 5.85%, 06/01/2013 | 880,000 | |||||
500,000 | 6.90%, 12/15/2017 | 360,000 | |||||
1,000,000 | American International | ||||||
Group Inc., | |||||||
8.175%, 05/15/2058 | 890,000 | ||||||
2,000,000 | Ameriprise Financial, Inc., | ||||||
7.30%, 06/28/2019 @ | 2,398,428 | ||||||
250,000 | AmSouth Bancorp, | ||||||
6.75%, 11/01/2025 | 202,678 | ||||||
1,708,000 | Arden Realty LP, | ||||||
5.25%, 03/01/2015 | 1,814,004 | ||||||
3,700,000 | ASIF Global | ||||||
Financing XIX, | |||||||
4.90%, 01/17/2013 | |||||||
(Acquired 10/25/2011; | |||||||
Cost $3,796,766)* | 3,730,902 | ||||||
400,000 | BAC Capital Trust VI, | ||||||
5.625%, 03/08/2035 | 332,384 | ||||||
1,715,000 | Bank of America | ||||||
Corporation | |||||||
Subordinated Notes, | |||||||
10.20%, 07/15/2015 | 1,837,218 | ||||||
100,000 | BankAmerica Capital II, | ||||||
Series 2, 8.00%, | |||||||
12/15/2026 | 90,000 | ||||||
2,175,000 | Banponce Trust I, Series | ||||||
A, 8.327%, 02/01/2027 | 1,479,000 | ||||||
2,500,000 | Barclays Bank PLC, | ||||||
6.75%, 05/22/2019 f @ | 2,771,557 | ||||||
2,400,000 | The Bear Stearns | ||||||
Companies LLC, | |||||||
5.30%, 10/30/2015 | 2,580,934 | ||||||
100,000 | Capital One Financial | ||||||
Corporation, | |||||||
6.15%, 09/01/2016 | 104,053 | ||||||
5,000,000 | CDP Financial Inc., | ||||||
4.40%, 11/25/2019 | |||||||
(Acquired 11/20/2009; | |||||||
Cost $4,987,600)* f | 5,425,185 | ||||||
CIT Group, Inc.: | |||||||
217 | 7.00%, 05/01/2015 | 218 | |||||
53,000 | 7.00%, 05/04/2015 | ||||||
(Acquired 01/23/2006; | |||||||
Cost $53,000)* @ | 53,066 |
The accompanying notes are an integral part of these financial statements.
Page 78
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.1% (cont.) | |||||||
Financial – 16.6% (cont.) | |||||||
$ | 694 | 7.00%, 05/01/2016 | $ | 694 | |||
88,000 | 7.00%, 05/02/2016 | ||||||
(Acquired 01/23/2006; | |||||||
Cost $88,000)* @ | 87,890 | ||||||
172 | 7.00%, 05/01/2017 | 172 | |||||
124,000 | 7.00%, 05/02/2017 | ||||||
(Acquired 01/23/2006; | |||||||
Cost $124,000)* | 123,845 | ||||||
2,000,000 | Citigroup Capital XXI, | ||||||
8.30%, 12/21/2057 | 1,997,500 | ||||||
Citigroup, Inc.: | |||||||
1,000,000 | 5.50%, 04/11/2013 | 1,020,923 | |||||
3,125,000 | 6.01%, 01/15/2015 | 3,264,703 | |||||
2,675,000 | 6.125%, 11/21/2017 @ | 2,854,843 | |||||
5,000,000 | CNA Financial | ||||||
Corporation, | |||||||
6.50%, 08/15/2016 | 5,408,270 | ||||||
5,330,000 | Countrywide | ||||||
Financial Corporation, | |||||||
6.25%, 05/15/2016 @ | 5,021,574 | ||||||
1,000,000 | Credit Agricole S.A., | ||||||
6.637%, 05/29/2049 | |||||||
(Acquired 05/23/2007; | |||||||
Cost $1,000,000)* f @ | 580,000 | ||||||
1,575,000 | Credit Suisse New York, | ||||||
5.30%, 08/13/2019 f @ | 1,624,313 | ||||||
3,135,000 | First Empire | ||||||
Capital Trust I, | |||||||
8.234%, 02/01/2027 | 3,146,327 | ||||||
1,575,000 | First Empire | ||||||
Capital Trust II, | |||||||
8.277%, 06/01/2027 | 1,635,187 | ||||||
3,749,000 | First Hawaiian Capital | ||||||
Trust I, Series B, | |||||||
8.343%, 07/01/2027 | 3,392,845 | ||||||
608,152 | First National Bank of | ||||||
Chicago Pass-Thru | |||||||
Certificates, | |||||||
Series 1993-A, | |||||||
8.08%, 01/05/2018 | 688,002 | ||||||
2,500,000 | Fleet Capital Trust II, | ||||||
7.92%, 12/11/2026 | 2,225,000 | ||||||
General Electric | |||||||
Capital Corporation: | |||||||
2,475,000 | 4.375%, 09/21/2015 | 2,662,409 | |||||
1,500,000 | 5.625%, 09/15/2017 | 1,660,163 | |||||
4,700,000 | 5.625%, 05/01/2018 | 5,264,009 | |||||
1,416,000 | Genworth Financial, Inc., | ||||||
5.75%, 06/15/2014 @ | 1,400,071 | ||||||
6,500,000 | Genworth Life Institutional | ||||||
Funding Trust, 5.875%, | |||||||
05/03/2013 (Acquired | |||||||
04/14/2011; Cost | |||||||
$6,766,994)* | 6,606,060 | ||||||
GMAC Inc.: | |||||||
336,000 | 7.50%, 12/31/2013 | 345,240 | |||||
403,000 | 8.00%, 12/31/2018 | 395,947 | |||||
150,000 | GMAC LLC, | ||||||
6.75%, 12/01/2014 | 151,309 | ||||||
1,180,000 | Goldman Sachs Capital I, | ||||||
6.345%, 02/15/2034 @ | 998,764 | ||||||
The Goldman | |||||||
Sachs Group, Inc.: | |||||||
2,200,000 | 3.70%, 08/01/2015 @ | 2,155,349 | |||||
1,000,000 | 6.25%, 09/01/2017 | 1,045,437 | |||||
4,500,000 | 6.15%, 04/01/2018 | 4,644,400 | |||||
2,520,000 | Goldman Sachs | ||||||
Group LP, 8.00%, | |||||||
03/01/2013 (Acquired | |||||||
01/05/2009 through | |||||||
09/23/2010; Aggregate | |||||||
Cost $2,649,945)* | 2,632,750 |
The accompanying notes are an integral part of these financial statements.
Page 79
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.1% (cont.) | |||||||
Financial – 16.6% (cont.) | |||||||
$ | 2,800,000 | Great West Life & | |||||
Annuity Insurance, | |||||||
7.153%, 05/16/2046 | |||||||
(Acquired 05/16/2006 | |||||||
through 11/08/2007; | |||||||
Aggregate Cost | |||||||
$2,783,656)* | $ | 2,730,000 | |||||
2,200,000 | Hartford Financial | ||||||
Services Group Inc., | |||||||
8.125%, 06/15/2038 @ | 2,178,000 | ||||||
2,100,000 | HSBC Holdings PLC | ||||||
Subordinated Notes, | |||||||
6.50%, 09/15/2037 f | 2,072,891 | ||||||
400,000 | HSBC USA | ||||||
Capital Trust I, | |||||||
7.808%, 12/15/2026 | |||||||
(Acquired 03/08/2007; | |||||||
Cost $407,729)* | 394,000 | ||||||
500,000 | HSBC USA | ||||||
Capital Trust II, | |||||||
8.38%, 05/15/2027 | |||||||
(Acquired 11/06/2007; | |||||||
Cost $512,741)* | 495,577 | ||||||
2,000,000 | Humana Inc., | ||||||
7.20%, 06/15/2018 | 2,332,928 | ||||||
500,000 | Industrial Bank of Korea, | ||||||
3.75%, 09/29/2016 | |||||||
(Acquired 03/22/2011; | |||||||
Cost $496,855)* f | 503,479 | ||||||
3,650,000 | ING Bank N.V., | ||||||
4.00%, 03/15/2016 | |||||||
(Acquired 03/08/2011; | |||||||
Cost $3,648,029)* f | 3,526,787 | ||||||
1,246,000 | Invesco Ltd., | ||||||
5.375%, 12/15/2014 f | 1,335,700 | ||||||
7,025,000 | Irish Life & Permanent | ||||||
Group Holdings PLC, | |||||||
3.60%, 01/14/2013 | |||||||
(Acquired 01/07/2010; | |||||||
Cost $7,021,207)* f | 6,143,896 | ||||||
Jefferies Group Inc.: | |||||||
4,000,000 | 6.875%, 04/15/2021 | 3,600,000 | |||||
1,395,000 | 6.25%, 01/15/2036 | 1,140,686 | |||||
6,800,000 | John Hancock Mutual | ||||||
Life Insurance Company, | |||||||
7.375%, 02/15/2024 | |||||||
(Acquired 08/26/2010; | |||||||
Cost $7,659,844)* | 8,134,840 | ||||||
3,000,000 | J.P. Morgan Chase Bank | ||||||
NA, 5.875%, 06/13/2016 | 3,247,299 | ||||||
J.P. Morgan Chase & Co.: | |||||||
2,700,000 | 3.70%, 01/20/2015 | 2,799,374 | |||||
4,600,000 | 5.60%, 07/15/2041 | 4,816,039 | |||||
1,250,000 | Kaupthing Bank, | ||||||
5.75%, 10/04/2011 | |||||||
(Acquired 06/06/2008 | |||||||
through 07/22/2008; | |||||||
Aggregate Cost | |||||||
$969,046)* f § | 309,375 | ||||||
3,400,000 | Key Bank NA, | ||||||
7.413%, 05/06/2015 | 3,694,675 | ||||||
5,000,000 | Kookmin Bank, | ||||||
7.25%, 05/14/2014 | |||||||
(Acquired 08/24/2009 | |||||||
through 03/10/2010; | |||||||
Aggregate Cost | |||||||
$5,283,744)* f @ | 5,522,705 | ||||||
Liberty Mutual | |||||||
Group, Inc.: | |||||||
450,000 | 7.25%, 09/01/2012 | ||||||
(Acquired 06/20/2011; | |||||||
Cost $466,365)* | 463,846 |
The accompanying notes are an integral part of these financial statements.
Page 80
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.1% (cont.) | |||||||
Financial – 16.6% (cont.) | |||||||
$ | 2,500,000 | 10.75%, 06/15/2058 | |||||
(Acquired 05/21/2008; | |||||||
Cost $2,445,125)* | $ | 3,137,500 | |||||
565,000 | Liberty Mutual | ||||||
Insurance Company, | |||||||
7.697%, 10/15/2097 | |||||||
(Acquired 03/26/2003; | |||||||
Cost $361,718)* | 533,993 | ||||||
1,125,000 | Lincoln National | ||||||
Corporation, | |||||||
6.05%, 04/20/2067 @ | 936,562 | ||||||
1,600,000 | Lloyds TSB Bank PLC, | ||||||
5.80%, 01/13/2020 | |||||||
(Acquired 02/10/2010; | |||||||
Cost $1,559,396)* f | 1,519,005 | ||||||
100,000 | Manulife Financial Corp., | ||||||
4.90%, 09/17/2020 f | 101,960 | ||||||
Marsh & McLennan | |||||||
Companies, Inc.: | |||||||
7,000,000 | 6.25%, 03/15/2012 | 7,065,674 | |||||
4,075,000 | 4.85%, 02/15/2013 | 4,204,459 | |||||
1,000,000 | 9.25%, 04/15/2019 | 1,318,788 | |||||
1,000,000 | Massachusetts Mutual | ||||||
Life Insurance Company, | |||||||
8.875%, 06/01/2039 | |||||||
(Acquired 05/27/2009; | |||||||
Cost $987,100)* | 1,462,758 | ||||||
800,000 | MBIA Insurance Corp., | ||||||
14.00%, 01/15/2033 | |||||||
(Acquired 01/11/2008; | |||||||
Cost $800,000)* @ | 448,000 | ||||||
Merrill Lynch | |||||||
& Company: | |||||||
1,000,000 | 6.40%, 08/28/2017 | 968,304 | |||||
1,750,000 | 6.875%, 04/25/2018 | 1,725,393 | |||||
1,275,000 | 7.75%, 05/14/2038 | 1,211,406 | |||||
422,000 | Metlife Inc., | ||||||
6.50%, 12/15/2032 | 505,811 | ||||||
1,650,000 | Monumental Global | ||||||
Funding Limited, | |||||||
5.50%, 04/22/2013 | |||||||
(Acquired 07/09/2010; | |||||||
Cost $1,710,831)* | 1,718,242 | ||||||
Morgan Stanley: | |||||||
1,075,000 | 4.75%, 04/01/2014 | 1,058,969 | |||||
1,000,000 | 4.00%, 07/24/2015 | 937,752 | |||||
150,000 | 6.625%, 04/01/2018 | 148,116 | |||||
3,644,000 | Morgan Stanley | ||||||
Dean Witter & Co., | |||||||
6.75%, 10/15/2013 | 3,784,298 | ||||||
1,000,000 | The NASDAQ | ||||||
OMX Group Inc., | |||||||
4.00%, 01/15/2015 | 1,024,679 | ||||||
National City | |||||||
Bank of Cleveland | |||||||
Subordinated Notes: | |||||||
1,310,000 | 4.625%, 05/01/2013 | 1,359,946 | |||||
2,000,000 | 5.80%, 06/07/2017 | 2,201,776 | |||||
4,921,000 | Navigators Group Inc. | ||||||
Senior Unsecured Notes, | |||||||
7.00%, 05/01/2016 | 5,077,537 | ||||||
4,389,000 | NB Capital Trust IV, | ||||||
8.25%, 04/15/2027 | 4,037,880 | ||||||
2,500,000 | North Fork | ||||||
Capital Trust II, | |||||||
8.00%, 12/15/2027 | 2,375,000 | ||||||
2,750,000 | Protective Life Corp., | ||||||
7.375%, 10/15/2019 | 3,051,755 | ||||||
1,000,000 | Regions Financial Corp., | ||||||
7.75%, 11/10/2014 | 1,005,000 | ||||||
4,750,000 | Regions Financing Trust | ||||||
II, 6.625%, 05/15/2047 | 3,895,000 |
The accompanying notes are an integral part of these financial statements.
Page 81
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.1% (cont.) | |||||||
Financial – 16.6% (cont.) | |||||||
$ | 1,000,000 | Republic New York | |||||
Capital I, | |||||||
7.75%, 11/15/2026 | $ | 1,002,500 | |||||
700,000 | Republic New York | ||||||
Corporation Debentures, | |||||||
9.125%, 05/15/2021 | 791,916 | ||||||
1,500,000 | Santander Issuances, | ||||||
6.50%, 08/11/2019 | |||||||
(Acquired 10/18/2007; | |||||||
Cost $1,660,835)* f | 1,305,952 | ||||||
1,100,000 | Santander U.S. Debt | ||||||
S.A. Unipersonal, | |||||||
2.991%, 10/07/2013 | |||||||
(Acquired 09/27/2010; | |||||||
Cost $1,100,000)* f | 1,051,614 | ||||||
8,760,000 | Schwab Capital Trust I, | ||||||
7.50%, 11/15/2037 | 8,762,891 | ||||||
SLM Corporation: | |||||||
1,000,000 | 5.375%, 01/15/2013 | 1,006,899 | |||||
3,000,000 | 5.00%, 10/01/2013 @ | 3,000,000 | |||||
1,137,000 | 5.375%, 05/15/2014 | 1,137,797 | |||||
500,000 | 5.625%, 08/01/2033 | 372,960 | |||||
4,900,000 | Sovereign Bancorp, Inc., | ||||||
8.75%, 05/30/2018 | 5,463,446 | ||||||
6,000,000 | SunTrust Banks Inc., | ||||||
5.25%, 11/05/2012 | 6,149,034 | ||||||
1,032,000 | Susa Partnership LP, | ||||||
8.20%, 06/01/2017 | 1,238,757 | ||||||
1,000,000 | Symetra Financial | ||||||
Corporation, | |||||||
6.125%, 04/01/2016 | |||||||
(Acquired 03/23/2006; | |||||||
Cost $995,570)* | 1,010,537 | ||||||
3,000,000 | TD Ameritrade | ||||||
Holding Corporation, | |||||||
5.60%, 12/01/2019 | 3,243,744 | ||||||
1,000,000 | Travelers | ||||||
Companies, Inc., | |||||||
6.75%, 06/20/2036 | 1,286,790 | ||||||
560,000 | UFJ Finance | ||||||
Aruba A.E.C., | |||||||
6.75%, 07/15/2013 f | 598,392 | ||||||
4,120,000 | Wachovia Bank NA, | ||||||
6.00%, 11/15/2017 | 4,549,399 | ||||||
750,000 | Willis North | ||||||
America Inc., | |||||||
5.625%, 07/15/2015 | 796,394 | ||||||
249,752,002 | |||||||
Industrial – 13.4% | |||||||
4,200,000 | Acuity Brands Lighting | ||||||
Inc., 6.00%, 12/15/2019 | 4,729,498 | ||||||
2,325,000 | Allied Waste North | ||||||
America, Inc., | |||||||
6.875%, 06/01/2017 | 2,458,687 | ||||||
Ameritech Capital | |||||||
Funding Debentures: | |||||||
1,750,092 | 9.10%, 06/01/2016 | 2,073,401 | |||||
1,500,000 | 6.45%, 01/15/2018 | 1,727,851 | |||||
3,000,000 | Anadarko Petroleum | ||||||
Corporation, | |||||||
6.375%, 09/15/2017 | 3,477,402 | ||||||
2,000,000 | Anglo American | ||||||
Capital PLC, | |||||||
9.375%, 04/08/2019 | |||||||
(Acquired 04/02/2009; | |||||||
Cost $2,000,000)* f | 2,544,844 | ||||||
Bunge Limited | |||||||
Finance Corporation: | |||||||
600,000 | 5.35%, 04/15/2014 | 629,312 | |||||
1,289,000 | 5.10%, 07/15/2015 | 1,349,154 | |||||
3,800,000 | Bunge NA Finance LP, | ||||||
5.90%, 04/01/2017 | 4,149,737 |
The accompanying notes are an integral part of these financial statements.
Page 82
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.1% (cont.) | |||||||
Industrial – 13.4% (cont.) | |||||||
$ | 3,000,000 | CenturyLink Inc., | |||||
5.15%, 06/15/2017 | $ | 2,973,546 | |||||
8,164,000 | Chevron Phillips | ||||||
Chemical Company LLC, | |||||||
7.00%, 06/15/2014 | |||||||
(Acquired 10/27/2010 | |||||||
through 10/28/2010; | |||||||
Aggregate Cost | |||||||
$9,004,058)* @ | 9,110,763 | ||||||
800,000 | Clear Channel | ||||||
Communications, | |||||||
5.50%, 12/15/2016 | 370,000 | ||||||
1,000,000 | Comcast Corporation, | ||||||
6.95%, 08/15/2037 | 1,272,308 | ||||||
500,000 | Comcast-Cable Holdings, | ||||||
7.875%, 08/01/2013 | 550,242 | ||||||
7,075,000 | Computer | ||||||
Sciences Corporation, | |||||||
5.50%, 03/15/2013 @ | 7,039,625 | ||||||
ConAgra Foods, Inc.: | |||||||
1,687,000 | 5.819%, 06/15/2017 | 1,889,398 | |||||
120,000 | 9.75%, 03/01/2021 | 162,276 | |||||
324,985 | Continental Airlines, Inc. | ||||||
Pass-Thru Certificates, | |||||||
Series 1997-4, Class A, | |||||||
6.90%, 01/02/2018 | 338,374 | ||||||
2,000,000 | COX | ||||||
Communications Inc., | |||||||
7.25%, 11/15/2015 | 2,351,132 | ||||||
2,000,000 | Daimler Finance | ||||||
North America LLC, | |||||||
1.184%, 03/28/2014 | |||||||
(Acquired 12/09/2011; | |||||||
Cost $1,947,613)* | 1,930,110 | ||||||
410,000 | Deutsche Telekom | ||||||
International | |||||||
Finance BV, | |||||||
8.75%, 06/15/2030 f | 571,913 | ||||||
8,000,000 | DIRECTV | ||||||
Holdings/Financing, | |||||||
7.625%, 05/15/2016 | 8,490,000 | ||||||
Donnelley (R.R.) | |||||||
& Sons Co.: | |||||||
2,500,000 | 8.60%, 08/15/2016 | 2,503,125 | |||||
2,000,000 | 6.125%, 01/15/2017 @ | 1,860,000 | |||||
1,000,000 | 7.625%, 06/15/2020 | 935,000 | |||||
1,000,000 | D.R. Horton Inc. | ||||||
Unsubordinated Notes, | |||||||
6.50%, 04/15/2016 @ | 1,036,250 | ||||||
3,000,000 | Express Scripts, Inc., | ||||||
3.125%, 05/15/2016 @ | 3,016,629 | ||||||
8,907,000 | Freeport-McMoRan | ||||||
Copper & Gold Inc., | |||||||
8.375%, 04/01/2017 | 9,463,687 | ||||||
7,000,000 | Georgia-Pacific LLC, | ||||||
8.25%, 05/01/2016 | |||||||
(Acquired 12/10/2010; | |||||||
Cost $7,585,171)* | 7,776,720 | ||||||
8,092,000 | Glencore Funding LLC, | ||||||
6.00%, 04/15/2014 | |||||||
(Acquired 03/31/2004 | |||||||
through 06/20/2011; | |||||||
Aggregate Cost | |||||||
$8,163,111)* | 8,358,381 | ||||||
GTE Corporation: | |||||||
2,400,000 | 6.84%, 04/15/2018 | 2,874,761 | |||||
100,000 | 8.75%, 11/01/2021 | 140,031 | |||||
650,000 | Health Management | ||||||
Association, | |||||||
6.125%, 04/15/2016 | 672,750 |
The accompanying notes are an integral part of these financial statements.
Page 83
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.1% (cont.) | |||||||
Industrial – 13.4% (cont.) | |||||||
Highmark Inc. Notes, | |||||||
$ | 1,950,000 | 6.80%, 08/15/2013 | |||||
(Acquired 08/14/2003 | |||||||
through 12/17/2007; | |||||||
Aggregate Cost | |||||||
$1,961,298)* | $ | 2,081,721 | |||||
3,000,000 | 4.75%, 05/15/2021 | ||||||
(Acquired 05/03/2011; | |||||||
Cost $2,987,880)* | 3,074,394 | ||||||
1,000,000 | Holcim U.S. Finance, | ||||||
6.00%, 12/30/2019 | |||||||
(Acquired 09/24/2009; | |||||||
Cost $986,740)* f | 1,030,469 | ||||||
5,700,000 | Hutchison Whampoa | ||||||
International Ltd., | |||||||
7.625%, 04/09/2019 | |||||||
(Acquired 10/22/2009 | |||||||
through 10/29/2009; | |||||||
Aggregate Cost | |||||||
$6,298,836)* f | 7,022,035 | ||||||
950,000 | Johnson Controls Inc., | ||||||
6.00%, 01/15/2036 | 1,098,975 | ||||||
400,000 | Laboratory Corporation | ||||||
of America Holdings, | |||||||
5.625%, 12/15/2015 | 445,298 | ||||||
1,000,000 | Lafarge SA, | ||||||
7.125%, 07/15/2036 f @ | 882,932 | ||||||
1,000,000 | Martin Marietta | ||||||
Materials, Inc., | |||||||
6.25%, 05/01/2037 | 899,106 | ||||||
1,000,000 | Masco Corporation, | ||||||
6.125%, 10/03/2016 | 1,026,203 | ||||||
1,100,000 | Nabors Industries, Inc., | ||||||
6.15%, 02/15/2018 | 1,228,798 | ||||||
7,045,000 | National Oilwell Varco | ||||||
Inc., Series B, | |||||||
6.125%, 08/15/2015 | 7,212,199 | ||||||
1,300,000 | New Cingular Wireless | ||||||
�� | Services, Inc., | ||||||
8.75%, 03/01/2031 | 1,910,090 | ||||||
1,500,000 | Nextel Communications, | ||||||
Series D, | |||||||
7.375%, 08/01/2015@ | 1,372,500 | ||||||
320,000 | Pactiv Corporation, | ||||||
7.95%, 12/15/2025 @ | 216,000 | ||||||
400,000 | PCCW-HKT | ||||||
Capital II Ltd., | |||||||
6.00%, 07/15/2013 | |||||||
(Acquired 07/10/2003; | |||||||
Cost $398,132)* f | 419,651 | ||||||
4,355,000 | Plum Creek | ||||||
Timberlands, L.P., | |||||||
5.875%, 11/15/2015 | 4,833,937 | ||||||
1,000,000 | Questar Market | ||||||
Resources Inc., | |||||||
6.80%, 03/01/2020 | 1,070,000 | ||||||
2,000,000 | Ralcorp Holdings, Inc., | ||||||
4.95%, 08/15/2020 | 2,038,816 | ||||||
500,000 | Rio Tinto Alcan, Inc., | ||||||
5.75%, 06/01/2035 f | 591,150 | ||||||
3,700,000 | Rio Tinto Financial | ||||||
USA Ltd., | |||||||
6.50%, 07/15/2018 f @ | 4,459,636 | ||||||
1,500,000 | SK Telecom, | ||||||
6.625%, 07/20/2027 | |||||||
(Acquired 07/13/2007; | |||||||
Cost $1,482,015)* f | 1,776,663 | ||||||
Sprint Capital | |||||||
Corporation: | |||||||
2,800,000 | 6.90%, 05/01/2019 @ | 2,303,000 | |||||
358,000 | 8.75%, 03/15/2032 | 289,532 |
The accompanying notes are an integral part of these financial statements.
Page 84
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.1% (cont.) | |||||||
Industrial – 13.4% (cont.) | |||||||
$ | 1,000,000 | Talisman Energy Inc., | |||||
7.75%, 06/01/2019 f | $ | 1,233,061 | |||||
2,793,000 | Teck Resources Limited, | ||||||
10.25%, 05/15/2016 f | 3,211,950 | ||||||
Telecom Italia | |||||||
Capital SA: f | |||||||
2,000,000 | 7.175%, 06/18/2019 @ | 1,874,216 | |||||
5,519,000 | 7.20%, 07/18/2036 | 4,558,407 | |||||
Telefonica Emisiones, | |||||||
S.A.U.: f | |||||||
1,950,000 | 6.421%, 06/20/2016 | 2,040,663 | |||||
5,075,000 | 6.221%, 07/03/2017 | 5,201,165 | |||||
Time Warner, Inc.: | |||||||
1,050,000 | 4.70%, 01/15/2021 | 1,130,556 | |||||
1,100,000 | 7.625%, 04/15/2031 | 1,419,969 | |||||
500,000 | 7.70%, 05/01/2032 | 652,342 | |||||
1,000,000 | 6.55%, 05/01/2037 | 1,137,416 | |||||
3,100,000 | 6.75%, 06/15/2039 | 3,663,326 | |||||
5,000,000 | 6.25%, 03/29/2041 @ | 5,994,755 | |||||
3,000,000 | Tyco Electronics | ||||||
Group S.A., | |||||||
6.55%, 10/01/2017 f | 3,465,594 | ||||||
53,574 | United AirLines, Inc. | ||||||
Pass-Thru Certificates, | |||||||
Series 2000-2, Class C, | |||||||
7.762%, 04/29/2049 § † ** | 1,607 | ||||||
317,248 | U.S. Airways | ||||||
Pass-Thru Certificate, | |||||||
Series 1998-1, 6.85%, | |||||||
01/30/2018 | 291,868 | ||||||
Vale Overseas Limited: f | |||||||
3,850,000 | 8.25%, 01/17/2034 @ | 4,943,916 | |||||
1,550,000 | 6.875%, 11/21/2036 | 1,764,754 | |||||
1,000,000 | 6.875%, 11/10/2039 | 1,145,400 | |||||
2,000,000 | Verizon Wireless Cap LLC, | ||||||
8.50%, 11/15/2018 | 2,699,400 | ||||||
Vulcan Materials Co.: | |||||||
2,000,000 | 7.00%, 06/15/2018 | 2,060,000 | |||||
500,000 | 7.15%, 11/30/2037 | 450,000 | |||||
100,000 | Westvaco Corporation, | ||||||
9.75%, 06/15/2020 | 126,287 | ||||||
2,000,000 | Weyerhaeuser Company, | ||||||
7.25%, 07/01/2013 | 2,117,636 | ||||||
3,600,000 | Woodside Finance Ltd., | ||||||
8.125%, 03/01/2014 | |||||||
(Acquired 02/24/2009; | |||||||
Cost $3,598,884)* f | 4,025,786 | ||||||
690,000 | Xstrata Finance | ||||||
Canada Ltd., | |||||||
5.80%, 11/15/2016 | |||||||
(Acquired 12/06/2011; | |||||||
Cost $746,256)* f | 752,707 | ||||||
202,072,793 | |||||||
Other Government Related Securities – 1.4% | |||||||
5,496,000 | Corp Andina | ||||||
De Fomento Notes, | |||||||
5.75%, 01/12/2017 f | 6,011,184 | ||||||
Korea Electric Power | |||||||
Corporation: f | |||||||
342,000 | 7.75%, 04/01/2013 | 363,793 | |||||
2,165,000 | 6.75%, 08/01/2027 | 2,580,892 | |||||
510,000 | National Bank of Hungary | ||||||
Yankee Debentures, | |||||||
8.875%, 11/01/2013 f | 549,845 | ||||||
3,000,000 | PEMEX Finance Ltd., | ||||||
10.61%, 08/15/2017 f | 3,673,386 | ||||||
2,800,000 | PEMEX Project | ||||||
Funding Master Trust, | |||||||
5.75%, 03/01/2018 | 3,080,000 | ||||||
1,000,000 | Petrobras International | ||||||
Finance Company, | |||||||
5.75%, 01/20/2020 f | 1,070,120 |
The accompanying notes are an integral part of these financial statements.
Page 85
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.1% (cont.) | |||||||
Other Government Related Securities – 1.4% (cont.) | |||||||
$ | 301,000 | United Mexican States, | |||||
6.75%, 09/27/2034 f | $ | 392,053 | |||||
2,788,000 | Westdeutsche | ||||||
Landesbank | |||||||
Subordinated Notes, | |||||||
4.796%, 07/15/2015 f | 2,895,165 | ||||||
20,616,438 | |||||||
Residential Mortgage Backed Securities – 28.6% | |||||||
Bank of America | |||||||
Alternative Loan Trust: | |||||||
296,384 | Series 2003-4, Class 2A1, | ||||||
5.00%, 06/25/2018 | 305,949 | ||||||
3,772,223 | Series 2003-5, Class 2A1, | ||||||
5.00%, 07/25/2018 | 3,895,774 | ||||||
499,878 | Series 2003-11, Class 4A1, | ||||||
4.75%, 01/25/2019 | 507,225 | ||||||
326,616 | Series 2004-6, Class 4A1, | ||||||
5.00%, 07/25/2019 | 330,632 | ||||||
7,440,241 | Series 2004-7, Class 4A1, | ||||||
5.00%, 08/25/2019 | 7,637,371 | ||||||
339,242 | Series 2004-11, Class 4A1, | ||||||
5.50%, 12/25/2019 | 349,912 | ||||||
524,125 | Series 2005-2, Class 4A1, | ||||||
5.50%, 03/25/2020 | 515,278 | ||||||
2,391,969 | Series 2005-4, Class 3A1, | ||||||
5.50%, 05/25/2020 | 2,277,246 | ||||||
1,641,141 | Series 2005-10, Class 5A1, | ||||||
5.25%, 11/25/2020 | 1,566,354 | ||||||
2,681,626 | Series 2007-1, | ||||||
Class 1A1, 5.792%, | |||||||
04/25/2022 | 2,490,622 | ||||||
1,127,133 | Series 2003-11, | ||||||
Class 2A1, 6.00%, | |||||||
01/25/2034 | 1,130,223 | ||||||
508,989 | Series 2005-2, | ||||||
Class 1CB2, | |||||||
5.50%, 03/25/2035 | 453,696 | ||||||
730,152 | Series 2005-9, | ||||||
Class 1CB3, | |||||||
5.50%, 10/25/2035 | 579,306 | ||||||
418,281 | Series 2005-11, | ||||||
Class 1CB4, | |||||||
5.50%, 12/25/2035 | 327,456 | ||||||
1,580,949 | Series 2006-5, Class CB7, | ||||||
6.00%, 06/25/2046 § | 1,069,404 | ||||||
2,834,424 | Bear Stearns Asset | ||||||
Backed Securities Trust, | |||||||
Series 2004-AC2, Class | |||||||
2A, 5.00%, 05/25/2034 | 2,833,752 | ||||||
Chase Mortgage | |||||||
Finance Corporation: | |||||||
689,163 | Series 2003-S13, Class | ||||||
A11, 5.50%, 11/25/2033 | 701,290 | ||||||
26,525 | Series 2003-S14, Class | ||||||
3A6, 5.50%, 01/25/2034 | 26,802 | ||||||
5,500,068 | Series 2006-A1, Class | ||||||
2A3, 5.806%, 09/25/2036 | 4,047,621 | ||||||
764,160 | Citigroup Mortgage | ||||||
Loan Trust, Inc., | |||||||
Series 2005-9, Class 2A2, | |||||||
5.50%, 11/25/2035 | 718,568 | ||||||
Countrywide Alternative | |||||||
Loan Trust: | |||||||
814,766 | Series 2005-50CB, | ||||||
Class 4A1, 5.00%, | |||||||
11/25/2020 § | 700,320 | ||||||
3,702,242 | Series 2006-7CB, Class | ||||||
3A1, 5.25%, 05/25/2021 § | 3,185,428 | ||||||
806,937 | Series 2006-J5, Class 3A1, | ||||||
6.045%, 07/25/2021 § | 621,843 |
The accompanying notes are an integral part of these financial statements.
Page 86
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.1% (cont.) | |||||||
Residential Mortgage | |||||||
Backed Securities – 28.6% (cont.) | |||||||
$ | 894,334 | Series 2006-43CB, | |||||
Class 2A1, | |||||||
6.00%, 02/25/2022 § | $ | 793,024 | |||||
127,664 | Series 2002-11, | ||||||
Class A4, 6.25%, | |||||||
10/25/2032 | 129,702 | ||||||
10,942,901 | Series 2003-20CB, Class | ||||||
1A1, 5.50%, 10/25/2033 | 11,484,826 | ||||||
4,488,807 | Series 2005-10CB, Class | ||||||
1A6, 5.50%, 05/25/2035 | 4,314,211 | ||||||
398,493 | Series 2005-34CB, Class | ||||||
1A6, 5.50%, 09/25/2035 | 397,390 | ||||||
1,920,005 | Series 2006-28CB, Class | ||||||
A17, 6.00%, 10/25/2036 § | 1,191,599 | ||||||
78,763 | Countrywide Home | ||||||
Loans, Inc., | |||||||
Series 2003-39, Class A5, | |||||||
5.00%, 05/25/2012 | 78,738 | ||||||
Deutsche Mortgage | |||||||
Securities Inc.: | |||||||
1,294,102 | Series 2006-AR5, | ||||||
Class 21A, 6.00%, | |||||||
10/25/2021 | 1,041,002 | ||||||
209,335 | Series 2004-4, Class | ||||||
1A6, 5.65%, 04/25/2034 | 207,648 | ||||||
Federal Gold Loan | |||||||
Mortgage Corporation | |||||||
(FGLMC): | |||||||
35,100 | 6.50%, 07/01/2014 | 36,871 | |||||
455,435 | 6.00%, 06/01/2020 | 493,917 | |||||
261,221 | 5.50%, 11/01/2022 | 283,556 | |||||
301,633 | 5.00%, 06/01/2023 | 328,979 | |||||
286,219 | 5.50%, 07/01/2023 | 312,749 | |||||
771,610 | 6.50%, 06/01/2029 | 884,124 | |||||
2,654,444 | 5.50%, 01/01/2036 | 2,889,704 | |||||
1,608,549 | 6.00%, 12/01/2036 | 1,772,225 | |||||
2,544,488 | 5.50%, 04/01/2037 | 2,764,438 | |||||
7,953,396 | 5.50%, 05/01/2038 | 8,640,900 | |||||
8,189,898 | 5.50%, 08/01/2038 | 8,897,846 | |||||
Federal Home Loan | |||||||
Mortgage Corporation | |||||||
(FHLMC): | |||||||
77,196 | Series 206, Class E, | ||||||
0.00%, 07/15/2019 ^ | 75,794 | ||||||
41,246 | Series 141, Class D, | ||||||
5.00%, 05/15/2021 | 44,320 | ||||||
45,162 | Series 1074, Class I, | ||||||
6.75%, 05/15/2021 | 49,393 | ||||||
257,928 | Series 1081, Class K, | ||||||
7.00%, 05/15/2021 | 289,279 | ||||||
45,025 | Series 163, Class F, | ||||||
6.00%, 07/15/2021 | 50,232 | ||||||
85,968 | Series 188, Class H, | ||||||
7.00%, 09/15/2021 | 95,800 | ||||||
36,031 | Series 1286, Class A, | ||||||
6.00%, 05/15/2022 | 39,090 | ||||||
8,123,355 | 4.50%, 11/01/2039 | 8,615,300 | |||||
9,016,262 | 4.50%, 08/01/2040 | 9,559,464 | |||||
14,875,049 | 4.50%, 08/01/2040 | 15,771,225 | |||||
20,856,732 | 4.50%, 09/01/2040 | 22,113,286 | |||||
Federal National | |||||||
Mortgage Association | |||||||
(FNMA): | |||||||
1,085,459 | 5.00%, 12/01/2019 | 1,172,396 | |||||
9,492,890 | 5.00%, 11/01/2021 | 10,253,194 | |||||
623,988 | 5.50%, 01/01/2023 | 684,459 | |||||
1,064,752 | 5.50%, 07/01/2023 | 1,167,937 | |||||
2,652,048 | 5.00%, 11/01/2023 | 2,906,159 | |||||
1,033,995 | 6.00%, 03/01/2026 | 1,140,339 | |||||
2,416,953 | 6.00%, 05/01/2026 | 2,665,531 | |||||
2,563,774 | 5.00%, 05/01/2028 | 2,772,572 |
The accompanying notes are an integral part of these financial statements.
Page 87
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.1% (cont.) | |||||||
Residential Mortgage | |||||||
Backed Securities – 28.6% (cont.) | |||||||
$ | 312,066 | 6.00%, 03/01/2033 | $ | 347,635 | |||
333,829 | 5.00%, 11/01/2033 | 361,017 | |||||
7,706,810 | 5.50%, 04/01/2034 | 8,454,371 | |||||
1,424,541 | 5.50%, 09/01/2034 | 1,556,361 | |||||
352,039 | 6.00%, 11/01/2034 | 391,216 | |||||
5,122,766 | 5.50%, 02/01/2035 | 5,596,802 | |||||
25,220,127 | 5.00%, 10/01/2035 @ | 27,266,212 | |||||
13,781,098 | 5.00%, 11/01/2035 | 14,899,145 | |||||
19,446,037 | 5.00%, 02/01/2036 | 21,023,675 | |||||
3,002,128 | 5.50%, 11/01/2036 | 3,275,239 | |||||
11,833,585 | 5.50%, 04/01/2037 @ | 12,936,004 | |||||
595,712 | 6.00%, 08/01/2037 | 653,256 | |||||
8,326,631 | 5.50%, 06/01/2038 | 9,073,719 | |||||
12,574,365 | 4.00%, 08/01/2040 @ | 13,221,084 | |||||
3,809,508 | 3.50%, 12/01/2040 | 3,921,297 | |||||
10,018,285 | 3.50%, 02/01/2041 | 10,312,269 | |||||
29,936,584 | 4.00%, 02/01/2041 | 31,476,267 | |||||
16,720,797 | 4.00%, 09/01/2041 | 17,585,998 | |||||
27,705 | Series 2002-56, Class | ||||||
MC, 5.50%, 09/25/2017 | 29,447 | ||||||
266,502 | Series 1989-37, Class G, | ||||||
8.00%, 07/25/2019 | 298,853 | ||||||
69,102 | Series 1989-94, Class G, | ||||||
7.50%, 12/25/2019 | 77,657 | ||||||
10,733 | Series 1990-58, Class J, | ||||||
7.00%, 05/25/2020 | 11,990 | ||||||
102,062 | Series 1990-76, Class G, | ||||||
7.00%, 07/25/2020 | 114,007 | ||||||
47,572 | Series 1990-105, Class J, | ||||||
6.50%, 09/25/2020 | 51,989 | ||||||
15,043 | Series 1990-108, Class G, | ||||||
7.00%, 09/25/2020 | 16,816 | ||||||
34,335 | Series 1991-1, Class G, | ||||||
7.00%, 01/25/2021 | 38,488 | ||||||
34,613 | Series 1991-86, Class Z, | ||||||
6.50%, 07/25/2021 | 38,037 | ||||||
424,344 | Series 1993-58, Class H, | ||||||
5.50%, 04/25/2023 | 462,544 | ||||||
278,776 | Series 1998-66, Class C, | ||||||
6.00%, 12/25/2028 | 305,366 | ||||||
1,364,411 | Series 2004-W6, Class | ||||||
1A4, 5.50%, 07/25/2034 | 1,406,040 | ||||||
2,807,969 | Series 2004-W6, Class | ||||||
1A6, 5.50%, 07/25/2034 | 2,938,620 | ||||||
529,392 | Series 2004-W10, | ||||||
Class A24, | |||||||
5.00%, 08/25/2034 | 528,161 | ||||||
4,100,000 | Series 2004-W10, Class | ||||||
A4, 5.75%, 08/25/2034 | 4,179,227 | ||||||
First Horizon Alternative | |||||||
Mortgage Securities: | |||||||
563,185 | Series 2005-FA7, Class | ||||||
2A1, 5.00%, 09/25/2020 | 534,219 | ||||||
787,018 | Series 2006-FA6, Class | ||||||
3A1, 5.75%, 11/25/2021 | 723,317 | ||||||
2,213,867 | Series 2006-FA8, Class | ||||||
2A1, 5.75%, 02/25/2037 | 2,033,623 | ||||||
Government National | |||||||
Mortgage Association | |||||||
(GNMA): | |||||||
227,281 | 6.00%, 11/20/2033 | 258,077 | |||||
13,509,885 | 5.00%, 07/20/2040 | 14,954,597 | |||||
36,070,858 | 4.50%, 01/20/2041 | 39,417,554 | |||||
235,508 | Impac CMB Trust, | ||||||
Series 2004-4, Class 2A2, | |||||||
4.905%, 09/25/2034 | 227,383 | ||||||
976,455 | J.P. Morgan Alternative | ||||||
Loan Trust, Series | |||||||
2006-A1, Class 2A1, | |||||||
2.661%, 03/25/2036 | 507,477 |
The accompanying notes are an integral part of these financial statements.
Page 88
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.1% (cont.) | |||||||
Residential Mortgage | |||||||
Backed Securities – 28.6% (cont.) | |||||||
J.P. Morgan | |||||||
Mortgage Trust: | |||||||
$ | 602,481 | Series 2006-A7, | |||||
Class 2A2, 2.756%, | |||||||
01/25/2037 § | $ | 393,046 | |||||
2,574,066 | Series 2006-A7, | ||||||
Class 2A4R, 2.756%, | |||||||
01/25/2037 § | 1,679,014 | ||||||
6,100,000 | Series 2007-A2, | ||||||
Class 2A3, 3.911%, | |||||||
04/25/2037 | 3,896,540 | ||||||
Master Alternative | |||||||
Loans Trust: | |||||||
1,480,953 | Series 2004-1, Class 1A1, | ||||||
5.00%, 01/25/2019 | 1,513,480 | ||||||
89,920 | Series 2004-2, Class 4A1, | ||||||
5.00%, 02/25/2019 | 90,785 | ||||||
1,113,403 | Series 2004-4, Class 4A1, | ||||||
5.00%, 04/25/2019 | 1,141,637 | ||||||
591,912 | Series 2003-5, Class 6A1, | ||||||
6.00%, 08/25/2033 | 626,476 | ||||||
550,045 | RAAC Series, Series | ||||||
2004-SP1, Class AI4, | |||||||
5.285%, 08/25/2027 | 552,193 | ||||||
352,693 | Residential Accredit | ||||||
Loans, Inc., Series | |||||||
2004-QS6, Class A1, | |||||||
5.00%, 05/25/2019 | 350,375 | ||||||
154,473 | Residential Funding | ||||||
Mortgage Security I, | |||||||
Series 2003-S11, Class | |||||||
A2, 4.00%, 06/25/2018 | 156,067 | ||||||
724,853 | Salomon Brothers | ||||||
Mortgage Securities | |||||||
VII, Series 2003-UP2, | |||||||
Class A2, | |||||||
4.00%, 06/25/2033 | 750,305 | ||||||
1,190,843 | Structured Asset | ||||||
Securities Corporation, | |||||||
Series 2005-7XS, | |||||||
Class 1A4B, 5.44%, | |||||||
04/25/2035 | 1,196,893 | ||||||
Washington Mutual, Inc. | |||||||
Pass-Thru Certificates: | |||||||
1,349,984 | Series 2004-CB1, Class | ||||||
5A, 5.00%, 06/25/2019 | 1,385,587 | ||||||
2,436,896 | Series 2004-CB2, Class | ||||||
7A, 5.50%, 08/25/2019 | 2,541,359 | ||||||
56,504 | Series 2004-CB3, Class | ||||||
3A, 5.50%, 10/25/2019 | 57,812 | ||||||
740,420 | Series 2004-CB3, Class | ||||||
4A, 6.00%, 10/25/2019 | 767,099 | ||||||
500,975 | Series 2004-CB4, | ||||||
Class 21A, | |||||||
5.50%, 12/25/2019 | 512,216 | ||||||
431,797,231 | |||||||
Taxable Municipal Bonds – 5.1% | |||||||
5,000,000 | Atlanta Independent | ||||||
School System, | |||||||
5.557%, 03/01/2026 | 5,455,700 | ||||||
California Qualified | |||||||
School Construction Bonds: | |||||||
2,500,000 | 5.041%, 07/01/2020 | 2,734,100 | |||||
7,500,000 | 7.155%, 03/01/2027 | 8,417,250 |
The accompanying notes are an integral part of these financial statements.
Page 89
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.1% (cont.) | |||||||
Taxable Municipal Bonds – 5.1% (cont.) | |||||||
$ | 2,000,000 | California School | |||||
Finance Authority, | |||||||
5.043%, 01/01/2021 | |||||||
(Callable 12/31/2015) | $ | 2,079,940 | |||||
3,500,000 | California State, | ||||||
5.75%, 03/01/2017 | 3,924,480 | ||||||
5,975,000 | Contra Costa County | ||||||
California Pension | |||||||
Obligation, | |||||||
5.14%, 06/01/2017 | 6,561,864 | ||||||
1,000,000 | Cuyahoga County | ||||||
Ohio Industrial | |||||||
Development Revenue, | |||||||
9.125%, 10/01/2023 | 844,710 | ||||||
2,580,000 | Eaton Ohio | ||||||
Community City Schools, | |||||||
5.39%, 08/25/2027 | |||||||
(Callable 06/01/2020) | 2,732,839 | ||||||
4,975,000 | Elgin Ohio LOC | ||||||
School District, | |||||||
5.499%, 08/31/2027 | |||||||
(Callable 12/01/2019) | 5,196,338 | ||||||
10,000,000 | Illinois State, | ||||||
3.636%, 02/01/2014 | 10,191,300 | ||||||
6,500,000 | San Dieguito California | ||||||
Public Facilities, | |||||||
6.459%, 05/01/2027 | 7,349,940 | ||||||
5,000,000 | State Public School | ||||||
Building Authorities | |||||||
Revenue, | |||||||
5.00%, 09/15/2027 | 5,232,950 | ||||||
2,650,000 | Three Rivers Ohio | ||||||
LOC School District, | |||||||
5.209%, 09/15/2027 | |||||||
(Callable 12/01/2020) | 2,779,876 | ||||||
7,415,000 | Tobacco Settlement | ||||||
Authority Iowa, | |||||||
6.50%, 06/01/2023 | |||||||
(Callable 06/01/2015) | 6,927,835 | ||||||
2,000,000 | West Contra Costa | ||||||
Unified School District, | |||||||
6.25%, 08/01/2030 | 2,076,240 | ||||||
4,000,000 | Westlake Ohio | ||||||
City School District, | |||||||
5.227%, 12/01/2026 | |||||||
(Callable 12/01/2020) | 4,267,800 | ||||||
76,773,162 | |||||||
Utilities – 7.1% | |||||||
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 | |||||||
$5,583,746)* | 5,599,308 | ||||||
1,900,000 | 5.75%, 10/15/2019 | ||||||
(Acquired 09/22/2009 | |||||||
through 06/30/2010; | |||||||
Aggregate Cost | |||||||
$1,891,569)* | 2,032,050 | ||||||
6,900,000 | Ameren Corporation, | ||||||
8.875%, 05/15/2014 | 7,731,905 | ||||||
850,000 | Arizona Pubic Service | ||||||
Senior Unsecured Notes, | |||||||
8.75%, 03/01/2019 | 1,085,504 | ||||||
1,914,000 | Beaver Valley Funding | ||||||
Corporation Debentures, | |||||||
9.00%, 06/01/2017 | 2,013,662 |
The accompanying notes are an integral part of these financial statements.
Page 90
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.1% (cont.) | |||||||
Utilities – 7.1% (cont.) | |||||||
$ | 5,862,000 | Constellation Energy | |||||
Group Inc., | |||||||
4.55%, 06/15/2015 | $ | 6,189,276 | |||||
4,500,000 | El Paso Pipeline Partners | ||||||
Operating Co LLC, | |||||||
7.50%, 11/15/2040 | 5,237,721 | ||||||
Enel Finance | |||||||
International: f | |||||||
2,475,000 | 5.125%, 10/07/2019 | ||||||
(Acquired 09/30/2009; | |||||||
Cost $2,464,110)* | 2,211,039 | ||||||
1,900,000 | 6.80%, 09/15/2037 | ||||||
(Acquired 09/13/2007; | |||||||
Cost $1,894,965)* | 1,650,087 | ||||||
1,173,000 | Energy Transfer Partners, | ||||||
8.50%, 04/15/2014 | 1,315,148 | ||||||
825,000 | Enterprise Products | ||||||
Operating LLC, | |||||||
6.125%, 02/01/2013 | 861,063 | ||||||
2,200,000 | Exelon Generation | ||||||
Company, LLC, | |||||||
6.20%, 10/01/2017 @ | 2,526,379 | ||||||
2,500,000 | FPL Group Capital, | ||||||
Inc., Series D, | |||||||
7.30%, 09/01/2067 @ | 2,600,000 | ||||||
360,869 | GG1C Funding | ||||||
Corporation, | |||||||
5.129%, 01/15/2014 | |||||||
(Acquired 06/27/2006; | |||||||
Cost $355,436)* | 368,389 | ||||||
Kinder Morgan Energy | |||||||
Partners Senior Notes: | |||||||
1,000,000 | 9.00%, 02/01/2019 | 1,261,515 | |||||
2,250,000 | 6.95%, 01/15/2038 | 2,541,350 | |||||
1,000,000 | 6.50%, 09/01/2039 | 1,111,495 | |||||
900,000 | Kinder Morgan Finance, | ||||||
5.70%, 01/05/2016 f | 920,250 | ||||||
257,767 | Kiowa Power | ||||||
Partners LLC, | |||||||
4.811%, 12/30/2013 | |||||||
(Acquired 11/19/2004 | |||||||
through 12/23/2011; | |||||||
Aggregate Cost $257,767)* | 253,888 | ||||||
2,600,000 | Korea Gas Corp., | ||||||
4.25%, 11/02/2020 | |||||||
(Acquired 10/26/2010; | |||||||
Cost $2,587,026)* f | 2,567,284 | ||||||
5,500,000 | Mega Advance | ||||||
Investments Ltd., | |||||||
5.00%, 05/12/2021 | |||||||
(Acquired 05/09/2011; | |||||||
Cost $5,443,790)* f @ | 5,593,000 | ||||||
1,325,000 | National Grid PLC | ||||||
Senior Unsecured Notes, | |||||||
6.30%, 08/01/2016 f | 1,520,476 | ||||||
National Rural | |||||||
Utilities Corporation: | |||||||
4,647,000 | 10.375%, 11/01/2018 | 6,685,890 | |||||
100,000 | 8.00%, 03/01/2032 | 140,804 | |||||
1,284,000 | Nisource Finance Corp., | ||||||
6.15%, 03/01/2013 | 1,348,450 | ||||||
2,000,000 | ONEOK, Inc., | ||||||
5.20%, 06/15/2015 @ | 2,191,972 | ||||||
3,401,000 | ONEOK Partners L.P., | ||||||
6.15%, 10/01/2016 | 3,905,399 | ||||||
1,000,000 | Plains All | ||||||
American Pipeline, | |||||||
5.625%, 12/15/2013 | 1,068,463 | ||||||
2,060,000 | PPL Energy Supply, | ||||||
LLC, Series A, | |||||||
5.70%, 10/15/2015 | 2,235,172 |
The accompanying notes are an integral part of these financial statements.
Page 91
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 97.1% (cont.) | |||||||
Utilities – 7.1% (cont.) | |||||||
PSE&G Power LLC: | |||||||
$ | 575,000 | 5.00%, 04/01/2014 @ | $ | 615,731 | |||
3,223,000 | 5.32%, 09/15/2016 | 3,594,857 | |||||
4,005,000 | 5.125%, 04/15/2020 @ | 4,492,685 | |||||
1,285,406 | RGS (I&M) Funding | ||||||
Corporation Debentures, | |||||||
9.82%, 12/07/2022 | 1,558,208 | ||||||
2,000,000 | Rockies Express | ||||||
Pipeline LLC, | |||||||
5.625%, 04/15/2020 | |||||||
(Acquired 03/17/2010; | |||||||
Cost $1,998,220)* | 1,904,672 | ||||||
1,400,000 | Southern Natural Gas, | ||||||
5.90%, 04/01/2017 | |||||||
(Acquired 03/14/2007; | |||||||
Cost $1,397,676)* | 1,600,021 | ||||||
3,000,000 | Southwestern Public | ||||||
Service Co., | |||||||
5.60%, 10/01/2016 | 3,436,686 | ||||||
7,500,000 | Spectra Energy | ||||||
Capital LLC, | |||||||
5.668%, 08/15/2014 | 8,208,690 | ||||||
2,000,000 | Trans-Canada Pipelines, | ||||||
6.50%, 08/15/2018 f | 2,447,532 | ||||||
1,100,000 | Vectren Utility | ||||||
Holdings, Inc., | |||||||
5.25%, 08/01/2013 | 1,168,382 | ||||||
3,100,000 | Williams Partners LP, | ||||||
6.30%, 04/15/2040 | 3,779,815 | ||||||
107,574,218 | |||||||
U.S. Government Agency Issues – 0.2% | |||||||
Federal Home Loan | |||||||
Mortgage Corporation | |||||||
(FHLMC), | |||||||
2,475,000 | 2.00%, 08/25/2016 @ | 2,573,668 | |||||
U.S. Treasury Obligations – 13.0% | |||||||
U.S. Treasury Bonds: | |||||||
30,900,000 | 2.375%, 07/31/2017 @ | 33,210,269 | |||||
33,575,000 | 6.25%, 08/15/2023 @ | 48,054,219 | |||||
42,325,000 | 5.25%, 11/15/2028 @ | 58,355,594 | |||||
43,600,000 | 4.375%, 02/15/2038 @ | 56,366,603 | |||||
195,986,685 | |||||||
Total Long-Term | |||||||
Investments | |||||||
(Cost $1,414,416,945) | 1,463,228,289 | ||||||
Shares | |||||||
SHORT-TERM INVESTMENT – 4.2% | |||||||
Money Market Mutual Funds – 4.2% | |||||||
35,025,049 | Dreyfus Institutional | ||||||
Cash Advantage | |||||||
Fund, 0.06% « | 35,025,049 | ||||||
27,475,860 | Short-Term Investments | ||||||
Trust – Liquid Assets | |||||||
Portfolio, 0.16% « | 27,475,860 | ||||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $62,500,909) | 62,500,909 |
The accompanying notes are an integral part of these financial statements.
Page 92
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 17.8% | |||||||
Commercial Paper – 0.1% | |||||||
$ | 3,026,931 | Atlantic East | |||||
Funding LLC, | |||||||
0.610%, | |||||||
03/25/2012 † ** | $ | 1,890,343 | |||||
Total Commercial Paper | |||||||
(Cost $3,026,931) | 1,890,343 | ||||||
Shares | |||||||
Investment Companies – 17.7% | |||||||
266,909,084 | Mount Vernon Securities | ||||||
Lending Trust Prime | |||||||
Portfolio, 0.23% « | 266,909,084 | ||||||
Total Investment | |||||||
Companies | |||||||
(Cost $266,909,084) | 266,909,084 | ||||||
Total Investments | |||||||
Purchased With Cash | |||||||
Proceeds From | |||||||
Securities Lending | |||||||
(Cost $269,936,015) | 268,799,427 | ||||||
Total Investments | |||||||
(Cost $1,746,853,869) | |||||||
– 119.1% | 1,794,528,625 | ||||||
Asset Relating to Securities | |||||||
Lending Investments – 0.1% | |||||||
Support | |||||||
Agreement** ^ a † | 1,136,588 | ||||||
Total (Cost $0) | 1,136,588 | ||||||
Liabilities in Excess of | |||||||
Other Assets – (19.2)% | (289,271,673 | ) | |||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 1,506,393,540 |
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, 2011. |
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 93
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
Summary of Fair Value Exposure at December 31, 2011
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 94
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2011:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 59,952,857 | $ | — | $ | 59,952,857 | ||||||||
Commercial Mortgage Backed Securities | — | 116,129,235 | — | 116,129,235 | ||||||||||||
Corporate Debt Securities | — | 559,397,406 | 1,607 | 559,399,013 | ||||||||||||
Other Government Related Securities | — | 20,616,438 | — | 20,616,438 | ||||||||||||
Residential Mortgage Backed Securities | — | 431,797,231 | — | 431,797,231 | ||||||||||||
Taxable Municipal Bonds | — | 76,773,162 | — | 76,773,162 | ||||||||||||
U.S. Government Agency Issues | — | 2,573,668 | — | 2,573,668 | ||||||||||||
U.S. Treasury Obligations | — | 195,986,685 | — | 195,986,685 | ||||||||||||
Total Fixed Income | — | 1,463,226,682 | 1,607 | 1,463,228,289 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 62,500,909 | — | — | 62,500,909 | ||||||||||||
Total Short-Term Investments | 62,500,909 | — | — | 62,500,909 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 1,890,343 | — | 1,890,343 | ||||||||||||
Money Market Mutual Fund | 266,909,084 | — | — | 266,909,084 | ||||||||||||
Total Investments Purchased with | ||||||||||||||||
Cash Proceeds from Securities Lending | 266,909,084 | 1,890,343 | — | 268,799,427 | ||||||||||||
Total Investments | $ | 329,409,993 | $ | 1,465,117,025 | $ | 1,607 | $ | 1,794,528,625 | ||||||||
Asset Relating to Securities Lending Investments | $ | — | $ | 1,136,588 | $ | — | $ | 1,136,588 |
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. Transfers were made out of Level 2 into Level 3 due to a security being priced at fair value by the Valuation Committee instead of the Fund’s pricing vendor.
Page 95
Baird Aggregate Bond Fund
Schedule of Investments December 31, 2011 |
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, 2010 | $ | — | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | — | |||
Change in unrealized appreciation (depreciation) | — | |||
Purchases | — | |||
Sales | — | |||
Transfers in and/or out of Level 3* | 1,607 | |||
Balance as of December 31, 2011 | $ | 1,607 |
* Transfers between levels are recognized at the end of the reporting period.
Page 96
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 converted that advantage into strong absolute and relative returns in 2011. Our long-term commitment to duration neutrality was critically important as well. The primary factors for the Fund’s outperformance over its benchmark were:
• | The Fund’s overweight position to the corporate credit sector was a positive for relative performance. Corporate bond spreads (the additional yield that investors demand above Treasury bonds for owning the presumed higher risk corporate debt) widened during the year. This is typically a negative for the corporate bondholder as the higher (wider) yield indicates a decline in value (price) for the bond. The Fund’s overweight to shorter credit, particularly BBB-rated industrial and utility issuers, mitigated the impact of widening spreads. |
• | An overweight position to commercial mortgage-backed securities (CMBS) through primarily seasoned, super-senior CMBS, was a positive for the year. |
• | Our underweight to U.S. Treasuries was an overall detractor to the Fund’s performance (Treasuries outperformed other high quality “spread sectors” of the bond market in 2011). However, our underweight to short maturity Treasuries and an emphasis on longer Treasury maturities minimized the impact. |
• | Our overweight to corporate issues in the financial sector also detracted from relative performance but a focus on intermediate maturities lessened the effect. |
Again, the Fund maintained its duration-neutral positioning relative to its benchmark index and held a very broadly diversified portfolio at year end.
We are pleased with the Fund’s performance in 2011 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 2012.
Portfolio Characteristics
Quality Distribution* | Sector Weightings* |
![]() | ![]() |
Net Assets: | $1,100,769,443 | Annualized Expense Ratio: | |||
SEC 30-Day Yield:** | Institutional Class: | 0.30 | % | ||
Institutional Class: | 3.67% | Investor Class: | 0.55 | %*** | |
Investor Class: | 3.37% | Portfolio Turnover Rate: | 34.6 | % | |
Average Effective Duration: | 4.92 years | Total Number of Holdings: | 527 | ||
Average Effective Maturity: | 7.07 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, 2011. |
*** | Includes 0.25% 12b-1 fee. |
Page 97
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 98
Baird Core Plus Bond Fund
Total Returns
Average Annual | ||||
For the Periods Ended December 31, 2011 | One Year | Five Years | Ten Years | Since Inception(1) |
Institutional Class Shares | 7.89% | 7.30% | 6.74% | 7.13% |
Investor Class Shares | 7.57% | 7.03% | 6.46% | 6.86% |
Barclays Capital | ||||
U.S. Universal Bond Index(2) | 7.40% | 6.39% | 6.01% | 6.40% |
(1) | For the period from September 29, 2000 (commencement of operations) through December 31, 2011. |
(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 99
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% | |||||||
Asset Backed Securities – 1.8% | |||||||
$ | 31,305 | Amresco Residential | |||||
Securities Mortgage | |||||||
Loan Trust, | |||||||
Series 1998-2, Class A6, | |||||||
6.45%, 12/25/2027 | $ | 30,617 | |||||
Bayview Financial | |||||||
Acquisition Trust: | |||||||
700,000 | Series 2007-A, | ||||||
6.205%, 05/28/2037 | 679,004 | ||||||
150,000 | Series 2007-B, Class 1A2, | ||||||
6.831%, 08/28/2047 | 60,761 | ||||||
840,000 | Chase Issuance Trust, | ||||||
Series 2004-8A, Class A8, | |||||||
0.398%, 09/15/2015 | 840,171 | ||||||
Countrywide Asset- | |||||||
Backed Certificates: | |||||||
4,166 | Series 2006-S2, Class A2, | ||||||
5.627%, 07/25/2027 § | 4,152 | ||||||
193,805 | Series 2004-12, Class AF6, | ||||||
4.634%, 03/25/2035 | 189,533 | ||||||
1,218,767 | Series 2004-15, Class AF6, | ||||||
4.613%, 04/25/2035 | 1,145,538 | ||||||
3,312,000 | Series 2005-7, Class AF6, | ||||||
4.693%, 08/25/2035 | 2,868,285 | ||||||
2,014,923 | Series 2005-11, Class AF3, | ||||||
4.778%, 02/25/2036 | 1,512,296 | ||||||
502,370 | Series 2005-10, Class AF6, | ||||||
4.915%, 02/25/2036 | 434,071 | ||||||
1,859,626 | Series 2005-13, Class AF3, | ||||||
5.43%, 04/25/2036 | 1,435,361 | ||||||
250,008 | Series 2006-S9, Class A3, | ||||||
5.728%, 08/25/2036 | 186,242 | ||||||
155,752 | Series 2007-S1, | ||||||
Class A6, 5.693%, | |||||||
11/25/2036 | 123,176 | ||||||
438,460 | Series 2006-13, Class | ||||||
1AF2, 5.884%, | |||||||
01/25/2037 § | 411,119 | ||||||
237,525 | Series 2006-13, Class | ||||||
1AF3, 5.944%, | |||||||
01/25/2037 § | 142,652 | ||||||
190,124 | Series 2007-S2, Class A2, | ||||||
5.649%, 05/25/2037 | 164,037 | ||||||
300,000 | Series 2007-4, Class A3, | ||||||
5.714%, 09/25/2037 | 118,078 | ||||||
1,300,000 | Series 2006-10, Class | ||||||
1AF3, 5.812%, | |||||||
09/25/2046 | 673,343 | ||||||
616,000 | Series 2006-9, Class | ||||||
1AF3, 5.859%, | |||||||
10/25/2046 | 315,469 | ||||||
1,603,643 | Credit Based Asset | ||||||
Servicing and | |||||||
Securitization LLC, | |||||||
Series 2005-CB8, | |||||||
Class AF2, 5.303%, | |||||||
12/25/2035 | 1,449,344 | ||||||
3,665 | GE Capital Mortgage | ||||||
Services, Inc., Series | |||||||
1999-HE1, Class A7, | |||||||
6.265%, 04/25/2029 | 3,576 | ||||||
Green Tree Financial | |||||||
Corporation: | |||||||
32,367 | Series 1993-4, Class A5, | ||||||
7.05%, 01/15/2019 | 32,622 | ||||||
12,399 | Series 1997-1, Class A5, | ||||||
6.86%, 03/15/2028 | 13,044 | ||||||
43,420 | Series 1997-4, Class A5, | ||||||
6.88%, 02/15/2029 | 45,481 | ||||||
613,053 | Series 1997-5, Class A6, | ||||||
6.82%, 05/15/2029 | 643,413 |
The accompanying notes are an integral part of these financial statements.
Page 100
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Asset Backed Securities – 1.8% (cont.) | |||||||
$ | 628,767 | Series 1998-3, Class A5, | |||||
6.22%, 03/01/2030 | $ | 681,663 | |||||
267,682 | Series 1998-4, Class A5, | ||||||
6.18%, 04/01/2030 | 273,619 | ||||||
2,172,416 | Home Equity Asset Trust, | ||||||
Series 2006-4, Class 2A3, | |||||||
0.464%, 08/25/2036 | 1,829,118 | ||||||
38,673 | Oakwood Mortgage | ||||||
Investors, Inc., | |||||||
Series 1999-B, Class A3, | |||||||
6.45%, 11/15/2017 | 33,201 | ||||||
Renaissance Home | |||||||
Equity Loan Trust: | |||||||
233,591 | Series 2005-1, Class AF6, | ||||||
4.97%, 05/25/2035 | 208,265 | ||||||
819,000 | Series 2006-2, Class AF3, | ||||||
5.797%, 08/25/2036 | 334,907 | ||||||
712,467 | Series 2006-3, | ||||||
Class AF2, 5.58%, | |||||||
11/25/2036 | 401,271 | ||||||
500,000 | Series 2007-1, | ||||||
Class AF2, 5.512%, | |||||||
04/25/2037 | 171,617 | ||||||
300,000 | Series 2007-1, Class AF3, | ||||||
5.612%, 04/25/2037 | 104,309 | ||||||
1,500,000 | Series 2007-2, Class AF2, | ||||||
5.675%, 06/25/2037 | 616,515 | ||||||
136,224 | Residential Asset | ||||||
Mortgage Products, Inc., | |||||||
Series 2003-RS10, Class | |||||||
AI7, 4.85%, 11/25/2033 | 134,321 | ||||||
Residential Asset | |||||||
Securities Corporation: | |||||||
165,325 | Series 2003-KS5, Class | ||||||
AI6, 3.62%, 07/25/2033 | 142,842 | ||||||
124,566 | Series 2003-KS9, | ||||||
Class AI6, 4.71%, | |||||||
11/25/2033 | 110,188 | ||||||
1,407,894 | Series 2006-EMX8, | ||||||
0.414%, 10/25/2036 | 1,305,198 | ||||||
19,868,419 | |||||||
Commercial Mortgage Backed Securities – 7.4% | |||||||
8,160,000 | Bear Stearns Commercial | ||||||
Mortgage Securities, | |||||||
Series 2005-PWR9, | |||||||
Class A4A, 4.871%, | |||||||
09/11/2042 | 8,850,205 | ||||||
8,510,000 | Citigroup Deutsche | ||||||
Bank, Series 2005-CD1, | |||||||
Class A4, 5.399%, | |||||||
07/15/2044 | 9,405,116 | ||||||
4,712,000 | Commercial Mortgage | ||||||
Pass-Through Certificates, | |||||||
Series 2005-C6, Class | |||||||
A5A, 5.116%, 06/10/2044 | 5,166,100 | ||||||
GE Capital Commercial | |||||||
Mortgage Corporation: | |||||||
1,610,000 | Series 2003-C2, Class A4, | ||||||
5.145%, 07/10/2037 | 1,674,787 | ||||||
1,600,000 | Series 2004-C3, Class A4, | ||||||
5.189%, 07/10/2039 | 1,711,688 | ||||||
6,295,000 | Series 2005-C4, Class A4, | ||||||
5.486%, 11/10/2045 | 6,952,267 | ||||||
GMAC Commercial | |||||||
Mortgage Securities, Inc.: | |||||||
1,750,000 | Series 2003-C1, Class A2, | ||||||
4.079%, 05/10/2036 | 1,787,809 | ||||||
6,727,000 | Series 2004-C2, Class A4, | ||||||
5.301%, 08/10/2038 | 7,162,512 |
The accompanying notes are an integral part of these financial statements.
Page 101
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Commercial Mortgage | |||||||
Backed Securities – 7.4% (cont.) | |||||||
J.P. Morgan Chase | |||||||
Commercial Mortgage | |||||||
Securities Corp.: | |||||||
$ | 5,970,000 | Series 2005-CB12, | |||||
Class A4, 4.895%, | |||||||
09/12/2037 | $ | 6,512,196 | |||||
11,570,000 | Series 2011-C5, | ||||||
Class A3, 4.171%, | |||||||
08/15/2046 | 12,389,260 | ||||||
11,275,000 | Morgan Stanley Capital I, | ||||||
Series 2005-HQ7, | |||||||
Class A4, 5.202%, | |||||||
11/14/2042 | 12,396,761 | ||||||
Wachovia Bank | |||||||
Commercial | |||||||
Mortgage Trust: | |||||||
1,504,900 | Series 2003-C3, Class A2, | ||||||
4.867%, 02/15/2035 | 1,541,953 | ||||||
5,000,000 | Series 2005-C22, | ||||||
Class A4, 5.444%, | |||||||
12/15/2044 | 5,501,895 | ||||||
81,052,549 | |||||||
Financial – 19.5% | |||||||
1,045,000 | Abbey National Treasury | ||||||
Services PLC, | |||||||
3.875%, 11/10/2014 | |||||||
(Acquired 02/25/2010 | |||||||
through 12/29/2011; | |||||||
Cost $1,024,493)* | 980,740 | ||||||
2,000,000 | AIG SunAmerica | ||||||
Global Financing X, | |||||||
6.90%, 03/15/2032 | |||||||
(Acquired 11/10/2011; | |||||||
Cost $2,138,315)* | 2,118,310 | ||||||
175,000 | Allstate Corporation, | ||||||
5.35%, 06/01/2033 | 180,327 | ||||||
1,065,000 | Ally Financial Inc., | ||||||
8.30%, 02/12/2015 | 1,123,575 | ||||||
American Express | |||||||
Credit Corporation: | |||||||
935,000 | Series C, 7.30%, | ||||||
08/20/2013 | 1,014,717 | ||||||
1,040,000 | 2.75%, 09/15/2015 | 1,045,516 | |||||
American General | |||||||
Finance Corporation: | |||||||
275,000 | 5.85%, 06/01/2013 | 242,000 | |||||
1,000,000 | 6.90%, 12/15/2017 | 720,000 | |||||
225,000 | AmSouth Bancorp, | ||||||
6.75%, 11/01/2025 | 182,410 | ||||||
2,500,000 | AON Corporation, | ||||||
3.50%, 09/30/2015 | 2,565,398 | ||||||
975,000 | Arden Realty LP, | ||||||
5.25%, 03/01/2015 | 1,035,511 | ||||||
2,464,000 | ASIF Global | ||||||
Financing XIX, | |||||||
4.90%, 01/17/2013 | |||||||
(Acquired 09/28/2011 | |||||||
through 12/06/2011; | |||||||
Cost $2,519,536)* | 2,484,579 | ||||||
2,250,000 | Australia and New | ||||||
Zealand Banking | |||||||
Group Limited, | |||||||
3.25%, 03/01/2016 | |||||||
(Acquired 02/22/2011 | |||||||
through 09/14/2011; | |||||||
Cost $2,242,352)* f @ | 2,272,833 | ||||||
200,000 | BankAmerica | ||||||
Capital II, Series 2, | |||||||
8.00%, 12/15/2026 | 180,000 |
The accompanying notes are an integral part of these financial statements.
Page 102
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Financial – 19.5% (cont.) | |||||||
$ | 1,400,000 | BankAmerica | |||||
Institutional, 8.07%, | |||||||
12/31/2026 (Acquired | |||||||
07/22/2010 through | |||||||
08/16/2011; Cost | |||||||
$1,360,717)* | $ | 1,260,000 | |||||
575,000 | Bank of America | ||||||
Corporation | |||||||
Subordinated Notes, | |||||||
10.20%, 07/15/2015 | 615,977 | ||||||
2,060,000 | Banponce Trust I, | ||||||
Series A, | |||||||
8.327%, 02/01/2027 | 1,400,800 | ||||||
3,850,000 | Barclays Bank PLC, | ||||||
6.75%, 05/22/2019 f @ | 4,268,199 | ||||||
600,000 | The Bear Stearns | ||||||
Companies LLC, | |||||||
5.30%, 10/30/2015 | 645,233 | ||||||
Capital One | |||||||
Financial Corporation: | |||||||
2,500,000 | 7.375%, 05/23/2014 | 2,746,780 | |||||
125,000 | 6.15%, 09/01/2016 | 130,067 | |||||
1,000,000 | The Chubb Corp., | ||||||
6.375%, 03/29/2067 | 987,500 | ||||||
CIT Group, Inc.: | |||||||
88 | 7.00%, 05/01/2015 | 88 | |||||
43,000 | 7.00%, 05/04/2015 | ||||||
(Acquired 11/27/2007 | |||||||
through 08/02/2010; | |||||||
Cost $43,000)* @ | 43,054 | ||||||
814 | 7.00%, 05/01/2016 | 814 | |||||
571,000 | 7.00%, 05/02/2016 | ||||||
(Acquired 11/27/2007 | |||||||
through 08/02/2010; | |||||||
Cost $571,000)* @ | 570,286 | ||||||
540 | 7.00%, 05/01/2017 | 540 | |||||
4,100,000 | 7.00%, 05/02/2017 | ||||||
(Acquired 11/27/2007 | |||||||
through 12/20/2011; | |||||||
Cost $4,098,750)* @ | 4,094,875 | ||||||
700,000 | Citigroup Capital XXI, | ||||||
8.30%, 12/21/2057 | 699,125 | ||||||
5,250,000 | Citigroup, Inc., | ||||||
6.01%, 01/15/2015 | 5,484,701 | ||||||
CNA Financial | |||||||
Corporation: | |||||||
1,000,000 | 6.50%, 08/15/2016 | 1,081,654 | |||||
3,500,000 | 5.875%, 08/15/2020 | 3,595,372 | |||||
Comerica Bank: | |||||||
1,675,000 | 5.75%, 11/21/2016 | 1,835,738 | |||||
525,000 | 5.20%, 08/22/2017 | 567,796 | |||||
1,100,000 | Countrywide Financial | �� | |||||
Corporation, | |||||||
6.25%, 05/15/2016 @ | 1,036,347 | ||||||
4,166,000 | Credit Suisse New York, | ||||||
5.30%, 08/13/2019 f @ | 4,296,437 | ||||||
2,700,000 | Dresdner Bank- | ||||||
New York Subordinated | |||||||
Debentures, | |||||||
7.25%, 09/15/2015 f @ | 2,264,533 | ||||||
500,000 | First Empire | ||||||
Capital Trust I, | |||||||
8.234%, 02/01/2027 | 501,807 | ||||||
2,300,000 | First Empire | ||||||
Capital Trust II, | |||||||
8.277%, 06/01/2027 | 2,387,892 | ||||||
2,250,000 | First Horizon | ||||||
National Corporation, | |||||||
5.375%, 12/15/2015 | 2,277,569 |
The accompanying notes are an integral part of these financial statements.
Page 103
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Financial – 19.5% (cont.) | |||||||
$ | 350,148 | First National | |||||
Bank of Chicago | |||||||
Pass-Thru Certificates, | |||||||
Series 1993-A, | |||||||
8.08%, 01/05/2018 | $ | 396,123 | |||||
1,148,000 | FMR LLC, | ||||||
4.75%, 03/01/2013 | |||||||
(Acquired 11/28/2011 | |||||||
through 12/15/2011; | |||||||
Cost $1,181,149)* | 1,177,128 | ||||||
General Electric | |||||||
Capital Corporation: | |||||||
1,150,000 | 5.625%, 09/15/2017 | 1,272,791 | |||||
1,875,000 | 5.50%, 01/08/2020 | 2,063,048 | |||||
3,000,000 | 4.65%, 10/17/2021 @ | 3,131,001 | |||||
1,000,000 | Genworth Financial, Inc., | ||||||
7.625%, 09/24/2021 @ | 934,999 | ||||||
2,300,000 | Genworth Life | ||||||
Institutional | |||||||
Funding Trust, | |||||||
5.875%, 05/03/2013 | |||||||
(Acquired 08/24/2011; | |||||||
Cost $2,270,130)* | 2,337,529 | ||||||
GMAC Inc.: | |||||||
1,000,000 | 6.00%, 05/23/2012 @ | 1,002,500 | |||||
1,305,000 | 7.50%, 12/31/2013 | 1,340,887 | |||||
984,000 | 8.00%, 12/31/2018 | 966,780 | |||||
250,000 | GMAC LLC, | ||||||
6.75%, 12/01/2014 | 252,182 | ||||||
125,000 | Goldman Sachs Capital I, | ||||||
6.345%, 02/15/2034 | 105,801 | ||||||
The Goldman | |||||||
Sachs Group, Inc.: | |||||||
100,000 | 5.15%, 01/15/2014 | 101,903 | |||||
3,500,000 | 5.95%, 01/18/2018 | 3,584,774 | |||||
1,000,000 | 5.25%, 07/27/2021 | 975,540 | |||||
300,000 | 6.75%, 10/01/2037 | 279,154 | |||||
1,805,000 | Goldman Sachs | ||||||
Group LP, | |||||||
8.00%, 03/01/2013 | |||||||
(Acquired 05/19/2006 | |||||||
through 10/28/2010; | |||||||
Cost $1,887,224)* | 1,885,759 | ||||||
Hartford Financial | |||||||
Services Group Inc.: | |||||||
1,000,000 | 7.30%, 11/01/2015 | 1,074,831 | |||||
2,913,000 | 5.375%, 03/15/2017 | 2,930,711 | |||||
800,000 | 8.125%, 06/15/2038 @ | 792,000 | |||||
3,000,000 | HSBC Bank USA NA, | ||||||
4.625%, 04/01/2014 | 3,065,373 | ||||||
1,000,000 | HSBC Holdings PLC, | ||||||
5.25%, 12/12/2012 f | 1,019,510 | ||||||
800,000 | Humana Inc., | ||||||
7.20%, 06/15/2018 | 933,171 | ||||||
ING Bank N.V.: f | |||||||
1,600,000 | 4.00%, 03/15/2016 | ||||||
(Acquired 03/08/2011 | |||||||
through 09/20/2011; | |||||||
Cost $1,601,347)* | 1,545,989 | ||||||
2,500,000 | 5.00%, 06/09/2021 | ||||||
(Acquired 10/12/2011; | |||||||
Cost $2,468,800)* | 2,422,630 | ||||||
Invesco Ltd.: f | |||||||
380,000 | 5.375%, 02/27/2013 | 394,945 | |||||
1,535,000 | 5.375%, 12/15/2014 | 1,645,505 | |||||
4,400,000 | Irish Life & Permanent | ||||||
Group Holdings PLC, | |||||||
3.60%, 01/14/2013 | |||||||
(Acquired 12/01/2010 | |||||||
through 10/14/2011; | |||||||
Cost $4,095,215)* f | 3,848,134 | ||||||
400,000 | Istar Financial, Inc., | ||||||
5.85%, 03/15/2017 | 317,000 |
The accompanying notes are an integral part of these financial statements.
Page 104
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Financial – 19.5% (cont.) | |||||||
$ | 875,000 | Jefferies Group Inc., | |||||
6.45%, 06/08/2027 | $ | 728,438 | |||||
1,000,000 | Jefferson-Pilot Corp., | ||||||
4.75%, 01/30/2014 | 1,034,457 | ||||||
1,500,000 | John Hancock Mutual | ||||||
Life Insurance Company, | |||||||
7.375%, 02/15/2024 | |||||||
(Acquired 08/26/2010; | |||||||
Cost $1,689,672)* | 1,794,450 | ||||||
J.P. Morgan | |||||||
Chase & Co.: | |||||||
3,100,000 | 4.25%, 10/15/2020 | 3,121,771 | |||||
2,400,000 | 4.35%, 08/15/2021 @ | 2,423,777 | |||||
Key Bank NA: | |||||||
2,000,000 | 5.80%, 07/01/2014 | 2,135,364 | |||||
600,000 | 7.413%, 05/06/2015 | 652,002 | |||||
820,000 | 4.95%, 09/15/2015 | 862,661 | |||||
1,279,000 | 5.45%, 03/03/2016 | 1,376,447 | |||||
2,900,000 | Kookmin Bank, | ||||||
7.25%, 05/14/2014 | |||||||
(Acquired 03/10/2010 | |||||||
through 09/23/2011; | |||||||
Cost $3,134,136)* f | 3,203,169 | ||||||
Liberty Mutual | |||||||
Group, Inc.: | |||||||
775,000 | 5.75%, 03/15/2014 | ||||||
(Acquired 12/21/2010 | |||||||
through 06/10/2011; | |||||||
Cost $801,130)* | 808,168 | ||||||
225,000 | 6.50%, 03/15/2035 | ||||||
(Acquired 09/29/2008 | |||||||
through 11/23/2010; | |||||||
Cost $182,763)* | 219,349 | ||||||
900,000 | 10.75%, 06/15/2058 | ||||||
(Acquired 05/21/2008 | |||||||
through 05/06/2009; | |||||||
Cost $750,457)* | 1,129,500 | ||||||
375,000 | Liberty Mutual | ||||||
Insurance Company, | |||||||
7.697%, 10/15/2097 | |||||||
(Acquired 03/26/2003; | |||||||
Cost $240,079)* | 354,420 | ||||||
825,000 | Lincoln National | ||||||
Corporation, | |||||||
6.05%, 04/20/2067 @ | 686,813 | ||||||
4,650,000 | Lloyds TSB Bank PLC, | ||||||
5.80%, 01/13/2020 | |||||||
(Acquired 01/05/2010 | |||||||
through 10/27/2011; | |||||||
Cost $4,772,319)* f | 4,414,608 | ||||||
2,189,000 | M&I Marshall | ||||||
& Ilsley Bank, | |||||||
4.85%, 06/16/2015 | 2,310,601 | ||||||
Manufacturer & | |||||||
Traders Trust Co.: | |||||||
500,000 | 6.625%, 12/04/2017 | 575,968 | |||||
265,000 | 5.585%, 12/28/2020 | 258,316 | |||||
Manulife | |||||||
Financial Corp.: f | |||||||
2,285,000 | 3.40%, 09/17/2015 | 2,297,744 | |||||
425,000 | 4.90%, 09/17/2020 | 433,328 | |||||
Marsh & McLennan | |||||||
Companies, Inc.: | |||||||
2,400,000 | 4.85%, 02/15/2013 | 2,476,246 | |||||
1,000,000 | 4.80%, 07/15/2021 @ | 1,094,567 | |||||
700,000 | MBIA Insurance Corp., | ||||||
14.00%, 01/15/2033 | |||||||
(Acquired 01/11/2008; | |||||||
Cost $700,000)* | 392,000 |
The accompanying notes are an integral part of these financial statements.
Page 105
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Financial – 19.5% (cont.) | |||||||
$ | 150,000 | MBNA Capital, | |||||
Series A, 8.278%, | |||||||
12/01/2026 | $ | 139,125 | |||||
Merrill Lynch & | |||||||
Company: | |||||||
100,000 | 5.00%, 02/03/2014 | 99,486 | |||||
800,000 | 6.875%, 04/25/2018 | 788,751 | |||||
725,000 | 7.75%, 05/14/2038 | 688,838 | |||||
Metlife Inc.: | |||||||
300,000 | Series A, 6.817%, | ||||||
08/15/2018 | 356,861 | ||||||
215,000 | 7.717%, 02/15/2019 | 269,598 | |||||
1,915,000 | Metropolitan Life | ||||||
Global Funding I, | |||||||
3.125%, 01/11/2016 | |||||||
(Acquired 09/27/2011 | |||||||
through 10/11/2011; | |||||||
Cost $1,918,134)* | 1,965,077 | ||||||
Morgan Stanley: | |||||||
2,505,000 | 4.75%, 04/01/2014 | 2,467,643 | |||||
650,000 | 6.00%, 04/28/2015 | 651,131 | |||||
300,000 | 5.375%, 10/15/2015 | 293,139 | |||||
1,125,000 | 6.625%, 04/01/2018 | 1,110,873 | |||||
3,000,000 | National Australia Bank | ||||||
Ltd., 3.00%, 07/27/2016 | |||||||
(Acquired 07/20/2011; | |||||||
Cost $2,991,720)* f | 2,988,804 | ||||||
2,000,000 | National City | ||||||
Bank of Cleveland | |||||||
Subordinated Notes, | |||||||
5.80%, 06/07/2017 | 2,201,776 | ||||||
800,000 | Nationwide Financial | ||||||
Services Inc., | |||||||
5.90%, 07/01/2012 | 809,229 | ||||||
100,000 | Nationwide Mutual | ||||||
Insurance Company, | |||||||
7.875%, 04/01/2033 | |||||||
(Acquired 10/13/2009; | |||||||
Cost $90,266)* | 102,709 | ||||||
3,709,000 | Navigators Group Inc. | ||||||
Senior Unsecured Notes, | |||||||
7.00%, 05/01/2016 | 3,826,983 | ||||||
175,000 | NB Capital Trust IV, | ||||||
8.25%, 04/15/2027 | 161,000 | ||||||
325,000 | Nomura Holdings Inc., | ||||||
6.70%, 03/04/2020 f | 342,204 | ||||||
775,000 | PHH Corporation, | ||||||
7.125%, 03/01/2013 | 745,938 | ||||||
1,550,000 | Principal Life Income | ||||||
Funding Trust, | |||||||
5.10%, 04/15/2014 | 1,637,274 | ||||||
1,450,000 | Protective Life | ||||||
Secured Trust, | |||||||
4.30%, 06/01/2013 | 1,490,934 | ||||||
Prudential Financial Inc.: | |||||||
2,297,000 | 6.20%, 01/15/2015 | 2,510,058 | |||||
2,000,000 | 6.00%, 12/01/2017 | 2,224,330 | |||||
1,203,000 | Prudential Holdings LLC, | ||||||
8.695%, 12/18/2023 | |||||||
(Acquired 11/29/2011; | |||||||
Cost $1,450,441)* | 1,511,389 | ||||||
1,400,000 | Regions Financing | ||||||
Trust II, | |||||||
6.625%, 05/15/2047 | 1,148,000 | ||||||
Royal Bank of Scotland | |||||||
Group PLC: f | |||||||
705,000 | 5.00%, 11/12/2013 | 630,318 | |||||
350,000 | 4.875%, 08/25/2014 | ||||||
(Acquired 08/24/2011; | |||||||
Cost $351,180)* | 342,468 |
The accompanying notes are an integral part of these financial statements.
Page 106
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Financial – 19.5% (cont.) | |||||||
$ | 1,528,000 | 5.05%, 01/08/2015 | $ | 1,246,000 | |||
3,300,000 | 4.875%, 03/16/2015 | 3,155,400 | |||||
300,000 | Santander Financial | ||||||
Issuances, | |||||||
7.25%, 11/01/2015 f | 304,208 | ||||||
2,500,000 | Santander U.S. Debt | ||||||
S.A. Unipersonal, | |||||||
2.991%, 10/07/2013 | |||||||
(Acquired 08/25/2011; | |||||||
Cost $2,400,102)* f | 2,390,033 | ||||||
2,378,000 | Schwab Capital Trust I, | ||||||
7.50%, 11/15/2037 | 2,378,785 | ||||||
SLM Corporation: | |||||||
425,000 | 5.125%, 08/27/2012 | 427,168 | |||||
1,300,000 | 5.375%, 05/15/2014 | 1,300,911 | |||||
50,000 | 5.625%, 08/01/2033 | 37,296 | |||||
5,500,000 | Societe Generale SA, | ||||||
5.20%, 04/15/2021 | |||||||
(Acquired 09/20/2011 | |||||||
through 12/09/2011; | |||||||
Cost $4,739,327)* f @ | 4,673,224 | ||||||
2,143,000 | Sovereign Bancorp Inc., | ||||||
8.75%, 05/30/2018 | 2,389,421 | ||||||
1,500,000 | Sumitomo Mitsui | ||||||
Banking Corporation, | |||||||
3.15%, 07/22/2015 | |||||||
(Acquired 09/23/2011; | |||||||
Cost $1,558,090)* f | 1,565,220 | ||||||
SunTrust Banks Inc.: | |||||||
1,450,000 | 5.25%, 11/05/2012 | 1,486,017 | |||||
4,250,000 | 3.50%, 01/20/2017 | 4,271,913 | |||||
1,000,000 | Susa Partnership LP, | ||||||
8.20%, 06/01/2017 | 1,200,346 | ||||||
3,590,000 | Symetra Financial | ||||||
Corporation, | |||||||
6.125%, 04/01/2016 | |||||||
(Acquired 10/12/2010 | |||||||
through 11/07/2011; | |||||||
Cost $3,816,620)* | 3,627,828 | ||||||
1,000,000 | TD Ameritrade | ||||||
Holding Corporation, | |||||||
5.60%, 12/01/2019 | 1,081,248 | ||||||
500,000 | Travelers Companies, Inc., | ||||||
5.35%, 11/01/2040 @ | 577,673 | ||||||
3,300,000 | UBS AG, | ||||||
5.75%, 04/25/2018 f | 3,419,047 | ||||||
1,070,000 | UFJ Finance Aruba A.E.C., | ||||||
6.75%, 07/15/2013 f | 1,143,356 | ||||||
1,000,000 | UnitedHealth Group, Inc., | ||||||
6.00%, 02/15/2018 @ | 1,188,961 | ||||||
1,000,000 | Unitrin, Inc. | ||||||
Senior Unsecured Notes, | |||||||
6.00%, 05/15/2017 | 1,061,522 | ||||||
5,322,000 | Wachovia Bank NA, | ||||||
6.00%, 11/15/2017 | 5,876,675 | ||||||
2,000,000 | WEA Finance LLC, | ||||||
7.50%, 06/02/2014 | |||||||
(Acquired 12/28/2011; | |||||||
Cost $2,197,980)* | 2,192,484 | ||||||
Wellpoint, Inc.: | |||||||
100,000 | 5.25%, 01/15/2016 | 111,956 | |||||
75,000 | 5.95%, 12/15/2034 | 88,616 | |||||
150,000 | Westpac Banking | ||||||
Corporation, | |||||||
4.875%, 11/19/2019 f | 159,588 | ||||||
600,000 | Willis North | ||||||
America Inc., | |||||||
5.625%, 07/15/2015 | 637,115 | ||||||
215,016,909 |
The accompanying notes are an integral part of these financial statements.
Page 107
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Industrial – 15.9% | |||||||
$ | 700,000 | Acuity Brands | |||||
Lighting Inc., | |||||||
6.00%, 12/15/2019 | $ | 788,250 | |||||
265,000 | Allied Waste North | ||||||
America, Inc., | |||||||
6.875%, 06/01/2017 | 280,238 | ||||||
Anadarko Petroleum | |||||||
Corporation: | |||||||
2,225,000 | 5.95%, 09/15/2016 @ | 2,522,149 | |||||
1,700,000 | 8.70%, 03/15/2019 | 2,170,390 | |||||
2,500,000 | Anglo American | ||||||
Capital PLC, | |||||||
9.375%, 04/08/2019 | |||||||
(Acquired 09/20/2011; | |||||||
Cost $3,249,899)* f | 3,181,055 | ||||||
4,000,000 | Aristotle Holding Inc., | ||||||
3.50%, 11/15/2016 | |||||||
(Acquired 11/14/2011; | |||||||
Cost $3,998,920)* | 4,073,820 | ||||||
AT&T Inc.: | |||||||
100,000 | 5.625%, 06/15/2016 @ | 114,717 | |||||
2,000,000 | 4.45%, 05/15/2021 @ | 2,196,928 | |||||
1,000,000 | 5.55%, 08/15/2041 @ | 1,177,417 | |||||
286,211 | Atlas Air, Inc. | ||||||
Pass-Thru Certificates, | |||||||
Series 2000-1, 8.707%, | |||||||
07/02/2021 | 286,211 | ||||||
1,000,000 | Bemis Company, Inc., | ||||||
4.50%, 10/15/2021 | 1,059,361 | ||||||
1,500,000 | BP Capital Markets PLC, | ||||||
4.75%, 03/10/2019 f | 1,666,083 | ||||||
50,000 | British | ||||||
Telecommunications PLC, | |||||||
5.95%, 01/15/2018 f | 55,254 | ||||||
1,500,000 | Browning-Ferris | ||||||
Industries Inc., | |||||||
9.25%, 05/01/2021 | 2,081,745 | ||||||
Bunge Limited | |||||||
Finance Corporation: | |||||||
625,000 | 5.35%, 04/15/2014 | 655,533 | |||||
2,527,000 | 5.10%, 07/15/2015 | 2,644,928 | |||||
1,105,000 | 8.50%, 06/15/2019 | 1,345,050 | |||||
1,950,000 | Bunge NA Finance LP, | ||||||
5.90%, 04/01/2017 | 2,129,470 | ||||||
2,000,000 | CenturyLink Inc., | ||||||
5.15%, 06/15/2017 | 1,982,364 | ||||||
1,500,000 | Chevron Phillips | ||||||
Chemical Company LLC, | |||||||
7.00%, 06/15/2014 | |||||||
(Acquired 11/05/2010 | |||||||
through 05/25/2011; | |||||||
Cost $1,664,830)* @ | 1,673,952 | ||||||
50,000 | Clear Channel | ||||||
Communications, | |||||||
5.50%, 12/15/2016 | 23,125 | ||||||
1,000,000 | CNPC HK | ||||||
Overseas Capital Ltd, | |||||||
5.95%, 04/28/2041 | |||||||
(Acquired 04/20/2011; | |||||||
Cost $978,120)* f @ | 1,109,370 | ||||||
825,000 | Comcast Cable Holdings, | ||||||
7.875%, 08/01/2013 | 907,898 | ||||||
350,000 | Comcast Corporation, | ||||||
6.50%, 01/15/2017 | 411,662 | ||||||
875,000 | Comcast Holdings | ||||||
Corporation, | |||||||
10.625%, 07/15/2012 | 912,462 | ||||||
Computer Sciences | |||||||
Corporation: | |||||||
2,100,000 | 5.00%, 02/15/2013 @ | 2,089,500 | |||||
3,100,000 | 5.50%, 03/15/2013 @ | 3,084,500 |
The accompanying notes are an integral part of these financial statements.
Page 108
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Industrial – 15.9% | |||||||
$ | 49,796 | Continental Airlines, Inc. | |||||
Pass-Thru Certificates, | |||||||
Series 1997-4, Class A, | |||||||
6.90%, 01/02/2018 | $ | 51,848 | |||||
800,000 | COX | ||||||
Communications Inc., | |||||||
5.45%, 12/15/2014 | 888,022 | ||||||
CSX Corporation: | |||||||
750,000 | 6.25%, 04/01/2015 | 856,958 | |||||
175,000 | 6.22%, 04/30/2040 | 214,373 | |||||
2,000,000 | Daimler Finance | ||||||
North America LLC, | |||||||
1.537%, 09/13/2013 | |||||||
(Acquired 09/07/2011; | |||||||
Cost $2,000,000)* | 1,974,300 | ||||||
Deutsche Telekom | |||||||
International Finance BV: f | |||||||
2,450,000 | 3.125%, 04/11/2016 | ||||||
(Acquired 11/09/2011; | |||||||
Cost $2,489,270)* | 2,468,189 | ||||||
425,000 | 8.75%, 06/15/2030 f | 592,837 | |||||
1,752,000 | DIRECTV | ||||||
Holdings/Financing, | |||||||
7.625%, 05/15/2016 | 1,859,310 | ||||||
Donnelley (R.R.) | |||||||
& Sons Co.: | |||||||
1,250,000 | 8.60%, 08/15/2016 | 1,251,562 | |||||
1,200,000 | 6.125%, 01/15/2017 @ | 1,116,000 | |||||
750,000 | The Dow Chemical Co., | ||||||
4.125%, 11/15/2021 @ | 769,290 | ||||||
500,000 | Encana Corporation, | ||||||
6.50%, 05/15/2019 f @ | 597,573 | ||||||
287,391 | Federal Express | ||||||
Corporation 1995 | |||||||
Pass-Thru Certificates, | |||||||
Series B2, 7.11%, | |||||||
01/02/2014 | 303,198 | ||||||
500,000 | First Data Corporation, | ||||||
9.875%, 09/24/2015 @ | 470,000 | ||||||
2,325,000 | Fiserv, Inc., | ||||||
3.125%, 06/15/2016 | 2,367,299 | ||||||
2,000,000 | Ford Motor | ||||||
Credit Co. LLC, | |||||||
3.875%, 01/15/2015 @ | 1,992,536 | ||||||
1,050,000 | France Telecom SA, | ||||||
2.75%, 09/14/2016 f | 1,052,830 | ||||||
4,300,000 | Freeport-McMoRan | ||||||
Copper & Gold Inc., | |||||||
8.375%, 04/01/2017 | 4,568,750 | ||||||
Georgia-Pacific LLC: | |||||||
1,000,000 | 8.25%, 05/01/2016 | ||||||
(Acquired 10/13/2011; | |||||||
Cost $1,096,736)* | 1,110,960 | ||||||
1,000,000 | 5.40%, 11/01/2020 | ||||||
(Acquired 10/27/2010; | |||||||
Cost $994,130)* @ | 1,107,648 | ||||||
4,510,000 | Glencore Funding LLC, | ||||||
6.00%, 04/15/2014 | |||||||
(Acquired 03/31/2004 | |||||||
through 12/15/2011; | |||||||
Cost $4,636,826)* | 4,658,465 | ||||||
975,000 | GTE Corporation, | ||||||
8.75%, 11/01/2021 | 1,365,309 | ||||||
2,200,000 | Hanson Australia Funding, | ||||||
5.25%, 03/15/2013 f | 2,211,000 | ||||||
2,375,000 | Hanson PLC Notes, | ||||||
6.125%, 08/15/2016 f @ | 2,410,625 |
The accompanying notes are an integral part of these financial statements.
Page 109
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Industrial – 15.9% (cont.) | |||||||
$ | 2,100,000 | Health Management | |||||
Association, | |||||||
6.125%, 04/15/2016 | $ | 2,173,500 | |||||
4,000,000 | Hewlett-Packard Co., | ||||||
4.65%, 12/09/2021 @ | 4,220,320 | ||||||
425,000 | Highmark Inc. Notes, | ||||||
6.80%, 08/15/2013 | |||||||
(Acquired 10/28/2010 | |||||||
through 11/24/2010; | |||||||
Cost $454,455)* | 453,708 | ||||||
92,000 | Historic Time Warner Inc., | ||||||
6.875%, 06/15/2018 | 109,645 | ||||||
3,563,000 | Hutchison Whampoa | ||||||
International Ltd., | |||||||
4.625%, 09/11/2015 | |||||||
(Acquired 08/19/2010 | |||||||
through 12/28/2011; | |||||||
Cost $3,739,734)* f | 3,771,400 | ||||||
1,114,000 | International | ||||||
Paper Company, | |||||||
7.40%, 06/15/2014 | 1,236,651 | ||||||
Johnson Controls Inc.: | |||||||
100,000 | 5.50%, 01/15/2016 @ | 111,890 | |||||
1,150,000 | 5.25%, 12/01/2041 | 1,219,003 | |||||
5,000,000 | Kinross Gold Corp., | ||||||
6.875%, 09/01/2041 | |||||||
(Acquired 08/15/2011; | |||||||
Cost $4,959,050)* f | 5,102,280 | ||||||
Lafarge SA: f | |||||||
1,375,000 | 6.50%, 07/15/2016 | 1,402,512 | |||||
875,000 | 7.125%, 07/15/2036 | 772,566 | |||||
Martin Marietta | |||||||
Materials, Inc.: | |||||||
475,000 | 6.60%, 04/15/2018 | 500,502 | |||||
450,000 | 6.25%, 05/01/2037 | 404,598 | |||||
Masco Corporation: | |||||||
2,150,000 | 6.125%, 10/03/2016 | 2,206,336 | |||||
1,000,000 | 7.125%, 03/15/2020 @ | 1,009,224 | |||||
250,000 | Nabors Industries, Inc., | ||||||
6.15%, 02/15/2018 | 279,272 | ||||||
2,655,000 | National Oilwell | ||||||
Varco Inc., Series B, | |||||||
6.125%, 08/15/2015 | 2,718,011 | ||||||
350,000 | New Cingular Wireless | ||||||
Services, Inc., | |||||||
8.75%, 03/01/2031 | 514,255 | ||||||
300,000 | Nextel Communications | ||||||
Senior Notes, Series E, | |||||||
6.875%, 10/31/2013 | 298,500 | ||||||
50,000 | Pactiv Corporation, | ||||||
7.95%, 12/15/2025 @ | 33,750 | ||||||
200,000 | PCCW-HKT | ||||||
Capital II Ltd., | |||||||
6.00%, 07/15/2013 | |||||||
(Acquired 07/10/2003; | |||||||
Cost $199,066)* f | 209,826 | ||||||
775,000 | PCCW-HKT | ||||||
Capital III Ltd., | |||||||
5.25%, 07/20/2015 | |||||||
(Acquired 09/29/2008 | |||||||
through 12/20/2010; | |||||||
Cost $787,124)* f | 813,549 | ||||||
75,000 | Pearson Dollar | ||||||
Finance PLC, | |||||||
5.70%, 06/01/2014 | |||||||
(Acquired 09/29/2008; | |||||||
Cost $74,131)* f | 81,860 | ||||||
3,000,000 | Petrohawk Energy | ||||||
Corporation, | |||||||
7.875%, 06/01/2015 | 3,195,000 |
The accompanying notes are an integral part of these financial statements.
Page 110
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Industrial – 15.9% (cont.) | |||||||
Plum Creek | |||||||
Timberlands, L.P.: | |||||||
$ | 1,200,000 | 5.875%, 11/15/2015 | $ | 1,331,969 | |||
1,200,000 | 4.70%, 03/15/2021 | 1,206,782 | |||||
POSCO: f | |||||||
1,725,000 | 8.75%, 03/26/2014 | ||||||
(Acquired 09/23/2011; | |||||||
Cost $1,924,623)* | 1,937,927 | ||||||
2,175,000 | 4.25%, 10/28/2020 | ||||||
(Acquired 10/21/2010; | |||||||
Cost $2,165,365)* | 2,106,207 | ||||||
2,000,000 | Reliance Holdings | ||||||
USA Inc., | |||||||
4.50%, 10/19/2020 | |||||||
(Acquired 10/14/2010 | |||||||
through 10/18/2010; | |||||||
Cost $1,988,700)* @ | 1,817,206 | ||||||
1,077,000 | Rio Tinto Alcan, Inc., | ||||||
5.20%, 01/15/2014 f | 1,150,532 | ||||||
1,125,000 | Rio Tinto Financial | ||||||
USA Ltd., 6.50%, | |||||||
07/15/2018 f @ | 1,355,970 | ||||||
2,250,000 | Sealed Air Corp., | ||||||
8.375%, 09/15/2021 | |||||||
(Acquired 09/16/2011 | |||||||
through 09/19/2011; | |||||||
Cost $2,291,717)* @ | 2,486,250 | ||||||
610,000 | SK Telecom, | ||||||
6.625%, 07/20/2027 | |||||||
(Acquired 07/13/2007 | |||||||
through 04/08/2009; | |||||||
Cost $544,614)* f | 722,510 | ||||||
1,000,000 | Sonoco Products Co., | ||||||
4.375%, 11/01/2021 | 1,035,773 | ||||||
Sprint Capital | |||||||
Corporation: | |||||||
675,000 | 6.90%, 05/01/2019 @ | 555,187 | |||||
300,000 | 8.75%, 03/15/2032 | 242,625 | |||||
200,000 | Sprint Nextel Corporation, | ||||||
6.00%, 12/01/2016 | 166,000 | ||||||
1,031,000 | SunGard Data | ||||||
Systems Inc., | |||||||
4.875%, 01/15/2014 | 1,032,289 | ||||||
701,000 | Sunoco, Inc. | ||||||
Senior Unsecured Notes, | |||||||
5.75%, 01/15/2017 | 704,382 | ||||||
1,000,000 | Sunoco Logistics | ||||||
Partners Operations LP, | |||||||
6.10%, 02/15/2042 @ | 1,070,141 | ||||||
2,635,000 | TCI Communications, Inc., | ||||||
8.75%, 08/01/2015 | 3,201,038 | ||||||
836,000 | Teck Resources Limited, | ||||||
10.25%, 05/15/2016 f | 961,400 | ||||||
Telecom Italia | |||||||
Capital SA: f | |||||||
340,000 | 4.95%, 09/30/2014 | 315,589 | |||||
4,100,000 | 5.25%, 10/01/2015 @ | 3,761,053 | |||||
1,775,000 | 7.20%, 07/18/2036 | 1,466,058 | |||||
Telefonica Emisiones, | |||||||
S.A.U.: f | |||||||
2,850,000 | 6.421%, 06/20/2016 | 2,982,508 | |||||
1,942,000 | 6.221%, 07/03/2017 | 1,990,278 | |||||
1,000,000 | 5.462%, 02/16/2021 | 954,266 | |||||
100,000 | 7.045%, 06/20/2036 | 97,507 | |||||
Time Warner, Inc.: | |||||||
175,000 | 8.875%, 10/01/2012 | 184,421 | |||||
2,300,000 | 7.25%, 10/15/2017 | 2,755,922 | |||||
725,000 | 7.625%, 04/15/2031 | 935,889 | |||||
95,000 | 7.70%, 05/01/2032 | 123,945 |
The accompanying notes are an integral part of these financial statements.
Page 111
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Industrial – 15.9% (cont.) | |||||||
Transocean, Inc.: f | |||||||
$ | 2,000,000 | 6.375%, 12/15/2021 | $ | 2,125,766 | |||
675,000 | 6.80%, 03/15/2038 | 680,358 | |||||
500,000 | Tyco Electronics | ||||||
Group S.A., | |||||||
7.125%, 10/01/2037 f | 664,913 | ||||||
United AirLines, Inc. | |||||||
Pass-Thru Certificates: | |||||||
124,608 | Series 1991-A, Class A-2, | ||||||
10.02%, 03/22/2014 | 47,351 | ||||||
155,852 | Series 2000-2, Class C, | ||||||
7.762%, 04/29/2049 § † ** | 4,675 | ||||||
590,114 | U.S. Airways | ||||||
Pass-Thru Trust, | |||||||
Series 1998-1, Class B, | |||||||
7.35%, 07/30/2019 | 534,053 | ||||||
322,000 | USX Corporation, | ||||||
9.125%, 01/15/2013 | 343,864 | ||||||
Vale Overseas Limited: f | |||||||
3,850,000 | 6.25%, 01/23/2017 | 4,338,631 | |||||
100,000 | 8.25%, 01/17/2034 @ | 128,413 | |||||
250,000 | 6.875%, 11/21/2036 | 284,638 | |||||
150,000 | Viacom Inc., | ||||||
6.25%, 04/30/2016 | 174,118 | ||||||
Vodafone Group PLC: f | |||||||
125,000 | 5.75%, 03/15/2016 | 144,115 | |||||
175,000 | 5.625%, 02/27/2017 @ | 203,198 | |||||
500,000 | 6.15%, 02/27/2037 | 622,201 | |||||
Vulcan Materials Co.: | |||||||
200,000 | 6.40%, 11/30/2017 | 203,000 | |||||
1,000,000 | 7.00%, 06/15/2018 | 1,030,000 | |||||
500,000 | 7.15%, 11/30/2037 | 450,000 | |||||
1,250,000 | Weatherford | ||||||
International Ltd., | |||||||
6.75%, 09/15/2040 f | 1,417,975 | ||||||
505,000 | Westvaco Corporation, | ||||||
9.75%, 06/15/2020 | 637,751 | ||||||
1,000,000 | Weyerhaeuser Company, | ||||||
7.25%, 07/01/2013 | 1,058,818 | ||||||
Williams | |||||||
Companies Inc.: | |||||||
1,034,000 | 7.875%, 09/01/2021 | 1,272,571 | |||||
37,000 | 7.50%, 01/15/2031 | 45,095 | |||||
46,000 | 7.75%, 06/15/2031 | 57,221 | |||||
Woodside Finance Ltd.: f | |||||||
400,000 | 5.00%, 11/15/2013 | ||||||
(Acquired 11/26/2010; | |||||||
Cost $418,998)* | 419,351 | ||||||
1,000,000 | 8.125%, 03/01/2014 | ||||||
(Acquired 02/24/2009; | |||||||
Cost $999,690)* | 1,118,274 | ||||||
4,000,000 | WPX Energy Inc., | ||||||
6.00%, 01/15/2022 | |||||||
(Acquired 11/07/2011 | |||||||
through 11/16/2011; | |||||||
Cost $3,985,000)* | 4,095,000 | ||||||
2,000,000 | Xstrata Canada Corp., | ||||||
5.375%, 06/01/2015 f | 2,171,816 | ||||||
2,000,000 | Xstrata Canada | ||||||
Financial Corp., | |||||||
4.95%, 11/15/2021 | |||||||
(Acquired 11/03/2011; | |||||||
Cost $1,997,480)* f | 2,043,250 | ||||||
174,688,512 | |||||||
Other Government Related Securities – 2.2% | |||||||
2,000,000 | Corp Andina de Fomento, | ||||||
8.125%, 06/04/2019 f | 2,456,606 | ||||||
5,000,000 | Eksportfinans ASA, | ||||||
2.00%, 09/15/2015 f | 4,141,900 |
The accompanying notes are an integral part of these financial statements.
Page 112
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Other Government Related Securities – 2.2% (cont.) | |||||||
Export-Import Bank | |||||||
of Korea Notes: f | |||||||
$ | 3,500,000 | 5.875%, 01/14/2015 | $ | 3,753,659 | |||
1,000,000 | 4.00%, 01/29/2021 @ | 965,026 | |||||
100,000 | Korea Development Bank, | ||||||
5.30%, 01/17/2013 f | 102,844 | ||||||
115,000 | Korea Electric | ||||||
Power Corporation, | |||||||
6.75%, 08/01/2027 f | 137,091 | ||||||
Korea Hydro & Nuclear | |||||||
Power Co., Ltd.: f | |||||||
1,000,000 | 6.25%, 06/17/2014 | ||||||
(Acquired 03/21/2011; | |||||||
Cost $1,078,033)* | 1,078,720 | ||||||
500,000 | 3.125%, 09/16/2015 | ||||||
(Acquired 09/09/2010; | |||||||
Cost $493,770)* | 500,628 | ||||||
550,000 | Landesbank Baden- | ||||||
Wurttemgerg | |||||||
Subordinated Notes, | |||||||
6.35%, 04/01/2012 f | 555,777 | ||||||
150,000 | National Bank | ||||||
of Hungary | |||||||
Yankee Debentures, | |||||||
8.875%, 11/01/2013 f | 161,719 | ||||||
4,100,000 | Petrobras International | ||||||
Finance Company, | |||||||
3.875%, 01/27/2016 f | 4,223,865 | ||||||
4,000,000 | Petroleos Mexicanos, | ||||||
6.50%, 06/02/2041 | |||||||
(Acquired 10/12/2011 | |||||||
through 10/13/2011; | |||||||
Cost $4,130,680)* f @ | 4,500,000 | ||||||
100,000 | United Mexican States, | ||||||
6.75%, 09/27/2034 f | 130,250 | ||||||
1,885,000 | Westdeutsche | ||||||
Landesbank | |||||||
Subordinated Notes, | |||||||
4.796%, 07/15/2015 f | 1,957,456 | ||||||
24,665,541 | |||||||
Residential Mortgage Backed Securities – 24.6% | |||||||
Bank of America | |||||||
Alternative Loan Trust: | |||||||
88,084 | Series 2004-2, Class 5A1, | ||||||
5.50%, 03/25/2019 | 91,788 | ||||||
92,493 | Series 2005-2, Class 4A1, | ||||||
5.50%, 03/25/2020 | 90,931 | ||||||
1,444,041 | Series 2005-4, Class 3A1, | ||||||
5.50%, 05/25/2020 | 1,374,782 | ||||||
168,442 | Series 2005-8, Class 5A1, | ||||||
5.50%, 09/25/2020 | 156,902 | ||||||
359,829 | Series 2006-2, Class 6A1, | ||||||
5.50%, 03/25/2021 | 332,455 | ||||||
187,714 | Series 2007-1, | ||||||
Class 1A1, 5.792%, | |||||||
04/25/2022 | 174,344 | ||||||
5,853,379 | Series 2005-2, Class 1CB2, | ||||||
5.50%, 03/25/2035 | 5,217,509 | ||||||
360,308 | Series 2006-3, Class 6A1, | ||||||
6.00%, 04/25/2036 | 349,207 | ||||||
447,935 | Series 2006-5, Class CB7, | ||||||
6.00%, 06/25/2046 § | 302,998 | ||||||
Chase Mortgage | |||||||
Finance Corporation: | |||||||
46,988 | Series 2003-S13, | ||||||
Class A11, 5.50%, | |||||||
11/25/2033 | 47,815 | ||||||
1,008,346 | Series 2006-A1, | ||||||
Class 2A3, 5.806%, | |||||||
09/25/2036 | 742,064 |
The accompanying notes are an integral part of these financial statements.
Page 113
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Residential Mortgage | |||||||
Backed Securities – 24.6% (cont.) | |||||||
Citigroup Mortgage | |||||||
Loan Trust, Inc.: | |||||||
$ | 108,063 | Series 2005-9, | |||||
Class 2A2, 5.50%, | |||||||
11/25/2035 | $ | 101,615 | |||||
362,919 | Series 2005-9, | ||||||
Class 22A2, 6.00%, | |||||||
11/25/2035 | 309,073 | ||||||
Countrywide Alternative | |||||||
Loan Trust: | |||||||
814,766 | Series 2005-50CB, | ||||||
Class 4A1, 5.00%, | |||||||
11/25/2020 § | 700,320 | ||||||
1,045,053 | Series 2006-7CB, | ||||||
Class 3A1, 5.25%, | |||||||
05/25/2021 § | 899,169 | ||||||
568,796 | Series 2006-43CB, | ||||||
Class 2A1, 6.00%, | |||||||
02/25/2022 § | 504,364 | ||||||
1,069,599 | Series 2005-10CB, | ||||||
Class 1A6, 5.50%, | |||||||
05/25/2035 | 1,027,996 | ||||||
239,808 | Series 2006-J2, Class A3, | ||||||
6.00%, 04/25/2036 | 176,083 | ||||||
1,461,337 | Series 2006-28CB, | ||||||
Class A17, 6.00%, | |||||||
10/25/2036 § | 906,939 | ||||||
21,733 | Credit Suisse First | ||||||
Boston Mortgage | |||||||
Securities Corporation, | |||||||
Series 2005-11, | |||||||
Class 5A1, 5.25%, | |||||||
12/25/2020 | 21,663 | ||||||
355,964 | Deutsche ALT-A | ||||||
Securities Inc. Alternate | |||||||
Loan Trust, Series 2005-3, | |||||||
Class 4A5, 5.25%, | |||||||
06/25/2035 | 321,621 | ||||||
242,432 | Deutsche Mortgage | ||||||
Securities Inc., Series | |||||||
2006-AR5, Class 21A, | |||||||
6.00%, 10/25/2021 | 195,017 | ||||||
Federal Gold Loan | |||||||
Mortgage Corporation | |||||||
(FGLMC) Pass-Thru | |||||||
Certificates: | |||||||
191,414 | 5.00%, 12/01/2020 | 206,326 | |||||
353,403 | 5.00%, 05/01/2021 | 380,935 | |||||
65,762 | 6.00%, 06/01/2021 | 71,647 | |||||
72,905 | 6.50%, 12/01/2028 | 83,535 | |||||
34,061 | 6.50%, 06/01/2029 | 39,027 | |||||
1,532,413 | 5.50%, 04/01/2037 | 1,664,877 | |||||
883,161 | 5.50%, 04/01/2038 | 959,503 | |||||
Federal Home Loan | |||||||
Mortgage Corporation | |||||||
(FHLMC): | |||||||
219,625 | Series 3122, Class VA, | ||||||
6.00%, 01/15/2017 | 223,646 | ||||||
1,946,903 | Series R010, Class VA, | ||||||
5.50%, 04/15/2017 | 2,064,784 | ||||||
469,980 | Series R010, Class AB, | ||||||
5.50%, 12/15/2019 | 483,008 | ||||||
9,726 | Series 1053, Class G, | ||||||
7.00%, 03/15/2021 | 11,536 | ||||||
17,836 | Series 136, Class E, | ||||||
6.00%, 04/15/2021 | 19,410 | ||||||
198,061 | Series 2804, Class VC, | ||||||
5.00%, 07/15/2021 | 222,825 |
The accompanying notes are an integral part of these financial statements.
Page 114
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Residential Mortgage | |||||||
Backed Securities – 24.6% (cont.) | |||||||
$ | 14,836 | Series 1122, Class G, | |||||
7.00%, 08/15/2021 | $ | 16,687 | |||||
34,098 | Series 1186, Class I, | ||||||
7.00%, 12/15/2021 | 38,374 | ||||||
24,247 | Series 3132, Class MA, | ||||||
5.50%, 12/15/2023 | 24,588 | ||||||
1,475,888 | 5.50%, 05/01/2038 | 1,603,466 | |||||
5,690,729 | 4.50%, 11/01/2039 | 6,035,356 | |||||
14,298,516 | 4.50%, 08/01/2040 | 15,159,958 | |||||
14,517,159 | 4.50%, 08/01/2040 | 15,391,774 | |||||
Federal National | |||||||
Mortgage Association | |||||||
(FNMA): | |||||||
1,374,996 | 5.00%, 11/01/2021 | 1,485,122 | |||||
729,027 | 5.50%, 03/01/2023 | 799,677 | |||||
324,200 | 5.50%, 07/01/2023 | 355,618 | |||||
467,033 | 5.50%, 12/01/2023 | 512,877 | |||||
103,399 | 6.00%, 03/01/2026 | 114,034 | |||||
480,708 | 5.00%, 05/01/2028 | 519,857 | |||||
55,862 | 6.50%, 09/01/2028 | 63,859 | |||||
119,646 | 6.50%, 02/01/2029 | 136,775 | |||||
70,344 | 5.50%, 01/01/2032 | 76,897 | |||||
3,436,154 | 5.50%, 04/01/2034 | 3,756,267 | |||||
5,637,165 | 5.50%, 04/01/2034 | 6,183,970 | |||||
172,657 | 5.50%, 09/01/2034 | 188,634 | |||||
88,934 | 5.50%, 02/01/2035 | 97,163 | |||||
10,908,568 | 5.00%, 04/01/2035 | 11,796,979 | |||||
15,162,045 | 5.00%, 07/01/2035 | 16,396,866 | |||||
18,378,682 | 5.00%, 02/01/2036 | 19,869,727 | |||||
3,594,690 | 5.00%, 03/01/2036 | 3,886,324 | |||||
13,016,214 | 5.50%, 04/01/2036 | 14,212,538 | |||||
595,712 | 6.00%, 08/01/2037 | 653,256 | |||||
3,661,204 | 4.00%, 08/01/2040 | 3,849,505 | |||||
4,288,069 | 4.00%, 10/01/2040 | 4,508,611 | |||||
9,605,896 | 4.00%, 12/01/2040 | 10,191,498 | |||||
8,275,429 | 3.50%, 01/01/2041 | 8,518,269 | |||||
12,736,901 | 4.00%, 02/01/2041 | 13,391,979 | |||||
8,966,669 | 4.50%, 07/01/2041 | 9,549,322 | |||||
19,484,702 | 4.00%, 09/01/2041 | 20,492,918 | |||||
8,859 | Series 1989-94, Class G, | ||||||
7.50%, 12/25/2019 | 9,956 | ||||||
31,639 | Series 1990-15, Class J, | ||||||
7.00%, 02/25/2020 | 34,961 | ||||||
5,705 | Series 1991-21, Class J, | ||||||
7.00%, 03/25/2021 | 6,373 | ||||||
108,045 | Series 1991-43, Class J, | ||||||
7.00%, 05/25/2021 | 121,337 | ||||||
135,476 | Series 1991-65, Class Z, | ||||||
6.50%, 06/25/2021 | 146,945 | ||||||
222,283 | Series 1992-129, Class L, | ||||||
6.00%, 07/25/2022 | 248,088 | ||||||
286,580 | Series 2003-33, Class LD, | ||||||
4.25%, 09/25/2022 | 292,067 | ||||||
45,721 | Series 1993-32, Class H, | ||||||
6.00%, 03/25/2023 | 49,665 | ||||||
239,715 | Series 1993-58, Class H, | ||||||
5.50%, 04/25/2023 | 261,294 | ||||||
147,568 | Series 2002-85, Class PD, | ||||||
5.50%, 05/25/2031 | 148,179 | ||||||
12,420,000 | Series 2004-90, Class LH, | ||||||
5.00%, 04/25/2034 | 13,304,448 | ||||||
452,835 | Series 2004-W6, | ||||||
Class 1A4, 5.50%, | |||||||
07/25/2034 | 466,651 | ||||||
481,366 | Series 2004-W6, | ||||||
Class 1A6, 5.50%, | |||||||
07/25/2034 | 503,764 | ||||||
26,636 | Series 2004-W10, | ||||||
Class A24, 5.00%, | |||||||
08/25/2034 | 26,574 |
The accompanying notes are an integral part of these financial statements.
Page 115
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Residential Mortgage | |||||||
Backed Securities – 24.6% (cont.) | |||||||
$ | 1,500,000 | Series 2004-W10, | |||||
Class A4, 5.75%, | |||||||
08/25/2034 | $ | 1,528,986 | |||||
First Horizon Alternative | |||||||
Mortgage Securities: | |||||||
510,843 | Series 2006-FA6, | ||||||
Class 3A1, 5.75%, | |||||||
11/25/2021 | 469,495 | ||||||
1,396,439 | Series 2006-FA8, | ||||||
Class 2A1, 5.75%, | |||||||
02/25/2037 | 1,282,747 | ||||||
Government National | |||||||
Mortgage Association | |||||||
(GNMA): | |||||||
74,498 | 6.00%, 12/20/2028 | 84,723 | |||||
29,290 | 6.50%, 01/20/2029 | 33,503 | |||||
213,198 | Series 2003-2, Class PB, | ||||||
5.50%, 03/20/2032 | 220,223 | ||||||
60,608 | 6.00%, 11/20/2033 | 68,821 | |||||
8,577,913 | 4.50%, 05/20/2040 | 9,380,483 | |||||
4,076,077 | 5.00%, 07/20/2040 | 4,511,962 | |||||
14,213,511 | 4.50%, 01/20/2041 | 15,532,257 | |||||
J.P. Morgan Alternative | |||||||
Loan Trust: | |||||||
2,125,510 | Series 2005-S1, Class | ||||||
3A1, 5.50%, 10/25/2020 | 2,014,486 | ||||||
195,291 | Series 2006-A1, | ||||||
Class 2A1, 2.661%, | |||||||
03/25/2036 | 101,495 | ||||||
2,743,600 | Series 2006-S2, Class A2, | ||||||
5.81%, 05/25/2036 | 2,731,572 | ||||||
300,000 | Series 2006-S3, | ||||||
Class A3A, 6.00%, | |||||||
08/25/2036 | 262,651 | ||||||
J.P. Morgan | |||||||
Mortgage Trust: | |||||||
705,792 | Series 2006-A7, | ||||||
Class 2A4R, 2.756%, | |||||||
01/25/2037 § | 460,375 | ||||||
1,250,000 | Series 2007-A2, | ||||||
Class 2A3, 3.911%, | |||||||
04/25/2037 | 798,471 | ||||||
Master Alternative | |||||||
Loans Trust: | |||||||
423,129 | Series 2004-1, Class 1A1, | ||||||
5.00%, 01/25/2019 | 432,423 | ||||||
560,744 | Series 2005-3, Class 4A1, | ||||||
5.50%, 03/25/2020 | 551,909 | ||||||
116,589 | Series 2003-5, Class 6A1, | ||||||
6.00%, 08/25/2033 | 123,397 | ||||||
730,255 | Master Asset | ||||||
Securitization Trust, | |||||||
Series 2005-2, Class 1A1, | |||||||
5.25%, 11/25/2035 | 715,195 | ||||||
115,356 | Merrill Lynch Mortgage | ||||||
Investors Trust, | |||||||
Series 2005-A8, | |||||||
Class A1C1, 5.25%, | |||||||
08/25/2036 | 114,535 | ||||||
946,061 | Residential Accredit | ||||||
Loans, Inc., | |||||||
Series 2005-QS2, Class | |||||||
A-1, 5.50%, 02/25/2035 | 832,533 | ||||||
1,330,942 | Structured Asset | ||||||
Securities Corporation, | |||||||
Series 2005-7XS, Class | |||||||
1A4B, 5.44%, | |||||||
04/25/2035 | 1,337,703 |
The accompanying notes are an integral part of these financial statements.
Page 116
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Residential Mortgage | |||||||
Backed Securities – 24.6% (cont.) | |||||||
Washington Mutual, Inc. | |||||||
Pass-Thru Certificates: | |||||||
$ | 188,552 | Series 2004-CB1, | |||||
Class 5A, 5.00%, | |||||||
06/25/2019 | $ | 193,525 | |||||
164,089 | Series 2004-CB2, Class | ||||||
5A, 5.00%, 07/25/2019 | 168,289 | ||||||
341,760 | Series 2004-CB2, Class | ||||||
7A, 5.50%, 08/25/2019 | 356,410 | ||||||
96,315 | Series 2004-CB3, Class | ||||||
4A, 6.00%, 10/25/2019 | 99,785 | ||||||
177,959 | Series 2004-CB4, Class | ||||||
22A, 6.00%, 12/25/2019 | 184,356 | ||||||
195,441 | Wells Fargo Alternative | ||||||
Loan Trust, Series | |||||||
2007-PA1, Class A4, | |||||||
6.00%, 03/25/2037 § | 136,581 | ||||||
270,703,652 | |||||||
Taxable Municipal Bonds – 3.1% | |||||||
625,000 | Bellevue California | ||||||
Union School District, | |||||||
5.00%, 08/01/2028 | 622,263 | ||||||
California | |||||||
Qualified School | |||||||
Construction Bonds: | |||||||
1,500,000 | 5.041%, 07/01/2020 | 1,640,460 | |||||
1,700,000 | 7.155%, 03/01/2027 | 1,907,910 | |||||
2,000,000 | California State, | ||||||
5.50%, 03/01/2016 | 2,215,820 | ||||||
1,500,000 | Central Valley Support | ||||||
Joint Powers Agency, | |||||||
5.676%, 09/01/2024 | 1,538,760 | ||||||
1,250,000 | Colton Joint Unified | ||||||
School District, | |||||||
6.008%, 08/01/2026 | 1,328,587 | ||||||
1,300,000 | Contra Costa County | ||||||
California Pension | |||||||
Obligation, | |||||||
5.14%, 06/01/2017 | 1,427,686 | ||||||
1,000,000 | Davie Florida Water | ||||||
& Sewer Revenue, | |||||||
6.599%, 10/01/2030 | |||||||
(Callable 10/01/2020) | 1,091,740 | ||||||
1,000,000 | Elgin Ohio LOC | ||||||
School District, | |||||||
5.499%, 08/31/2027 | |||||||
(Callable 12/01/2019) | 1,044,490 | ||||||
Illinois State: | |||||||
2,000,000 | 4.026%, 03/01/2014 | 2,053,840 | |||||
1,200,000 | 4.421%, 01/01/2015 | 1,242,132 | |||||
2,000,000 | 4.961%, 03/01/2016 | 2,112,380 | |||||
3,000,000 | North East Independent | ||||||
School District Texas, | |||||||
5.24%, 08/01/2027 | 3,350,880 | ||||||
1,515,000 | San Dieguito California | ||||||
Public Facilities, | |||||||
6.459%, 05/01/2027 | 1,713,101 | ||||||
2,000,000 | State Public School | ||||||
Building Authorities | |||||||
Revenue, | |||||||
5.00%, 09/15/2027 | 2,093,180 | ||||||
1,350,000 | Three Rivers Ohio | ||||||
LOC School District, | |||||||
5.209%, 09/15/2027 | |||||||
(Callable 12/01/2020) | 1,416,164 | ||||||
2,300,000 | Tobacco Settlement | ||||||
Authority Iowa, | |||||||
6.50%, 06/01/2023 | |||||||
(Callable 06/01/2015) | 2,148,890 |
The accompanying notes are an integral part of these financial statements.
Page 117
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Taxable Municipal Bonds – 3.1% (cont.) | |||||||
$ | 4,000,000 | West Contra Costa | |||||
Unified School District, | |||||||
6.25%, 08/01/2030 | $ | 4,152,480 | |||||
1,160,000 | Westlake Ohio City | ||||||
School District, | |||||||
5.227%, 12/01/2026 | |||||||
(Callable 12/01/2020) | 1,237,662 | ||||||
34,338,425 | |||||||
Utilities – 6.1% | |||||||
Allegheny Energy | |||||||
Supply Co. Senior | |||||||
Unsecured Notes: | |||||||
500,000 | 8.25%, 04/15/2012 | ||||||
(Acquired 12/23/2011; | |||||||
Cost $509,119)* | 509,028 | ||||||
500,000 | 5.75%, 10/15/2019 | ||||||
(Acquired 09/22/2009; | |||||||
Cost $498,175)* | 534,750 | ||||||
1,816,000 | Ameren Corporation, | ||||||
8.875%, 05/15/2014 | 2,034,948 | ||||||
1,025,000 | Appalachian Power | ||||||
Company Senior | |||||||
Unsecured Notes, | |||||||
6.70%, 08/15/2037 | 1,325,838 | ||||||
1,150,000 | Arizona Pubic Service | ||||||
Senior Unsecured Notes, | |||||||
8.75%, 03/01/2019 | 1,468,624 | ||||||
4,000,000 | Centrais Eletricas | ||||||
Brasileiras SA, | |||||||
5.75%, 10/27/2021 | |||||||
(Acquired 10/20/2011; | |||||||
Cost $4,000,000)* f @ | 4,156,000 | ||||||
3,000,000 | CMS Energy | ||||||
Corporation, | |||||||
4.25%, 09/30/2015 | 3,032,094 | ||||||
750,000 | Constellation Energy | ||||||
Group Inc., | |||||||
4.55%, 06/15/2015 | 791,872 | ||||||
2,245,000 | DCP Midstream LLC, | ||||||
4.75%, 09/30/2021 | |||||||
(Acquired 09/14/2011 | |||||||
through 11/18/2011; | |||||||
Cost $2,252,809)* | 2,320,367 | ||||||
2,500,000 | El Paso Pipeline Partners | ||||||
Operating Co LLC, | |||||||
7.50%, 11/15/2040 | 2,909,845 | ||||||
500,000 | Enel Finance | ||||||
International, | |||||||
6.80%, 09/15/2037 | |||||||
(Acquired 09/13/2007 | |||||||
through 09/29/2008; | |||||||
Cost $498,897)* f | 434,233 | ||||||
Energy Transfer Partners: | |||||||
875,000 | 5.65%, 08/01/2012 | 893,962 | |||||
125,000 | 6.125%, 02/15/2017 | 137,241 | |||||
1,189,000 | 9.70%, 03/15/2019 | 1,456,704 | |||||
223,000 | Entergy Arkansas, Inc., | ||||||
5.00%, 07/01/2018 | 222,465 | ||||||
Exelon Corporation: | |||||||
500,000 | 4.90%, 06/15/2015 | 538,740 | |||||
225,000 | 5.625%, 06/15/2035 | 242,202 | |||||
4,350,000 | Exelon Generation | ||||||
Company, LLC, | |||||||
6.20%, 10/01/2017 @ | 4,995,340 | ||||||
1,000,000 | FPL Group Capital, | ||||||
Inc., Series D, 7.30%, | |||||||
09/01/2067 @ | 1,040,000 | ||||||
277,591 | GG1C Funding | ||||||
Corporation, | |||||||
5.129%, 01/15/2014 | |||||||
(Acquired 11/21/2008; | |||||||
Cost $271,924)* | 283,376 |
The accompanying notes are an integral part of these financial statements.
Page 118
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Utilities – 6.1% (cont.) | |||||||
$ | 1,000,000 | IPALCO | |||||
Enterprises Inc., | |||||||
5.00%, 05/01/2018 | $ | 980,000 | |||||
1,875,000 | KeySpan Corp., | ||||||
8.00%, 11/15/2030 | 2,510,959 | ||||||
Kinder Morgan Energy | |||||||
Partners Senior Notes: | |||||||
400,000 | 6.50%, 02/01/2037 | 440,465 | |||||
350,000 | 6.95%, 01/15/2038 | 395,321 | |||||
Kinder Morgan Finance: | |||||||
1,685,000 | 5.70%, 01/05/2016 f | 1,722,912 | |||||
1,000,000 | 6.00%, 01/15/2018 | ||||||
(Acquired 12/06/2010; | |||||||
Cost $999,930)* | 1,017,500 | ||||||
30,131 | Kiowa Power | ||||||
Partners LLC, | |||||||
4.811%, 12/30/2013 | |||||||
(Acquired 11/19/2004; | |||||||
Cost $30,131)* | 30,129 | ||||||
1,500,000 | Mega Advance | ||||||
Investments Ltd., | |||||||
5.00%, 05/12/2021 | |||||||
(Acquired 05/09/2011; | |||||||
Cost $1,484,670)* f @ | 1,525,363 | ||||||
2,225,000 | National Grid PLC | ||||||
Senior Unsecured Notes, | |||||||
6.30%, 08/01/2016 f | 2,553,252 | ||||||
National Rural | |||||||
Utilities Corporation: | |||||||
2,175,000 | 10.375%, 11/01/2018 | 3,129,290 | |||||
125,000 | 8.00%, 03/01/2032 | 176,005 | |||||
1,583,000 | Nisource Finance Corp., | ||||||
5.40%, 07/15/2014 | 1,717,527 | ||||||
1,000,000 | NuStar Logistics L.P., | ||||||
4.80%, 09/01/2020 | 1,041,428 | ||||||
500,000 | PPL Electric | ||||||
Utilities Corp., | |||||||
5.20%, 07/15/2041 | 597,156 | ||||||
PPL Energy | |||||||
Supply, LLC: | |||||||
1,350,000 | Series A, 5.70%, | ||||||
10/15/2015 | 1,464,797 | ||||||
1,950,000 | 6.20%, 05/15/2016 | 2,174,800 | |||||
3,077,000 | PSE&G Power LLC, | ||||||
5.32%, 09/15/2016 | 3,432,012 | ||||||
500,000 | Public Service Company | ||||||
of New Mexico, | |||||||
7.95%, 05/15/2018 | 584,463 | ||||||
233,710 | RGS (I&M) Funding | ||||||
Corporation Debentures, | |||||||
9.82%, 12/07/2022 | 283,311 | ||||||
Rockies Express | |||||||
Pipeline LLC: | |||||||
850,000 | 3.90%, 04/15/2015 | ||||||
(Acquired 09/15/2011; | |||||||
Cost $863,191)* | 839,963 | ||||||
2,000,000 | 6.85%, 07/15/2018 | ||||||
(Acquired 12/21/2011; | |||||||
Cost $2,040,560)* | 2,066,400 | ||||||
2,695,000 | 5.625%, 04/15/2020 | ||||||
(Acquired 12/10/2010 | |||||||
through 12/29/2011; | |||||||
Cost $2,702,902)* | 2,566,546 | ||||||
300,000 | Southern Natural Gas, | ||||||
5.90%, 04/01/2017 | |||||||
(Acquired 03/14/2007; | |||||||
Cost $299,502)* | 342,862 | ||||||
1,395,000 | Spectra Energy | ||||||
Capital LLC, | |||||||
5.668%, 08/15/2014 | 1,526,816 |
The accompanying notes are an integral part of these financial statements.
Page 119
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
LONG-TERM INVESTMENTS – 96.1% (cont.) | |||||||
Utilities – 6.1% (cont.) | |||||||
$ | 1,000,000 | Veolia | |||||
Environnement SA, | |||||||
6.00%, 06/01/2018 f | $ | 1,091,780 | |||||
Williams Partners LP: | |||||||
2,000,000 | 7.25%, 02/01/2017 | 2,372,676 | |||||
500,000 | 6.30%, 04/15/2040 | 609,648 | |||||
66,521,010 | |||||||
U.S. Treasury Obligations – 15.5% | |||||||
U.S. Treasury Bonds: | |||||||
74,675,000 | 2.375%, 07/31/2017 @ | 80,258,151 | |||||
15,250,000 | 6.25%, 08/15/2023 @ | 21,826,562 | |||||
18,775,000 | 5.25%, 11/15/2028 @ | 25,886,031 | |||||
32,975,000 | 4.375%, 02/15/2038 @ | 42,630,476 | |||||
170,601,220 | |||||||
Total Long-Term | |||||||
Investments | |||||||
(Cost $1,033,618,775) | 1,057,456,237 | ||||||
Shares | |||||||
SHORT-TERM INVESTMENTS – 3.3% | |||||||
Money Market Mutual Funds – 3.3% | |||||||
16,725,061 | Dreyfus Institutional | ||||||
Cash Advantage | |||||||
Fund, 0.06% « | 16,725,061 | ||||||
19,171,029 | Short-Term | ||||||
Investments Trust – | |||||||
Liquid Assets | |||||||
Portfolio, 0.16% « | 19,171,029 | ||||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $35,896,090) | 35,896,090 | ||||||
Principal | |||||||
Amount | |||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 18.5% | |||||||
Commercial Paper – 0.0% | |||||||
$ | 275,151 | Atlantic East | |||||
Funding LLC, | |||||||
0.610%, | |||||||
03/25/2012 † ** | 171,834 | ||||||
Total Commercial Paper | |||||||
(Cost $275,151) | 171,834 |
The accompanying notes are an integral part of these financial statements.
Page 120
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Shares | Value | ||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 18.5% (cont.) | |||||||
Investment Companies – 18.5% | |||||||
203,655,253 | Mount Vernon | ||||||
Securities Lending | |||||||
Trust Prime | |||||||
Portfolio, 0.23% « | $ | 203,655,253 | |||||
Total Investment | |||||||
Companies | |||||||
(Cost $203,655,253) | 203,655,253 | ||||||
Total Investments | |||||||
Purchased With Cash | |||||||
Proceeds From | |||||||
Securities Lending | |||||||
(Cost $203,930,404) | 203,827,087 | ||||||
Total Investments | |||||||
(Cost $1,273,445,269) | |||||||
– 117.9% | 1,297,179,414 | ||||||
Asset Relating to Securities | |||||||
Lending Investments – 0.0% | |||||||
Support | |||||||
Agreement** ^ a † | 103,317 | ||||||
Total (Cost $0) | 103,317 | ||||||
Liabilities in Excess of | |||||||
Other Assets – (17.9)% | (196,513,288 | ) | |||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 1,100,769,443 |
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, 2011. |
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 121
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
Summary of Fair Value Exposure at December 31, 2011
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 122
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
The following is a summary of the inputs used to value the Fund’s investments as of December 31, 2011:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Fixed Income | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 19,868,419 | $ | — | $ | 19,868,419 | ||||||||
Commercial Mortgage Backed Securities | — | 81,052,549 | — | 81,052,549 | ||||||||||||
Corporate Debt Securities | — | 456,221,756 | 4,675 | 456,226,431 | ||||||||||||
Other Government Related Securities | — | 24,665,541 | — | 24,665,541 | ||||||||||||
Residential Mortgage Backed Securities | — | 270,703,652 | — | 270,703,652 | ||||||||||||
Taxable Municipal Bonds | — | 34,338,425 | — | 34,338,425 | ||||||||||||
U.S. Treasury Obligations | — | 170,601,220 | — | 170,601,220 | ||||||||||||
Total Fixed Income | — | 1,057,451,562 | 4,675 | 1,057,456,237 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 35,896,090 | — | — | 35,896,090 | ||||||||||||
Total Short-Term Investments | 35,896,090 | — | — | 35,896,090 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 171,834 | — | 171,834 | ||||||||||||
Money Market Mutual Fund | 203,655,253 | — | — | 203,655,253 | ||||||||||||
Total Investments Purchased with | ||||||||||||||||
Cash Proceeds from Securities Lending | 203,655,253 | 171,834 | — | 203,827,087 | ||||||||||||
Total Investments | $ | 239,551,343 | $ | 1,057,623,396 | $ | 4,675 | $ | 1,297,179,414 | ||||||||
Asset Relating to Securities Lending Investments | $ | — | $ | 103,317 | $ | — | $ | 103,317 |
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. Transfers were made out of Level 2 into Level 3 due to a security being priced at fair value by the Valuation Committee instead of the Fund’s pricing vendor.
Page 123
Baird Core Plus Bond Fund
Schedule of Investments December 31, 2011 |
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, 2010 | $ | — | ||
Accrued discounts/premiums | — | |||
Realized gain (loss) | — | |||
Change in unrealized appreciation (depreciation) | — | |||
Purchases | — | |||
Sales | — | |||
Transfers in and/or out of Level 3* | 4,675 | |||
Balance as of December 31, 2011 | $ | 4,675 |
* Transfers between levels are recognized at the end of the reporting period.
Page 124
Baird Funds, Inc.
Additional Information on Fund Expenses December 31, 2011 |
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 (7/1/11 – 12/31/11).
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 125
Baird Funds, Inc.
Additional Information on Fund Expenses December 31, 2011 |
Actual vs. Hypothetical Returns
For the Six Months Ended December 31, 2011
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) | 7/1/11 | 12/31/11 | Period(1) | 12/31/11 | Period(1) | ||||||
Baird Short-Term Bond Fund | |||||||||||
Institutional Class | 0.30% | $1,000.00 | $1,003.80 | $1.52 | $1,023.69 | $1.53 | |||||
Baird Intermediate Bond Fund | |||||||||||
Institutional Class | 0.30% | $1,000.00 | $1,027.80 | $1.53 | $1,023.69 | $1.53 | |||||
Investor Class | 0.55% | $1,000.00 | $1,027.20 | $2.81 | $1,022.43 | $2.80 | |||||
Baird Intermediate Municipal | |||||||||||
Bond Fund | |||||||||||
Institutional Class | 0.30% | $1,000.00 | $1,046.30 | $1.55 | $1,023.69 | $1.53 | |||||
Investor Class | 0.55% | $1,000.00 | $1,044.00 | $2.83 | $1,022.43 | $2.80 | |||||
Baird Aggregate Bond Fund | |||||||||||
Institutional Class | 0.30% | $1,000.00 | $1,043.70 | $1.55 | $1,023.69 | $1.53 | |||||
Investor Class | 0.55% | $1,000.00 | $1,042.00 | $2.83 | $1,022.43 | $2.80 | |||||
Baird Core Plus Bond Fund | |||||||||||
Institutional Class | 0.30% | $1,000.00 | $1,040.70 | $1.54 | $1,023.69 | $1.53 | |||||
Investor Class | 0.55% | $1,000.00 | $1,039.10 | $2.83 | $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 126
Baird Funds, Inc.
Statements of Assets and Liabilities December 31, 2011 |
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 $1,107,644,957; | |||||||||||||||||||||
$833,995,621; $1,038,224,735; $1,746,853,869; | |||||||||||||||||||||
& $1,273,445,269, respectively)* | $ | 1,103,825,684 | $ | 857,169,134 | $ | 1,101,725,791 | $ | 1,794,528,625 | $ | 1,297,179,414 | |||||||||||
Support Agreement (Note 6) | 327,614 | 827,831 | — | 1,136,588 | 103,317 | ||||||||||||||||
Interest receivable | 12,145,638 | 7,904,596 | 12,790,444 | 13,882,062 | 10,534,167 | ||||||||||||||||
Receivable for investments sold or paid down | 11,908,626 | 16,345 | — | 35,718 | 5,353 | ||||||||||||||||
Receivable for Fund shares sold | 1,334,025 | 1,376,242 | 5,658,713 | 9,460,533 | 7,693,113 | ||||||||||||||||
Uninvested cash | 86,061 | 9,582 | — | 18,504 | 4,372,020 | ||||||||||||||||
Total assets | 1,129,627,648 | 867,303,730 | 1,120,174,948 | 1,819,062,030 | 1,319,887,384 | ||||||||||||||||
LIABILITIES: | |||||||||||||||||||||
Payable for collateral received | |||||||||||||||||||||
for securities loaned (Note 6) | 94,561,562 | 140,421,143 | — | 269,954,519 | 203,944,523 | ||||||||||||||||
Payable for securities purchased | 12,214,111 | 8,667,341 | 25,318,609 | 41,721,116 | 14,047,687 | ||||||||||||||||
Payable for Fund shares repurchased | 5,344,690 | 8,153 | 449,824 | 455,848 | 707,639 | ||||||||||||||||
Payable to Advisor and Distributor | 266,223 | 184,048 | 338,613 | 391,504 | 386,780 | ||||||||||||||||
Other liabilities | 10,975 | 77,902 | — | 145,503 | 31,312 | ||||||||||||||||
Total liabilities | 112,397,561 | 149,358,587 | 26,107,046 | 312,668,490 | 219,117,941 | ||||||||||||||||
NET ASSETS | $ | 1,017,230,087 | $ | 717,945,143 | $ | 1,094,067,902 | $ | 1,506,393,540 | $ | 1,100,769,443 | |||||||||||
NET ASSETS CONSIST OF: | |||||||||||||||||||||
Capital stock | $ | 1,020,168,156 | $ | 693,158,986 | $ | 1,030,734,224 | $ | 1,459,349,952 | $ | 1,076,993,157 | |||||||||||
Undistributed net investment income | 12,570 | 130,830 | 19,518 | 82,473 | 127,835 | ||||||||||||||||
Accumulated net realized gain (loss) | |||||||||||||||||||||
on investments sold | 541,020 | 653,983 | (186,896 | ) | (1,850,229 | ) | (189,011 | ) | |||||||||||||
Net unrealized appreciation (depreciation) on | |||||||||||||||||||||
investments and support agreement | (3,491,659 | ) | 24,001,344 | 63,501,056 | 48,811,344 | 23,837,462 | |||||||||||||||
NET ASSETS | $ | 1,017,230,087 | $ | 717,945,143 | $ | 1,094,067,902 | $ | 1,506,393,540 | $ | 1,100,769,443 | |||||||||||
INSTITUTIONAL CLASS SHARES | |||||||||||||||||||||
Net Assets | $ | 1,017,230,087 | $ | 703,229,161 | $ | 836,132,295 | $ | 1,480,275,135 | $ | 768,891,204 | |||||||||||
Shares outstanding ($0.01 par value, | |||||||||||||||||||||
unlimited shares authorized) | 106,097,860 | 63,607,447 | 70,057,143 | 139,030,987 | 71,093,096 | ||||||||||||||||
Net asset value, offering and | |||||||||||||||||||||
redemption price per share | $ | 9.59 | $ | 11.06 | $ | 11.94 | $ | 10.65 | $ | 10.82 | |||||||||||
INVESTOR CLASS SHARES | |||||||||||||||||||||
Net Assets | $ | 14,715,982 | $ | 257,935,607 | $ | 26,118,405 | $ | 331,878,239 | |||||||||||||
Shares outstanding ($0.01 par value, | |||||||||||||||||||||
unlimited shares authorized) | 1,283,478 | 21,177,650 | 2,386,621 | 29,680,841 | |||||||||||||||||
Net asset value, offering and | |||||||||||||||||||||
redemption price per share | $ | 11.47 | $ | 12.18 | $ | 10.94 | $ | 11.18 |
* | Includes securities out on loan to brokers with a market value of $92,550,098, $137,665,514, $0, $263,868,621, and $199,757,841, respectively. |
The accompanying notes are an integral part of these financial statements.
Page 127
Baird Funds, Inc.
Statements of Operations Year Ended December 31, 2011 |
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 | $ | 26,954,725 | $ | 25,562,458 | $ | 29,493,730 | $ | 70,656,628 | $ | 30,345,174 | ||||||||||
Income from securities lending (Note 6) | 133,932 | 222,274 | — | 262,695 | 143,388 | |||||||||||||||
Other income | 28,071 | 15,743 | 920 | 20,895 | 13,189 | |||||||||||||||
Total investment income | 27,116,728 | 25,800,475 | 29,494,650 | 70,940,218 | 30,501,751 | |||||||||||||||
EXPENSES: | ||||||||||||||||||||
Investment advisory fee | 2,511,553 | 1,701,713 | 2,428,416 | 4,034,928 | 1,686,615 | |||||||||||||||
Administration fee | 502,311 | 340,343 | 485,683 | 806,986 | 337,323 | |||||||||||||||
Distribution expense – | ||||||||||||||||||||
Investor Class Shares (Note 8) | — | 32,693 | 550,110 | 70,894 | 297,670 | |||||||||||||||
Interest Expense (Note 7) | 926 | — | 4,345 | — | 22 | |||||||||||||||
Total expenses | 3,014,790 | 2,074,749 | 3,468,554 | 4,912,808 | 2,321,630 | |||||||||||||||
NET INVESTMENT INCOME | 24,101,938 | 23,725,726 | 26,026,096 | 66,027,410 | 28,180,121 | |||||||||||||||
REALIZED AND UNREALIZED | ||||||||||||||||||||
GAIN (LOSS) ON INVESTMENTS: | ||||||||||||||||||||
Net realized gain on investments | 6,005,269 | 3,633,559 | 1,184,801 | 29,334,806 | 5,311,546 | |||||||||||||||
Change in unrealized appreciation/depreciation | ||||||||||||||||||||
on investments and support agreement | (9,257,746 | ) | 12,455,100 | 51,360,206 | 27,081,217 | 15,339,832 | ||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gain (loss) on investments | (3,252,477 | ) | 16,088,659 | 52,545,007 | 56,416,023 | 20,651,378 | ||||||||||||||
NET INCREASE IN NET ASSETS | ||||||||||||||||||||
RESULTING FROM OPERATIONS | $ | 20,849,461 | $ | 39,814,385 | $ | 78,571,103 | $ | 122,443,433 | $ | 48,831,499 |
The accompanying notes are an integral part of these financial statements.
Page 128
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird Short-Term Bond Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2011 | December 31, 2010 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 24,101,938 | $ | 22,342,660 | ||||
Net realized gain on investments | 6,005,269 | 3,517,847 | ||||||
Change in unrealized appreciation/depreciation | ||||||||
on investments and support agreement | (9,257,746 | ) | 4,968,573 | |||||
Net increase in net assets resulting from operations | 20,849,461 | 30,829,080 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 514,984,905 | 523,293,674 | ||||||
Shares issued to holders in reinvestment of dividends | 27,443,430 | 22,945,673 | ||||||
Cost of shares redeemed | (434,651,786 | ) | (239,674,038 | ) | ||||
Other capital contribution (Note 3) | — | 24,793 | ||||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 107,776,549 | 306,590,102 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (24,321,455 | ) | (22,712,303 | ) | ||||
From net realized gains | (6,100,633 | ) | (1,929,290 | ) | ||||
Total Distributions | (30,422,088 | ) | (24,641,593 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 98,203,922 | 312,777,589 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 919,026,165 | 606,248,576 | ||||||
End of year (including undistributed net | ||||||||
investment income of $12,570 and $0, respectively) | $ | 1,017,230,087 | $ | 919,026,165 |
The accompanying notes are an integral part of these financial statements.
Page 129
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird Intermediate Bond Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2011 | December 31, 2010 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 23,725,726 | $ | 24,416,303 | ||||
Net realized gain on investments | 3,633,559 | 8,859,362 | ||||||
Change in unrealized appreciation/depreciation | ||||||||
on investments and support agreement | 12,455,100 | 10,584,059 | ||||||
Net increase in net assets resulting from operations | 39,814,385 | 43,859,724 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 215,597,625 | 163,307,410 | ||||||
Shares issued to holders in reinvestment of dividends | 24,186,576 | 24,923,797 | ||||||
Cost of shares redeemed | (136,560,126 | ) | (133,422,324 | ) | ||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 103,224,075 | 54,808,883 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (23,416,880 | ) | (24,028,156 | ) | ||||
From net realized gains | (5,067,500 | ) | (4,782,773 | ) | ||||
Total Distributions | (28,484,380 | ) | (28,810,929 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (411,556 | ) | (313,689 | ) | ||||
From net realized gains | (101,027 | ) | (98,191 | ) | ||||
Total Distributions | (512,583 | ) | (411,880 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 114,041,497 | 69,445,798 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 603,903,646 | 534,457,848 | ||||||
End of year (including undistributed net | ||||||||
investment income of $130,830 and $112,543, respectively) | $ | 717,945,143 | $ | 603,903,646 |
The accompanying notes are an integral part of these financial statements.
Page 130
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird Intermediate Municipal Bond Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2011 | December 31, 2010 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 26,026,096 | $ | 23,097,843 | ||||
Net realized gain on investments | 1,184,801 | 75,330 | ||||||
Change in unrealized appreciation/depreciation on investments | 51,360,206 | (8,200,997 | ) | |||||
Net increase in net assets resulting from operations | 78,571,103 | 14,972,176 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 434,046,253 | 550,282,182 | ||||||
Shares issued to holders in reinvestment of dividends | 22,891,902 | 20,938,691 | ||||||
Cost of shares redeemed | (356,580,147 | ) | (351,297,595 | ) | ||||
Other capital contribution (Note 3) | — | 2,094 | ||||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 100,358,008 | 219,925,372 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (20,603,834 | ) | (18,087,492 | ) | ||||
From net realized gains | (467,874 | ) | — | |||||
Total Distributions | (21,071,708 | ) | (18,087,492 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (5,402,244 | ) | (5,032,968 | ) | ||||
From net realized gains | (141,151 | ) | — | |||||
Total Distributions | (5,543,395 | ) | (5,032,968 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 152,314,008 | 211,777,088 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 941,753,894 | 729,976,806 | ||||||
End of year (including undistributed net | ||||||||
investment income of $19,518 and $0, respectively) | $ | 1,094,067,902 | $ | 941,753,894 |
The accompanying notes are an integral part of these financial statements.
Page 131
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird Aggregate Bond Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2011 | December 31, 2010 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 66,027,410 | $ | 68,033,449 | ||||
Net realized gain on investments | 29,334,806 | 17,413,416 | ||||||
Change in unrealized appreciation/depreciation on | ||||||||
investments and support agreement | 27,081,217 | 32,470,647 | ||||||
Net increase in net assets resulting from operations | 122,443,433 | 117,917,512 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 605,032,019 | 624,236,049 | ||||||
Shares issued to holders in reinvestment of dividends | 87,989,277 | 72,134,875 | ||||||
Cost of shares redeemed | (908,429,486 | ) | (433,249,939 | ) | ||||
Net increase (decrease) in net assets resulting | ||||||||
from capital share transactions | (215,408,190 | ) | 263,120,985 | |||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (67,922,305 | ) | (69,717,831 | ) | ||||
From net realized gains | (28,455,915 | ) | (9,498,319 | ) | ||||
Total Distributions | (96,378,220 | ) | (79,216,150 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (1,101,319 | ) | (1,549,845 | ) | ||||
From net realized gains | (496,921 | ) | (218,924 | ) | ||||
Total Distributions | (1,598,240 | ) | (1,768,769 | ) | ||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | (190,941,217 | ) | 300,053,578 | |||||
NET ASSETS: | ||||||||
Beginning of year | 1,697,334,757 | 1,397,281,179 | ||||||
End of year (including undistributed net investment | ||||||||
income of $82,473 and $38,284, respectively) | $ | 1,506,393,540 | $ | 1,697,334,757 |
The accompanying notes are an integral part of these financial statements.
Page 132
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird Core Plus Bond Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2011 | December 31, 2010 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 28,180,121 | $ | 19,758,841 | ||||
Net realized gain on investments | 5,311,546 | 2,788,631 | ||||||
Change in unrealized appreciation/depreciation on | ||||||||
investments and support agreement | 15,339,832 | 4,481,630 | ||||||
Net increase in net assets resulting from operations | 48,831,499 | 27,029,102 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 687,143,111 | 294,817,715 | ||||||
Shares issued to holders in reinvestment of dividends | 30,879,432 | 21,571,061 | ||||||
Cost of shares redeemed | (143,951,115 | ) | (70,688,565 | ) | ||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 574,071,428 | 245,700,211 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (24,400,094 | ) | (17,444,760 | ) | ||||
From net realized gains | (2,509,064 | ) | (2,081,939 | ) | ||||
Total Distributions | (26,909,158 | ) | (19,526,699 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net investment income | (4,960,208 | ) | (2,869,768 | ) | ||||
From net realized gains | (1,035,923 | ) | (262,999 | ) | ||||
Total Distributions | (5,996,131 | ) | (3,132,767 | ) | ||||
TOTAL INCREASE IN NET ASSETS | 589,997,638 | 250,069,847 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 510,771,805 | 260,701,958 | ||||||
End of year (including undistributed net investment | ||||||||
income of $127,835 and $83,682, respectively) | $ | 1,100,769,443 | $ | 510,771,805 |
The accompanying notes are an integral part of these financial statements.
Page 133
Baird Funds, Inc.
Financial Highlights |
Baird Short-Term Bond Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 9.68 | $ | 9.57 | $ | 9.25 | $ | 9.91 | $ | 9.81 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.23 | 0.29 | 0.41 | 0.52 | 0.48 | |||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | (0.03 | ) | 0.13 | 0.32 | (0.67 | ) | 0.10 | |||||||||||||
Total from investment operations | 0.20 | 0.42 | 0.73 | (0.15 | ) | 0.58 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.23 | ) | (0.29 | ) | (0.41 | ) | (0.51 | ) | (0.48 | ) | ||||||||||
Distributions from net realized gains | (0.06 | ) | (0.02 | ) | — | — | — | |||||||||||||
Total distributions | (0.29 | ) | (0.31 | ) | (0.41 | ) | (0.51 | ) | (0.48 | ) | ||||||||||
Net asset value, end of year | $ | 9.59 | $ | 9.68 | $ | 9.57 | $ | 9.25 | $ | 9.91 | ||||||||||
Total return | 2.08 | % | 4.39 | % | 8.14 | % | (1.79 | )% | 6.08 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 1,017,230,087 | $ | 919,026,165 | $ | 606,248,576 | $ | 214,999,406 | $ | 199,090,483 | ||||||||||
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 | 2.40 | % | 2.92 | % | 4.28 | % | 5.01 | % | 5.00 | % | ||||||||||
Portfolio turnover rate | 61.1 | % | 58.7 | % | 55.5 | % | 98.5 | % | 36.6 | % |
The accompanying notes are an integral part of these financial statements.
Page 134
Baird Funds, Inc.
Financial Highlights |
Baird Intermediate Bond Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 10.87 | $ | 10.61 | $ | 10.00 | $ | 10.62 | $ | 10.52 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.39 | 0.44 | (1) | 0.51 | (1) | 0.55 | 0.54 | |||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.27 | 0.35 | 0.63 | (0.64 | ) | 0.10 | ||||||||||||||
Total from investment operations | 0.66 | 0.79 | 1.14 | (0.09 | ) | 0.64 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.39 | ) | (0.44 | ) | (0.51 | ) | (0.53 | ) | (0.54 | ) | ||||||||||
Distributions from net realized gains | (0.08 | ) | (0.09 | ) | (0.02 | ) | — | — | ||||||||||||
Total distributions | (0.47 | ) | (0.53 | ) | (0.53 | ) | (0.53 | ) | (0.54 | ) | ||||||||||
Net asset value, end of year | $ | 11.06 | $ | 10.87 | $ | 10.61 | $ | 10.00 | $ | 10.62 | ||||||||||
Total return | 6.14 | % | 7.54 | % | 11.76 | % | (0.91 | )% | 6.24 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 703,229,161 | $ | 591,158,539 | $ | 527,750,216 | $ | 401,914,872 | $ | 398,321,566 | ||||||||||
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 | 3.49 | % | 4.05 | % | 4.92 | % | 5.14 | % | 5.13 | % | ||||||||||
Portfolio turnover rate(2) | 24.1 | % | 38.7 | % | 38.6 | % | 32.9 | % | 42.5 | % |
(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 Bond Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.26 | $ | 10.97 | $ | 10.32 | $ | 10.96 | $ | 10.85 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.37 | 0.43 | (1) | 0.50 | (1) | 0.52 | 0.52 | |||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.28 | 0.36 | 0.65 | (0.65 | ) | 0.10 | ||||||||||||||
Total from investment operations | 0.65 | 0.79 | 1.15 | (0.13 | ) | 0.62 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.36 | ) | (0.41 | ) | (0.48 | ) | (0.51 | ) | (0.51 | ) | ||||||||||
Distributions from net realized gains | (0.08 | ) | (0.09 | ) | (0.02 | ) | — | — | ||||||||||||
Total distributions | (0.44 | ) | (0.50 | ) | (0.50 | ) | (0.51 | ) | (0.51 | ) | ||||||||||
Net asset value, end of year | $ | 11.47 | $ | 11.26 | $ | 10.97 | $ | 10.32 | $ | 10.96 | ||||||||||
Total return | 5.84 | % | 7.30 | % | 11.51 | % | (1.31 | )% | 5.89 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 14,715,982 | $ | 12,745,107 | $ | 6,707,632 | $ | 4,017,828 | $ | 3,276,351 | ||||||||||
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 | 3.24 | % | 3.80 | % | 4.67 | % | 4.89 | % | 4.88 | % | ||||||||||
Portfolio turnover rate(2) | 24.1 | % | 38.7 | % | 38.6 | % | 32.9 | % | 42.5 | % |
(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 Intermediate Municipal Bond Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.31 | $ | 11.35 | $ | 10.98 | $ | 10.69 | $ | 10.55 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.32 | 0.32 | 0.32 | (1) | 0.39 | (1) | 0.37 | (1) | ||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.64 | (0.04 | ) | 0.36 | 0.28 | 0.14 | ||||||||||||||
Total from investment operations | 0.96 | 0.28 | 0.68 | 0.67 | 0.51 | |||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.32 | ) | (0.32 | ) | (0.31 | ) | (0.38 | ) | (0.37 | ) | ||||||||||
Distributions from net realized gains | (0.01 | ) | — | — | — | — | ||||||||||||||
Total distributions | (0.33 | ) | (0.32 | ) | (0.31 | ) | (0.38 | ) | (0.37 | ) | ||||||||||
Net asset value, end of year | $ | 11.94 | $ | 11.31 | $ | 11.35 | $ | 10.98 | $ | 10.69 | ||||||||||
Total return | 8.55 | % | 2.42 | % | 6.22 | % | 6.37 | % | 4.93 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 836,132,295 | $ | 738,957,721 | $ | 533,313,125 | $ | 226,148,164 | $ | 106,583,763 | ||||||||||
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 | % | 2.74 | % | 2.83 | % | 3.58 | % | 3.44 | % | ||||||||||
Portfolio turnover rate(2) | 8.0 | % | 8.7 | % | 0.7 | % | 0.9 | % | 5.6 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 137
Baird Funds, Inc.
Financial Highlights |
Baird Intermediate Municipal Bond Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 11.53 | $ | 11.57 | $ | 11.19 | $ | 10.90 | $ | 10.75 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.29 | 0.29 | 0.29 | (1) | 0.36 | (1) | 0.35 | (1) | ||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.66 | (0.04 | ) | 0.37 | 0.28 | 0.14 | ||||||||||||||
Total from investment operations | 0.95 | 0.25 | 0.66 | 0.64 | 0.49 | |||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.29 | ) | (0.29 | ) | (0.28 | ) | (0.35 | ) | (0.34 | ) | ||||||||||
Distributions from net realized gains | (0.01 | ) | — | — | — | — | ||||||||||||||
Total distributions | (0.30 | ) | (0.29 | ) | (0.28 | ) | (0.35 | ) | (0.34 | ) | ||||||||||
Net asset value, end of year | $ | 12.18 | $ | 11.53 | $ | 11.57 | $ | 11.19 | $ | 10.90 | ||||||||||
Total return | 8.30 | % | 2.11 | % | 5.95 | % | 6.02 | % | 4.68 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 257,935,607 | $ | 202,796,173 | $ | 196,663,681 | $ | 17,415,418 | $ | 396,464 | ||||||||||
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 | % | 2.49 | % | 2.58 | % | 3.33 | % | 3.19 | % | ||||||||||
Portfolio turnover rate(2) | 8.0 | % | 8.7 | % | 0.7 | % | 0.9 | % | 5.6 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 138
Baird Funds, Inc.
Financial Highlights |
Baird Aggregate Bond Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 10.52 | $ | 10.23 | $ | 9.74 | $ | 10.54 | $ | 10.51 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.44 | (1) | 0.47 | (2) | 0.54 | 0.56 | 0.54 | |||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.36 | 0.37 | 0.49 | (0.81 | ) | 0.03 | ||||||||||||||
Total from investment operations | 0.80 | 0.84 | 1.03 | (0.25 | ) | 0.57 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.46 | ) | (0.49 | ) | (0.54 | ) | (0.55 | ) | (0.54 | ) | ||||||||||
Distributions from net realized gains | (0.21 | ) | (0.06 | ) | (0.00 | )(3) | — | — | ||||||||||||
Total distributions | (0.67 | ) | (0.55 | ) | (0.54 | ) | (0.55 | ) | (0.54 | ) | ||||||||||
Net asset value, end of year | $ | 10.65 | $ | 10.52 | $ | 10.23 | $ | 9.74 | $ | 10.54 | ||||||||||
Total return | 7.85 | % | 8.34 | % | 10.88 | % | (2.36 | )% | 5.61 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 1,480,275,135 | $ | 1,658,404,061 | $ | 1,362,164,059 | $ | 842,724,670 | $ | 725,580,384 | ||||||||||
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 | 4.10 | % | 4.44 | % | 5.37 | % | 5.46 | % | 5.37 | % | ||||||||||
Portfolio turnover rate(4) | 45.9 | % | 41.4 | % | 37.7 | % | 21.9 | % | 33.6 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Net investment income per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences. |
(3) | Amount is less than ($0.005). |
(4) | 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 Aggregate Bond Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 10.80 | $ | 10.48 | $ | 9.97 | $ | 10.78 | $ | 10.73 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.42 | (1) | 0.46 | (2) | 0.52 | 0.52 | 0.53 | |||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.37 | 0.38 | 0.50 | (0.81 | ) | 0.04 | ||||||||||||||
Total from investment operations | 0.79 | 0.84 | 1.02 | (0.29 | ) | 0.57 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.44 | ) | (0.46 | ) | (0.51 | ) | (0.52 | ) | (0.52 | ) | ||||||||||
Distributions from net realized gains | (0.21 | ) | (0.06 | ) | (0.00 | )(3) | — | — | ||||||||||||
Total distributions | (0.65 | ) | (0.52 | ) | (0.51 | ) | (0.52 | ) | (0.52 | ) | ||||||||||
Net asset value, end of year | $ | 10.94 | $ | 10.80 | $ | 10.48 | $ | 9.97 | $ | 10.78 | ||||||||||
Total return | 7.46 | % | 8.16 | % | 10.55 | % | (2.63 | )% | 5.45 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 26,118,405 | $ | 38,930,696 | $ | 35,117,120 | $ | 29,146,211 | $ | 14,363,416 | ||||||||||
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 | 3.85 | % | 4.19 | % | 5.12 | % | 5.21 | % | 5.12 | % | ||||||||||
Portfolio turnover rate(4) | 45.9 | % | 41.4 | % | 37.7 | % | 21.9 | % | 33.6 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Net investment income per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences. |
(3) | Amount is less than ($0.005). |
(4) | 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.
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Baird Funds, Inc.
Financial Highlights |
Baird Core Plus Bond Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 10.51 | $ | 10.18 | $ | 9.46 | $ | 10.22 | $ | 10.16 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.45 | (1) | 0.59 | (2) | 0.65 | (1) | 0.56 | (1) | 0.54 | (1) | ||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.36 | 0.39 | 0.74 | (0.73 | ) | 0.05 | ||||||||||||||
Total from investment operations | 0.81 | 0.98 | 1.39 | (0.17 | ) | 0.59 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.46 | ) | (0.60 | ) | (0.65 | ) | (0.55 | ) | (0.53 | ) | ||||||||||
Distributions from net realized gains | (0.04 | ) | (0.05 | ) | (0.02 | ) | (0.04 | ) | — | |||||||||||
Total distributions | (0.50 | ) | (0.65 | ) | (0.67 | ) | (0.59 | ) | (0.53 | ) | ||||||||||
Net asset value, end of year | $ | 10.82 | $ | 10.51 | $ | 10.18 | $ | 9.46 | $ | 10.22 | ||||||||||
Total return | 7.89 | % | 9.81 | % | 15.36 | % | (1.79 | )% | 5.99 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 768,891,204 | $ | 452,419,012 | $ | 215,194,337 | $ | 158,983,325 | $ | 114,421,895 | ||||||||||
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 | 4.22 | % | 5.56 | % | 6.67 | % | 5.61 | % | 5.41 | % | ||||||||||
Portfolio turnover rate(3) | 34.6 | % | 61.5 | % | 33.2 | % | 27.7 | % | 47.4 | % |
(1) | Calculated using average shares outstanding during the period. |
(2) | Net investment income per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences. |
(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 141
Baird Funds, Inc.
Financial Highlights |
Baird Core Plus Bond Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 10.85 | $ | 10.49 | $ | 9.72 | $ | 10.50 | $ | 10.42 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.44 | (1) | 0.57 | (2) | 0.64 | (1) | 0.53 | (1) | 0.53 | (1) | ||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.37 | 0.41 | 0.78 | (0.74 | ) | 0.06 | ||||||||||||||
Total from investment operations | 0.81 | 0.98 | 1.42 | (0.21 | ) | 0.59 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.44 | ) | (0.57 | ) | (0.63 | ) | (0.53 | ) | (0.51 | ) | ||||||||||
Distributions from net realized gains | (0.04 | ) | (0.05 | ) | (0.02 | ) | (0.04 | ) | — | |||||||||||
Total distributions | (0.48 | ) | (0.62 | ) | (0.65 | ) | (0.57 | ) | (0.51 | ) | ||||||||||
Net asset value, end of year | $ | 11.18 | $ | 10.85 | $ | 10.49 | $ | 9.72 | $ | 10.50 | ||||||||||
Total return | 7.57 | % | 9.53 | % | 15.06 | % | (2.07 | )% | 5.80 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 331,878,239 | $ | 58,352,793 | $ | 45,507,621 | $ | 29,583,588 | $ | 2,473,660 | ||||||||||
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 | 3.97 | % | 5.31 | % | 6.42 | % | 5.36 | % | 5.16 | % | ||||||||||
Portfolio turnover rate(3) | 34.6 | % | 61.5 | % | 33.2 | % | 27.7 | % | 47.4 | % |
(1) | Calculated using average shares outstanding during the period. |
(2) | Net investment income per share is calculated using ending balances prior to consideration of adjustments for permanent book and tax differences. |
(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 142
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
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 of 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 143
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
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 net asset value, 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, Interactive Data Corporation (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 (4:00 p.m. 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 144
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
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 May 2011, the FASB ASU No. 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and the International Financial Reporting Standards (“IFRS”)” (ASU 2011-04). ASU 2011-04 amends FASB ASC Topic 820, Fair Value Measurements and Disclosures, to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and IFRS. ASU No. 2011-04 is effective for fiscal years beginning after December 15, 2011 and for interim periods within those fiscal years. Management is currently evaluating the impact these amendments may have on the Fund’s 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 $240,409,977 (23.63% of net assets), $75,882,546 (10.57% of net assets), $133,366,618 (8.85% of net assets) and $131,958,967 (11.99% of net assets), respectively, at December 31, 2011. 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, 2011 consist of securities issued pursuant to Rule 144A under the Securities Act of 1933 and nearly 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.
Page 145
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
2.SIGNIFICANT ACCOUNTING POLICIES (cont.)
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, 2011, or for any other tax years which are open for exam. As of December 31, 2011, open tax years include the tax years ended December 31, 2008 through 2011. 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.
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 the 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 146
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
3.CAPITAL SHARE TRANSACTIONS
The following table summarizes the capital share transactions of each Fund for the past two fiscal years:
BAIRD SHORT-TERM BOND FUND | |||||||||||||||||||
Year Ended | Year Ended | ||||||||||||||||||
December 31, 2011 | December 31, 2010 | ||||||||||||||||||
Institutional Class Shares | Shares | Amount | Institutional Class Shares | Shares | Amount | ||||||||||||||
Shares sold | 53,122,196 | $ | 514,984,905 | Shares sold | 53,941,581 | $ | 523,293,674 | ||||||||||||
Shares issued to | Shares issued to | ||||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||||
reinvestment of dividends | 2,841,238 | 27,443,430 | reinvestment of dividends | 2,370,167 | 22,945,673 | ||||||||||||||
Shares redeemed | (44,833,884 | ) | (434,651,786 | ) | Shares redeemed | (24,719,978 | ) | (239,674,038 | ) | ||||||||||
Net increase | 11,129,550 | $ | 107,776,549 | Other capital | |||||||||||||||
Shares Outstanding: | contribution(1) | — | 24,793 | ||||||||||||||||
Net increase | 31,591,770 | $ | 306,590,102 | ||||||||||||||||
Beginning of year | 94,968,310 | Shares Outstanding: | |||||||||||||||||
End of year | 106,097,860 | 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, 2011 | December 31, 2011 | ||||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | ||||||||||||||
Shares sold | 18,638,168 | $ | 205,507,343 | Shares sold | 883,474 | $ | 10,090,282 | ||||||||||||
Shares issued to | Shares issued to | ||||||||||||||||||
shareholders in | shareholders in | ||||||||||||||||||
reinvestment of dividends | 2,149,990 | 23,704,272 | reinvestment of dividends | 42,204 | 482,304 | ||||||||||||||
Shares redeemed | (11,543,624 | ) | (127,767,983 | ) | Shares redeemed | (773,902 | ) | (8,792,143 | ) | ||||||||||
Net increase | 9,244,534 | $ | 101,443,632 | Net increase | 151,776 | $ | 1,780,443 | ||||||||||||
Shares Outstanding: | Shares Outstanding: | ||||||||||||||||||
Beginning of year | 54,362,913 | Beginning of year | 1,131,702 | ||||||||||||||||
End of year | 63,607,447 | End of year | 1,283,478 |
Page 147
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
3.CAPITAL SHARE TRANSACTIONS (cont.)
BAIRD INTERMEDIATE BOND FUND (cont.) | ||||||||||||||||||
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 | |||||||||||||||
BAIRD INTERMEDIATE MUNICIPAL BOND FUND | ||||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2011 | December 31, 2011 | |||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | |||||||||||||
Shares sold | 28,247,024 | $ | 327,854,380 | Shares sold | 8,949,573 | $ | 106,191,873 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment of dividends | 1,511,354 | 17,575,486 | reinvestment of dividends | 447,538 | 5,316,416 | |||||||||||||
Shares redeemed | (25,043,108 | ) | (288,447,567 | ) | Shares redeemed | (5,800,868 | ) | (68,132,580 | ) | |||||||||
Net increase | 4,715,270 | $ | 56,982,299 | Net increase | 3,596,243 | $ | 43,375,709 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 65,341,873 | Beginning of year | 17,581,407 | |||||||||||||||
End of year | 70,057,143 | End of year | 21,177,650 |
Page 148
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
3.CAPITAL SHARE TRANSACTIONS (cont.)
BAIRD INTERMEDIATE MUNICIPAL BOND FUND (cont.) | ||||||||||||||||||
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. |
BAIRD AGGREGATE BOND FUND | ||||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2011 | December 31, 2011 | |||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | |||||||||||||
Shares sold | 55,839,863 | $ | 597,699,924 | Shares sold | 667,679 | $ | 7,332,095 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment of dividends | 8,120,694 | 86,467,957 | reinvestment of dividends | 139,163 | 1,521,320 | |||||||||||||
Shares redeemed | (82,507,416 | ) | (886,351,800 | ) | Shares redeemed | (2,025,333 | ) | (22,077,686 | ) | |||||||||
Net decrease | (18,546,859 | ) | $ | (202,183,919 | ) | Net decrease | (1,218,491 | ) | $ | (13,224,271 | ) | |||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 157,577,846 | Beginning of year | 3,605,112 | |||||||||||||||
End of year | 139,030,987 | End of year | 2,386,621 |
Page 149
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
3.CAPITAL SHARE TRANSACTIONS (cont.)
BAIRD AGGREGATE BOND FUND (cont.) | ||||||||||||||||||
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 | |||||||||||||||
BAIRD CORE PLUS BOND FUND | ||||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2011 | December 31, 2011 | |||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | |||||||||||||
Shares sold | 36,047,590 | $ | 388,252,142 | Shares sold | 26,760,168 | $ | 298,890,969 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment of dividends | 2,340,028 | 25,063,056 | reinvestment of dividends | 524,142 | 5,816,376 | |||||||||||||
Shares redeemed | (10,328,750 | ) | (110,911,182 | ) | Shares redeemed | (2,980,242 | ) | (33,039,933 | ) | |||||||||
Net increase | 28,058,868 | $ | 302,404,016 | Net increase | 24,304,068 | $ | 271,667,412 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 43,034,228 | Beginning of year | 5,376,773 | |||||||||||||||
End of year | 71,093,096 | End of year | 29,680,841 |
Page 150
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
3.CAPITAL SHARE TRANSACTIONS (cont.)
BAIRD CORE PLUS BOND FUND (cont.) | ||||||||||||||||||
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 |
4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION
During the year ended December 31, 2011, 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 | $ | 235,567,196 | $ | 132,667,879 | $ | — | $ | 482,411,784 | $ | 410,584,818 | ||||||||||
Other | $ | 510,442,615 | $ | 138,375,067 | $ | 177,081,584 | $ | 221,688,514 | $ | 356,815,956 | ||||||||||
Sales: | ||||||||||||||||||||
U.S. Government | $ | 289,870,636 | $ | 67,409,813 | $ | — | $ | 655,498,506 | $ | 180,427,886 | ||||||||||
Other | $ | 290,015,402 | $ | 90,065,999 | $ | 75,334,170 | $ | 276,129,235 | $ | 48,329,116 |
Page 151
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION (cont.)
At December 31, 2011, 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 | $ | 1,107,663,428 | $ | 833,995,621 | $ | 1,038,274,202 | $ | 1,748,288,036 | $ | 1,273,564,118 | ||||||||||
Gross unrealized appreciation | $ | 7,284,356 | $ | 32,040,424 | $ | 63,679,571 | $ | 79,018,370 | $ | 36,284,483 | ||||||||||
Gross unrealized depreciation | (10,794,486 | ) | (8,039,080 | ) | (227,982 | ) | (31,641,193 | ) | (12,565,870 | ) | ||||||||||
Net unrealized appreciation | $ | (3,510,130 | ) | $ | 24,001,344 | $ | 63,451,589 | $ | 47,377,177 | $ | 23,718,613 | |||||||||
Undistributed | ||||||||||||||||||||
ordinary income | $ | 84,035 | $ | 424,194 | $ | — | $ | 82,473 | $ | 127,835 | ||||||||||
Undistributed long-term | ||||||||||||||||||||
capital gain | 488,026 | 360,619 | — | — | — | |||||||||||||||
Undistributed | ||||||||||||||||||||
tax-exempt income | — | — | 19,518 | — | — | |||||||||||||||
Total distributable earnings | $ | 572,061 | $ | 784,813 | $ | 19,518 | $ | 82,473 | $ | 127,835 | ||||||||||
Other accumulated losses | $ | — | $ | — | $ | (137,429 | ) | $ | (416,062 | ) | $ | (70,162 | ) | |||||||
Total accumulated | ||||||||||||||||||||
earnings/(losses) | $ | (2,938,069 | ) | $ | 24,786,157 | $ | 63,333,678 | $ | 47,043,588 | $ | 23,776,286 |
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, 2011, the following table shows the reclassifications made:
Undistributed Net | Accumulated Net | Paid In | ||||||||||||
Investment Income (Loss) | Realized Gain (Loss) | Capital | ||||||||||||
Baird Short-Term Bond Fund | $ | 232,087 | $ | (232,087 | ) | $ | — | |||||||
Baird Intermediate Bond Fund | 120,996 | (120,998 | ) | 2 | ||||||||||
Baird Intermediate Municipal Bond Fund | (500 | ) | 500 | — | ||||||||||
Baird Aggregate Bond Fund | 3,040,403 | (3,040,404 | ) | 1 | ||||||||||
Baird Core Plus Bond Fund | 1,224,334 | (1,224,334 | ) | — |
Page 152
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
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, 2011 | December 31, 2010 | |||||||||||||||
Ordinary | Long-Term | Ordinary | Long-Term | |||||||||||||
Income | Capital Gains | Income | Capital Gains | |||||||||||||
Distributions | Distributions | Distributions | Distributions | |||||||||||||
Baird Short-Term Bond Fund | $ | 26,304,269 | $ | 4,117,819 | $ | 23,700,754 | $ | 940,839 | ||||||||
Baird Intermediate Bond Fund | $ | 24,939,410 | $ | 4,057,553 | $ | 25,148,629 | $ | 4,074,180 | ||||||||
Baird Intermediate Municipal Bond Fund | $ | 407,181 | $ | 608,525 | $ | 648,696 | $ | — | ||||||||
Baird Aggregate Bond Fund | $ | 75,902,247 | $ | 22,074,213 | $ | 71,267,676 | $ | 9,717,243 | ||||||||
Baird Core Plus Bond Fund | $ | 30,406,429 | $ | 2,498,860 | $ | 20,825,534 | $ | 1,833,932 |
For the years ended December 31, 2011 and December 31, 2010, distributions of $25,599,397 and $22,471,764, 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, 2011, Baird Intermediate Municipal Bond Fund, Baird Aggregate Bond Fund and Baird Core Plus Bond Fund elected to defer capital losses occurring between November 1, 2011 and December 31, 2011 in the amount of $137,429, $416,062 and $70,162, respectively.
At December 31, 2011, there were no accumulated net realized capital loss carryovers.
During the year ended December 31, 2011, Baird Intermediate Municipal Bond Fund utilized capital loss carryovers of $713,705.
On December 22, 2010, the Regulated Investment Modernization Act of 2010 (the “RIC Act”) was enacted, and the provisions within the RIC Act are effective for the Funds for the year ended December 31, 2011. The RIC Act modernized several of the federal income and excise tax provisions related to regulated investments companies (“RICs”). Under the RIC Act, new capital losses may be carried forward indefinitely with the character of the original loss retained. Prior to the RIC Act, capital losses could be carried forward for eight years, and were carried forward as short-term capital losses regardless of the character of the original loss. 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 repeals 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 RIC during the portion of its taxable year ending after October 31 or December 31.
Page 153
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
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, 2011, the Baird Short-Term Bond Fund, Baird Intermediate Bond Fund, Baird Aggregate Bond Fund and Baird Core Plus Bond Fund had loaned securities that were collateralized by cash equivalents. The cash collateral is invested by the custodian in accordance with approved investment guidelines. Those guidelines require the cash collateral to be invested in readily marketable, high quality, short-term obligations; however, such investments are subject to risk of payment delays or default on the part of the issuer or counterparty or otherwise may not generate sufficient interest to support the costs associated with securities lending. A Fund could also experience delays in recovering its securities and possible loss of income or value if the borrower fails to return the borrowed securities, although the Funds are indemnified from this risk by contract with the securities lending agent.
Page 154
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
6.SECURITIES LENDING (cont.)
As of December 31, 2011, 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 | $ | 92,550,098 | $ | 94,561,562 | |||||
Baird Intermediate Bond Fund | 137,665,514 | 140,421,143 | |||||||
Baird Aggregate Bond Fund | 263,868,621 | 269,954,519 | |||||||
Baird Core Plus Bond Fund | 199,757,841 | 203,944,523 |
The Funds receive cash as collateral in return for securities lent as part of the 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, 2011.
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, 2011, 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, 2011 for the Baird Short-Term Bond Fund, Baird Intermediate Bond Fund, Baird Aggregate Bond Fund, and Baird Core Plus Bond Fund were $133,932, $222,274, $262,695, and $143,388, respectively.
Page 155
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
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 2011). For the year ended December 31, 2011, the Baird Short-Term Bond Fund, Baird Intermediate Municipal Bond Fund, and Baird Core Plus Bond Fund incurred $926, $4,345 and $22 in interest charges, respectively, on average daily loan balances of $40,581, $190,463 and $945, 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 of 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 $32,693, $550,110, $70,894 and $297,670, respectively, in fees pursuant to the Plan during the year ended December 31, 2011.
9.SUBSEQUENT EVENT
In preparing these financial statements, the Corporation has evaluated events after December 31, 2011. There were no subsequent events since December 31, 2011 that would require adjustment to or additional disclosure in these financial statements.
Page 156
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, 2011, 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, 2011, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. 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, 2011, 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.
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Chicago, Illinois
February 28, 2012
Page 157
Baird Funds, Inc.
Directors & Officers as of December 31, 2011 |
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: 72 | |||||||
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) | |||||
Madison, WI 53726 | (1967-1980) | ||||||
Age: 69 | |||||||
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: 72 | 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: 58 | (1976-1978) | ||||||
Cory L. Nettles* | Interested | Indefinite; | Managing Director, Generation Growth Capital, Inc., a | 7 | Director of Weyco | ||
Generation Growth Capital, Inc. | Director | Since January | private equity fund, since March 2007; Of Counsel, | Group, Inc., a men’s | |||
411 East Wisconsin Avenue, | 2008 | Quarles & Brady LLP, a law firm, since January 2005; | footwear distributor | ||||
Suite 1710 | Secretary, Wisconsin Department of Commerce | ||||||
Milwaukee, WI 53202 | (January 2003 – January 2005) | ||||||
Age: 41 |
* | Mr. Nettles is considered 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. Mr. Nettles also serves as a senior advisor to Baird Private Equity, a division of the Advisor. |
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 158
Baird Funds, Inc.
Directors & Officers as of December 31, 2011 |
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: 55 | 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: 58 | 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: 49 | 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: 40 | August 2010 | ||||
Dominick P. Zarcone | Treasurer | Re-elected by | Chief Financial Officer, the Advisor since March 2011; Chief Operating Officer-Investment | ||
777 East Wisconsin Avenue | Board annually; | Banking, the Advisor (June 2004-March 2011); Managing Director, the Advisor | |||
Milwaukee, WI 53202 | Since | since February 1995 | |||
Age: 53 | March 2011 | ||||
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: 48 | September 2005 | ||||
Dustin J. Hutter | Assistant | Re-elected by | Senior Vice President, the Advisor since January 2011; First Vice President, the Advisor (January | ||
777 East Wisconsin Avenue | Treasurer | Board annually; | 2008-December 2010); Vice President, the Advisor (January 2006-December 2007); Assistant | ||
Milwaukee, WI 53202 | Since | Controller, the Advisor since January 2006 | |||
Age: 35 | February 2011 | ||||
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: 27 | August 2010 | ||||
Andrew D. Ketter | Assistant | Re-elected by | First Vice President and Associate General Counsel, the Advisor since September 2010; Associate, | ||
777 East Wisconsin Avenue | Secretary | Board annually; | Quarles & Brady LLP, a law firm (September 2002-August 2010) | ||
Milwaukee, WI 53202 | Since | ||||
Age: 37 | February 2011 |
Page 159
Baird Funds, Inc.
DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD FIXED INCOME FUNDS
The Board of Directors (the “Board”) of Baird Funds, Inc. (the “Corporation”) met on August 16, 2011 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 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, Form BD and financial statements), a profitability analysis, comparative information about the Funds’ performance for periods ended June 30, 2011, management fees and expense ratios, and other pertinent information. The Board also discussed relevant case law, including the Supreme Court’s 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 reviewed a summary of the Advisor’s risk management tools and process. 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 $16 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 Funds’ 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, 2011 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 the Intermediate Municipal Bond Fund has trailed its benchmark index in certain periods, the Board noted that the Fund did not hold the lower quality bonds that had outperformed higher quality bonds in recent years due to the Advisor’s disciplined risk management process, 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 most time 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 not provide in
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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.)
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 also reviewed sub-advisory fees paid to the Advisor under sub-advisory arrangements with two unaffiliated mutual funds, noting that the sub-advisory services were limited to asset management and that the Advisor provided numerous other services under the advisory agreement with the Funds and, accordingly, that the sub-advisory fees were expected to be lower than the Funds’ advisory fees.
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 Board noted that for the past fiscal year, the Advisor had incurred significantly more in expenses under the Administration Agreement than it received in administrative fees.
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.
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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, Baird Aggregate Bond Fund and Baird Core Plus Bond Fund were 7.54%, 4.45%, 9.06% and 3.44%, respectively.
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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.
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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
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Annual Report - Baird Funds
Baird LargeCap Fund
Baird MidCap Fund
TABLE OF CONTENTS
Page | |
Letter to Shareholders | 1 |
2011 Economic and Stock Market Commentary | 2 |
Baird LargeCap Fund | 4 |
Baird MidCap Fund | 13 |
Additional Information on Fund Expenses | 22 |
Statements of Assets and Liabilities | 24 |
Statements of Operations | 25 |
Statements of Changes in Net Assets | 26 |
Financial Highlights | 28 |
Notes to the Financial Statements | 32 |
Report of Independent Registered Public Accounting Firm | 42 |
Directors and Officers | 43 |
Disclosure Regarding the Board of Directors’ Approval | |
of the Investment Advisory Agreement for Baird Equity Funds | 45 |
Additional Information | 48 |
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.
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Baird Funds, Inc.
1-866-442-2473
www.bairdfunds.com
February 28, 2012
Dear Shareholder,
Our equity portfolio management team adds long-term value with its quality conscious investment management approach. While equity returns for investors in 2011 were modest, we are pleased with the performance of the Funds in 2011, notably our MidCap product, which offered exceptional performance.
We thank you for your continued investment in Baird Funds. Steady inflows into the Baird Funds family have increased total net assets to $5.5 billion at the end of 2011, an increase of more than 15% over the prior year-end. We’ve built our reputation on employing a risk controlled process in our approach to investment decision making and portfolio management. Our long-term success is a testament to this.
On the following pages, we review the equity market in 2011 and the performance and composition of each of the Baird MidCap and LargeCap Funds.
We appreciate the confidence and trust that you have placed in our experienced investment team to help you achieve your financial goals and we welcome the opportunity to continue to serve you.
Sincerely,
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Mary Ellen Stanek, CFA
President
Baird Funds
2011 Economic and Stock Market Commentary
Equities produced a strong rally in the fourth quarter, which helped stock market averages recover from a challenging late summer retreat to finish the year with modest gains. The broad-based S&P 500 index rose 2.1% for all of 2011, while the Dow Jones Industrial Average advanced 8.4%. In general, larger stocks fared better than smaller and mid cap companies as evidenced by the Russell 1000® Growth index, which advanced 2.6% compared to the Russell Midcap® Growth Index decline of 1.7%.
The somewhat muted market returns experienced by investors in 2011 belied the volatility during the course of the year. A robust start to the year pushed the S&P 500 index up over 8% into late spring. However, the headwinds of sovereign debt crises, slowing economic growth and negative political discourse caught up with the stock market during the third quarter of 2011. The fundamental performance of companies across most sectors, as reflected in second quarter earnings reported in July, did not foreshadow the surge in market volatility or the accompanying drop in equity prices. A broad sell-off lasting most of the quarter coincided with the contentious U.S. debt-ceiling debate and subsequent ratings downgrade that affected stocks, commodities and other riskier assets.
The pause in economic activity was short-lived, and a series of encouraging economic releases were enough to change the direction of equities in the fourth quarter. Most domestic equity indices posted double digit returns in the year’s final three months as the U.S. economy strengthened and corporate profits continued to march higher.
Sector performance within the broad S&P 500 index was varied. As one might expect during a period of slowing economic growth and heightened uncertainty, more defensive areas of the market, including consumer staples and health care, outperformed. Sectors with more cyclical earnings streams such as materials, financials, and industrials lagged the market. It was also a period where the perceived safety of size outperformed smaller and mid-sized companies.
Economic Outlook
As we flip the calendar to a new year, it is our belief that macroeconomic factors will again dominate the investment landscape. Sovereign debt and banking crises, central bank decisions, and global politics are front and center in the minds of investors, and rightly so. Resolution and clarity would be welcome – potentially lifting both spirits and earnings multiples for shareholders. Fortunately, domestic company fundamentals generally remain rather positive, providing some degree of comfort.
European sovereign debt challenges have been intensely discussed and debated with steps taken, but few concrete accomplishments. Because so much country debt is held by the banking system, it is difficult to structure a solution that requires austerity measures, asset write-downs and capital raising without inducing at least a modest recession in Europe. The stronger northern economies (i.e., Germany and France) are being pressured to provide the lifelines necessary to manage the debt situation. Recapitalizing the banks will possibly require TARP-like
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2011 Economic and Stock Market Commentary
financing. These are big, but not impossible tasks. We are closely monitoring our companies with European exposure with an eye to further reducing position sizes where appropriate.
The Chinese central bank maintained a restrictive monetary policy through much of the past year in order to reduce raw material and real estate inflation. Those efforts have largely been successful, but have slowed GDP growth to a rate below their stated goals. It is not outside the realm of possibility that the breaking mechanism is reversed in 2012. This change would provide welcome relief for many companies that generate revenues and profits from that important growth economy.
Aside from our country’s own debt and budget situation, 2012 is a Presidential election year. Uncertainty regarding the path of key issues including tax policy, federal budget cuts, and entitlement reform may be with us for much of 2012, and may well keep a lid on stocks. In sum, risks remain elevated and we have positioned the portfolios accordingly. Better clarity and confidence would make for a more favorable investing climate, and should the winds begin shifting to our back, we will adjust to an improved investing environment.
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Baird LargeCap Fund
Portfolio Managers’ Commentary
For the year ended December 31, 2011, the Baird LargeCap Fund Institutional Class posted a decline of 2.34% (-2.58% for the Investor Class), as compared to a return of 2.64% for the Russell 1000® Growth Index, the LargeCap Fund’s primary benchmark.
We can attribute the Fund’s underperformance to two themes. First, we were positioned for an economic recovery which was highlighted by heavier weights in the industrial, energy and materials sectors. This positioning proved a drag on performance during 2011 as the slowdown in economic data and the negative impact from the U.S. budget debate called for a more defensive stance.
The second performance headwind arose from the market cap profile of the Fund, which was smaller than the benchmark, as there was a clear relationship between size and performance during the year. When broken down into quintiles, the benchmark’s largest market cap group produced a collective return that far exceeded the benchmark, while companies generally underperformed in the lower three market cap quintiles.
Our investment strategy is focused on identifying large cap companies in the earlier part of their life cycle (generally having market capitalizations that are smaller than the benchmark average) where we believe there remains a meaningful runway for attractive growth. The strategy is simply an effort to keep the collective portfolio away from the law of large numbers, which eventually affects the growth rate of the biggest and most well known businesses. However, in periods of significant market volatility, our strategy can struggle on a relative basis as size and liquidity become key investment themes and investor time horizons shrink.
We saw the size theme most notably in technology where the Fund’s holdings drove the largest underperformance during the year. While the Fund was essentially equal in weight compared to the benchmark, the composition was much different. During the year, the five largest technology companies accounted for nearly 15% of the Russell 1000® Growth Index. The Fund had exposure to three of these names, Apple, Oracle and Google, but their collective weight was approximately 60% that of the benchmark.
The most difficult sectors from a relative performance standpoint were technology as discussed, as well as industrials, consumer discretionary, financial services, and energy. The more cyclical nature of many of the businesses in these sectors was challenged by the slower pace of economic growth in 2011. As a case in point, while we saw continued solid fundamental performance from the Fund’s industrial companies, concerns about the global economy pressured valuation levels in this sector. We continue to have confidence in our view that companies in the sector will produce favorable earnings growth in the coming year.
The highlight of the year was the strength in the materials sector as well as the Fund’s health care holdings. Our pursuit of less commodity-exposed businesses in the materials sector proved beneficial. We lean toward quality companies that, although impacted by the economy, are not tied to the price level of a particular commodity. Performance in health care was encouraging after a difficult 2010. Good stock selection offset the challenges of
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Baird LargeCap Fund
a slowdown in medical procedures and pressure on overall utilization of services. 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 Fund’s performance was clearly impacted by the portfolio’s positioning for more robust economic activity and the lower average market cap position relative to the target benchmark. Our focus will remain on executing our investment process and expending energy on the things we can control – identifying and investing in what we believe are good businesses, properly allocating capital across sectors and aligning position sizes to account for risk and reward for clients. We are confident that our investment process is sound and our strategy will add long-term value for clients.
Portfolio Managers:
Douglas E. Guffy
Kenneth M. Hemauer, CFA
Page 5
Baird LargeCap Fund
A December 31, 2011 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. | 5.9% | ||
Praxair, Inc. | 3.8% | ||
Danaher Corporation | 3.5% | ||
Emerson Electric Company | 3.2% | ||
Occidental Petroleum Corporation | 3.0% | ||
Cognizant Technology | |||
Solutions Corporation – Class A | 2.8% | ||
Fastenal Company | 2.8% | ||
C.H. Robinson Worldwide, Inc. | 2.8% | ||
O’Reilly Automotive, Inc. | 2.7% | ||
Core Laboratories N.V. | 2.6% | ||
Net Assets: | $20,641,186 | ||
Portfolio Turnover Rate: | 38.2% | ||
Number of Equity Holdings: | 54 | ||
Annualized Portfolio Expense Ratio:*** | |||
INSTITUTIONAL CLASS: | 0.75% | ||
INVESTOR CLASS: | 1.00% | **** | |
* | The Fund’s portfolio composition is subject to change and there is no assurance that the Fund will continue to hold any particular security. Percentages shown relate to the Fund’s total net assets as of December 31, 2011. |
** | Percentages shown in parentheses relate to the Fund’s total market value of investments as of December 31, 2011, 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, 2013. |
**** | Includes 0.25% 12b-1 fee. |
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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.
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Baird LargeCap Fund
Average Annual Total Returns
Since | ||||
For the Periods Ended December 31, 2011 | One Year | Five Years | Ten Years | Inception(1) |
Institutional Class Shares | -2.34% | 0.70% | 0.50% | -0.85% |
Investor Class Shares | -2.58% | 0.47% | 0.25% | -1.10% |
Russell 1000® Growth Index(2) | 2.64% | 2.50% | 2.60% | -1.87% |
(1) | For the period from September 29, 2000 (commencement of operations) through December 31, 2011. |
(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.
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Baird LargeCap Fund
Schedule of Investments December 31, 2011 |
Shares | Value | ||||||
COMMON STOCKS – 98.8% | |||||||
Aerospace & Defense – 2.0% | |||||||
2,475 | Precision Castparts Corp. | $ | 407,855 | ||||
Air Freight & Logistics – 2.8% | |||||||
8,282 | C.H. Robinson | ||||||
Worldwide, Inc. | 577,918 | ||||||
Auto Components – 2.3% | |||||||
15,450 | Johnson Controls, Inc. | 482,967 | |||||
Capital Markets – 2.2% | |||||||
4,816 | State Street Corporation | 194,133 | |||||
4,489 | T. Rowe Price Group, Inc. | 255,649 | |||||
449,782 | |||||||
Chemicals – 3.8% | |||||||
7,250 | Praxair, Inc. | 775,025 | |||||
Commercial Banks – 0.6% | |||||||
2,175 | PNC Financial | ||||||
Services Group, Inc. | 125,432 | ||||||
Commercial Services & Supplies – 2.1% | |||||||
5,625 | Stericycle, Inc.* | 438,300 | |||||
Communications Equipment – 3.5% | |||||||
800 | F5 Networks, Inc.* | 84,896 | |||||
5,825 | Juniper Networks, Inc.* | 118,888 | |||||
6,325 | QUALCOMM | ||||||
Incorporated | 345,977 | ||||||
7,075 | Riverbed Technology, Inc.* | 166,263 | |||||
716,024 | |||||||
Computers & Peripherals – 8.7% | |||||||
2,985 | Apple Inc.* | 1,208,925 | |||||
22,950 | EMC Corporation*@ | 494,343 | |||||
2,300 | NetApp, Inc.* | 83,421 | |||||
1,786,689 | |||||||
Electrical Equipment – 3.2% | |||||||
14,300 | Emerson | ||||||
Electric Company | 666,237 | ||||||
Electronic Equipment, Instruments | |||||||
& Components – 1.3% | |||||||
7,550 | Agilent | ||||||
Technologies, Inc.* | 263,722 | ||||||
Energy Equipment & Services – 7.1% | |||||||
4,746 | Core Laboratories N.V. f @ | 540,807 | |||||
5,250 | Oceaneering | ||||||
International, Inc. | 242,183 | ||||||
4,687 | Schlumberger Limited f @ | 320,169 | |||||
7,225 | Tidewater Inc. | 356,192 | |||||
1,459,351 | |||||||
Food & Staples Retailing – 2.6% | |||||||
7,725 | Whole Foods | ||||||
Market, Inc.@ | 537,506 | ||||||
Health Care Equipment | |||||||
& Supplies – 2.4% | |||||||
1,065 | Intuitive Surgical, Inc.* | 493,106 | |||||
Health Care Providers & Services – 2.5% | |||||||
11,625 | Express Scripts, Inc.*@ | 519,521 | |||||
Insurance – 1.2% | |||||||
5,525 | Aflac, Inc.@ | 239,012 | |||||
Internet & Catalog Retail – 1.8% | |||||||
2,183 | Amazon.com, Inc.* | 377,877 | |||||
Internet Software & Services – 4.1% | |||||||
8,050 | Akamai Technologies, Inc.* | 259,854 | |||||
718 | Baidu, Inc.* f | 83,625 | |||||
783 | Google, Inc. – Class A* | 505,740 | |||||
849,219 | |||||||
IT Services – 4.3% | |||||||
9,100 | Cognizant Technology | ||||||
Solutions Corporation – | |||||||
Class A* | 585,221 | ||||||
840 | MasterCard, Inc. – Class A | 313,169 | |||||
898,390 |
The accompanying notes are an integral part of these financial statements.
Page 9
Baird LargeCap Fund
Schedule of Investments December 31, 2011 |
Shares | Value | ||||||
COMMON STOCKS – 98.8% (cont.) | |||||||
Machinery – 6.6% | |||||||
3,850 | Caterpillar Inc. | $ | 348,810 | ||||
15,234 | Danaher Corporation | 716,607 | |||||
8,050 | PACCAR Inc. | 301,634 | |||||
1,367,051 | |||||||
Media – 1.9% | |||||||
8,975 | DIRECTV*@ | 383,771 | |||||
Metals & Mining – 0.6% | |||||||
3,375 | Freeport-McMoRan | ||||||
Copper & Gold Inc. | 124,166 | ||||||
Multiline Retail – 2.1% | |||||||
10,765 | Dollar General | ||||||
Corporation* | 442,872 | ||||||
Oil, Gas & Consumable Fuels – 7.9% | |||||||
4,000 | Continental | ||||||
Resources, Inc.*@ | 266,840 | ||||||
3,625 | Noble Energy, Inc. | 342,164 | |||||
6,572 | Occidental Petroleum | ||||||
Corporation | 615,796 | ||||||
2,925 | QEP Resources, Inc. | 85,702 | |||||
9,775 | Southwestern | ||||||
Energy Company* | 312,214 | ||||||
1,622,716 | |||||||
Pharmaceuticals – 3.9% | |||||||
6,000 | Allergan, Inc.@ | 526,440 | |||||
2,850 | Perrigo Company@ | 277,305 | |||||
803,745 | |||||||
Semiconductors & | |||||||
Semiconductor Equipment – 1.1% | |||||||
6,365 | Altera Corporation | 236,141 | |||||
Software – 6.4% | |||||||
5,225 | Citrix Systems, Inc.* | 317,262 | |||||
16,175 | Oracle Corporation | 414,889 | |||||
3,100 | Red Hat, Inc.* | 127,999 | |||||
4,460 | Salesforce.com, Inc.*@ | 452,511 | |||||
1,312,661 | |||||||
Specialty Retail – 7.0% | |||||||
14,450 | Dick’s Sporting | ||||||
Goods, Inc. | 532,916 | ||||||
7,025 | O’Reilly Automotive, Inc.* | 561,649 | |||||
2,225 | Tractor Supply Company | 156,083 | |||||
7,200 | Urban Outfitters, Inc.* | 198,432 | |||||
1,449,080 | |||||||
Trading Companies & Distributors – 2.8% | |||||||
13,269 | Fastenal Company@ | 578,661 | |||||
Total Common Stocks | |||||||
(Cost $16,083,686) | 20,384,797 | ||||||
SHORT-TERM INVESTMENTS – 1.2% | |||||||
Money Market Mutual Fund – 1.2% | |||||||
251,768 | Short-Term Investments | ||||||
Trust – Liquid Assets | |||||||
Portfolio, 0.16%« | 251,768 | ||||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $251,768) | 251,768 | ||||||
Principal | |||||||
Amount | |||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 17.9% | |||||||
Commercial Paper – 0.5% | |||||||
$ | 159,452 | Atlantic East | |||||
Funding LLC, | |||||||
0.61%, 03/25/2012†** | 99,579 | ||||||
Total Commercial Paper | |||||||
(Cost $159,452) | 99,579 |
The accompanying notes are an integral part of these financial statements.
Page 10
Baird LargeCap Fund
Schedule of Investments December 31, 2011 |
Shares | Value | ||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 17.9% (cont.) | |||||||
Investment Companies – 17.4% | |||||||
3,591,681 | Mount Vernon Securities | ||||||
Lending Trust Prime | |||||||
Portfolio, 0.23%« | $ | 3,591,681 | |||||
Total Investment | |||||||
Companies | |||||||
(Cost $3,591,681) | 3,591,681 | ||||||
Total Investments Purchased | |||||||
With Cash Proceeds From | |||||||
Securities Lending | |||||||
(Cost $3,751,133) | 3,691,260 | ||||||
Total Investments | |||||||
(Cost $20,086,587) – | |||||||
117.9% | 24,327,825 | ||||||
Asset Relating to Securities | |||||||
Lending Investments – 0.3% | |||||||
Support Agreement*a **† | 59,873 | ||||||
Total (Cost $0) | 59,873 | ||||||
Liabilities in Excess of | |||||||
Other Assets – (18.2)% | (3,746,512 | ) | |||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 20,641,186 |
Notes to Schedule of Investments
* | Non-Income Producing |
** | Illiquid Security |
@ | This security or portion of this security is out on loan at December 31, 2011. |
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. |
Industry classifications shown in the Schedule of Investments are based on the Global Industry Classification Standard (GICS®). 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
Schedule of Investments December 31, 2011 |
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, 2011:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity | ||||||||||||||||
Common Stocks | $ | 20,384,797 | $ | — | $ | — | $ | 20,384,797 | ||||||||
Total Equity | 20,384,797 | — | — | 20,384,797 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Fund | 251,768 | — | — | 251,768 | ||||||||||||
Total Short-Term Investments | 251,768 | — | — | 251,768 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 99,579 | — | 99,579 | ||||||||||||
Money Market Mutual Fund | 3,591,681 | — | — | 3,591,681 | ||||||||||||
Total Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | 3,591,681 | 99,579 | — | 3,691,260 | ||||||||||||
Total Investments* | $ | 24,228,246 | $ | 99,579 | $ | — | $ | 24,327,825 | ||||||||
Asset Relating to Securities Lending Investments | $ | — | $ | 59,873 | $ | — | $ | 59,873 |
*Additional information regarding the industry classifications of these investments is disclosed in the Schedule of Investments.
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, Level 2 and Level 3 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.
Page 12
Baird MidCap Fund
Portfolio Managers’ Commentary
For the year ended December 31, 2011, the Baird MidCap Fund Institutional Class posted a total return of 5.19% (4.93% for the Investor Class), as compared to a decline of 1.65% for the Russell MidCap® Growth Index, the MidCap Fund’s primary benchmark.
As we assess the strong relative performance for the year we note the impact of good stock picking in multiple sectors and the benefit of owning quality companies in a year characterized by periods of meaningful uncertainty. The Fund’s holdings in the energy, materials, and consumer discretionary sectors enjoyed the strongest returns during the year. The financial services and technology sectors also contributed to outperformance. Companies with strong earnings, cash flow, and superior balance sheets continued to be rewarded.
While the Fund carried a modest pro-cyclical stance during the course of 2011, sector weight remained well-balanced and in a tight range when compared to the benchmark. We deem this prudent, as we worry that the improved economic conditions of the fourth quarter may fade somewhat in the New Year. This concern is especially true for the first six months, as earnings comparisons will be more challenging and global growth, particularly in Europe, will decline further.
The Fund’s holdings of consumer discretionary stocks produced broad strength, which in our view were a reflection of solid earnings growth and the more domestic nature of the businesses. Despite persistently high unemployment, consumer spending has churned to higher levels and is now above its prior peak. Several of the Fund’s retailing stocks have grown square footage at well over 10%, and when coupled with same store sales of mid single digits, above average earnings growth is achieved. This type of financial performance was rewarded in 2011.
Of particular note was the strength from the Fund’s energy holdings, despite the fact that stock performance in this sector is closely tied to the price of the underlying commodities. The bulk of the sector is made up of businesses providing services and equipment. We believe those companies benefit from the overall strength of energy industry spending on new drilling activity, as well as upgrading and replacing equipment. The Fund also benefitted from holding an exploration and development company possessing significant acreage and production in the Marcellus shale formation in the eastern U.S.
The positive impact of the Fund’s basic materials holdings was a function of our more conservative holdings. The businesses models we focus on were not as affected by economic uncertainty as we tend to shy away from those that are tied more directly to commodity prices such as chemical, building material, and fertilizer companies. This was particularly true of our holdings in distribution companies, which benefit from higher demand for their products but are somewhat more immune from the price volatility of the underlying commodities.
Page 13
Baird MidCap Fund
The Fund’s holdings of industrial companies lagged slightly during the year. The sector remained modestly overweight in the Fund but several positions were trimmed mid-year as earnings comparisons became more difficult and the risks of a European recession became evident. We remain confident in the business models in this sector.
The more defensive nature of health care businesses and a meaningful slowdown in medical procedures as well as pressure on overall utilization of services continued as a theme during 2011. These issues negatively impacted earnings multiples and share prices. We remained underweight the sector for the majority of the year, but the Fund benefitted from the introduction of several new stocks in the areas of prescription benefit management, generic products, and biotechnology.
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 domestic economic growth we expect in 2012, with attention to particular businesses that should demonstrate better profitability and stronger growth than peers. We believe in our strategy of focusing on high quality business models and controlling risk, and we will continue to work our investment philosophy and process.
Portfolio Managers:
Kenneth M. Hemauer, CFA
Charles F. Severson, CFA
Page 14
Baird MidCap Fund
A December 31, 2011 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. | 2.9% | ||
Plantronics, Inc. | 2.5% | ||
Microchip Technology Incorporated | 2.4% | ||
Roper Industries, Inc. | 2.4% | ||
Fastenal Company | 2.3% | ||
ANSYS, Inc. | 2.3% | ||
Catalyst Health Solutions, Inc. | 2.2% | ||
Perrigo Company | 2.1% | ||
Digital Realty Trust, Inc. | 2.1% | ||
Church & Dwight Co., Inc. | 2.1% | ||
Net Assets: | $43,461,051 | ||
Portfolio Turnover Rate: | 44.8% | ||
Number of Equity Holdings: | 55 | ||
Annualized Portfolio Expense Ratio:*** | |||
INSTITUTIONAL CLASS: | 0.85% | ||
INVESTOR CLASS: | 1.10% | **** | |
* | The Fund’s portfolio composition is subject to change and there is no assurance that the Fund will continue to hold any particular security. Percentages shown relate to the Fund’s total net assets as of December 31, 2011. |
** | Percentages shown in parentheses relate to the Fund’s total market value of investments as of December 31, 2011, 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, 2013. |
**** | Includes 0.25% 12b-1 fee. |
Page 15
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 16
Baird MidCap Fund
Average Annual Total Returns
Since | ||||
For the Periods Ended December 31, 2011 | One Year | Five Years | Ten Years | Inception(1) |
Institutional Class Shares | 5.19% | 5.89% | 5.77% | 4.34% |
Investor Class Shares | 4.93% | 5.64% | 5.53% | 4.10% |
Russell Midcap® Growth Index(2) | -1.65% | 2.44% | 5.29% | 2.43% |
(1) | For the period from December 29, 2000 (commencement of operations) through December 31, 2011. |
(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 17
Baird MidCap Fund
Schedule of Investments December 31, 2011 |
Shares | Value | ||||||
COMMON STOCKS – 93.6% | |||||||
Auto Components – 1.8% | |||||||
25,805 | Gentex Corporation | $ | 763,570 | ||||
Automobiles – 1.7% | |||||||
18,995 | Harley-Davidson, Inc.@ | 738,336 | |||||
Biotechnology – 1.5% | |||||||
8,898 | Alexion | ||||||
Pharmaceuticals, Inc.* | 636,207 | ||||||
Capital Markets – 3.9% | |||||||
4,595 | Affiliated Managers | ||||||
Group, Inc.* | 440,890 | ||||||
13,493 | Greenhill & Co., Inc.@ | 490,740 | |||||
37,805 | Invesco Limited f | 759,503 | |||||
1,691,133 | |||||||
Chemicals – 3.5% | |||||||
10,670 | Airgas, Inc. | 833,114 | |||||
12,350 | Ecolab, Inc.@ | 713,953 | |||||
1,547,067 | |||||||
Commercial Banks – 1.0% | |||||||
21,900 | East West Bancorp, Inc. | 432,525 | |||||
Commercial Services & Supplies – 1.7% | |||||||
9,385 | Stericycle, Inc.* | 731,279 | |||||
Communications Equipment – 3.7% | |||||||
30,140 | Plantronics, Inc. | 1,074,190 | |||||
22,565 | Riverbed Technology, Inc.* | 530,277 | |||||
1,604,467 | |||||||
Containers & Packaging – 1.8% | |||||||
14,707 | AptarGroup, Inc. | 767,264 | |||||
Electrical Equipment – 3.8% | |||||||
8,395 | Rockwell Automation, Inc. | 615,941 | |||||
11,837 | Roper Industries, Inc. | 1,028,280 | |||||
1,644,221 | |||||||
Electronic Equipment, Instruments | |||||||
& Components – 4.6% | |||||||
21,345 | Agilent Technologies, Inc.* | 745,581 | |||||
23,010 | Plexus Corp.* | 630,014 | |||||
14,900 | Trimble | ||||||
Navigation Limited* | 646,660 | ||||||
2,022,255 | |||||||
Energy Equipment & Services – 7.7% | |||||||
6,780 | Core Laboratories N.V. f @ | 772,581 | |||||
16,870 | Dresser-Rand Group, Inc.* | 841,982 | |||||
26,911 | Oceaneering | ||||||
International, Inc.@ | 1,241,404 | ||||||
16,345 | Rowan Companies, Inc.* | 495,744 | |||||
3,351,711 | |||||||
Food Products – 1.9% | |||||||
16,412 | McCormick & | ||||||
Co, Incorporated | 827,493 | ||||||
Health Care Providers & Services – 2.2% | |||||||
18,115 | Catalyst Health | ||||||
Solutions, Inc.* | 941,980 | ||||||
Health Care Technology – 0.9% | |||||||
6,650 | Cerner Corporation* | 407,312 | |||||
Hotels Restaurants & Leisure – 3.6% | |||||||
12,658 | Buffalo Wild Wings Inc.*@ | 854,542 | |||||
38,750 | InterContinental | ||||||
Hotels Group PLC ADR f | 697,112 | ||||||
1,551,654 | |||||||
Household Products – 2.1% | |||||||
19,676 | Church & Dwight | ||||||
Co., Inc.@ | 900,374 | ||||||
IT Services – 3.6% | |||||||
7,935 | Alliance Data Systems | ||||||
Corporation*@ | 823,970 | ||||||
15,060 | Teradata Corporation*@ | 730,561 | |||||
1,554,531 | |||||||
Life Sciences Tools & Services – 1.3% | |||||||
32,681 | ICON PLC – ADR* f | 559,172 |
The accompanying notes are an integral part of these financial statements.
Page 18
Baird MidCap Fund
Schedule of Investments December 31, 2011 |
Shares | Value | ||||||
COMMON STOCKS – 93.6% (cont.) | |||||||
Machinery – 4.9% | |||||||
27,985 | Actuant Corporation@ | $ | 634,980 | ||||
6,680 | Joy Global Inc. | 500,799 | |||||
6,410 | Navistar International | ||||||
Corporation* | 242,811 | ||||||
17,085 | WABCO Holdings Inc.* | 741,489 | |||||
2,120,079 | |||||||
Multiline Retail – 1.8% | |||||||
19,195 | Dollar General | ||||||
Corporation* | 789,682 | ||||||
Office Electronics – 1.8% | |||||||
21,535 | Zebra Technologies | ||||||
Corporation* | 770,522 | ||||||
Oil, Gas & Consumable Fuels – 3.1% | |||||||
11,065 | Cabot Oil & | ||||||
Gas Corporation | 839,834 | ||||||
10,635 | Whiting Petroleum | ||||||
Corporation* | 496,548 | ||||||
1,336,382 | |||||||
Pharmaceuticals – 2.1% | |||||||
9,660 | Perrigo Company@ | 939,918 | |||||
Professional Services – 1.1% | |||||||
13,010 | Manpower Inc. | 465,107 | |||||
Real Estate Investment | |||||||
Trust (REIT) – 2.1% | |||||||
13,565 | Digital Realty Trust, Inc.@ | 904,379 | |||||
Road & Rail – 1.8% | |||||||
17,070 | J.B. Hunt Transport | ||||||
Services, Inc. | 769,345 | ||||||
Semiconductors & | |||||||
Semiconductor Equipment – 4.2% | |||||||
21,250 | Altera Corporation | 788,375 | |||||
28,863 | Microchip Technology | ||||||
Incorporated@ | 1,057,252 | ||||||
1,845,627 | |||||||
Software – 4.1% | |||||||
17,300 | ANSYS, Inc.* | 990,944 | |||||
12,885 | Citrix Systems, Inc.* | 782,377 | |||||
1,773,321 | |||||||
Specialty Retail – 9.2% | |||||||
23,111 | Dick’s Sporting | ||||||
Goods, Inc. | 852,334 | ||||||
10,865 | O’Reilly Automotive, Inc.* | 868,657 | |||||
10,846 | Tractor Supply Company | 760,847 | |||||
12,500 | Ulta Salon, Cosmetics | ||||||
& Fragrance, Inc.* | 811,500 | ||||||
25,794 | Urban Outfitters, Inc.* | 710,882 | |||||
4,004,220 | |||||||
Textiles, Apparel & Luxury Goods – 0.8% | |||||||
5,145 | Under Armour, | ||||||
Inc. – Class A* | 369,360 | ||||||
Trading Companies & Distributors – 4.3% | |||||||
22,917 | Fastenal Company@ | 999,410 | |||||
13,615 | Watsco, Inc.@ | 893,961 | |||||
1,893,371 | |||||||
Total Common Stocks | |||||||
(Cost $33,051,687) | 40,653,864 | ||||||
SHORT-TERM INVESTMENTS – 6.2% | |||||||
Money Market Mutual Funds – 6.2% | |||||||
1,895,725 | Dreyfus Institutional | ||||||
Cash Advantage | |||||||
Fund, 0.06%« | 1,895,725 | ||||||
800,000 | Short-Term Investments | ||||||
Trust – Liquid Assets | |||||||
Portfolio, 0.16%« | 800,000 | ||||||
Total Short-Term | |||||||
Investments | |||||||
(Cost $2,695,725) | 2,695,725 |
The accompanying notes are an integral part of these financial statements.
Page 19
Baird MidCap Fund
Schedule of Investments December 31, 2011 |
Principal | |||||||
Amount | Value | ||||||
INVESTMENTS PURCHASED | |||||||
WITH CASH PROCEEDS FROM | |||||||
SECURITIES LENDING – 17.0% | |||||||
Commercial Paper – 0.3% | |||||||
$ | 224,461 | Atlantic East | |||||
Funding LLC, | |||||||
0.61%, 03/25/2012†** | $ | 140,178 | |||||
Total Commercial Paper | |||||||
(Cost $224,461) | 140,178 | ||||||
Shares | |||||||
Investment Companies – 16.7% | |||||||
7,260,199 | Mount Vernon Securities | ||||||
Lending Trust Prime | |||||||
Portfolio, 0.23%« | 7,260,199 | ||||||
Total Investment | |||||||
Companies | |||||||
(Cost $7,260,199) | 7,260,199 | ||||||
Total Investments Purchased | |||||||
With Cash Proceeds From | |||||||
Securities Lending | |||||||
(Cost $7,484,660) | 7,400,377 | ||||||
Total Investments | |||||||
(Cost $43,232,072) – | |||||||
116.8% | 50,749,966 | ||||||
Asset Relating to Securities | |||||||
Lending Investments – 0.2% | |||||||
Support Agreement*a **† | 84,283 | ||||||
Total (Cost $0) | 84,283 | ||||||
Liabilities in Excess of | |||||||
Other Assets – (17.0)% | (7,373,198 | ) | |||||
TOTAL NET | |||||||
ASSETS – 100.0% | $ | 43,461,051 |
Notes to Schedule of Investments
ADR American Depository Receipt
* | Non-Income Producing |
** | Illiquid Security |
@ | This security or portion of this security is out on loan at December 31, 2011. |
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. |
Industry classifications shown in the Schedule of Investments are based on the Global Industry Classification Standard (GICS®). 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 20
Baird MidCap Fund
Summary of Fair Value Exposure at December 31, 2011 |
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, 2011:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity | ||||||||||||||||
Common Stocks | $ | 40,653,864 | $ | — | $ | — | $ | 40,653,864 | ||||||||
Total Equity | 40,653,864 | — | — | 40,653,864 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Money Market Mutual Funds | 2,695,725 | — | — | 2,695,725 | ||||||||||||
Total Short-Term Investments | 2,695,725 | — | — | 2,695,725 | ||||||||||||
Investments Purchased with Cash | ||||||||||||||||
Proceeds from Securities Lending | ||||||||||||||||
Commercial Paper | — | 140,178 | — | 140,178 | ||||||||||||
Money Market Mutual Fund | 7,260,199 | — | — | 7,260,199 | ||||||||||||
Total Investments Purchased with | ||||||||||||||||
Cash Proceeds from Securities Lending | 7,260,199 | 140,178 | — | 7,400,377 | ||||||||||||
Total Investments* | $ | 50,609,788 | $ | 140,178 | $ | — | $ | 50,749,966 | ||||||||
Asset Relating to Securities Lending Investments | $ | — | $ | 84,283 | $ | — | $ | 84,283 |
*Additional information regarding the industry classifications of these investments is disclosed in the Schedule of Investments.
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, Level 2 and Level 3 fair value measurements during the reporting period, as compared to their classification from the prior year’s annual report.
Page 21
Baird Funds, Inc.
Additional Information on Fund Expenses December 31, 2011 |
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 (7/1/11 – 12/31/11).
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 22
Baird Funds, Inc.
Additional Information on Fund Expenses December 31, 2011 |
Actual vs. Hypothetical Returns
For the Six Months Ended December 31, 2011
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) | 7/1/11 | 12/31/11 | Period(1) | 12/31/11 | Period(1) | ||||||
Baird LargeCap Fund | |||||||||||
Institutional Class | 0.75% | $1,000.00 | $931.80 | $3.65 | $1,021.42 | $3.82 | |||||
Investor Class | 1.00% | $1,000.00 | $930.30 | $4.87 | $1,020.16 | $5.09 | |||||
Baird MidCap Fund | |||||||||||
Institutional Class | 0.85% | $1,000.00 | $953.10 | $4.18 | $1,020.92 | $4.33 | |||||
Investor Class | 1.10% | $1,000.00 | $951.80 | $5.41 | $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 23
Baird Funds, Inc.
Statements of Assets and Liabilities December 31, 2011 |
Baird | Baird | |||||||
LargeCap Fund | MidCap Fund | |||||||
ASSETS: | ||||||||
Investments, at value (cost $20,086,587 and $43,232,072, respectively)* | $ | 24,327,825 | $ | 50,749,966 | ||||
Support Agreement (Note 6) | 59,873 | 84,283 | ||||||
Dividends receivable | 19,816 | 20,196 | ||||||
Interest receivable | 31 | 176 | ||||||
Receivable for investments sold | 105,963 | — | ||||||
Receivable for fund shares sold | 13,262 | 139,627 | ||||||
Uninvested cash | 249 | 503 | ||||||
Prepaid expenses | 10,015 | 10,483 | ||||||
Total assets | 24,537,034 | 51,005,234 | ||||||
LIABILITIES: | ||||||||
Payable for collateral received for securities loaned (Note 6) | 3,751,382 | 7,485,163 | ||||||
Payable for securities purchased | 103,493 | — | ||||||
Payable to Advisor and Distributor | 1,622 | 16,503 | ||||||
Accrued expenses and other liabilities | 39,351 | 42,517 | ||||||
Total liabilities | 3,895,848 | 7,544,183 | ||||||
NET ASSETS | $ | 20,641,186 | $ | 43,461,051 | ||||
NET ASSETS CONSIST OF: | ||||||||
Capital stock | $ | 19,776,446 | $ | 35,822,291 | ||||
Accumulated undistributed net investment income | 53 | — | ||||||
Accumulated net realized gain (loss) on investments sold | (3,436,424 | ) | 36,583 | |||||
Net unrealized appreciation on investments and support agreement | 4,301,111 | 7,602,177 | ||||||
NET ASSETS | $ | 20,641,186 | $ | 43,461,051 | ||||
INSTITUTIONAL CLASS SHARES | ||||||||
Net Assets | $ | 20,485,829 | $ | 40,880,008 | ||||
Shares outstanding ($0.01 par value, unlimited shares authorized) | 2,351,402 | 4,097,047 | ||||||
Net asset value, offering and redemption price per share | $ | 8.71 | $ | 9.98 | ||||
INVESTOR CLASS SHARES | ||||||||
Net Assets | $ | 155,357 | $ | 2,581,043 | ||||
Shares outstanding ($0.01 par value, unlimited shares authorized) | 17,896 | 267,314 | ||||||
Net asset value, offering and redemption price per share | $ | 8.68 | $ | 9.66 |
*Includes securities out on loan to brokers with a market value of $3,611,399 and $7,212,293, respectively.
The accompanying notes are an integral part of these financial statements.
Page 24
Baird Funds, Inc.
Statements of Operations Year Ended December 31, 2011 |
Baird | Baird | |||||||
LargeCap Fund | MidCap Fund | |||||||
INVESTMENT INCOME: | ||||||||
Dividends (net of foreign taxes or issuance fees | ||||||||
withheld of $1,041 and $1,448, respectively) | $ | 189,408 | $ | 272,833 | ||||
Income from securities lending (Note 6) | 6,425 | 12,488 | ||||||
Interest | 604 | 1,888 | ||||||
Other income | — | 54 | ||||||
Total investment income | 196,437 | 287,263 | ||||||
EXPENSES: | ||||||||
Investment advisory fees | 146,615 | 286,318 | ||||||
Administration fees | 4,059 | 6,699 | ||||||
Shareholder servicing fees | 15,330 | 18,670 | ||||||
Fund accounting fees | 22,165 | 23,604 | ||||||
Professional fees | 29,195 | 29,195 | ||||||
Federal and state registration | 37,272 | 38,195 | ||||||
Directors fees | 43,795 | 43,795 | ||||||
Custody fees | 2,077 | 6,627 | ||||||
Reports to shareholders | 4,147 | 6,756 | ||||||
Distribution fees – Investor Class Shares (Note 8) | 396 | 3,543 | ||||||
Miscellaneous expenses | 780 | 930 | ||||||
Total expenses | 305,831 | 464,332 | ||||||
Expense reimbursement by Advisor (Note 5) | (136,264 | ) | (136,295 | ) | ||||
Total expenses | 169,567 | 328,037 | ||||||
NET INVESTMENT INCOME (LOSS) | 26,870 | (40,774 | ) | |||||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | ||||||||
Net realized gain on investments | 1,579,463 | 3,717,798 | ||||||
Change in unrealized appreciation/depreciation on investments | ||||||||
and support agreement | (2,097,553 | ) | (1,766,260 | ) | ||||
Net realized and unrealized gain (loss) on investments | (518,090 | ) | 1,951,538 | |||||
NET INCREASE (DECREASE) IN NET ASSETS | ||||||||
RESULTING FROM OPERATIONS | $ | (491,220 | ) | $ | 1,910,764 |
The accompanying notes are an integral part of these financial statements.
Page 25
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird LargeCap Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2011 | December 31, 2010 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 26,870 | $ | 27,834 | ||||
Net realized gain on investments | 1,579,463 | 541,152 | ||||||
Change in unrealized appreciation/depreciation | ||||||||
on investments and support agreement | (2,097,553 | ) | 3,040,877 | |||||
Net increase (decrease) in net assets from operations | (491,220 | ) | 3,609,863 | |||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 2,788,450 | 1,834,410 | ||||||
Shares issued to holders in reinvestment of dividends | 26,756 | 19,011 | ||||||
Cost of shares redeemed | (5,196,123 | ) | (2,992,605 | ) | ||||
Net decrease in net assets resulting | ||||||||
from capital share transactions | (2,380,917 | ) | (1,139,184 | ) | ||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net investment income | (26,841 | ) | (19,202 | ) | ||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | (2,898,978 | ) | 2,451,477 | |||||
NET ASSETS: | ||||||||
Beginning of year | 23,540,164 | 21,088,687 | ||||||
End of year (including undistributed | ||||||||
net investment income of $53 and $27, respectively) | $ | 20,641,186 | $ | 23,540,164 |
The accompanying notes are an integral part of these financial statements.
Page 26
Baird Funds, Inc.
Statements of Changes in Net Assets |
Baird MidCap Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, 2011 | December 31, 2010 | |||||||
OPERATIONS: | ||||||||
Net investment loss | $ | (40,774 | ) | $ | (32,176 | ) | ||
Net realized gain on investments | 3,717,798 | 2,878,157 | ||||||
Change in unrealized appreciation/depreciation | ||||||||
on investments and support agreement | (1,766,260 | ) | 4,470,072 | |||||
Net increase in net assets from operations | 1,910,764 | 7,316,053 | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from shares sold | 11,352,599 | 4,145,696 | ||||||
Shares issued to holders in reinvestment of dividends | 2,310,237 | — | ||||||
Cost of shares redeemed | (4,282,939 | ) | (4,001,060 | ) | ||||
Net increase in net assets resulting | ||||||||
from capital share transactions | 9,379,897 | 144,636 | ||||||
DISTRIBUTIONS TO | ||||||||
INSTITUTIONAL CLASS SHAREHOLDERS: | ||||||||
From net realized gains | (2,240,606 | ) | — | |||||
DISTRIBUTIONS TO | ||||||||
INVESTOR CLASS SHAREHOLDERS: | ||||||||
From net realized gains | (140,127 | ) | — | |||||
TOTAL INCREASE IN NET ASSETS | 8,909,928 | 7,460,689 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 34,551,123 | 27,090,434 | ||||||
End of year (including undistributed net investment | ||||||||
income of $0 and $0, respectively) | $ | 43,461,051 | $ | 34,551,123 |
The accompanying notes are an integral part of these financial statements.
Page 27
Baird Funds, Inc.
Financial Highlights |
Baird LargeCap Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 8.93 | $ | 7.57 | $ | 5.59 | $ | 9.33 | $ | 8.53 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.01 | 0.01 | 0.03 | 0.03 | 0.02 | |||||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | (0.22 | ) | 1.36 | 1.98 | (3.74 | ) | 0.80 | |||||||||||||
Total from investment operations | (0.21 | ) | 1.37 | 2.01 | (3.71 | ) | 0.82 | |||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.01 | ) | (0.01 | ) | (0.03 | ) | (0.03 | ) | (0.02 | ) | ||||||||||
Net asset value, end of year | $ | 8.71 | $ | 8.93 | $ | 7.57 | $ | 5.59 | $ | 9.33 | ||||||||||
Total return | (2.34 | %) | 18.06 | % | 36.27 | % | (39.88 | %) | 9.63 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 20,485,829 | $ | 23,399,325 | $ | 20,741,302 | $ | 16,349,025 | $ | 27,644,009 | ||||||||||
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) | 1.35 | % | 1.40 | % | 1.39 | % | 1.17 | % | 1.10 | % | ||||||||||
Ratio of net investment income | ||||||||||||||||||||
to average net assets | 0.12 | % | 0.14 | % | 0.46 | % | 0.32 | % | 0.25 | % | ||||||||||
Ratio of net investment loss | ||||||||||||||||||||
to average net assets (before waivers) | (0.48 | %) | (0.51 | %) | (0.18 | %) | (0.10 | %) | (0.10 | %) | ||||||||||
Portfolio turnover rate(1) | 38.2 | % | 52.0 | % | 58.7 | % | 43.0 | % | 72.2 | % |
(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 28
Baird Funds, Inc.
Financial Highlights |
Baird LargeCap Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 8.91 | $ | 7.56 | $ | 5.59 | $ | 9.29 | $ | 8.50 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.01 | ) | (0.02 | ) | 0.02 | 0.00 | (1) | 0.00 | (1) | |||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | (0.22 | ) | 1.37 | 1.97 | (3.70 | ) | 0.79 | |||||||||||||
Total from investment operations | (0.23 | ) | 1.35 | 1.99 | (3.70 | ) | 0.79 | |||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | — | — | (0.02 | ) | — | — | ||||||||||||||
Net asset value, end of year | $ | 8.68 | $ | 8.91 | $ | 7.56 | $ | 5.59 | $ | 9.29 | ||||||||||
Total return | (2.58 | %) | 17.86 | % | 35.79 | % | (39.94 | %) | 9.29 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 155,357 | $ | 140,839 | $ | 347,385 | $ | 261,198 | $ | 740,779 | ||||||||||
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) | 1.60 | % | 1.65 | % | 1.64 | % | 1.42 | % | 1.35 | % | ||||||||||
Ratio of net investment income (loss) | ||||||||||||||||||||
to average net assets | (0.13 | %) | (0.11 | %) | 0.21 | % | 0.07 | % | 0.00 | % | ||||||||||
Ratio of net investment loss | ||||||||||||||||||||
to average net assets (before waivers) | (0.73 | %) | (0.76 | %) | (0.43 | %) | (0.35 | %) | (0.35 | %) | ||||||||||
Portfolio turnover rate(2) | 38.2 | % | 52.0 | % | 58.7 | % | 43.0 | % | 72.2 | % |
(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 29
Baird Funds, Inc.
Financial Highlights |
Baird MidCap Fund – Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 10.04 | $ | 7.90 | $ | 5.63 | $ | 9.62 | $ | 9.33 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss)(1) | (0.01 | ) | (0.01 | ) | 0.02 | 0.01 | (0.01 | ) | ||||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.54 | 2.15 | 2.27 | (3.99 | ) | 1.99 | ||||||||||||||
Total from investment operations | 0.53 | 2.14 | 2.29 | (3.98 | ) | 1.98 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | — | — | (0.02 | ) | (0.01 | ) | — | |||||||||||||
Distributions from net realized gains | (0.59 | ) | — | — | — | (1.69 | ) | |||||||||||||
Total distributions | (0.59 | ) | — | (0.02 | ) | (0.01 | ) | (1.69 | ) | |||||||||||
Net asset value, end of year | $ | 9.98 | $ | 10.04 | $ | 7.90 | $ | 5.63 | $ | 9.62 | ||||||||||
Total return | 5.19 | % | 27.09 | % | 40.90 | % | (41.53 | %) | 20.89 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 40,880,008 | $ | 33,432,268 | $ | 25,513,554 | $ | 18,163,034 | $ | 36,616,547 | ||||||||||
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) | 1.21 | % | 1.30 | % | 1.34 | % | 1.19 | % | 1.11 | % | ||||||||||
Ratio of net investment income (loss) | ||||||||||||||||||||
to average net assets | (0.10 | %) | (0.10 | %) | 0.25 | % | 0.06 | % | (0.06 | %) | ||||||||||
Ratio of net investment loss | ||||||||||||||||||||
to average net assets (before waivers) | (0.46 | %) | (0.55 | %) | (0.24 | %) | (0.28 | %) | (0.32 | %) | ||||||||||
Portfolio turnover rate(2) | 44.8 | % | 62.7 | % | 61.3 | % | 74.0 | % | 72.3 | % |
(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 30
Baird Funds, Inc.
Financial Highlights |
Baird MidCap Fund – Investor Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net asset value, beginning of year | $ | 9.76 | $ | 7.69 | $ | 5.49 | $ | 9.40 | $ | 9.17 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss)(1) | (0.03 | ) | (0.03 | ) | 0.00 | (2) | (0.02 | ) | (0.04 | ) | ||||||||||
Net realized and unrealized | ||||||||||||||||||||
gains (losses) on investments | 0.52 | 2.10 | 2.21 | (3.89 | ) | 1.96 | ||||||||||||||
Total from investment operations | 0.49 | 2.07 | 2.21 | (3.91 | ) | 1.92 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | — | — | (0.01 | ) | — | — | ||||||||||||||
Distributions from net realized gains | (0.59 | ) | — | — | — | (1.69 | ) | |||||||||||||
Total distributions | (0.59 | ) | — | (0.01 | ) | — | (1.69 | ) | ||||||||||||
Net asset value, end of year | $ | 9.66 | $ | 9.76 | $ | 7.69 | $ | 5.49 | $ | 9.40 | ||||||||||
Total return | 4.93 | % | 26.92 | % | 40.52 | % | (41.70 | %) | 20.61 | % | ||||||||||
Supplemental data and ratios: | ||||||||||||||||||||
Net assets, end of year | $ | 2,581,043 | $ | 1,118,855 | $ | 1,576,880 | $ | 1,563,786 | $ | 4,783,844 | ||||||||||
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) | 1.46 | % | 1.55 | % | 1.59 | % | 1.44 | % | 1.36 | % | ||||||||||
Ratio of net investment income (loss) | ||||||||||||||||||||
to average net assets | (0.35 | %) | (0.35 | %) | 0.00 | % | (0.19 | %) | (0.31 | %) | ||||||||||
Ratio of net investment loss | ||||||||||||||||||||
to average net assets (before waivers) | (0.71 | %) | (0.80 | %) | (0.49 | %) | (0.53 | %) | (0.57 | %) | ||||||||||
Portfolio turnover rate(3) | 44.8 | % | 62.7 | % | 61.3 | % | 74.0 | % | 72.3 | % |
(1) | Calculated using average shares outstanding during the year. |
(2) | Amount is less than $0.005. |
(3) | Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. |
The accompanying notes are an integral part of these financial statements.
Page 31
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
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 of 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, 2011, shareholders affiliated with the Advisor held 84% of the Institutional Class shares of the Baird LargeCap Fund and 36% 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 net asset value, 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, Interactive Data Corporation (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 (4:00 p.m. EST).
Page 32
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
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 May 2011, the FASB issued ASU No. 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and the International Financial Reporting Standards (“IFRS”)” (ASU 2011-04). ASU 2011-04 amends FASB ASC Topic 820, Fair Value Measurements and Disclosures, to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and IFRS. ASU No. 2011-04 is effective for fiscal years beginning after December 15, 2011 and for interim periods within those fiscal years. Management is currently evaluating the impact these amendments may have on the Fund’s financial statements.
b)Foreign Securities – Foreign securities are defined as securities issued by companies that are organized outside the United States. Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in U.S. companies and the U.S. government. These risks include foreign currency fluctuations and adverse political and economic developments. Moreover, securities of many foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies and the U.S. government. Occasionally, events that affect those values and exchange rates may occur after the close of the exchange on which such securities are traded. If such events materially affect the value of a Fund’s securities, these securities may be valued at their fair value pursuant to procedures adopted
Page 33
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
2.SIGNIFICANT ACCOUNTING POLICIES (cont.)
by the Board of Directors. All of the foreign securities owned by the Funds as of December 31, 2011 are traded directly on the New York Stock Exchange or NASDAQ or through an American Depository Receipt (ADR).
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, 2011, or for any other tax years which are open for exam. As of December 31, 2011, open tax years include the tax years ended December 31, 2008 through 2011. 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 the 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 34
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
3.CAPITAL SHARE TRANSACTIONS
The following table summarizes the capital share transactions of each Fund for the past two fiscal years:
BAIRD LARGECAP FUND | ||||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2011 | December 31, 2011 | |||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | |||||||||||||
Shares sold | 310,586 | $ | 2,768,012 | Shares sold | 2,275 | $ | 20,438 | |||||||||||
Shares issued to | ||||||||||||||||||
shareholders in | ||||||||||||||||||
reinvestment of dividends | 3,047 | 26,756 | ||||||||||||||||
Shares redeemed | (581,336 | ) | (5,194,653 | ) | Shares redeemed | (180 | ) | (1,470 | ) | |||||||||
Net decrease | (267,703 | ) | $ | (2,399,885 | ) | Net increase | 2,095 | $ | 18,968 | |||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 2,619,105 | Beginning of year | 15,801 | |||||||||||||||
End of year | 2,351,402 | End of year | 17,896 | |||||||||||||||
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 | ||||||||||||||||||
shareholders in | ||||||||||||||||||
reinvestment of dividends | 2,124 | 19,011 | ||||||||||||||||
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 |
Page 35
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
3.CAPITAL SHARE TRANSACTIONS (cont.)
BAIRD MIDCAP FUND | ||||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||
December 31, 2011 | December 31, 2011 | |||||||||||||||||
Institutional Class Shares | Shares | Amount | Investor Class Shares | Shares | Amount | |||||||||||||
Shares sold | 918,529 | $ | 9,487,425 | Shares sold | 187,694 | $ | 1,865,174 | |||||||||||
Shares issued to | Shares issued to | |||||||||||||||||
shareholders in | shareholders in | |||||||||||||||||
reinvestment of dividends | 214,890 | 2,170,393 | reinvestment of dividends | 14,314 | 139,844 | |||||||||||||
Shares redeemed | (364,653 | ) | (3,784,255 | ) | Shares redeemed | (49,311 | ) | (498,684 | ) | |||||||||
Net increase | 768,766 | $ | 7,873,563 | Net increase | 152,697 | $ | 1,506,334 | |||||||||||
Shares Outstanding: | Shares Outstanding: | |||||||||||||||||
Beginning of year | 3,328,281 | Beginning of year | 114,617 | |||||||||||||||
End of year | 4,097,047 | End of year | 267,314 | |||||||||||||||
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 |
Page 36
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
4.INVESTMENT TRANSACTIONS AND INCOME TAX INFORMATION
During the year ended December 31, 2011, purchases and sales of investment securities (excluding short-term investments) were as follows:
Baird | Baird | |||||||
LargeCap Fund | MidCap Fund | |||||||
Purchases: | $ | 8,521,303 | $ | 21,761,518 | ||||
Sales: | $ | 10,301,876 | $ | 16,629,744 |
The Baird LargeCap Fund and Baird MidCap Fund did not purchase or sell U.S. Government securities during the year ended December 31, 2011.
At December 31, 2011, accumulated earnings/losses on a tax basis were as follows:
Baird | Baird | |||||||
LargeCap | MidCap | |||||||
Fund | Fund | |||||||
Cost of Investments | $ | 20,098,494 | $ | 43,364,740 | ||||
Gross unrealized appreciation | $ | 5,071,705 | $ | 9,447,340 | ||||
Gross unrealized depreciation | (782,501 | ) | (1,977,831 | ) | ||||
Net unrealized appreciation | $ | 4,289,204 | $ | 7,469,509 | ||||
Undistributed ordinary income | $ | 53 | $ | — | ||||
Undistributed long-term capital gain | — | 169,251 | ||||||
Total distributable earnings | $ | 53 | $ | 169,251 | ||||
Other accumulated losses | $ | (3,424,517 | ) | $ | — | |||
Total accumulated earnings | $ | 864,740 | $ | 7,638,760 |
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, 2011, the following table shows the reclassification made:
Undistributed | Accumulated | |||||||||||||
Net Investment | Net Realized | |||||||||||||
Income/(Loss) | Gain/(Loss) | Paid In Capital | ||||||||||||
Baird LargeCap Fund | $ | (3 | ) | $ | 3 | $ | — | |||||||
Baird MidCap Fund | 40,774 | — | (40,774 | ) |
Page 37
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
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, 2011, the Baird LargeCap Fund and Baird MidCap Fund did not defer any capital losses occurring between November 1, 2011 and December 31, 2011.
At December 31, 2011, 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 | $ | 407,235 | 2016 | |||||
3,017,282 | 2017 |
To the extent the Fund realizes future net capital gains, those gains will be offset by any unused capital loss carryovers. During the year ended December 31, 2011, the Baird LargeCap Fund and the Baird MidCap Fund utilized capital loss carryovers of $1,538,929 and $1,264,942, respectively.
RIC Modernization Act
On December 22, 2010, the Regulated Investment Modernization Act of 2010 (the “RIC Act”) was enacted, and the provisions within the RIC Act are effective for the Funds for the year ended December 31, 2011. The RIC Act modernized several of the federal income and excise tax provisions related to regulated investments companies (“RICs”). Under the RIC Act, new capital losses may be carried forward indefinitely with the character of the original loss retained. Prior to the RIC Act, capital losses could be carried forward for eight years, and were carried forward as short-term capital losses regardless of the character of the original loss. 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 repeals 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 RIC during the portion of its taxable year ending after October 31 or December 31.
During the year ended December 31, 2011, the Funds paid the following dividends:
Ordinary Income Dividends | Net Capital Gain | ||||||||
Baird LargeCap Fund | $ | 26,841 | $ | — | |||||
Baird MidCap Fund | — | 2,380,733 |
During the year ended December 31, 2010, the Funds paid the following dividends:
Ordinary Income Dividends | |||||
Baird LargeCap Fund | $ | 19,202 | |||
Baird MidCap Fund | — |
Page 38
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
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, 2011 and through April 30, 2013, 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, | |||
2011 | 2010 | 2009 | |
Reimbursed / Absorbed Expenses Subject | |||
to Recovery by Advisor Until: | 2014 | 2013 | 2012 |
Baird LargeCap Fund | $136,264 | $136,939 | $118,040 |
Baird MidCap Fund | $136,295 | $133,302 | $110,382 |
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, 2011.
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 39
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
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, 2011, 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, 2011, 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 | $3,611,399 | $3,751,382 |
Baird MidCap Fund | $7,212,293 | $7,485,163 |
The Funds receive cash as collateral in return for securities lent as part of the 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, 2011.
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, 2011, 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, 2011 for the Baird LargeCap Fund and Baird MidCap Fund was $6,425 and $12,488, respectively.
Page 40
Baird Funds, Inc.
Notes to the Financial Statements December 31, 2011 |
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 2011). For the year ended December 31, 2011, the Baird LargeCap Fund and 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 of 0.25% of the average daily net assets of the Funds’ Investor Class Shares. The Baird LargeCap Fund and Baird MidCap Fund incurred $396 and $3,543, respectively, in fees pursuant to the Plan during the year ended December 31, 2011.
9.SUBSEQUENT EVENT
In preparing these financial statements, the Corporation has evaluated subsequent events after December 31, 2011. There were no subsequent events since December 31, 2011 that would require adjustment to or additional disclosure in these financial statements.
Page 41
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, 2011, 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, 2011, 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, 2011, 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.
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Chicago, Illinois
February 28, 2012
Page 42
Baird Funds, Inc.
Directors & Officers as of December 31, 2011 |
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: 72 | |||||||
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) | |||||
Madison, WI 53726 | (1967-1980) | ||||||
Age: 69 | |||||||
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: 72 | 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: 58 | (1976-1978) | ||||||
Cory L. Nettles* | Interested | Indefinite; | Managing Director, Generation Growth Capital, Inc., | 7 | Director of Weyco | ||
Generation Growth Capital, Inc. | Director | Since January | a private equity fund, since March 2007; Of Counsel, | Group, Inc., a men’s | |||
411 East Wisconsin Avenue, | 2008 | Quarles & Brady LLP, a law firm, since January 2005; | footwear distributor | ||||
Suite 1710 | Secretary, Wisconsin Department of Commerce | ||||||
Milwaukee, WI 53202 | (January 2003 – January 2005) | ||||||
Age: 41 |
* | Mr. Nettles is considered 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. Mr. Nettles also serves as a senior advisor to Baird Private Equity, a division of the Advisor. |
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 43
Baird Funds, Inc.
Directors & Officers as of December 31, 2011 |
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: 55 | 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: 58 | 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: 49 | 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: 40 | August 2010 | ||||
Dominick P. Zarcone | Treasurer | Re-elected by | Chief Financial Officer, the Advisor since March 2011; Chief Operating Officer-Investment | ||
777 East Wisconsin Avenue | Board annually; | Banking, the Advisor (June 2004-March 2011); Managing Director, the Advisor | |||
Milwaukee, WI 53202 | Since | since February 1995 | |||
Age: 53 | March 2011 | ||||
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: 48 | September 2005 | ||||
Dustin J. Hutter | Assistant | Re-elected by | Senior Vice President, the Advisor since January 2011; First Vice President, the Advisor (January | ||
777 East Wisconsin Avenue | Treasurer | Board annually; | 2008-December 2010); Vice President, the Advisor (January 2006-December 2007); Assistant | ||
Milwaukee, WI 53202 | Since | Controller, the Advisor since January 2006 | |||
Age: 35 | February 2011 | ||||
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: 27 | August 2010 | ||||
Andrew D. Ketter | Assistant | Re-elected by | First Vice President and Associate General Counsel, the Advisor since September 2010; Associate, | ||
777 East Wisconsin Avenue | Secretary | Board annually; | Quarles & Brady LLP, a law firm (September 2002-August 2010) | ||
Milwaukee, WI 53202 | Since | ||||
Age: 37 | February 2011 |
Page 44
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 16, 2011 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 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, Form BD and financial statements), a profitability analysis, comparative information about the Funds’ performance for periods ended June 30, 2011, management fees and expense ratios, and other pertinent information. The Board also discussed relevant case law, including the Supreme Court’s 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 reviewed a summary of the Advisor’s risk management tools and process. 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 $16 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
Page 45
Baird Funds, Inc.
DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD EQUITY FUNDS (cont.)
transactions, ensuring adherence to the Funds’ 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 Funds, the Board reviewed information as of June 30, 2011 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 average and index for certain other 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 three-year, five-year, ten-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.
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.
Page 46
Baird Funds, Inc.
DISCLOSURE REGARDING THE BOARD OF DIRECTORS’ APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT FOR BAIRD EQUITY FUNDS (cont.)
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 Advisor 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 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 Board recognized that the Advisor has been waiving fees and/or reimbursing expenses for the Funds since their inception.
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 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 47
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, 2011, 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 Fund100%
For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends received deduction for the fiscal year ended December 31, 2011 was as follows:
Baird LargeCap Fund100%
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, 2011.
Page 48
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, 10th 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 12/31/2011 | FYE 12/31/2010 | |
Audit Fees | $99,960 | $97,733 |
Audit-Related Fees | - | - |
Tax Fees | $24,752 | $24,024 |
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 2011. 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 2011 and 2010 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: $414,497 for 2011 and $530,703 for 2010. 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 7, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/Mary Ellen Stanek
Mary Ellen Stanek, President
Date: March 7, 2012
By: /s/Dominick Zarcone
Dominick Zarcone, Treasurer
Date: March 7, 2012